Innovation Performance Measures
For Students’ and Researchers’ References
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05 April 2017
Innovation is defined as the socially and economically successful introduction of a new technology or a new combination of existing technologies in converting or transforming input into output such that it creates a drastic or significant change in the use value and monetary value (price) relationship based on the perception of consumers and/or users (Fontana, 2009, 2010, 2011). Fontana & Musa (2016), Fontana in Aryanto, Fontana, Afiff (2015) and in Aryanto (2016), and then further developed Fontana et al. (2016) provide description and examination of innovation system performance measures based on the following systematic dimensions:
(i) Internal Aspect of Innovation Performance (Input Performance) measures the perceptual organizational innovativeness before, during and after an innovation process. This dimension measures the contribution of internal tangible and intangible resources (such as climate, culture, and resources) to innovation performance. It basically shows that an organization has been successful in fostering innovativeness, knowledge management and a climate for generating new ideas, selecting, developing, and diffusing products resulting from the process of innovation.
(ii) Technical Performance (Process Performance) refers to the organization ability to realize creative and innovative ideas into real products, goods and/or services. This dimension shows the capacity of an organization to manage the ideation, the selection and the development process of innovative products. The technical performance of innovation is an invention performance, that is a part of an innovation-process performance. At a minimum the product has been in the prototype stage at the time of the measurement. Technical performance can be viewed as measuring development process effectiveness, or the effectiveness of the innovation process.
(iii) Commercial Performance (Process-Output Performance) refers to the organization ability in diffusing or distributing the innovative products in the market. It basically indicates that the innovation process has produced goods and/or services that can be sold to the market. Commercially successful products do not necessarily mean successful economically. In this sense, the economic performance, in terms of profit, must be measured, as it is a proxy of a successful commercialization of a product.
(iv) Economic Performance (Output-Outcome Performance) deals with the financial performance of an innovative output that has passed the commercialization phase in particular or the diffusion phase in general. Economic performance is measured by the organization’s ability to create economic value added in terms of residual income or internal rates of returns that exceed the cost of capital. The economic performance of innovation must be measured after social performance.
(v) Social Performance (Outcome Performance) refers to the positive impact that an organization creates through their innovation input, process, and output not only to the pertinent stakeholders in particular but also to the community and society in general as part of their corporate social responsibility as well as their corporate-shared-values’ actions toward the community and society at large. The attainment of a social performance assumes that organizations have at least fulfilled their obligations to their stakeholders. It is assumed here that social performance is attained before economic performance. Organizations measure their economic performance, after having distributed the value created to relevant stakeholders.
Based on the innovation-performance dimensions afore-defined, Fontana further developed the measures (see in Aryanto, 2016; Fontana & Musa 2017; Fontana et al., 2016) in five-performance dimensions representing the input, process, output, and outcome aspects of the organization’s innovation systems.
Aryanto, R., Fontana, A., Afiff, A.Z. (2015). Strategic Human Resource Management, Innovation Capability and Performance: An Empirical Study in Indonesia Software Industry. Paper presented in the 2nd Global conference on business and Social Science-2015. GCBSS-2015, 17-18 September. Procedia-Social and Behavioral Sciences 211 (2015) 874-879.
Aryanto, R. (2016). Pengaruh Strategi Bisnis, Manajemen Pengetahuan, Manajemen Sumber Daya Manusia terhadap Kapabilitas dan Kinerja Inovasi: Studi Perusahaan Perangkat Lunak di Indonesia. Disertasi Doktoral. Fakultas Ekonomi dan Bisnis Universitas Indonesia. Tidak diterbitkan. Bab 4.
Fontana, A. (2009, 2010, 2011). Innovate We Can! Manajemen Inovasi dan Penciptaan Nilai. Jakarta: Gramedia Widiasarana Indonesia; Rev. Edition, Bekasi: Cipta Inovasi Sejahtera.
Fontana, A. (2011a). Innovate We Can! Manajemen Inovasi dan
Penciptaan Nilai. Bekasi: Cipta Inovasi Sejahtera.
Fontana, A. (2011b). The Practice & Art of Innovation. Workshop Material. CIS School of Innovation.
Fontana, A. (2015). Kuesioner Sistematika Inovasi. CIS School of Innovation. Tidak diterbitkan.
Fontana, A., & Musa, S. (2017). The Impact of Entrepreneurial Leadership on Innovation Management and Its Measurement Validation. The International Journal of Innovation Science, 9(1), 2-19.
Zubaedah, Y., & Fontana, A (Ed.). (2016). Building Agility: Firm Configuration for Innovation and Growth. UI Press.