Describe internal innovation, and the two types of internal innovation. What are the advantages and disadvantages of organizations relying on internal innovation?

Question

What will be an ideal response?

Answer 1

When organizations use their own resources and capabilities to create innovations, they are engaged in internal innovation. Incremental innovation occurs when each innovation builds on the firm's existing knowledge base. Conversely, radical innovation occurs when new knowledge is created. While incremental innovations, such as the extension of a product line, can be very profitable, radical innovations may lead to more substantial profits. But, internal innovation carries some risks. Internal innovations take more time than acquiring another firm or engaging in cooperative innovation. This handicaps the firm in getting a new product or service to the market rapidly. There are risks to all innovation, and the firm must have a culture that tolerates and supports failure, especially if it wishes to pursue radical innovation. Failures can lead to significant learning for the organization, which may allow it to innovate more successfully in the future. With internal innovation, the organization must take on all the risk itself, although it doesn't have to share the profits with another organization.