Invention vs Innovation?

To most people, the terms are synonymous, but to many economists, there is a distinction (one that, as far as I know, goes back to Schumpeter): invention is the technological development, and innovation is its application to the market. Invention is building the machines, and innovation is selling them.

I think these definitions are confusing, and even unhelpful.

Innovation, as a term, can be put to better uses, bringing with it connotations that are not quite covered by just invention. Invention brings to mind tinkering with machines, or at most the development of technologies that are physical. When we think of inventions, we think of steam engines, or of cotton gins. Innovation, on the other hand, is commonly used to cover anything from new machines, to new medical technologies, to advertising techniques: innovation therefore provides a useful catch-all term for improvements that are both tangible and intangible. It seems a little off, for example, to speak of the practice of washing hands before surgical operations as an invention, but fine to describe it as an innovation (among other people, you have Edward Alanson, pictured, to thank for the practice).

Edward Alanson (1747–1823), whom you have to thank for the washing of hands before surgery, for various amputation techniques, and for a whole host of other ways to make hospitals more hygienic.

When most people speak of innovation, they don’t just refer to the selling of new technologies or techniques. They use it to refer to all stages of the creative process: the initial insight, its development, and its implementation on ever greater scales, from initial drafts or models and onwards. Selling is just one step that comes under implementation, and one that is not always there. Washing hands before operations was not a technique that needed to be sold for money, but was merely adopted and then diffused (Schumpeter, to his credit, does usefully distinguish invention/innovation from diffusion — the spread of a technique or technology without further improvements).

There is another historically important distinction, which is lost when referring to innovators as sellers: not all innovators were entrepreneurs. Many were employees, particularly of the state, and many were simply amateurs, uninterested in interacting with the market or even in making money. Even of those who did respond to monetary inducements, they did not always interact with the market — cash prizes, for example, do not involve selling, but do involve pecuniary reward.

So for greater clarity in the study of technological development, my plea to economists is this: let’s stop using innovation as per Schumpeter, and use clearer terms that avoid all ambiguity: the selling of new technologies, or their commercialisation. Let’s use innovation as everyone else uses it: a useful catch-all term for improvements that are both tangible and intangible, and that covers all of the stages of technological development.

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