Attila Havas


Budapest, HU


Business Innovation and social innovation


Kiútprogramme - social exclusion of Roma in Hungary

By Attila Havas

Eight lessons for social innovation from business innovation studies

1. What is innovation?

While most policy-makers, journalists, natural scientists and other opinion leaders tend to think of innovation as a ground-breaking technological idea, contemporary economic analysis of business innovations has a different understanding:

  • Innovation is not an idea. It is a solution introduced to the market.
  • New solutions don’t need to be ‘world class’ to be innovations. New solutions are distinguished by who they are novel to: a solution can be new to the organisation introducing it, a given market or geographic area, or the world.
  • Innovation isn’t just technological (whether that technology is applied to products, services or processes): organisational and marketing innovations are also important. Technological innovations cannot be successful without non-technological innovations; studies of innovation clearly show that introducing technological innovations without organisational innovation is more the exception than it is the rule. In many cases marketing and market innovations are nalso needed.

2. What to expect from social innovation?

The literature on business innovation stresses the need to identify the subject (or level) of change, and has developed the relevant levels that are needed to perform detailed analyses.

In social innovation, however, different definitions break down units of analysis differently, whether at the level of social innovation projects (such as the case studies in the CrESSI project) or at a macro level (see for example. Moulaert et al., 2013; Heiskala, 2007). In order to assess the change brought about by a social innovation from a policy point of view, it is crucial to have a clear objective as to what sort of change is aimed at and at what level.

3. The ‘dark side’ of innovation

Innovation does not always bring positive changes. There are many obvious examples of this from business innovation studies, such as:

  • the way that inferior technological trajectories become ‘locked-in’ (Arthur 1989; David 1985);
  • the negative health and environmental consequences of widespread motorisation (Barker, 1987);
  • ‘planned obsolescence’, that is, purposely limiting the life-span of consumer goods (Calvano, 2007);
  • the so-called financial innovations introduced in the name of ‘dispersing the risk’, which in fact allowed a few, well-informed and well-positioned individuals to profit immensely whilst putting a hug financial burden on society as a whole (Soete, 2013).

Social innovation may also have a ‘dark side’ (Nicholls et al. 2015: 5–6). Clearly, no society is homogenous, not even those members of it who are marginalised and disempowered: they still have their own values and views, and might perceive certain changes and their effects in different ways. Moreover, a particular policy measure or social innovation project that improves the situation of some groups can, in fact, affect other groups negatively in actual objectively measurable ways. Social innovation policy-makers and practitioners need to consider this when devising interventions and specific policy tools.

4. Diversity matters

Social innovations – even more so than business innovations – draw on various types (scientific and practical) and forms (codified and tacit) of knowledge, stemming from different sources (organised and systematic research & development activities, or other types of search processes such as those by practitioners). Nurturing diversity is, therefore, important.

Social innovations are also diverse in terms of their nature, drivers, objectives, the actors involved, the knowledge bases exploited, and their dynamics. To devise appropriate policy tools, policy-makers need to recognise the diversity of social innovations, too.

5. Intellectual property rights would be harmful

‘The market failure argument’ advanced by mainstream economics implies that a strong intellectual property rights (IPR) regime is a must. But this policy approach is unlikely to be the most germane one to promote social innovation. Gaining recognition as being a creative social innovator is a stronger driver than protecting the IPR of ‘social inventors’. Policies should promote the dissemination and exploitation of relevant knowledge to foster social innovation, rather than constrain these processes through IPR.

6. Understand and tackle ‘systemic failure’ by social innovation policies

The concept of ‘systemic failure’ comes from business innovation studies and can be directly extended to social innovation, without any theoretical constraint. It is a demanding task to establish which elements of an innovation system are missing or fledgling, which institutions (‘rules of the game’) hamper social innovations and how, and therefore what policy actions would be appropriate to induce the necessary changes. Nevertheless, these analytical efforts cannot be spared when devising effective policy measures.

7. ‘Framework’ conditions for empowerment and capacity building

Just as for business innovations, framework conditions for social innovations are of crucial relevance. Yet, as social innovation policy-makers cannot influence these factors, they need to orchestrate their efforts with those officials, who devise policy measures that affect framework conditions for social innovation. Empowerment and capacity building are influenced by a number of policy domains,  including education and culture, labour market and employment, social care and social housing, regional development, health, and taxation policies, as well as regulations on setting up and closing down businesses.

8. Many social innovations can’t succeed without business innovation

Our longitudinal analysis of fresh water supply and social housing showed that many social innovations can only be successful when supported by various types of business innovations, whether technological, organisational, business model, financial, or market innovations. Social innovations, therefore, need to be considered by science, technology and innovation (STI) policy-makers, too.

When social innovation is considered as a sub-field of STI policies, policy-makers need to pay more attention to:

  • the interactions between business and social innovations;
  • ‘frugal innovation’, providing solutions for poor customers;
  • inclusive innovation, aimed at inclusive economic growth and involving various stakeholders in the innovation processes to mobilise diverse sets of knowledge and experience.

A new type of justification for STI policies is also emerging based on the bold ambition that policies should not just aim to correct market and systemic failures, but create new opportunities and new markets. The basic idea of challenge-driven and market-creating STI policies (Cagnin et al., 2012; Foray et al., 2012; Mazzucato, 2016; Mowery et al., 2010) might provide a useful starting point for social innovation policy-making. It might also make it easier to accept that STI policies should be considering social innovation as a legitimate ‘policy target’ too.

In light of the lessons learnt during the CrESSI project, the prevalent dichotomy between social and technological innovation needs to be abandoned. It is more instructive and productive – both for social innovation practitioners and social innovation policy-makers – to understand social innovation as a co-evolutionary process between social changes and all the business innovations – including some technological ones – that are necessary to achieve the desired social changes.

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