The Innovation Process: A Socio-Cognitive Analysis

Business Education, GBSN Member Schools

Nowadays, innovation is a key dimension in the performance of business organizations. In contexts that are more and more dynamic and competitive, and where clients have become more demanding, firms need to distinguish themselves by developing new products and services, and/or improving their processes to gain in terms of productivity. Through innovation, they are asked to build a competitive advantage by meeting new expectations from customers and entering new markets or adopting more effective practices and technologies. For organizations, it is a matter of survival. Innovation gives them an effective solution to deal with sectors convergence, technological dynamism and market globalization. For entrepreneurs, innovation is the key factor to overcome market barriers and create new value or new industries. As Peter Drucker[1] (1985, p. 19) stated: « Innovation is the specific tool of entrepreneurship, the means by which they exploit change as an opportunity for different business or a different service. »

Accordingly, the question that becomes important is not « Why innovate? » but « How to innovate? », and more precisely, « How to successfully do so? ». This question is critical given the fact that innovation is a complex and costly process. To answer it, numerous researchers have tried to identify determinants that foster innovation within firms and contexts. At the beginning, they have exposed the role played by governments in setting the rules and incentives that promote innovation, and that of financial agents (venture capitalists, business angels, etc.) in supporting innovative efforts, as well as national cultures that encourage risk-taking, uncertainty acceptance, creativity, etc. Other authors have highlighted the importance of dimensions related to the sector such as the nature of the market demand, the degree of competition, the role of suppliers, etc., to explain to what extent a context stimulate innovation or not. In addition, research on innovation has shown the importance of endogenous factors like the organizational structure (centralized or not), strategy (entrepreneurial vs. conservative), resources (sufficient or not), culture (creative or not), etc. These factors determine the willingness and the capacity of business organization to innovate.

These findings have certainly helped managers to understand how innovation in firms is determined by their environment and their internal characteristics. However, they have mainly focused on economic and technical factors and ignored social and psychological ones. The latter seem very important since innovation involves newness, risk and change, those dimensions which limit the rationality of individuals and consequently, determine their decision to innovate or not. Actually, the high degree of uncertainty, risk and change that characterize innovation, may imply socio-cognitive dimensions related to the values, the feelings, and the perception of individuals and relationships between them and organizations. In other terms, the choice to innovate may be relevant or not from a technical and economic point of view but be rejected or accepted for socio-cognitive reasons. In the following paragraphs, we will try to describe socio-cognitive processes that firms need to take into account in order to succeed in developing or implementing an innovation. These ideas rely on the principles of the new institutional theory, as described by W. Richard Scott (2001) in his book entitled “Institutions and Organizations”. This theoretical approach offers a very useful explanations of mechanisms that determine the behavior of individuals and firms in a context beyond the rational perspective usually based on economic and technical arguments.

First, firms and individuals may refuse an innovation because it is uncertain. In fact, innovation usually brings newness to its context, and consequently, puts firms and individuals in front of unknown situations (technologies, practices, etc.). These latter often lack information when it comes to developing new products/services or exploring new markets, and are unable to predict the result. In this case, they are unable to understand what the new solution, or the process to get to it, is and how it works. They cannot determine whether these innovations are useful for them and to what extent they can master their development or implementation process. In fact, a customer may hesitate to adopt a new technology because he/she perceives himself or herself as lacking the expertise (he/she fails to see how to operate it) or because he/she can’t get the information that he/she needs to assess its relevance before its development or adoption. To overcome this cognitive barrier, more efforts have to be deployed by innovators in presenting and explaining their innovative solutions. Communication plans are a key dimension in such a situation. Innovative firms need to spend a lot of money and time to inform their clients and/or customers about their new solutions, to offer them a test period, to train them and coach them in order to equip them with the knowledge and expertise needed for using their new technologies, and to let them verify its performance. Communication plans are also to be used inside organizations to promote new technologies and practices among individuals. In fact, firms need to ensure an internal acceptance for innovations to guarantee their implementation. In such situations, information and training sessions are essential to reduce the perception of new things as unknown and by consequence, as uncertain.

Secondly, individuals may be reluctant to innovation because it is risky. Innovation requires hefty budgets and doesn’t lead all the time to positive results because of the changing environment of firms and its sophisticated characteristics. It is risky given the high costs and complex technologies and practices it implies. Individuals and firms may well refuse to adopt a new technology that is clearly effective because of their fear of failure. To overcome this barrier, individuals and firms need to feel reassured about the outcomes of new technologies and practices. To do so, at the external level, firms need to build into their innovations a positive perception among their customers. For instance, firms will submit their products to industry competitions, professional certifications and recognized clients’ approval. Thus, they are able to promote their new technologies and practices by referring to the awards and accreditations they have received from legitimate actors like professional associations, and also by using first adopters as references specially when these are well-respected in their context. The trust that clients have in these institutional actors will benefit to the promotion of innovative solutions. In this way, innovators also use well-known and trusted persons to publicize their new products and services. They aim to link their innovations to firms and individuals who are credible in their contexts. At the internal level, this process is also useful: firms involve managers who enjoy a good reputation and positive history in running innovative projects. Their successful background helps them to reassure individuals around them about the positive consequences that innovation could bring. They give them the feeling that the innovation journey will be successful. These practices reduce the risk associated to innovative solutions and reassure individuals and firms when it comes to innovate.

Thirdly, individuals and firms may avoid innovation that could threaten the advantages that they have in the present situation. Innovation requires a switch from a situation where individuals have their well-established benefits, to another situation that is uncertain for them. They need to have the guarantee that the new situation brought about by the innovation will benefit to them. To do so, innovative firms rely on a participative process to develop and launch their new products and processes. By involving customers and users in the innovation process right from the development phase, firms not only understand better their needs but also allow them to safeguard and maximize their interests in the new situation and consequently, facilitate the implementation phase. Thus, firms ensure that the benefits of stakeholders are assured with the innovation implemented. For instance, technologies that generate the replacement of human resources within the automotive or banking industry, often require to involve employees or their representatives in their development or implementation, in order to integrate their expectations. In this case, firms ensure that employees will not be affected by the technological shift or the adoption of new practice. In this way, innovators reduce the perceived change associated with their new technologies and practices. They could also try to present that change as advantageous by offering incentives for users and clients. For instance, first adopters could be offered major or leading positions once the innovation implemented. Financial incentives could be given for those who show innovative actions. Finally, innovative firms may look for a support from the regulatory institutions to promote the adoption of their new technologies or new practices. For instance, innovators developing solutions that promote sustainable development or job security, seek the governmental support. They ask for the elaboration of rules that promote their solutions. In this case, individuals or firms decide to develop or adopt a new technology or practice in order to conform by the rules established by an authority. At the internal level, innovators look for the support of the top managers in order to persuade the more reluctant users.

Fourthly, individuals and/or firms may refuse to innovate because they prefer to keep their habits. Innovation brings changes in its context in terms of behaviors and practices. When facing it, individuals and firms may defend the status-quo instead of trying something else that is new. In fact, individuals and firms prefer to keep practices and technologies that they used to. In this case, innovative firms choose to develop their new technologies and practices by integrating some characteristics from the previous technologies that are important for users and customers. In doing so, they give the latter the perception that by adopting the new solutions, their habits will not be radically altered. For instance, the design of new products could include some features of the previous ones and the introduction of new practices takes into account habits and routines that are important for individuals. This being said, firms could also try to set the innovative actions as desirable in their contexts. Actually, the most innovative firms set the change as a mindset among their stakeholders, by valuing people and organizations that promote innovative solutions. By doing so, innovation also becomes a habit in its context. To do so, they build a strong confidence among individuals by awarding the most creative individuals.

Thus, when developing or adoption an innovation, it is certainly important to take into account the economic factors of their market, the technical aspects of the products or processes, the organizational and strategic characteristics of their firms. However, to ensure the success of their innovative projects, it is critical to bear in mind that given the newness, the risk and the change associated with the innovation process, firms need to consider the social and psychological mechanisms that determine the willingness and the ability of individuals and firms to innovate. The importance of those socio-cognitive processes may differ from a context to another but they still exist, and may positively or negatively impact the innovative efforts of firms.


[1] Drucker, P. (1985). Innovation and Entrepreneurship : Practices and Principles. New York: Harper & Row.

Imad-Eddine Hatimi is the Associate Dean in Charge of Accreditations at GBSN member school, ESCA Ecole de Management in Morocco.