Implications of Internal and External Innovation

Innovation has been the very essence of organizational survival. As a result, organizations, big or small, constantly and eagerly invest in innovation. In the meantime, there are a large number of different types of innovation. For example, companies can engage in open or closed innovation depending on whether they perform innovation activities openly in cooperation with external parties or closely on their own. In this study, we focus on yet another type of categorization of innovation – internally-focused or externally-focused innovation. Internally-focused innovation covers the type of innovation that is internal to the firm. This is the type of innovation whose audience is mostly internal and deals with innovating internal processes. On the other hand, externally-focused innovation deals with innovating the products and services that companies offer to their customers. Research suggests that organizations that engage in these two different types of innovation face completely different types of challenges and need to take into account totally different sets of considerations when investing in these two different types of innovation (Ozer, 1999; Ozer & Zhang, 2015). In other words, it is obvious that these different types of innovation require completely different types of attention on the part of the organizations. Given this background, this study addresses the implications of these different types of innovation to different types of organizations.