PROCESS AND PRODUCT INNOVATIONS: A THEORETICAL APPROACH

Abstract

In this paper, first, we expressed the reasons how the firms decide and choice whether the process or the product innovation investment that they supposed to attempt. Then, the economic fundamentals of the firms’ decisions explained in developed models. Within this respect, the capacity and the capability of the firms has taken into consideration as the major determining factors of innovation targeted research and development (R&D) investment decisions. The human capital source and existence of the knowledge management system accepted as the other determining crucial factors. Besides, the organizational structure also required to adapt in R&D processes accordingly to the type of innovative activity. Despite similarity of the inputs in model equations, due to the differences in the extent of the innovative activities, the derived outputs appeared quite different from each other. The outcomes of the each type of innovations reflects the peculiarity of the R&D investments.

Keywords

• Product and process innovations, tacit knowledge, spillover effect, knowledge management, organizational structure.

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