2. Literature review

A review of the literature in the research on absorptive capacity, innovation and results of previous innovation projects was broad-based and varied. Cronin et al. (2008) suggested that an effective literature review should include multiple sources. The search was carried out using the Discover Durham connections, Durham University databases and search engines using EBSCOhost, LexisNexis, Science direct and Google Scholar. The keyword search terms included terms such as innovation management, innovation projects, innovation failure, innovation collaboration, open innovation, innovation success, organizational innovation, non technological innovation, innovation paradigm, absorptive capacity influence on innovation, absorptive capacity of SME, organizational learning, organizational competitiveness, project failure, innovation project failure, effect of project failure and resilience.

The remaining part of the chapter is a review on the published literature on innovation, its dimensions and definition; the impact of the results of the previous innovation project; and absorptive capacity, its dimensions, how to measure absorptive capacity and the questions developed from the literature review.

2.1 Innovation

Innovation is widely regarded as the one of the main process driving economic growth and sustainable competitive advantages for the manufacturing industry. An innovation is the implementation of a new or improved product either goods or service or a process. The Oslo Manual (2005) describes the minimum requirement for a product, process or organizational method to be innovative is that it should be new or significantly improved by the organization. Innovation is closely linked to the concept of uncertainty and unpredictable, making the innovation management a complex task (Candi et al. 2013). However, Innovation is important for organization to have a competitive advantage over their competitors and to become leaders in their field (Cho and Pucik 2005; Gunday et al., 2011). Therefore, engaging in these activities is become a vital imperative for many organizations.

The increase in competition among organizations, large and small in the same field of work is forcing them to innovate to stay ahead or even remain in the industry. This increasing competence is the key to improvement and innovation.  Such competition has therefore pushed SMEs to improve their competitiveness in customer service and innovation (Sing et al. 2008). Thakkar et al. (2008) argues that smaller organizations have to differ from larger organizations in essentially three main aspects – evolution. uncertainty and innovation.

The acquisition of knowledge from external sources, supplier network, competition, research partners even customers is vital to continuing innovation by an organization (Tallman and Phene 2007). The organization’s ability to capitalise on this external knowledge and commercialize it is related to its prior knowledge and absorptive capacity (Cohen and Levinthal 1990). By making use of the external knowledge and thus expanding boundaries, organizations can swiftly react to change in the market and make use of the information.

Traditionally, innovation has stemmed out the R&D department of the organization, from the hard work of the R&D employees and the organization’s commitment and expenditure in their R&D efforts (Arora et al. 2001). Much of the literature discussion on innovation examines the individual or organizational aspects. Many of the existing process models for innovation are linear in nature (Cheng and Van de Ven 1996). Furthermore, many authors focus on only one specific type of innovation like technological, product or process (Barrett and Walsham 1995). Cheng and Van de Ven (1996) propose an innovation model that presents innovation in non linear and as a complex and dynamic process. Van de Ven (2017) argues that