5
(1)
Functional sources of innovation. Some possibilities are: its own internal value chain functions; its
external value added chain of suppliers, customers and complementary innovators, universities,
government and private laboratories; competitors and related industries; and other nations or regions.
(2)
Circumstantial sources of innovation. In general, it is difficult to tell when to expect an innovation:
unexpected occurrences; planned firms activities; creative destruction (technological discontinuity,
regulation and deregulation, globalization, change in customer expectation, macroeconomic, social or
demographic changes).
According to Porter (1985), technological innovation has an important role in the success or failure of a
business. He asserts that although technological innovation has important strategic implications for individual
firms, it can influence the whole industry. Technological change is a major vector to market competition. Garud et
al. (1997) say that technological changes offer individual firms an excellent opportunity to maintain their vital
corporate motivation. Thus, many firms develop and adopt technological changes in their products, services and
processes. Nevertheless, there is no consensus about the classification of Technological innovation. Christensen &
Overdorf (2000), Afuah (1998), Porter (1985) and Garud et al. (1997) define, for example, technological innovation
as an internal process by which technological entrepreneurs probe, create, choose and implement new ideas. Sheth
et al. (2001) classify technological innovation in four types: type A – low technology (applies existing
technologies); type B - medium technology (innovation that involves known technology, although with some new
characteristics or functionality); type C – high technology (uses totally new technology) and type D – the highest
technology (uses emerging technology or technology that has to be developed). Porter (1985) classifies
technological innovation in two types: product and process. According to this author, product technological
innovation is related either to product development focused on cost reduction (content decrease, logistic
requirements simplification, less production facilities requirements, etc.) or to increase product quality
(functionality or delivery availability). Process technological innovation is related to the learning curve, focused on
reducing material and labor or manufacturing process development, such as quality control, delivery punctuality,
and demand requirements. In addition, this author says that technological innovation only creates competitive
advantage to the firm if it generates cost reduction and product differentiation. Afuah (1998, p. 14) mentions a
distinction between technical and administrative innovation. “Technical innovation is related to improved products,
services and/or processes or completely new ones. This contrast with administrative innovation pertains to
organizational structure and administrative processes and may or may not affect technical innovation”. Technical
innovation may or may not require administrative innovation. According to Damanpour (1991), a technical
innovation can be either a product (new product or service introduced to meet an external and market need) or a
Convention