an integrated innovation process model based on practices of australian biotechnology firms

An integrated innovation process model based on practices

of Australian biotechnology firms

Boaz Bernsteina,1,*, Prakash J. Singhb

aSchool of Management, Queensland University of Technology, Brisbane, Qld 4001, AustraliabDepartment of Management, The University of Melbourne, Melbourne, Vic. 3010, Australia

Abstract

An integrated approach to managing the innovation process is attractive for organizations for many reasons. However, there is a relative

paucity of models that describe this approach. In this paper, an attempt is made to produce one such model. Based on a multiple case study

design involving nine biotechnology companies and one peak industry body from Australia, a conceptual model is proposed that has the

linear stage process model as the backbone. The twin mechanisms of market pull and technology push are incorporated within the model,

with a set of key organizational constructs (management, communication, structure and control) embedded within these mechanisms.

Overall, the results of this study improve our understanding of the innovation process by building a more comprehensive and integrated

conceptual model.

q 2004 Elsevier Ltd. All rights reserved.

Keywords: Innovation process model; Biotechnology; Organizational constructs; Technology push; Market pull

1. Introduction

Being innovative has become one of the most important

factors for organizations in sustaining their competitiveness

(Tidd et al., 2002). This has been widely recognized by

scholars in the field, yet the vast and diverse research in the

area is still fragmented and inconsistent (Edwards, 2000;

Kanter, 2001; Wolfe, 1994). The innovation literature draws

from multiple disciplines such as the social sciences,

economics, psychology and management. It also covers

many different industry sectors and markets. In addition to

these, researchers have traditionally focused on single

dimensions of innovation such as technology (Ettlie,

2000), organization (Damanpour, 1991) or market-related

issues (Hargadon and Sutton, 2000). As a result of these

trends, a coherent and consolidated view of the innovation

process has largely been prevented from emerging.

Recognising this ‘problem’, some researchers have

called for a more integrated approach to research and

0166-4972/$ - see front matter q 2004 Elsevier Ltd. All rights reserved.

doi:10.1016/j.technovation.2004.11.006

* Corresponding author. Tel.: C61 3 8344 4713; fax: C61 3 9349 4293.

E-mail addresses: [email protected] (B. Bernstein), pjsingh@

unimelb.edu.au (P.J. Singh).1 Tel.: C61 7 3864 2053; fax: C61 7 3864 1054.

practice in the area, with the view to, inter alia, better

understand the interaction between internal organization

activities, sequence of activities in the innovation

process, market and environmental influences, and

managerial issues affecting the ability of companies to

innovate (Cooper, 1998; Frambach, 1993; Rothwell,

1994). There appears to be broad agreement that a

combination of these factors is instrumental to develop-

ing a better understanding of the innovation process from

an integrated perspective.

The objective of this article is to develop, through an

inductive process, an integrated innovation process model.

In developing the model, we attempt to answer the

questions: (1) What are the key concepts associated with

an integrated innovation process model?; and (2) How are

these key concepts inter-related? We have used practices

associated with management of the innovation process in

nine biotechnology companies from Australia to inform this

model. Specifically, we sought to understand the key steps

in the process, the main organizational concepts and the key

influencing factors involved in the drive to innovate within

these organizations. A conceptual model was developed to

show how these concepts inter-relate throughout the

innovation process.

Technovation 26 (2006) 561–572

www.elsevier.com/locate/technovation

http://www.elsevier.com/locate/technovation

B. Bernstein, P.J. Singh / Technovation 26 (2006) 561–572562

The next section of this article provides a review of the

literature on innovation process that succinctly chronicles

the progress of the field over the past half century, thus

identifying the key developments leading to the need for a

more integrated approach to studying innovation. This is

followed by a description of the methodology used in this

study. Next, the results of the study are presented in

summary form. The conceptual model emanating from the

analysis of the data is then described. The paper concludes

with a summary of the findings, their implications for

researchers and practitioners, and a discussion of future

research possibilities.

2. Innovation process research

2.1. Early studies—simple process model and focus

on the individual

The early studies of the innovation process, conducted

mostly in the 1950s and 1960s, proposed a simple unitary

progression of phases or stages in the development of

products. These models were presented as simple linear

sequential events focused on research and development

(R&D) activities. The products resulting from these

activities were imposed on to the market (Bales and

Strodtbeck, 1951; Lippitt et al., 1958; March and Simon,

1958). In their review of managing innovation and change

process, Schroeder et al. (1986) provided a chronological

summary of the innovation process and concluded that early

developments of the innovation model were inadequate for

dealing with the complexities apparent in the phase process.

They called for a re-examination of the findings of these

previous studies by proposing a more dynamic approach

that was validated with more rigorous empirical evidence.

Many of these early studies also assumed that individuals

are the major source of change in organizations. Rogers

(1962) and Schon (1963) identified the main determinants of

innovation in terms of age, educational level, gender,

cognitive style, and creativity of individuals. Under this

perspective, there is a particular focus on the actions of

individuals. Individuals in organizations are regarded as

supreme agents acquiring outstanding qualities such as

skills, knowledge and power. They are regarded as playing

the leading roles in facilitating innovation in organizations.

Edwards (2000) states that these actions of individuals are

not constrained by external factors; rather they are the

outcome of self-directing agents who are capable of

introducing change in organizations.

During this period, economic growth came mainly from

new industrial sectors where the dominant corporate

strategy emphasized R&D and manufacturing as key

elements in a linear process of innovation performance.

Managers of major companies accepted the view that a new

product or process was the result of discoveries in basic

science. Therefore, possible commercial applications were

brought to the attention of organizations by research staff

(Herminia, 1993; Howell, 1990). Hence, this explained the

significance researchers placed on drawing individual

attributes as an important determinant of innovation for

organizational success.

The focus on the individual suggests that informal

structures in an organization may be just as, if not more

critical than formal structures when the exercise of power

requires extensive boundaries, and where sources of power

have both general and innovation-specific effects. This may

not come as a surprise, as informal organizational networks

are a powerful mechanism for the control and distribution of

a wide array of resources and play a critical role in the

innovation processes in organizations. While the early

studies showed that innovation was stimulated by the

individual, technology, R&D, and/or the markets, these

studies generally failed to go beyond the idea generation

stage and explain how these processes occurred in an

organization. They also failed to shed light on the

complexity of aligning structure and knowledge of the

individual agent together in a functional process of value

creation. These factors identify a need for applying a more

integrated approach to studying innovation which includes

multiple, cumulative, progressional, and perhaps longitudi-

nal research methods.

2.2. Organizational and market influences on the innovation

process

The organizational approach ostensibly evolved in the

1970s as a new dimension in innovation research. It was

developed to address the deficiencies of explaining

innovation in terms of individual behaviour. Research

evolved around the structural parameters of organizations

and the importance of organizational functionality within

the business environment. This view of innovation focused

on both structural functionalism and contingency theory,

with an attempt made towards explaining how organiz-

ational structure constrained or propelled the innovation

process. This body of literature introduced the linkage of

‘technology push’ and ‘market pull’ models. It reveals the

sequence of events in the innovation process and the way

innovation is linked to technological developments and

market forces. It also shows the role of functional

departments in the organization and ways of converting

information into ideas, utilizing knowledge towards product

development and delivery of products into the marketplace.

For example, models presented by Rothwell and Zegveld

(1985) show the innovation process as a sequence of events

linked to organizational functionality where each function

holds a distinctive role in the contribution to innovation

success.

The focus in other studies (Edwards, 2000; Johnson et al.,

2001; Meyer and Mugge, 2001; O’Connor and Rice, 2001)

also shifted from the individual level to studying market

trends and shifting the concentration to demand side factors.

B. Bernstein, P.J. Singh / Technovation 26 (2006) 561–572 563

Factors like trends in new products and expansionary

technological change were introduced. This view has placed

the market as the source of ideas for directing R&D, which

had an interactive role in the innovation process. The

intensifying competition accompanied by growing strategic

emphasis on marketing thus result in the interaction of

organizational structures and market-pull variables. Other

studies (Kodama, 2001; Leifer et al., 2001; Nambisan,

2002) found that in mature and ongoing organizations,

attempts to modify the products or markets were constrained

by the organization’s existing manufacturing and manage-

ment competencies. As innovation in organizations begun to

shift towards market demand, issues concerning the

alignment of organizational structure to its environment

became a major topic in research.

The recent study by Coriat (2002) on strategic perspec-

tive, for example, concluded that more effort should be

made in minimizing time-to-market and maximizing the fit

between customer requirements and product characteristics

for organizations to innovate and develop new products.

The suggested strategies such as mapping the company’s

R&D portfolio, using strategic alliances, matching team

structure to project type, and others are meant to change the

existing form of organizations to facilitate innovation and

improve the organization’s capability to achieve competi-

tive advantage. Hence, centralization, complexity, formali-

zation, size, strategy, and goals became common

organizational characteristics influencing innovation

(Hage, 1999). However, controversy exists as to the

significance of these variables as predictors of innovation,

with contradictory results having been found for the

influence of these types of variables. As a remedy,

contingency theory based solutions such as that developed

earlier by Zaltman (1973) would be useful. These predicted

that the effect of structural variables is contingent upon

innovation initiation and innovation implementation, thus

providing a link between the different stages of innovation

and structural variables necessary to accommodate the

process.

2.3. An evolution towards an integrated approach

An emerging body of literature suggests an integrated

approach to the innovation process, reflecting the synthesis

of both individual behaviour parameters as well as structural

variables in the organization. The innovation process is

looked upon as a complex stream of communication linking

the structural functions of the organization and knowledge

creation. Knowledge is transferred from R&D through

manufacturing, marketing and service through internal

linkages, and moves inside and outside the organization

through external linkages. Initiation of the innovation

process is thus dependent on three main sources: organiz-

ation capabilities, science and technology developments,

and the marketplace. Much of the research work has evolved

from the shortcoming of previous studies to provide

a reconciliation of organizational behaviour and environ-

ment in which these innovations are initiated and adopted.

Researchers such as Van de Ven and Rogers (1998), and

Pettigrew (1985) suggest that under the notion of an

integrated approach, innovation is not to be seen as the

result of freely participating individuals (the individual

approach) nor is it believed to be dependent on some

objective characteristic of the organization (the organiz-

ational approach). Rather, it reflects the continuity or

modification of those rules and resources that mediate and

are an outcome of human conduct in an organizational

setting.

Rothwell’s (1994) integrated view suggests that there is a

characteristic sequence in the process of innovation.

However, it is not a continuous process that can be divided

into a series of functionally distinct entities, but that can be

made up of interacting and interdependent stages. The

overall pattern of the innovation process can be thought of

as a complex net of communication paths, both intra- and

extra-organizational, linking together the various in-house

functions and linking the firm to the broader scientific and

technological community and the marketplace. The descrip-

tion highlights the importance of feedback emphasizing the

significance placed on communication where it links the

internal functions of a firm to the external knowledge pool.

The integrated approach to innovation is also strongly

linked to systems theory. Several researchers depict the

organization as a system that affects, and is affected by, its

external environment (Cooper, 1998; Read, 2000; Swan

et al., 1999). This perspective puts emphasis on high levels

of rationality where organizations are directed towards

networks of communication and where members are drawn

together to facilitate product innovation.

2.4. Synthesis of research literature on innovation process

Research studies in the innovation process area have

come a long way since the early works of Schumpeter

(1934) where he placed innovation at the centre of his

theory of economic development. Many scholars since then

have attempted to define innovation and assess its impact on

organizations’ competitiveness (Damanpour, 1991;

Edwards, 2000; Harrisson and Laberge, 2002; Kanter,

2001). Though the vast and diverse research in the area has

provided meaningful concepts for understanding the

determinants of innovation and success of organizations,

these are nevertheless inherently limited because they

invariably take a narrow approach to innovation. There is

still a lack of consistency in the literature and often studies

confuse industry types, methodologies and theories, making

it difficult for the reader to draw meaningful conclusions or

practical implications.

Several researchers have contributed towards consolidat-

ing innovation research. For example, Damanpour (1991)

suggests that cumulative research and theory is possible in

the field, and future research should be multidimensional,


examining the whole organization and not just one or two

innovations in isolation. Similarly, Wolfe (1994) suggested

that the research efforts in the field need to be directed to

minimize ambiguity and develop a cumulative base. Tang

(1998) attempted to integrate the vast research in the area by

proposing a model based on six approaches to viewing

innovation: information and communication; behaviour and

integration; knowledge and skills; project raising and doing;

guidance and support; and external environment. The main

thrust of his work was categorizing innovation under

different perspectives to gain an integrated view of the field.

Different approaches to studying innovation in organiz-

ations is widely practiced, and the need for a more

‘panoramic’ view has been suggested (Rothwell, 1994). In

support of this, in this paper, we wish to make a contribution

to the integrated approach to innovation by presenting a

conceptual model that shows the key concepts related to the

innovation process, organizational and market-related

issues. Further, the model shows how these concepts are

inter-related to each other.

3. Methodology

A multiple case study design in the form suggested by

Yin (2003) was employed in this research. The sample

consisted of nine biotechnology companies from Australia,

as well as the peak industry body representing the industry.

The biotechnology industry sector was chosen for two

main reasons. First, firms in the biotechnology area are well

known for their high-innovation capabilities and capacities,

with many of them having an existential dependency on

innovation (i.e. their survival depends on being able to

innovate). Second, the biotechnology sector in Australia has

been the recipient of special attention in the last few years in

terms of support for innovation. In practical terms, this has

seen support for the development of concentrations of firms

(clusters), seed capital being made available and govern-

ment policies being actively directed towards the industry.

These features made the industry an ideal candidate to study

innovation process.

The actual firms that were selected for inclusion in this

study were chosen systematically so that a wide cross-

section of firms from the industry sector were included. We

wanted to ensure that the sample consisted of firms that were

large, medium and small in size. We also wanted to ensure

that there was a fair representation of firms from the various

sub-sectors within the industry. Finally, we were keen to

ensure that firms were at different stages in terms of the life

cycles of their main products. Table 1 provides brief

descriptions of these organizations. Due to confidentiality

arrangements, the companies cannot be identified in the

paper. As can be seen, all the above objectives relating to

firm characteristics were achieved.

Data collection was based on interviews with executive

managers from the firms and the peak industry body.

As Table 1 shows, the interviewees were mostly general

managers or the heads of R&D of the companies. These

senior managers can reasonably be expected to be very

knowledgeable about the operations of their firms, and so

the information obtained in the interviews could be treated

as being highly credible. The interviews, lasting between 1

and 2 hours, were semi-structured in nature. All the

participants were a priori provided with a brief set of

questions which helped them prepare for the interviews.

Most of the information collected pertained to events in the

innovation process of each company. In addition to the

interviews, tours of the organizations were made to

personally observe processes relating to the actual oper-

ations of the companies. Finally, published secondary data

relating to the firms such as annual reports and information

on their websites were also reviewed. This three-prong

triangulated approach to data collection resulted in rich

insights into the firms.

The grounded theory approach to data analysis was

adopted (Glaser and Strauss, 1967). The interviews were

recorded and transcribed. This text was then systematically

coded. The codes were then logically categorized. As

allowed by the grounded theory approach, we did not start

with a complete ‘clean slate’ (Goulding, 2002). Instead, we

decided to ‘start’ our model development process by

focusing on existing knowledge relating to the integrated

approach to innovation management. We used the data

collected as part of this study to empirically augment and

produce thick descriptions of concepts associated with the

model. Hence, we searched for statement, activities and

information related to the innovation process in the data that

was collected that were relevant to the model.

4. Results and analysis

4.1. The innovation process and organizational constructs

Analysis of the data showed that there were clearly

identifiable stages in the innovation process, namely idea

generation, innovation support, innovation development,

and innovation implementation. These four stages were

repeatedly indicated by our interviewees as being the most

important milestones in the success of their product

innovation process. These stages are consistent with the

stage model reported in the literature (Cooper and Zmud,

1990; Rogers, 1983; Scott, 1994). Idea generation was

identified as the initial stage in the process where

individuals in the organization gathered information from

both internal as well as external sources. Innovation support

was the second step in the process where ideas were

introduced to the management level and evaluated against

companies’ goals. Many of the ideas were lost at this stage

due to the low level of support provided by the organization.

However, the ideas that did make it through were set up as

projects with clear development methods and project

Table 1

Brief descriptions of participating companies

Com-

pany

Business area Company description Firm size Life cycle

stage of main

product

Interviewee

A Clinical tests Develops quantitative blood measurement tools Small Embryonic General manager

B Hospital diagnostic equip-

ment

Develops hospital laboratory diagnostic tools Medium Growth General manager

C Medical instruments Market leader in developing medical instrument for

clinical use

Medium Growth General manager

D Medical devices Develops medical instruments used by clinical patients

suffering from respiratory problems

Large Mature Manager-business

development

E Testing equipment Develops testing equipment for human diseases Medium Growth General manager

F Pharmaceutical Leading developer and producer of human and

veterinary pharmaceutical products

Large Mature General manager

G Diagnostic equipment Develops hospital diagnostic equipment Medium Growth Head of R&D

H Medical devices Developed a high throughput DNA fragment analysis

system

Medium Growth General manager

I Testing equipment Developing a diagnostic visual test for detecting

mental illnesses

Small Embryonic General manager

Ja Peak industry institution An biotechnology administrative body – Administrative General manager

a This company was an industry association and not a commercial biotechnology firm.


specifications. The third stage of development was often

identified with a formalized project structure supported by

the organization with adequate finance and other resources

provided. The last stage of innovation implementation

represented the introduction of the ‘fruits of innovation’ into

the marketplace. Marketing functions often took the leading

role in this stage, aligning the product with market

expectations and feeding back market information for

future improvements.

The data also revealed the prevalence of four organiz-

ational constructs that appeared to be important in

facilitating successful innovation outcomes. These con-

structs were: management, communication, structure and

control. We also found that each of these constructs played a

different role, depending on progression in the innovation

process.

Table 2 summarizes the data observed across the nine

companies. The information in this table is organised in grid

form, and classified into groups that will be discussed in

detail in Sections 4.2–4.5 below. The first column shows the

four stages of the innovation process and the second row

identifies the four organizational constructs.

4.2. Management and the innovation process

The role that management related activities play in

facilitating the innovation process is well known. Research-

ers such as Rothwell (1994) and Rogers (1983), and

Edwards (2000) have highlighted their crucial influence.

Our interest was in addressing the practical management

issues associated with the innovation process. Some specific

questions that arose were: Are the organizations providing

enough freedom to their employees to engage in creative

thinking rather than following management guidelines? Do

organizations provide enough risk leverage for their

innovators to think ‘out of the box?’ How are innovation

failures dealt with by managers in the organization? And,

are there sufficient rewards for successful adoptions? Our

research showed that the overall nature of the management

style that was evident was different, depending on the stages

of the innovation process.

A strong participative style was found to be important

in the early stages of the process. Several companies

took a very proactive approach to encouraging idea

generation through greater levels of social interactivity.

For example, a general manager of a diagnostic company

indicated:

We are a small team and everyone is expected to be

innovative. We have management meetings weekly, and

we have a monthly team meeting where everybody

comes in, where we will have Pizza and occasionally we

will have Champaign. That helps with the brainstorming.

Similarly, a manager at another firm highlighted the need

for greater social interactivity:

Every Friday, we went to a place for afternoon mealtime,

where we sit around and chat. So we do try to encourage

social interaction.

Another theme that appeared strongly was the need to

reward and celebrate innovative ideas. A practical example

of how a firm encourages innovation at the individual level

was provided by a manager:

That was a really good idea if you translate that to how

much it would save in labour. He got two movie tickets

for that. People come up with ideas like that. They get

spot rewards and are encouraged to come up with more.

Table 2

Innovation process: Summary of observations and findings

Innovation stage Organizational constructs

Management Communication Structure Control

Idea generation Employee participation

encouraged

External communication

present

Flat hierarchy around

individuals formed

Innovation goals assessed

Individual/group goals set Diverse idea-teams

formed

Individuals rotated in their

roles

Idea quotas/patents set

Incentive bonuses

provided

Failure not discouraged Informal environment

present

Estimated value of innovation determined

New ideas heard and

accepted

Innovation goals were

important

Bottom-up feedback encouraged

Meeting of corporate criteria determined

Support Project methods and

criteria set

Cross-team

communication

encouraged

‘Fit’ of structure assessed Innovation program set

Cross-company teams

formed

Positive evaluation

supported

Flat rather than hierarchi-

cal structure preferred

Matching of organization competence

evaluated

New ideas fitted to goals Evaluation criteria set

early

Dedicated innovation

team formed

Sufficient information-technology and

marketing provided

Close supervision

provided

Open discussion

encouraged

Teaming up with support

groups

Approval of number of projects controlled

Development Systematic management

approach applied

Cross-unit communication

encouraged

Independent project teams

present

Performance measures set

Cross-functional

management team formed

Inter-company

communication present

Alternative structures

assessed

Project milestones set

Commercially viable

ideas developed

Linking of innovation to

formal team

Financial control applied

Milestone funding pro-

vided

Innovation seen as part of

ongoing operation

Formal reporting scheme established

Easy reporting system

present

Written procedures set

Project team control own resources

Implementation Secure access to resources

for marketing provided

Customer/consultant/

suppliers communication

present

Project team integrated

into organization

Customer feedback and preference available

Management quotas set Success rewarded and

celebrated

Independent business

units formed

Feedback for future innovation sought

Trust with customers built Intrinsic and extrinsic

rewards provided

Decentralized power

systems

Employee bonus schemes used

Quality criteria controlled

Market requirements tested


And he felt really good. We get lots of ideas this way.they come up with little things that can make the

difference to the business.

Similarly, the importance of rewarding new ideas was

expressed by another manager as:

You have to reward success. We celebrate success a lot

more than we had in the past.

Likewise, the manager from a medical device manufac-

turer indicated that they use rewards to encourage employ-

ees to engage in innovation activities:

We reward individuals as well. The company has

generous options which made a few employees very

wealthy. The options certainly reward the employees

financially in one sense.

The same manager indicated how the organization uses

freedom to pursue esoteric ideas to encourage employees to

be innovative:

The ones who actually had come up with very good

design had the freedom to pursue their interest. For

instance, the person who does product design only works

on the design he feels like working on. If he is not

interested, he doesn’t touch it. We got a few people who

were essentially hired because they had some bright

ideas. They are not under pressure to do anything else.

They just need to come up with more ideas.

As innovation progressed to the latter stages, it appeared

that the management style became more formal with strong

emphasis on administrative aspects. Managers pointed out

the importance of setting project criteria and formal

methods in the innovation support stage. It was also


important to involve other functions across the organization.

At times, the scientific ideas were found to be ingenious,

however, with little market applicability. Successful out-

comes need a mix of good technical viability as well as

matching customer needs. Cross functional teams were

found to be helpful in writing clear product requirements for

the next development phase. One of the R&D executives

gave the following comments on the management approach

at this stage of the innovation process:

We sit down and have a brainstorming session. We

describe what we need to do to get a product on the

market. What are the benchmarks from a marketing

perspective that needs to be achieved? So we go back

down to where we are now and evaluate the situation. We

ask ourselves what is causing us to fall short. We identify

the issues. Then we determine the best person in the room

with the scope or knowledge to tackle the ideas.

We further found that even if innovators had access to

required technical and market information, there was still a

need to have strong support systems in place. These systems

facilitated the integration of knowledge in converting good

ideas into successful products. These social parameters go

beyond ‘creating the right environment in the organization’

and a supportive innovation leadership.

Overall, the specific nature of management activities and

styles appear to different, depending on the stage of the

innovation process. During the early stages, the style is

strongly participative, with emphasis on high levels of

social interactivity and rewards for innovation related

activities. However, in the latter stages, the management

style is generally a lot more formal and administrative in

nature.

4.3. Communication and the innovation process

There are several key communication issues within

organizations that need to be addressed in order for the

innovation process to be successful. These relate to formal

and informal links between internal and external parties that

need to exchange strategically important information.

In terms of the importance placed on communications

inside and outside of the organizations, the interviewees

reinforced this strongly. As expressed by one of the

interviewees:

We get lots of ideas from people in the team and we

constantly say: ‘Go and talk to all your friends and ask

them what they think’. we are open to all those ideas

and as they come back, we make more modifications.

The importance of both formal and informal communi-

cation links is well documented in the literature. For

example, Nonaka and Kenney (1991), describe innovation

as an information creation process that arises out of social

interaction. They also point out the importance of

organizational structure as a host within which the creative

process is located. Our study shows that the informal system

is very important. As one manager, on informal communi-

cation paths, indicated:

Most of the interaction doesn’t happen inside meetings, a

lot of it happens in the hallways. And people need to feel

at ease with each other. People need to talk about things,

about issues. In fact, a lot of stuff which is said in the

hallway often gets done [in formal projects].

In the early stages of innovation communication, we

found that links between the person generating the idea and

his/her manager were important in seeking the support and

securing organizational resources for future development of

the idea. We also found that bringing people from different

disciplines into the organization fostered creativity in the

idea generation stage. People from different functional areas

had different views and perspectives and thus helped to

generate new ideas. In the development stage, communi-

cation links between the project development team and

other organizational functional areas become important.

Information from different sources needed to come together

in order to achieve viable product designs. Communicating

with marketing functions, for example, was important in

developing product characteristics required by customers.

In the event that these communication links were not

established, the information path was blocked and the

innovation process was stalled. As reflected by one of the

general managers overlooking an unsuccessful development

program:

I think the real complaint among the engineers is the

communication. It was not effective. And they didn’t

know what the overall project was doing. It was all a bit

unfair, because they didn’t now. They never got into

details of what is going on with the other groups.

For most of the companies, many of the new ideas

originated from ad hoc laboratory experimentations invol-

ving cross-sectional teams. There was also growing

importance of tacit knowledge which evolved in the absence

of any theoretical framework. Such knowledge developed

through practice and experimentation. Although gaining

access to this internal knowledge was important, equally

important was gaining knowledge through external com-

munication. Assessing customer preferences and market

needs was deemed crucial. As the managing director of a

diagnostics company pointed out:

I spend most of the time going out and talking to

surgeons..sneaking up to find out our competitors with

a camera and take pictures of their stuff.. I am the one

who brings back market information, trying to figure out

what clients really want out there. That’s largely my role


now, to make sure what the products are like out there

and to find out what the market wants.

As the innovation process evolve from idea generation to

innovation support, the importance of formal communi-

cation became evident. The need to communicate the idea

across organizations became increasingly important as

different functions became involved in future development

of innovative ideas. For example, an idea coming from the

research department was shared internally with both the

manufacturing department (to provide for production inputs

and manufacturing line schedules) as well as the marketing

department (for market needs assessment and distribution of

resources). Hence, there is a need for knowledge to overlap

different departments facilitated by communication across

organizational functions. An example of how cross func-

tional communication took place in one of the participating

organizations was revealed in the following statement from

one of the interviewees:

What we are now proposing and about to implement is to

get all the brains of the company and high level people

who are leading the projects, people who have got the

‘smarts’ and cleverness, who think outside of the box, to

all meet once a week. So even though I am an expert in

mechanical engineering, someone comes and critiques it.

So, getting all the brains in one room on a regular basis, I

think is important.

It was evident from the responses of the interviewees and

our personal observations that most organizations realised

the strategic value of smooth and effective communication

between all the relevant players. Most were taking steps to

alleviate the potential disruptive effects of dysfunctional

communications systems.

4.4. Structure and the innovation process

It has been claimed that organizational structure has an

effect on the innovation process as it determines the link

between employees and their activities. Although this

structural view was a welcome shift from the individual

perspective, it nonetheless has been found to place too high

an emphasis on structures of the organizations, and failed to

include other elements important for facilitating innovation.

It also failed to provide support for explaining successful

cases of directing innovation in organizations. As suggested

by Van De Ven and Rogers (1988), p. 645: ‘studies of

organizational innovativeness could not effectively investi-

gate how organizational structure affected innovation’.

In this study, it was found that formal stratified

structures had relatively small impact in the early stages

of the innovation process compared to the later stages of

development and implementation. It was more important

for managers to keep a relatively flat hierarchy around

individuals to support idea generation. It also seemed to

have a lesser influence on the early stages of the

innovation process compared to management or com-

munication constructs. As innovation progressed to the

development phase, formal structures appeared to assume

a more central role. Managers stressed the need to

provide project teams with a greater level of indepen-

dence, particularly in controlling their resources. In many

cases, innovation teams were integrated into ongoing

operations in the organization during the implementation

stage.

Structure was found to be the main contributor to cross-

functional communication difficulties in many organiz-

ations. In several firms, there seemed to be a ‘language’

barrier when marketing employees needed to present their

cases to engineers. There was also a barrier when technical

people tried to explain why certain product characteristics

were unachievable due to technical conflicts. One of the

solutions we came across is when a marketing employee

agreed to act as a liaison for the technical project and, vice

versa, a technical employee agreed to facilitate direct

contact with marketing. A mentor structure seemed to work

well for an instrumentation company:

We actually have an interesting structure where two

people are posed as mentors. One is myself, looking at it

from a marketing perspective side of things. I have the

other guy, a project manager, who is looking at how the

delivery of these projects fit the final product. He will be

checking against the timeline and looking at resources.

So there are two separate functions there. There is a

scientific marketing moderator which is me and there is

the timeline project driving guy on the other side.

As we noted before, formal structure seemed to play a

more important role in the development and implementation

stages compared to the early ones. One of the explanations

we received was the need to provide an independent status

for the project teams in controlling their resources. There

was often a need to recruit new expertise to the teams and

secure financial resources for development tools and

product materials. Complex lines of reporting appeared to

cause inefficiencies and prolong the development period.

We also found that the formalization of the innovation

teams in gaining project status had an impact on achieving

success. The recognition awarded by the organization

management teams had positive impact on the members

of the teams involved in the process. Lack of formal project

status appeared to reduce the commitment of employees to

engage in the final stages of development and stall the

launch of products to markets.

The next logical step in many firms was the integration of

the project team as part of ongoing company operations.

This provided more resources to develop the next

generation of innovative products and a positive signal for

team members as they were recognised for their

contributions.


Overall, during the early stage of the innovation process,

the structure was mostly informal, ad hoc and focused on the

individuals. In the later stages of the innovation process,

structure was seen as being more important. There was

strong emphasis on formal teams that worked on highly

focused projects.

4.5. Control and innovation process

Control mechanisms in organizations are addressed in a

large body of literature. This literature refers to strategic

control systems as a monitoring tool to assess how well an

organization is performing or how well the firm is using its

current resources (Flamholtz, 1979; Mintzberg, 1979;

Simmons, 1994). It is also about how organizations reward

their employees to keep them motivated and encourage

them to focus on solving problems. However, relatively few

studies have focused on how control systems link to the

innovation process. In our study, we hope to go beyond

controlling the four basic building blocks of competitive

advantage to obtain superior cost efficiency, quality,

innovation and responsiveness to customers. We found

that control had a significant role in each of the stages of the

innovation process. Top managers in many of our cases

made special effort to control the innovation process by: (1)

assessing innovation goals early in the innovation process

and their alignment with more general organizational goals;

(2) setting formal structures for innovation teams with clear

progression milestones; (3) setting performance measures in

the development stage to filter good innovation projects

from the ‘lemons’; (4) setting feedback mechanisms to gain

information from internal sources as well as from customers

and the external community.

An interesting observation came from a leading diag-

nostic company. The company has separated their research

activities from development in order to provide greater

focus to idea generation activities. It also developed a

structured process for evaluating ideas whereby ideas

‘flowed’ more efficiently through the organization and

were done in a less costly manner. As expressed by the Head

of Research of this organization:

The way we are structured is that we’ve split research

and development. So I am managing research and we are

given much more scope to think about creative ideas. It is

the development people who start to work once the

product has been churned out by research. There is a

much more structured process they go through. So in

research we have a greater scope for generating new

ideas. [The new idea is] then referred to the business unit

to get their feedback as to whether it is worth pursuing

from a commercial perspective. We are simply not big

enough, as a company, to employ five or six researchers

just to carry on into the blue-sky areas. What we are

trying to do is have a small research group that can

follow-up on one or two ideas.

The same company also established clear guidelines for

its innovation development stage. This was found to be

necessary as unprofitable projects sometimes went through

the innovation process to a stage where it would finally be

realized that they did not meet the technical criteria or were

not commercially viable. As noted by the same Head of

Research:

It’s hard to start a project, but more difficult to stop it.

We’re not a rich company, projects that run for 2 or 3

years without profit are simply not going to make it. The

whole idea now is to stop projects much earlier, thirty

percent of the products fail because many are making

what the customer doesn’t want. There is also a lot of

drift happening in technical problems. Even the devel-

opment people have seen the technical failures and come

up with a product that really doesn’t do much. This

happens because they are not constantly checking if it’s

on track with where we are going. If they are not on track,

it’s a drain on effort, time and resources.

The most common control mechanism that companies in

the study used was the milestone based review approach.

Each project was identified with several milestones and

reviewed against outcomes. These outcomes were tangible

and needed to be technically sound as well as have ability to

sell to the market. Projects that successfully met the

milestone requirements were provided with additional

funding for the next development stage. If, on the other

hand, those that did not meet these requirements were either

provided with extensions to meet the next milestone or were

terminated. On the importance of milestone based control of

projects, the following comment was made by a manage-

ment team member at one of the firms:

Each project has defined milestones. I guess one way

to do it is to just simply approve funding of a

project/product to a certain milestone, and then see it

progress, and see if it has passed the test. But at the same

time, we strongly identify what is required for the next

stage before approving funding. We identify what the

next step needs to achieve, so everyone is very clear,

down to the details. [We specify] very detailed require-

ments of what is needed to be achieved. So it’s a matter

of being very hard on that. If it hasn’t hit that milestone,

either stop it or at least say, ok, we shall allow this but

this is what will happen [in terms of future requirements],

rather than letting development carry on for 2 years.

Thus, we observed a set of well defined control criteria

utilized by managers in different stages of the innovation

process. There seemed to be a fine balance between the

provision of a relatively flexible system to encourage ideas

in the initial stages to a more rigid, defined and controlled

structure in the development stages. There also seemed to

be considerable sensitivity to assessing market needs


and the commercial potential of products in the marketplace

before resources were committed to development of the

innovative ideas.

5. An emerging integrated innovation process model

In Section 4, we described the individual components of

a model that describes the process through which innovation

takes place. The domain of the model is the Australian

biotechnology firms as reflected by data from nine

companies and one peak industry body from the industry.

We defined four stages in the innovation process which are

influenced by two disparate mechanisms and four organiz-

ational constructs. In meeting the objective of this study, we

developed a conceptual model, shown in Fig. 1. This figure

succinctly illustrates how all the concepts fit together to

form the integrated innovation process.

The innovation process begins when an idea is generated

at a specific time and place within the organization.

Employees often derive information from both internal

sources within the organization or from external sources.

Idea generators will often interact with other scientists in the

field, university sources, colleagues in their area of research,

as well as competitors. This can be broadly described as the

technology push mechanism. Similarly, employees will

often interact with customers, suppliers and competitors to

gain market information for a better understanding of what

customers want before products are launched to the market.

This approach can be characterised as the market pull

Fig. 1. Proposed integrated inn

mechanism. The progressional process continues through

support and development toward its implementation in the

marketplace. Each stage is limited by a box to reveal the

separation in case information does not flow transparently in

the innovation process. It has been shown in other studies,

such as Zirger and Maidique (1990), that without substantial

effort by the organization to bridge these barriers,

information critical to the formulation of products, their

development and marketing, may be lost. This is particu-

larly the case for more complex organizations with

excessively formal and bureaucratic structures and multiple

product ranges.

We have also introduced four organizational constructs

(i.e. management, communication, structure and control)

that seem to be strongly associated with determining the

success of the innovation process. Hence, it is useful to

integrate these four constructs and link them to the different

innovation stages towards developing a more coherent and

complete innovation process model. In the early stages of

the innovation process, sound management and communi-

cation functions appear to be critical. Specifically, it appears

that a strong participative management style that empha-

sizes social interactivity and rewards for innovative

behaviour is typical at this stage. In terms of communi-

cation, an open, transparent and informal communication

system focused on facilitating exchange of strategic

information between internal and external parties is most

prevalent. In the latter stages of the innovation process,

there is strong focus on structure and control issues. Formal

teams are usually used. Also project management

ovation process model.


methodologies are commonly utilised. Overall, a highly

disciplined approach to project delivery seems to be

preferred at this stage of innovation.

6. Conclusion

In this paper, a conceptual model that describes the

innovation process has been presented. The model builds on

the existing knowledge on the integrated approach to

innovation. For empirical support, it relies on the experi-

ences of nine biotechnology companies in Australia. Using

a triangulated approach, data were obtained in the form of

in-depth interviews with top management group members,

personal observations of operations and review of published

information about the firms.

Through the grounded theory approach to data analysis,

we first developed a basic innovation process model. This

consisted of four distinct and identifiable stages, beginning

with idea generation, then innovation support, innovation

development and finally innovation implementation. We

then identified four organizational constructs, management,

communication, structure and control, that seemed to play a

pivotal role in the innovation process. All four constructs

were linked to each stage of the innovation process. We

provided evidence to show that each of these constructs

played a different role in each of the innovation process

stages, thus resulting in a rather complex interaction of

factors which are both internal and external to the

organization.

Our proposed model is different from the more general

sequential process models described in the literature and

thus provides a more holistic approach to the innovation

process. We observed a more complex set of factors which

facilitated new communication paths in transferring knowl-

edge from one stage of innovation to another. These paths

were also influenced by internal linkages of the latest

science and technology developments in the biotechnology

industry as well as external linkages from the needs of

consumers and the marketplace.

This study has attempted to develop a more integrated

understanding of the innovation process through a multiple

case study research design. As a result, there are some

inherent weaknesses that can be remedied in future studies.

First, the proposed model is conceptual and qualitative in

nature and may lack generalizability. Larger sample size

studies that have a confirmatory bent would be needed to

overcome this weakness. Second, our findings are cross

sectional in nature and therefore limit the ability to establish

causality between constructs. Future studies could apply a

longitudinal approach to explore the relationships intro-

duced in this study and improve their ability to explain

innovation success. Finally, there is also a concern as to how

generalizable our results are to other industry sectors. This

study was limited to one specific industry, and therefore

our results may not apply to other industry settings.

However, some parts of our findings appear to be similar

to that of other studies based in organizational and industry

settings such as the information technology sector. Study

designs that involve multiple industry settings will be

needed to address this particular issue.

In sum, we believe that the proposed model provides a

good conceptual framework for understanding the inno-

vation process from an integrated perspective. It also

provides the platform for further in-depth studies that can

result in a more comprehensive understanding of how

companies use their innovation processes to generate

successful outcomes.

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Dr Boaz Bernstein is a senior lecturer with the School of Management

at Queensland University of Technology, Australia. He received his

PhD from the University of Illinois, Urbana-Champaign. After his PhD,

he spent several years working for Motorola in the corporate finance

division. His current research efforts are focused on the determinants of

innovation, particularly on impact of innovation upon firm’s perform-

ance in the biotechnology industry. He has articles published in several

journals and has worked as a strategy consultant several large

multinational corporations.

Dr Prakash Singh is a lecturer with the Department of Management at

the University of Melbourne, Australia. His research interests are in

operations management, quality management, project management,

supply chain management and innovation management. Dr Singh has

published his research in several journal articles and presented papers at

a number of international conferences. He is the author of a new book

entitled ‘What really works in quality management: a comparison of

approaches’. Dr Singh holds a PhD from the University of Melbourne,

and combined Bachelor of Engineering (first class honours)/Bachelor

of Business (distinction) degrees from Queensland University of

Technology.

an integrated innovation process model based on practices of australian biotechnology firms

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