In today’s highly competitive business environments with shortened product and technology life cycle, it is critical for software industry to continuously innovate. This goal can be achieved by developing a better understanding and control of the activities and determinants of innovation. Innovation measurement initiatives assess innovation capability, output and performance to help develop such an understanding. This study explores various aspects relevant to innovation measurement ranging from definitions, measurement frameworks and metrics that have been proposed in literature and used in practice. A systematic literature review followed by an online questionnaire and interviews with practitioners and academics were employed to identify a comprehensive definition of innovation that can be used in software industry. The metrics for the evaluation of determinants, inputs, outputs and performance were also aggregated and categorised. Based on these findings, a conceptual model of the key measurable elements of innovation was constructed from the findings of the systematic review. The model was further refined after feedback from academia and industry through interviews.
Defines Novelty of innovation as follows:
New to the firm: The minimum level of novelty of innovation is that it must be new to firm. It is defined as the adoption of an idea, practice or behaviour whether a system, policy, program, device, process, product, technology or administrative practice that is new to the adopting organisation (Damanpour, 1992; Hage, 1999; Parashar and Sunil Kumar, 2005; Berger and Revilla Diez, 2006; Fruhling and Keng, 2007; Linton, 2007; Carmona-Lavado et al., 2010).
New to the market: When the firm is the first to introduce the innovation to its market (Acs and Audretsch, 1988; OECD, 2005).
New to the world: These innovations imply a greater degree of novelty than new to the market and include innovations first introduced by the firm to all markets and industries, domestic and international (OECD, 2005; Berger and Revilla Diez, 2006).
New to the industry: These innovations are new to the firm’s industry sector (Garcia and Calantone, 2002; De Jong and Vermeulen,2006; Beugelsdijk, 2008).
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