Enterprenureship

Define Innovation and Its types

Innovation is the "creative Destruction" which involves a set of principles. It plays an important role in entrepreneurial activities. It is the process by which an idea or innovation is converted into good or service for which the people will pay. To be called an innovation, an idea must be replicable at an economical cost and must satisfy a specific need. Innovation is the central to identifying entrepreneurs and their behavior. It is a tool by which entrepreneur creates wealth.

There are two types of innovation

Products and

Process

Within each of these two categories, there are three degrees of innovation:

Incremental

Synthetic and

Discontinuous

1) Incremental

Most product innovations are incremental which involves minor changes to enhancement to existing technologies. They are usually made in response to the increasing competitions and customer feedback.

Once a new product is launched, the process of incremental improvement is ongoing.

In same way, the incremental process innovation seeks to continuously improve quality or lower cost via enhanced productivity or reduced cost.

2) Synthetic

Synthetic innovation involves the ability to combine existing ideas or technologies in creative ways to produce new products or processes.

For example, in 1930, the Douglas DC 3 incorporated the existing technologies already available within the aircraft industry which led to superior aircraft than any others.

Synthetic process usually involves major advances in manufacturing or production e.g rotary kilns in cement manufacturing.

Entrepreneurial activity

There are number of methods used to determine the impact of entrepreneurial activity including the number of start up efforts, the incorporation of firms, changes in net tax returns filed and the amount of self employment. During 1980 to 1999, fortune 500 companies lost 5 million jobs in U.S due to downsizing which was offset by 34 million new jobs because of entrepreneurial activity.

Entrepreneurial firms contribute to economies in terms of economic renewal and enabling individuals to enter the social and economic mainstream. Level of entrepreneurial activity around the world can be measured by the fact that 47 percent of people in EU and 67 percent in US prefer self employment for working for wages.

There are two types of entrepreneurs, necessity entrepreneur and opportunity entrepreneur. Necessity entrepreneur are those who enter into self employment out of lack of choice usually