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Based on the models of endogenous growth theory (Romer 1986, 1990; Lucas 1988),

economic growth is substantially explained through R&D investments in the private

sector as the most important source of technological progress. Endogenous economic
growth models assume that firms invest in new technology through expenditure on
R&D if they perceive the opportunity to appropriate the returns on R&D investment in
terms of above-average profit achieved by offering new goods and products or
implementing technical process innovation. As a consequence, the firms enlarge their
market share and, with increasing returns to scale, they enjoy greater production
efficiency and a higher rate of economic growth (Schmookler 1966; Segerstrom 1991).
Greater production efficiency enables industries to expand their domestic market share
through import substitution, to increase local consumption and, at the same time, to
penetrate new foreign markets and increase their export share (Shefer/Frenkel 2005;
Porter 1990). The relationship between technological progress and economic growth is
thereby characterised as a linear, steady-state growth pattern which can be adjusted
relatively easily by "turning the knobs of the R&D process" (Verspagen 2005: 504).
During past decades, a large number of empirical contributions have analysed the
growth impact of the R&D-intensity in terms of product and technical process
innovations on growth of productivity (Griliches 1995; Lööf/Heshmati 2006; Bronwyn
et al. 2010; Lachenmaier 2007) or employment (Entorf/Pohlmeier 1990; Konig et al.
1995, van Reenen 1997; Smolny 1998, 2002; Pianta 2005) at the firm level. Today, there
is broad consensus on the general positive impact of R&D-driven types of innovation on
growth in productivity and employment. However, the positive relationship between
R&D intensity and firm growth seems to be valid only in the case of R&D devoted to
product innovation. In contrast, R&D activities that aim at process innovation are rather
negatively correlated with employment growth (Katsoulakos 1986; Lachenmaier 2007).
The terms of “innovation” and “R&D”, respectively, the level of R&D intensity and the
innovativeness and growth of firms and economies have often been equated by
mainstream innovation literature in the past (Kirner et al. 2009a; Barge-Gil et al. 2008).
Non-technological types of innovation such as organisational or marketing innovation
thus would probably not be recognised as drivers of firm growth and innovativeness by
neoclassical growth theory as they are not directly associated with R&D and
accumulation of technological knowledge.

However, since this narrow focus on private R&D as the predominant determinant of
firm growth and innovativeness turned out to be too restrictive for understanding the
growth and employment effects of innovation, fields of non-technological innovation
began to attract more and more attention. Firstly, against the backdrop of the ongoing
structural change from the secondary (industrial) to the tertiary sector (services) in
developed economies, a mere technological perspective on innovation appeared to be
outdated, because of its bias towards innovation in manufacturing. Thereby, it is not
able to fully capture the field of non-technological innovation taking place in the service
sector (Hipp/Grupp 2005; Hipp et al. 2000).
As a result, the innovation process is today understood to be highly complex and
variable. There is no one best way to innovate. Instead, against the background of
modern, knowledge-based economies, the use of R&D as a proxy or surrogate measure
for a wider range of innovation is no longer adequate (Kline/Rosenberg 1986; Freeman
1994; Arundel et al. 2008; Raymond/St-Pierre 2010) and the theoretical focus needs to
shift “from R&D to learning processes”, as all knowledge produced within a firm cannot
be attributed to formal research activities (Foray 2006).

The recognition of non-technological aspects like marketing and organisational

innovation as drivers of firms’ competitive advantage and growth goes hand in hand
with certain premises of how firms as organisations have to be understood and
conceptualised. As mentioned above, the recognition of organisational and marketing as
distinct types of innovation means not only broadening the innovation concept, but also
employing a different understanding of innovation processes.

Both marketing and organisational innovation aim at the renewal or improvement of

interactive and interdependent working and communication processes between firm-
internal (e.g. employees, departments, groups and teams) and/or firm-external (e.g.
collaboration partners, users and customers) social entities. Thereby, innovation
activities for generating organisational and marketing innovation not only take place in
close social processes of interaction, negotiation, and learning but are even targeted to
shape these relationships by themselves. Thus, they should be regarded as being of
systemic and complex nature according to the complex and self-referential cycle model
of innovation (Kline/Rosenberg 1986; Rothwell 2003; Dodgson 2000; Tidd/Bessant

Furthermore, following the seminal work of Schumpeter (1912), many authors

emphasised the point that the recognition of non-technological dimensions of
innovation such as the adoption and (re-)organisation of internal business processes
and routines, external relations or novel marketing activities represent an important
development in organisation theory (Boer/During 2001, Baranano 2003, Grant 1991,
Amit/Shoemaker 1993, Hamel/Prahalad 1993) and led to the further development of
the concept of organisational innovation by drawing attention to "intangible" factors,
which account for the economic success and performance of enterprises (March/Simon
1958; Penrose 1959; Selznick 1957; Chandler 1992). Finally, innovation management
theory underlines the importance of integrating product, technical process innovation
with organisational and marketing innovation in order to increase the firm’s ability to
transfer new ideas and business opportunities into successful market solutions
(Tidd/Bessant 2009; Porter 1996; Cozzarin/Perzival 2006). In line with this, firms gain
persistent competitive advantage from the firm-specific linkage of technological and
non-technological elements of innovation.