What is innovation? What, indeed, is invention? I am confident that the average economist could not answer these questions. Is invention merely a novel process or idea? A novel process or idea for a given person? A new way of combining real resources like capital and labor? A new process which allows more of something to be created using a given amount of real resources? Does the new process need to be used, or embodied in technology, or is the idea enough?
None of these definitions seem satisfactory. A poem is a “new idea”, but we wouldn’t call it an invention. Novelty for a given person without technological embodiment, as a definition, doesn’t seem to distinguish between diffusion and simple learning. The idea of technology as a Solow residual means that merely using different mixtures of capital and labor to make the same product doesn’t qualify, and further the Solow residual includes things like Bowles-style adaptations to a more cooperative or trusting culture, which we generally don’t think of as innovation. Was Schumpeter correct that invention is a mere act of creativity “without importance to economic analysis”, or does the sequential nature of ideas mean that even non-embodied ideas are economically important?
In an interesting “genealogy of an idea”, Benoit Godin examines the history of how the terms invention and innovation were used in the Western World. The term invention goes back to Cicero, who listed the development of new argumentative concepts as one of the five tools of rhetoric. From the 15th to 19th centuries, invention was used occasionally to mean novel thoughts, but also novel recombinations (as in painting) or simple imitation (such as the patents given to importers in 18th century England).
It is really quite late in the game – well into the twentieth century – that something like “innovation is the invention, embodiment and diffusion of a commercial product” begins to be accepted as a definition. Part of this involves the shift from the individual inventor, the lone genius, to commercial firm R&D, as well as a recognition that simultaneous discovery and ex-post construction of credit meant that the lone genius inventor probably never existed. The terms discovery and invention began to separate. Science policy began to focus much more on the quantifiable, inventions as discoveries embodied in products or countable as patents. The word innovation became identified with an economic sense rather than an artistic sense which it previously possessed.’
Even the economic definition that would eventually be adopted is not the only one that could have developed. Schumpeter is often recognized as the father of economic studies of technological change, but his definition of innovation includes many concepts no longer covered by that term. For Schumpeter, innovation was tightly linked to creative destruction, or the dynamic ability of economic change to remake the commercial sphere. The opening of new commercial markets, for example, was an important part of innovation, whereas pure science was not.
http://www.csiic.ca/PDF/IntellectualNo1.pdf (2008 Working Paper – this is still unpublished, as far as I can tell).