Introduction
Innovation as newness:
what is new, how new,
and new to whom?
Jon-Arild Johannessen
Bjùrn Olsen and
G.T. Lumpkin
The authors
Jon-Arild Johannessen is a Professor at the Norwegian
School of Management, Oslo, Norway.
Bjùrn Olsen is an Associate Professor at the Bodù
Graduate School of Business, Norway.
G.T. Lumpkin is Assistant Professor at the University of
Illinois at Chicago, Chicago, Illinois, USA.
Keywords
Innovation, Measurement, Entrepreneurialism, Norway
Abstract
Innovation implies newness. To define and measure
innovation better, we investigated three dimensions of
newness: what is new, how new, and new to whom?
Drawing on prior research by Schumpeter and Kirzner, we
developed a scale that addresses six areas of innovative
activity: new products, new services, new methods of
production, opening new markets, new sources of supply,
and new ways of organizing. Using factor analysis on data
from two separate field studies ± 684 firms from eight
industries and 200 information technology firms ± we
found that innovation as newness represents a
unidimensional construct, distinguished only by the
degree of radicalness.
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European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . pp. 20±31
# MCB University Press . ISSN 1460-1060
20
During the last decade we have observed an
explosive attention, both in the popular press
(e.g. Young, 1994) and among academics
(e.g. Drazin and Schoonhoven, 1996; Kanter,
1985), on innovation as a means to create and
maintain sustainable competitive advantages.
Innovation is considered a fundamental
component of entrepreneurship (e.g. Covin
and Miles, in press) and a key element of
business success (e.g. Nonaka and Takeuchi,
1995). This is becoming even more evident as
we move into a post-capitalist, knowledge-
based society (Drucker, 1993). Jacobson
(1992) argues that continuous changes in the
state of knowledge produce new
disequilibrium situations and, therefore, new
profit opportunities or ``gaps''. The rate of
change is also increasing due in part to
exponential advancements in technology,
frequent shifts in the nature of customer
demand, and increased global competition.
D'Aveni (1994) categorizes the situation in its
extreme form as ``hyper-competition'' and, as
we move into a more knowledge-based
society, an increasing number of industries
and firms are likely to face such hyper-
competitive conditions. Hence, the unending
and increasing stream of knowledge that
keeps marketplaces in perpetual motion will
require companies to focus even harder on
being innovative in order to create and sustain
competitive advantages.
The growing importance of innovation to
entrepreneurship is reflected in a dramatic
increase in literature that addresses the role
and nature of innovation (Drazin and
Schoonhoven, 1996; Drucker, 1985). In spite
of this increase and the resulting vibrancy
within the field, prior research has not yielded
a widely-held consensus regarding how to
define innovation. Additionally, without a
good working definition, we still lack good
measures of innovation. Kotabe and Swan
(1995) argue that one of the greatest obstacles
to understanding innovation has been the lack
of a meaningful measure. Without adequate
measures, theory development is impeded
and it becomes difficult to suggest appropriate
interventions for firms seeking to pursue
The authors thank Rod Shrader for his helpful
comments on an earlier draft and gratefully
acknowledge the funding that was provided for this
research by the Norwegian Research Council (The
FAKTA-programme).
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
innovations. To address these issues, the
overarching research question considered in
the present study is, what is innovation and
how should it be operationalized?
As a starting point, we note that nearly
every definition of innovation focuses on the
concept of newness. Slappendel (1996)
argues that the perception of newness is
essential to the concept of innovation as it
serves to differentiate innovation from
change. The newness theme is especially
important to understanding the link between
innovation and entrepreneurship as suggested
by prior studies that emphasize its pivotal role
in new venture creation and management:
``new business startup'' (Vesper, 1988), ``new
entry'' (Lumpkin and Dess, 1996), ``new
organizations'' (Gartner, 1988) and
``organizational renewal'' (Stevenson and
Jarillo, 1990). Thus, we suggest that, in order
to isolate a useful definition and measure of
innovation, we need to address three
newness-related questions: what is new, how
new, and new to whom?
With these innovation concepts in mind, we
developed a study that investigated six
different types of innovative activity:
(1) new products;
(2) new services;
(3) new methods of production;
(4) opening new markets;
(5) new sources of supply; and
(6) new ways of organizing.
The purpose of the study was to explore how
perceptions of innovative activity in these six
areas might contribute to a meaningful
definition of innovation and inform us about
effective ways to measure innovation. Two
different mailed surveys were conducted
among Norwegian firms ± a ``general'' study to
which 696 CEOs from eight industry groups
responded, and a ``knowledge sector'' study
that yielded 200 CEO respondents from the
information technology sector (IT-sector).
The remainder of this analysis is divided
into four parts. Next, we discuss prior theory
and literature that has guided the study of
innovation and contributed to our
understanding of the salient issues. Then, we
describe the sample and methods used to
investigate these issues. Third, we present our
results and, finally, we discuss the
implications of our findings for current and
future innovation and entrepreneurship
research.
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European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
Literature review
The innovation literature can be categorized
into four different approaches or orientations:
(1) individual-oriented;
(2) structure-oriented;
(3) interactive-oriented; and
(4) systems of innovation-oriented.
The individual-oriented perspective
emphasizes the role of individual factors such
as age, educational level, gender, cognitive
style and creativity (e.g. Scott and Bruce,
1994). Influential theoretical sources are
mainly found in the notion of the rational
actor and in limited rationality as a
determinant of innovation (Pettigrew, 1985;
Cyert and March, 1963). The structural
perspective focuses on organizational
characteristics. Influential theoretical sources
here are structural functionalism and
contingency theory, i.e. how organizational
structure constrains or propels innovation. A
strongly emphasized area in this perspective is
the relationship between the organization and
the environment (Slappendel, 1996). The
interactive perspective has recently received
increased attention (e.g. Van de Ven et al.,
1989; Van de Ven and Rogers, 1988). The
focus in this perspective is on how action
influences structure, and vice versa in the
innovation process (Van de Ven and Poole,
1988; Pettigrew, 1985; Walton, 1987), and
some importance has been attached to the
political context of innovation (Child and
Smith, 1987). A fourth research school which
has also received increased attention in recent
years is the study of how national and regional
innovation systems influence innovation
activity in companies (Nelson and Winter,
1982; Lundvall and Johnson, 1994; Edquist,
1997). The main focus is on the organization
in the environment, interactive learning,
knowledge creation, the practical use of
knowledge and the distribution of knowledge.
In particular, the knowledge infrastructure
and the organization of networks between
companies and knowledge institutions,
suppliers, customers and other entities are
emphasized in this perspective.
Each of these orientations may be useful for
addressing issues of the definition and
measurement of innovation. But the picture
that emerges from these diverse approaches
underscores the point that a multitude of
factors are interacting to induce innovation in
economic life. The various perspectives are
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
indicative of the lack of common definitions
and measures of innovation. The resulting
inconsistency makes it difficult to conduct
comparative studies because it is often
unclear whether researchers are studying the
same phenomena. Thus, in the subsections
below, we draw on important insights from
each of these four schools to focus on the
elements of innovation that are common
across approaches.
Innovation as newness
Most of the widely-used definitions of
innovation focus on novelty and newness. For
example, the European Commission Green
paper on innovation defines innovation rather
broadly as a synonym for ``the successful
production, assimilation and exploitation of
novelty in the economic and social spheres''
(European Commission, 1995, p. 9). Nohria
and Gulati (1996) defined innovation to
include any policy, structure, method or
process, or any product or market
opportunity that the manager of an
innovating unit perceives to be new.
Damanpour defined innovation as ``the
generation, development, and adaption of
novel ideas on the part of the firm'' (1991,
p. 556), and Zaltman et al. defined it as ``any
idea, practice, or material artifact perceived to
be new by the relevant unit of adoption''
(1973, p. 10).
Although newness is a theme in all of these
definitions, they do not agree on three basic
questions about the nature of newness: what
is new, how new, and new to whom? Several
of the definitions suggest a theme of
``successful adoption'', for example, but are
vague in terms of what is adopted and what
constitutes a success. Specifying what is new
is important for distinguishing innovation
from mere change (Slappendel, 1996)
because all innovation presupposes change,
but not all change presupposes innovation.
Additionally, none of the above definitions
addresses the issue ``how new?'', that is, the
degree or extent of newness that constitutes
an innovation. Finally, the issue of new to
whom? is also unresolved in the above
definitions. Nohria and Gulati's (1996)
definition seems confusing because it is
unclear whether the newness of an innovation
applies to the manager of an innovating unit
or to the innovating unit itself. Damanpour's
(1991) emphasis on newness to the firm
seems to exclude the kind of innovation that
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European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
might be associated with individuals or
emerge from systems of innovation outside
the firm.
As a starting point, this study embraces
Zaltman et al.'s (1973) definition of
innovation as ``any idea, practice, or material
artifact perceived to be new by the relevant
unit of adoption'' to guide our examination of
what is new, how new, and new to whom?
Next, we will discuss each of these
subquestions in more detail.
What is new?
Evidence of vagueness in specifying what
about innovation is new can be found by
analyzing how innovation has been
operationalized in prior studies. A European
example illustrates this well. In 1991, the
European Commission stated the following:
``economic performance depends upon the
progressive introduction over time of
innovations in products and processes . . . ''
(European Commission, 1991, p. 8). This
notion was elaborated in the European
Commission Green Paper on innovation
which emphasized ``the successful
production, assimilation and exploitation of
novelty in the economic and social spheres''
(1995, p. 10). When it came to
operationalizing the construct, however, the
Green Paper used proxie's as measures of
innovative activity rather than explicitly
addressing what is new. These proxie's
include, among other measures, total
expenditure on R&D, proportion of R&D
scientists and engineers, and number of
patents. Similar measures can be found in
other innovation research: Daft and Becker
(1978) analyzed the number of innovations
adopted within a given period of time, Blau
and McKinley (1979) investigated the
number of patents, Miller (1987) measured
the relative amount spent on R&D, and Miller
and Friesen (1978) used the number of new
product and service introductions. The
measures in these earlier studies often had
limited face validity and tended to foster a
narrow view of innovation.
Such operationalizations are rather weak
indicators of what is new and they generate
several levels of problems for research. First,
these measures indicate a general lack of
consistency between definition and
measurement. Second, a heavy focus on R&D
suggests a linear approach to the innovation
process, although most contemporary
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
research emphasizes circular processes (e.g.
Nelson and Winter, 1982; Edquist, 1997).
Third, by focusing on the proportion of
scientists and engineers, they leave out other
members of the organization who may be
equally important to the innovative activity
within a firm (Johannessen and Hauan,
1994). Fourth, by using patents as measures
of innovative activity, they ignore those who
argue that patents are often not
commercialized (Manu and Sriram, 1996),
and that innovations may take other forms
than only those that it is possible to patent. It
may also be argued that all innovations are
not patented. Hence, the operationalizations
and measurement of innovation in prior
research provide little guidance to the
question ``What is new?''
Exceptions, however, do exist. Some
researchers have used methods that are
consistent with Zaltman et al.'s (1973) notion
of perceptions of newness. McGrath et al.
(1996) operationalized innovation by having
participants address to what extent 15
different project characteristics were new to
the firm at the moment. The characteristics
ranged from new products to the skill of the
project team. Damanpour (1996)
operationalized innovation broadly to
encompass a range of types, including new
products or services, new organizational
structures or administrative systems, new
process technologies or new plans or
programs pertaining to organizational
members. We follow in the footsteps of
McGrath et al. (1996) and Damanpour
(1996), who themselves relied on important
work by Schumpeter (1934; 1939; 1942) and
Kirzner (1976; 1985), to operationalize what
is new in a fashion that addresses a range of
innovative activities across broadly-defined
``relevant units of adoption''.
How new?
A review of the four orientations in the
innovation literature reveals that several
different approaches have been used to
address the issue of how new, that is, the
degree of newness that constitutes an
innovation. The literature has devoted
considerable attention to debating the issue of
revolutionary innovations (Gersick, 1991).
Revolutionary innovations, often reflected in
punctuated equilibrium models (Tushman
and Romanelli, 1985), describe situations
where discontinuities totally redefine the
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European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
meaning of an industry by creating new
technological regimes or paradigms. The
invention of the combustion engine and
IBM's introduction of the DOS operating
system are examples of such revolutionary
innovations. Lawless and Anderson (1996)
argued that most punctuated equilibrium
models are explaining broad patterns of
change on a historical time scale. However,
within these paradigms, considerable
innovative activity may take place. Henderson
and Clark (1990), for example, argued for the
importance of architectural innovations, i.e.
the reconfiguration of existing products.
Drazin and Schoonhoven (1996) noted that
the emergence of a dominant design leads to
additional innovation, bringing new
approaches and technologies in its wake. For
instance, in the IT-sector, the pace of
innovation has been extremely rapid within
existing technological regimes.
The distinction between radical and
incremental innovations is also often
highlighted in studies of innovativeness. Hage
(1980) argued that innovations vary along a
continuum from incremental to radical. The
term ``radical'' has been associated with
revolutionary innovations, whereas
``incremental'' is associated with innovations
within a paradigm (Dosi, 1982; Dewar and
Dutton, 1986). However, the distinctions
noted above suggest that the terms radical
and incremental could also be used in a
within-paradigm context. Damanpour
(1996), for example, used the term radical
innovations to characterize innovations that
produce fundamental changes in the activities
of an organization and large departures from
existing practices, whereas the term
incremental innovations was used to depict
innovations that represent a lesser degree of
departure from existing practices. In both
cases, the terms apply to within-organization
innovations.
From this very brief review of the literature,
we observed that the issue of ``how new'' is
closely linked to the question, ``new to
whom?'' That is, in order to operationalize the
distinction between incremental and radical
innovations, we must also determine the
relevant unit of analysis. It is that issue that
we turn to next.
New to whom?
Prior innovation research suggests that the
extent of newness of an innovation may be
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
related to the domain into which the
innovation is adopted. In other words, to
assess the nature of an innovation, we need
simultaneously to consider the ``relevant unit
of adoption''. Both Cooper (1993) and
Kotabe and Swan (1995) argued that
innovation can be investigated in terms of
both newness to the company (the firm-based
framework), and newness to the market (the
newness to the market framework). Although
the firm-based framework is unlikely to reflect
a product's impact on either competitors or
customers (Kotabe and Swan, 1995), from a
broader perspective, the measure does
capture the ability of a firm to service and
continue to update the innovative technology
which are key consumer concerns. Thus, even
innovations that are primarily new within a
firm may have an impact outside the firm.
Booz, Allen & Hamilton (1982) combined the
two approaches in a framework that identifies
six levels of product innovativeness. However,
since innovations can materialize both as new
products and new processes (Utterback and
Abernathy, 1975; Damanpour, 1996), we
argue that newness to a market framework
represents a view that is too narrowly focused
on product innovations. To encompass both
product and process innovations, we suggest
that newness to the industry, rather than
newness to the market, represents a more
broadly-construed and inclusive framework.
Thus, by ascribing to Zaltman et al.'s
(1973) notion of ``relevant units of adoption'',
we envision a continuum of units of adoption
that is roughly parallel to the degree of
radicalness continuum. That is, as the
economic unit that adopts an innovation
becomes more broadly-defined or
encompassing, the impact of the innovation is
more likely to be radical, that is, organization-
changing or paradigm-shifting. In
operationalizing this distinction, therefore, it
is important to inquire about both within-firm
and industry-level innovations to address the
question, ``new to whom?''
Methodology
Sample and data
The findings reported in this paper are based
on data from two separate studies. For the
first study, labeled the ``general'' study, data
were collected from eight different industry
groups. In the second study, called the
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European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
``knowledge-sector'' study, data were
collected from the information technology
sector (the IT-sector). Both studies included
both manufacturing and service firms.
The general study was part of a larger study
on critical innovation factors in Norwegian
firms. The study was initiated and sponsored
by the Norwegian Ministry of Local
Government and Labor. A field survey was
designed and survey data were collected from
eight different industry groups including both
manufacturing and service firms. The firms
were selected from a Norwegian database
(Bedriftsdatabasen) consisting of all
incorporated firms in Norway. Within each
group, we randomly selected 750 firms, using
a total of 40 two-, three-, and five-digit
NACE codes (Nomenclature geÂneÂrale des
ActiviteÂs eÂconomiques dans les
CommunauteÂs EuropeÂennes): 111, 18, 192,
193, 20, 21, 23, 24, 28, 630, 28, 752, 297,
30, 31, 32, 33, 34, 300, 35, 361, 364, 365,
36, 631, 36, 633, 40, 45, 45, 442, 524, 55,
633, 72, 73, 741, 746, 747, 85. Since not all
of the eight categories contained as many as
750 firms, the final mailing included only
5,584 questionnaires. The surveys were
mailed in January 1996 to the CEOs of these
firms as they were considered to be best
informed about the extent of innovative
activity within the firm. The questionnaires
were followed-up by two written reminders. A
total of 267 undeliverable questionnaires were
returned. Of the 5,050 remaining firms, 696
returned questionnaires. Of these, 12 could
not be used for further studies. The final
count of usable questionnaires was 684 for a
response rate of 13.5 per cent.
The second study, the knowledge-sector
study, was part of a larger study on innovation
and performance in small and new firms
within knowledge-based sectors in Norway.
The study, which was initiated and sponsored
by the Norwegian Research Counsil, focused
primarily on relatively new (< ten years old)
SME's (< 100 employees). To highlight the
research question, a field survey was
designed, and survey data were collected from
the Norwegian IT-sector. This sector was
chosen in part because a priori studies of the
Norwegian IT-sector (STEP, 1995) indicated
a higher level of innovations in this sector
than in other industry sectors. This gave us
reason to believe that the IT-sector was, on
average, more knowledge intensive than the
average of all other sectors which we regarded
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
as important for testing our research
questions. In order to encompass most of the
value chain-related activities of the IT-sector,
we included both hardware and software
producers, as well as sales and services
connected to IT in our sector definition. A
total of 12 four-digit NACE codes were
selected for this study: 3000, 3200, 3300,
5164, 6420, 7133, 7260, 7210, 7220, 7230,
7240 and 7250. Firms were selected from the
same Norwegian database (Bedriftsdatabasen),
containing all incorporated firms in Norway.
To meet the focus of the overall research
program, the criteria for selection were:
. firms had to be ten years old or less; and
. firms had to have more than two and
fewer than 100 employees.
Initially, 5,631 companies were considered;
4,551 companies were excluded as they did
not meet the above criteria, leaving 1,080
companies to survey. Questionnaires were
mailed in March 1996 to the CEOs of these
firms as they were considered to be best
informed about the firm's innovative activity.
The questionnaires were followed-up by two
written reminders. A total of 63 undeliverable
questionnaires were returned. Of the 1,017
remaining firms, 200 returned completed
questionnaires for a response rate of 19.6 per
cent. This rate would seem comparable to
that achieved in similar studies.
Measures
An extensive literature review was conducted
prior to operationalizing the constructs to
enhance the construct validity of our
measures. To capture the essence of Zaltman
et al.'s (1973) definition of innovation as
``ideas, practices or material artifacts
perceived to be new'', we used six variables to
reflect perceptions of different types of
innovation. For the knowledge-sector study,
we also used a question that distinguished
innovations based on the degree of
radicalness.
To operationalize innovation effectively, we
have argued that we need to ask the question:
what is new? We argue at the outset of this
paper that the potential for innovations is
found in the ``gaps'' that open up as the result
of new disequilibrium situations arising from
continuous changes in the state of knowledge.
Consistent with prior research, we suggest
that, within a paradigm, these gaps can be
filled with six different types of innovative
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European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
activity. Hence, for both studies, we used six
variables to assess the innovativeness of the
firms we examined. These variables are:
(1) new products (NEWPROD)
(2) new services (NEWSERVI);
(3) new methods of production
(NEWMETO);
(4) opening new markets (NEWMARK);
(5) new sources of supply (NEWMATER);
and
(6) new ways of organizing (NEWORG).
The variables are adopted and deduced from
Schumpeter (1934; 1939; 1942)[1] and
Kirzner (1976; 1985)[2], but have also been
used separately by a numbers of researchers
(e.g. Utterback and Abernathy, 1975;
Damanpour and Evan, 1984; McGrath et al.,
1996; Damanpour, 1996). However, the
composition of innovation variables which are
used in the present study has not, to the best
of our knowledge, been previously used in this
form for studying innovation.
In the general study, respondents were
asked to indicate on a five-point scale the
degree to which their company had made
changes within the last three years to any of
the six innovation variables (mentioned
above) that were of such a nature that they
were perceived to be new to the company. For
each of the areas, respondents were asked to
indicate the extent of change using a
five-point Likert-type scale ranging from 1 =
``To no extent'' to 5 = ``To a very great
extent''.
In the knowledge sector study, we
endeavored to distinguish between radical
and incremental innovations. Drawing on the
line of arguments made in the literature
review, we propose that innovation
radicalness may be distinguished by
classifying it on the grounds of newness to the
``relevant unit of adoption''. Hence, in order
to link the issue of ``how new?'' to the
question, ``new to whom?'', we collapsed
innovation radicalness into the following two
definitions: Incremental innovations are any
idea, practice or material artifact that is
perceived to be new to the firm, but which
may have been previously used by other firms.
Radical innovations, by contrast, are any idea,
practice or material artifact perceived to be
new to the industry. Thus, in the knowledge-
sector study, we used the firm and the
industry in which the firm operates as the
distinguishing criteria. Respondents were
 Innovation as newness European Journal of Innovation Management
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin Volume 4 . Number 1 . 2001 . 20±31

asked to indicate (yes or no) whether the sector study in Tables IIa and IIb. The Tables
company had made changes within any of the display the component loadings,
above mentioned six innovation variables communalities, and sum of the squares, as
within the last three years, which were of such well as descriptive statistics.
a nature that they were perceived as new to As only one component was extracted for
the company, but which had been previously each innovation category in both studies, the
used by other firms. They also responded to solution converged after one rotation for both
measures of radical innovation when asked to incremental and radical innovations. Hence,
indicate (yes or no) whether the company had the component loadings showed that the
made changes within the same six areas analysis grouped together items, both for
within the last three years, which were of such radical and incremental innovations, which
a nature that they were perceived as new by on a priori ground, might have been regarded
the industry in which they operated. For an as very similar. Although a number of studies
overview of innovation measures used in the have suggested that we should classify
two studies see the Appendix. innovations according to whether they are
technical or administrative, or process- versus
Analysis product-oriented (e.g. Utterback and
For the innovation variables, separate principal Abernathy, 1975; Dosi, 1988; Teece, 1989;
component factor analyses were used to reduce Damanpour, 1996), our findings support Van
the data and develop and test the validity of de Ven (1986) and Nohria and Gulati (1996)
meaningful constructs. An eigenvalue of one who argue that such distinctions resulted in
was used to determine the number of an unnecessary fragmentation of innovation.
components to extract for further analysis
(Kim and Mueller, 1978). To ensure
Table IIa Varimax-rotated component loadings for incremental innovation
convergent validation, items were retained on a variables in the knowledge-based study
factor if their loading exceeded 0.5 on the
Variable NMean SD Components Communality
primary factor; to ensure discriminant validity,
no variable could load above 0.4 on any NEWPROD 198 1.18 0.38 0.56390 0.31798
secondary factors. To clarify the loadings, the NEWSERVI 195 1.31 0.46 0.55382 0.30672
components were rotated. The varimax NEWMETO 195 1.46 0.50 0.74293 0.55195
rotation method was selected for its simplicity NEWMARK 197 1.30 0.46 0.51997 0.27037
and rigor (Nunnally, 1978). Cronbach's alpha NEWMATER 194 1.41 0.49 0.74867 0.56051
were calculated to ensure internal consistency. NEWORG 192 1.35 0.48 0.51991 0.27031
Eigenvalue 2.77
% Variance 38.00
Findings Alpha 0.67
Note: Listwise missing value treatment
The results from the principal component
factor analysis for the general study are
exhibited in Table I, and for the knowledge-

Table I Varimax-rotated component loadings for innovation variables in Table IIb Varimax-rotated component loadings for radical innovation
the general study variables in the knowledge-based study

Variable NMean SD Components Communality Variable NMean SD Components Communality

NEWPROD 684 3.02 0.98 0.77077 0.59409 NEWPROD 192 1.40 0.49 0.73170 0.53538
NEWSERVI 685 2.86 0.92 0.72582 0.52681 NEWSERVI 190 1.66 0.47 0.63946 0.40891
NEWMETO 681 2.73 1.12 0.72471 0.52521 NEWMETO 191 1.70 0.46 0.74635 0.55703
NEWMARK 682 2.79 1.02 0.70185 0.49259 NEWMARK 191 1.54 0.50 0.65021 0.42278
NEWMATER 669 2.08 1.02 0.58661 0.34412 NEWMATER 190 1.58 0.49 0.76191 0.58051
NEWORG 688 3.00 0.99 0.64187 0.41199 NEWORG 190 1.67 0.47 0.59944 0.35933

Eigenvalue 2.89 Eigenvalue 2.86

% Variance 48.20 % Variance 47.70
Alpha 0.86 Alpha 0.78

Note: Listwise missing value treatment Note: Listwise missing value treatment

26
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
This finding is also consistent with
Damanpour (1991) who found that type of
innovation did not appear to influence the
relationship between organizational
determinants and innovation.
The principal component factor analysis of
the six innovation variables, in both studies
and for both incremental and radical
innovations, confirmed the unidimensionality
of the scale. All six variables loaded strongly
on the same factor. Further, reliability
analysis performed on the scale also
confirmed the contribution of the six items as
indicators of an overall construct of
innovation. The innovation construct also
met the requirement of convergent validity as
there were no statistically significant negative
relationships, as well as the requirement for
discriminant validity, as there were no
significant correlations or factor loadings of
measures that were assumed to be distinct.
Thus, the results satisfied the requirements
necessary to validate a undimensional
construct (Campbell and Fiske, 1959). This
indicates that the composition of variables
deducted from frameworks suggested by
Schumpeter and Kirzner shows a very
promising direction for measuring innovation,
as it enables us to treat innovation as a single
concept.
Discussion and implications
Innovation is a critical activity that is vitally
important for most firms to embrace in order
to create and sustain a competitive advantage.
Drucker describes innovation as ``the specific
instrument of entrepreneurship'' (1985,
p. 30) and thus, among entrepreneurial firms,
it may be the most critical success factor.
Given the pivotal role of innovation to
entrepreneurship and business success within
increasingly knowledge-based and hyper-
competitive environments, the need to
understand innovation has become
paramount. In order to do so, we have
endeavored to explore the concept of
innovation and how to measure it. We have
seen that there exists some disagreement
between the definition and the measure of
innovation, and in some cases there is little
consistency between definitions and
measures. The objective of this paper was to
search for a meaningful measure of
27
European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
innovation by focusing on the ``common
denominator'' of innovation: newness.
Our results indicate that innovation at the
organizational level can be defined and
measured as a single construct, distinguished
only by the degree of radicalness. That is, by
focusing on newness as the central concept of
innovation, we found that innovation met the
requirement of convergent and discriminant
validity necessary to support a undimensional
construct (Campbell and Fiske, 1959).
Although newness has several components ±
as indicated by our three subquestions: what
is new, how new, and new to whom? ± our
results suggest that innovation ranges across a
single continuum that encompasses all three
aspects. This is consistent with prior research
which suggests that the innovation construct
need not be fragmented into separate
categories or types (Nohria and Gulati, 1996;
Van de Ven, 1986). Our findings are also
supportive of the view that how new an
innovation is perceived to be is closely linked
to the issue of who perceives it as such. That
is, as the economic unit that recognizes the
newness of an innovation increases in size or
scope, the more radical the innovation is
considered to be.
These findings, which enable us to treat
innovation as a single construct, are very
promising for future innovation and
entrepreneurship research. First, by focusing
on newness as the essence of innovativeness,
it provides a useful starting point for
applications of the innovation concept. In this
way, it confirms Slappendel's (1996)
assertion that innovation is something more
than mere change. Thus, for example, in
arenas such as process reengineering or
organizational design, it allows us to
distinguish between changes that are simply
alternatives or copies, and changes that are
novel and original. As such, the focus on
newness can be an indicator of the building-
blocks of sustainable competitive advantage
by highlighting factors that are, because of
their newness, rare and inimitable, consistent
with a resource-base approach to developing
competitive advantage (Barney, 1991).
Even though our findings support a
unidimensional innovation construct, the
method used here allows us to consider a
range of innovative activities, that is, types of
newness. Thus, innovation as newness does
not focus too narrowly on elements such as
how highly technical an innovation is, or the
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
outcome of large investments in R&D.
Instead, it considers a broad array of
innovations ± characterized by the six areas
addressed in this study ± and acknowledges
that innovation might occur in any of these
areas. In this way, innovation as newness cuts
across the four approaches to innovation
outlined in the literature review. That is, an
innovation is just as likely to come from an
individual inventor as from an organizational
initiative or a government-sponsored
program. The success of an innovation,
therefore, is determined more by the extent of
its adoption than by who originates it or how
technologically advanced it is. What makes it
innovative is its newness.
Numerous studies have focused on the
external and internal influences that are
associated with innovativeness in
organizations. The insights from this study
regarding the importance of newness to
innovative processes may help organizations
further innovation by suggesting ways to
manage and predict factors that are
antecedent to and corollaries of innovation.
External factors influencing innovation that
have been highlighted in the literature include
customer-supplier relations (Von Hippel,
1989), network studies (HaÊkanson, 1989;
Midley et al., 1992), market conditions (Ames
and Hlavacek, 1988; Ancona and Caldwell,
1992), and external knowledge infrastructures
(Lundvall, 1992; Nelson, 1993). Each of
these is a potential source of ``ideas, practices,
and material artifacts'' for innovation. As an
example, it can be argued that the richest
sources for stimulating innovation are those
factors that are most new. For network
relationships to contribute positively to
innovativeness, therefore, it may be necessary
to emphasis ``weak ties'' (as opposed to
``strong ties'') because weak ties provide more
diverse and rich links to the kind of novel and
unique information that may be needed to
generate innovative activity (Granovetter,
1973). Other external factors that emphasize
newness may also be fruitful for
understanding and promoting innovation.
Internal factors associated with innovation
might also be profitably managed by focusing
on newness. Internal factors that may be
critical for utilizing the innovation potential in
companies include cultural factors (Hage and
Dewar, 1973), structural links, i.e.
information, communication and learning
processes (Teece, 1986; 1988; Tushman and
28
European Journal of Innovation Management
Volume 4 . Number 1 . 2001 . 20±31
Nadler, 1986), internal competencies
(Drucker, 1985; Quinn, 1992), and the role
of management information and
communication technology (Freeman, 1991;
Antonelli, 1993). Maintaining an internal
awareness of the importance of newness to
innovation may aid a firm's innovation efforts.
For example, factors such as cultural and
structural forces often tend to be
impediments to innovation because they lock-
in traditional methods and thus shut out new
ideas and practices (Miller, 1990). Even core
competencies such as values, technical skills,
and management systems that served a
company well in the past can evolve into
``core rigidities'' that hinder effective
innovation as Leonard-Barton (1992) found
when studying new product development. To
keep such tendencies from inhibiting
innovativeness, firms need continually to
infuse their knowledge sets with newness: new
ideas, new skills, new personnel and new
forms of organizing. Thus, by emphasizing
the importance of newness to the process of
innovation, managers may identify more
targeted interventions that can be used to
generate innovativeness more effectively.
Future research should endeavor to
overcome some of the limitations of this
study. We relied on a single respondent to
address an organization-level question; future
research might seek the views of multiple
organization members to reduce the potential
for common method variance. Nevertheless, a
data reduction technique such as factor
analysis as was used here should not be
troubled by the types of problems often
associated with hypothesis guessing or
common method variance (Cook and
Campbell, 1976). Our measure of the range
of radicalness was essentially dichotomous.
Future research might benefit by taking a
finer-grained approach to measuring the
``relevant units or adoption'', consistent with
Zaltman et al.'s (1973) approach to
innovation. Additionally, more specific
measures of how new an innovation is
perceived to be would strengthen this
approach.
Future research might also consider how
innovation as newness is related to
performance and other internal and external
factors. For example, Nelson and Winter's
(1982) study suggests that innovators may not
be as profitable in the long run as imitators. Is
there a price to pay for being the most
 Innovation as newness
Jon-Arild Johannessen, Bjùrn Olsen and G.T. Lumpkin
innovative? Or can a firm focus on the
newness aspect of innovation without
jeopardizing profitability? The innovation-
performance relationship might also be tested
with regard to potential contingencies. How,
for example, do industry effects and
environment relate to issues such as the
newness or radicalness of an innovation? For
new entrants, how important is
innovativeness to launching a successful
start-up? For established firms, what are the
internal organizational factors that contribute
to or detract from effective innovation? Such
studies, by maintaining a focus on the role of
newness in the process of innovation, can help
researchers unravel the underlying
assumptions of innovation, and help
managers apply appropriate interventions to
pursue innovation. To meet this challenge, we
suggest that future researchers endeavor to
understand more precisely these basic
questions about innovation ± what is new,
how new, and new to whom?
Notes
1 Schumpeter (1934) also used ``change of market
form'' as one type of innovation. We exclude this
variable from our analysis as it represents a change
that we consider revolutionary, hence, outside the
focus of this study.
2 New services was not used originally by either
Schumpeter or Kirzner, but is included here to better
capture a contemporary phenomenon. This is
consistent with Quinn et al. (1996) who note that
75 per cent of all economic activity now involves
delivery of services and intangibles.
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that were perceived to be new to the
industry in which the company operates,
within the following areas? (Please circle
Appendix one response in each row).
Innovation measured used in the New products Yes No
``general'' and ``knowledge sector'' studies New services Yes No
Has your company made changes during the New methods of production Yes No
last three years that were perceived to be new Opening new markets Yes No
for the company, within the following areas? New sources of supply Yes No
(Please circle one number in each row). New ways of organizing Yes No

31