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    Digital Innovation

    Posted on May 29, 2012 by admin in Articles

    Digital Innovation

    Generally, distinction is made in the literature between ‘invention’ and ‘innovation’ where invention is an idea or new product that may or may not have economic value while innovation is the process through which invention moves into usable form and is commercialised (Lundvall, 1988; King et al, 1994; Arthur, 2006). This paper concerns with digital innovation that can be defined as “innovations that are enabled by information and communication technologies and lead to the creation of novel products and services” (Yoo et al., forthcoming: 4). It is appropriate here to define digitisation as “the processing, storing, communicating and representing of all types of information using strings of ones and zeros” (Yoo et al., forthcoming: 3). Traditionally the research in the realm of information systems has focused on the digitisation of organisations’ internal processes and structures, however there is increasing interest in understanding how continuing digitisation allows organisations to develop radically new services and products that may transcend the organisational or even the industry boundaries by creating new markets (Zammuto et al., 2007). Digitisation has reduced the communications costs and enhanced integration of diverse (and previously unconnected) knowledge, activities, artefacts and capabilities. This has resulted in the increased distribution of control, co-ordination and heterogeneity of available knowledge and emergence of new forms of innovation networks (termed as doubly distributed by Yoo et al. (forthcoming)). However, the topic is still understudied and especially there is a lack of empirical studies on the effects of digitisation in enabling such networks and its effects on the innovation process within and between organisations. This paper attempts to bridge this gap by analysing the case of Smart m-Banking (mobile banking) services in Philippines to understand: How are new forms of innovation networks influenced by the continuing digitization of products and services?


    Digital Digital Innovation in the Context of Mobile Communications

    Mobile telecommunications industry has experienced unprecedented growth all over the world in last two decades. This has especially provided a way for the developing countries to ‘leap frog’ to cellular networks and provide connectivity to millions of people deprived of any telecommunication facilities. It is therefore no surprise that developing countries have been the main engine for growth in mobile sector for last five years (Portion Research, 2008). With the deployment of mobile infrastructure in almost all countries of the world and the rapid diffusion of voice services, the focus now seems to be shifting towards the ‘content’ or value added services based on the ability of mobile telecommunications to handle ‘data’. This also presents unique opportunities for developing countries where majority of people live in informal and/or cash economies, with no access to financial services that are taken as granted in the developed world. In such countries, where the number of mobile handsets by far exceeds that of bank accounts, using mobile telecommunications to provide financial services to “the unbanked” has enormous potential (Porteous, 2006). Many such initiatives have therefore been launched and are known by various names such as mobile banking, mobile transfers and mobile payments etc. however this paper shall use m-banking to refer to all such services and define it as “a set of applications that enable people to use their mobile telephones to manipulate their bank accounts, store value in an account linked to their handsets, transfer funds, or even access credit or insurance products” (Donner and Tellez, 2008:3).
    Scholarly research on m-banking is relatively limited (Maurer, 2008; Donner and Tellez, 2008) however some work has been done in recent years. This can be categorised into two main schools of thought. The first approach can be termed as ‘Adoption of Innovation’ and includes the authors such as Laukkanen and Pasanen (2008), Karjaluoto (2002), Cracknell (2004), who view the spread of m-banking as a result of decisions made by individual users to adopt the service. They focus on the attributes of the adopter (such as their socio-economic characteristics) and those of the service (such as the convenience, accessibility and affordability of m-banking applications) to explain the decision made by the user. Cracknell (2004) for example argues that for the users in developing countries, accessibility and affordability of m-banking services may have more appeal than the convenience. Scholars in Adoption school use theories such as Diffusion of Innovation (DOI), Theory of Reasoned Action (TRA) and its extensions like Technology Acceptance Model (TAM) etc. The main premise of this approach is that the innovations diffuse in different stages, starting from the ‘early adopters’ that are small in number to ‘secondary adopters’ that are larger in number and to ‘tertiary’ and ‘quaternary adopters’ etc. In many cases, different versions of Rogers (1962) famous ‘S’ shaped curve are used as theoretical lens. The second approach can be termed as ‘Infrastructure Innovation’ and includes the theories such as ‘Innovation Systems Theory’ Edquist (1997). It views the phenomenon from the perspective of those responsible for the provision of mobile services. Studies such as Ivatury (2004), Ivatury & Pickens (2006), Porteous (2006) for example explore the role of mobile operators, banks, hardware and software providers, regulatory agencies and donors to determine the shape of m-banking in developing world. These authors view the emergence of m-banking applications as an evolutionary process and follow the likes of Nelson (1995) and Edquist (1997) to conceptualise innovation as an open ended and path-dependent process that strives to produce optimal solution to a technical problem.
    Both approaches discussed above have limitations and are criticised for presenting the diffusion process as predictable, unproblematic and uncontested where technological innovation is expected to diffuse in a linear sequence. Although these have been useful in explaining how the firms innovate and how it diffuses at individual level, their inherent linearity has been criticised by many authors (e.g. Tuomi, 2002; Feraj et al, 2004, Yoo et al, 2005 and Gao and Damsgaard, 2007) who argue that these only partly explain the phenomena. Instead these authors view technological innovations as complex socio-technical systems where technological designs are contested by various social players acting in their self interest and the issues of power and politics also play an important role in shaping the dynamics of such a system.

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