Innovative revolutions can either occur within market or nonmarket environments. There are two separate types of forces that regulate innovation. On one side are nonmarket forces which are those that influence the economic factors of a market system externally (Prasad, 2011). Case in point are the self-correcting aspects especially in scientific circles where peers constantly review one another’s scholastic works. Self-correction brings order, competence, and efficacy to a market and its institutions. On the other side are market forces described as those economic elements that shape the value, need for, and accessibility of goods and services within a market. Examples are the five forces introduced by Michael Porter to assist investors in the assessment of the viability of an industry. They are the power of rival companies, product providers, potential fresh entrants, consumers, and the nature of substitute products (Dobbs, 2014). Although effective innovation demands both technological and commercial motivations it thrives best under nonmarket forces due to the absence of widespread imitation and commoditization of products, and the need for companies to constantly alter their value propositions.
Although innovation cannot be easily measured, it can be defined in a number of ways. Launching a new product, enhancing inventive policies, introducing new forms of production, or replacing costly factors of production with inexpensive ones are all categorized as innovations (Kline & Rosenberg, 2010). All these processes are innovative because they offer relative advantage, are compatible with relevant solutions, and are complex enough to be seen as progressive. This means that innovation has to leave users at a better position than previous technologies. Additionally, because innovation is intended for utilization, it should enable users to experience the supplementary benefits it brings about.
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Johnson (2015) offers us insights of how innovations devoid of market forces took place over three centuries ago. Before artificial light was invented, very few social and economic activities could be carried out at night. Later on, candles were invented. However, only the rich and members of the clergy could afford such luxuries. As time went by, developments on existing technologies were carried out. One of the most revolutionary was Thomas Edison’s invention of the light bulb. This innovation ended an overreliance of oil-based lighting systems. The author asserts that although Edison is credited with the invention, the technology had been developed for tens of years before his breakthrough. This admission brings into perspective one of the key benefits of nonmarket environments on innovativeness. Under these conditions, competitiveness is limited. This offers a chance for key innovators to work on quality rather than quantity.
Under nonmarket conditions, innovators are motivated by the need to create long-lasting impacts. Zehr (2016) notes that market-based innovativeness, especially under capitalist environments, have made turned industries into those that entertain widespread imitation and commoditization of products. In addition, due to fierce competition from rival companies, business organisations today are forced to continuously change their value propositions.
Although imitated products offer some, if not all, of the services offered by the primary products, quality is often compromised. An example can be given of the cheap mobile phones that flood the market today. The first handheld cell phones were introduced in the later parts of the 20th century. Companies such as Motorola were credited with these inventions. Their products brought about much-needed convenience to customers. People could now make calls with ease. However, the current market is flooded with products that do not meet the quality threshold. Low quality products are inconvenient to users. Under nonmarket environments, the introduction of products is a collaborative effort that brings together top industrial minds. The focus is on offering solutions to problems and not on making maximum profit.
Under nonmarket environments, goods and services are not widely commoditized. This implies companies are not under continued external and internal pressures to reduce the prices of their products. Commoditization opens up the market for multiple producers of similar products or services. On one hand, this introduces numerous business opportunities for companies and job opportunities for potential workers. On the other hand, however, commoditization locks out many potential buyers from benefiting from a basic product or service. For example, education is considered an important facet of human development. In today’s market economy, most students from poor backgrounds are locked out of Ivy League institutions. An inability to keep up with ever-increasing tuition fees denies them opportunities to find jobs and push their families to the next economic levels.
In the same way, market economies demand that companies constantly revitalize their value propositions. As consumer needs change, organizations are forced to finance new projects such as research and development aimed at gaining competitive edge over their competitors. This means that customers can easily swap one company for another. Although vigorous competition helps improve productivity in the long-run, unhealthy competitive tactics have negative effects on the population. Consumers may feel inadequate which is psychologically damaging. Such conditions may also force workers to overwork. Therefore, nonmarket conditions that encourage product quality improvements as opposed to the need to beat competitors are more ideal for innovative development.
In conclusion, pioneering innovations can both occur within market and nonmarket environments. Nonmarket forces are those that influence the economic factors of a market system externally while market forces shape the value, demand for, and availability of goods and services. Nonmarket forces are ideal for innovativeness because they do not encourage copying, commoditization, and unhealthy competitiveness.
References
E. Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review , 24 (1), 32-45.
Johnson, S. (2015). How we got to now: Six innovations that made the modern world . Riverhead books.
Kline, S. J., & Rosenberg, N. (2010). An overview of innovation. In Studies On Science And The Innovation Process: Selected Works of Nathan Rosenberg (pp. 173-203).
Prasad, A. (2011). The impact of non-market forces on competitive positioning understanding global industry attractiveness through the eyes of ME porter. Journal of Management Research , 11 (3), 131-137.
Zehr, W. (2016, September). Market-based innovation for sustainable competitive advantage. In 2016 Portland International Conference on Management of Engineering and Technology (PICMET) (pp. 914-924). IEEE.
