Tourism innovation at the firm level: Delimitation, typology and measurement Cáceres-Carrasco, Rafael Romero, Isidoro Tejada, Pilar

WORKING PAPER

7| 2016

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PYMED Working Paper No. 7 - 2016

Septiembre, 2016

ABSTRACT

This paper reviews the approaches proposed in the literature to analyze innovation in tourism

at the firm level. Firstly, the paper presents the specificities of the tourism industry that

condition the nature of innovation in this sector compared to other activities. In this respect,

the special characteristics of the generation and transfer of knowledge in the tourism industry

are discussed. Secondly, the definitions and typologies of tourism innovation proposed in the

literature are presented and examined in order to delimitate the concept of tourism

innovation. Finally, some considerations regarding the measurement of tourism innovation are

suggested, also based on the prior literature. This paper is part of the Project "Tourist SME

Global Value Chains and Innovation" (INTURPYME), which was selected by the Ministry of

Economy and Competitiveness for funding in the framework of the Spanish National 2013 R&D

Plan.

JEL classification: Z3; I8; O3

Key words: tourism; innovation; SMEs.

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1. INTRODUCTION

The aim of this paper is to discuss different approaches to the concept, typology and measurement of tourism innovation. Tourism presents some peculiarities that differentiate it from other activities, such as manufacturing industries or other services. These peculiarities impose special features on tourism innovation that distinguish it from innovation activity in other sectors. Furthermore, a general agreement about the concept and delimitation of tourism innovation does not exist.

The characteristics of tourism innovation greatly determine how the knowledge that is relevant for innovation is generated and transmitted. Likewise, these peculiarities influence the kinds of innovation in tourism. Once the tourism innovation concept is clearly delimitated, the measurement issue arises. These analysis areas have been addressed rather deeply by the literature, either jointly or independently.

Therefore, this paper is organized in three main sections following this introduction. Firstly, the tourism activity’s peculiarities are analyzed regarding the generation and transmission of knowledge and sources of innovation. Secondly, different typologies of tourism innovation are analyzed and, thirdly, some considerations are presented about the measurement of innovation in the tourism activity.

2. SOURCES OF KNOWLEDGE AND TOURISM INNOVATION

Tourism activity presents certain peculiarities that condition the creation and transmission of knowledge and, therefore, innovation activity in this sector:

1 Tourism depends greatly on natural or man-made attractions, around which touristic destinations arise. Consequently, public authorities play a fundamental role as touristic supply co-producers since they can influence the availability and accessibility of what is attractive to tourists by its protection, conservation, improvement or supply.

2 Closely related to the prior characteristic, the touristic offer, far from being based on a product individually offered by a single enterprise, is part of a service package in a destination (transport, hotel industry, restoration, natural or cultural attractions, oriented toward living desired-experiences activities, etc.). When a tourist consumes his/her holidays in a destination, not just the product of a sole supplier is consumed but a service package as a whole: a few or many suppliers participate in the creation of a touristic experience.

3 Imitation and subcontracting (outsourcing) are two very frequent forms of knowledge and innovation in the tourism industry (compared to R&D activities, which are less frequent). Lately the interdependence between the tourism industry and Information and Comunication Technologies (ICT) suppliers is growing increasingly and more.

4 The importance of knowledge spreading mechanisms is narrowly related to the difficulty of one firm exclusively exploiting individually developed innovations. As a consequence, the existence of “free-riders” emerges as a problem. However, imitation does not necessarily imply coming up with an exact copy of what has been already developed, but frequently

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means the introduction of an improved or readjusted copy, causing what is named as “creative imitation”.

5 Many touristic services are very intensive in capital or workforce. This has been considered by some authors as a reason why tourism companies are inclined to integrate themselves into networks where they can find necessary “know-how” resources and, in this way, minimize risks. Another factor that has frequently been pointed out by some authors to justify the importance of networks in the tourism industry is subcontracting. Outsourcing processes may have very diverse characteristics and actors, from consultants or tourism specialized academics to cooperation agreements with service suppliers. Nevertheless, there is a certain lack of awareness about the importance and characteristics of networks in tourism.

6 The tourist (consumer) participates actively or passively in the generation process of numerous touristic services (e.g., finding out or demanding information in the case of cultural tourism and participating actively in adventure travels). In addition, the process and product very often cannot be separated in the tourism industry. Participation is essential when experience-based products are considered, in which continuous learning and knowledge acquisition by clients are an essential part of the activity.

7 The touristic product is often intangible. This is why it has a high level of risk or uncertainty of the value given by the tourist, who will compare the quality/price ratio to value it. Due to their intangibility, the value of touristic products can be improved by the addition of sensations (design, fragrance, light, color, attachment). These product changes may improve the emotional value of the touristic experience.

8 A high level of inclusion of ICTs. The use of Internet has become widespread in numerous touristic activities that have converted e-commerce (contracting, booking, etc.) and information transmission to the consumer into an essential service.

As was previously pointed out, these basic characteristics condition the creation and transmission of knowledge within the tourism industry in different ways, as is analyzed in the following subsections.

a) About the systemic character of tourism innovation

A first controversial issue related to the creation and transmission of knowledge within the tourism sector is its systemic character (or not). Different authors (Jacob et al., 2010; Sundbo, et al., 2007) have emphasized the systemic dimension of tourism pointing out, among other characteristics, its complementarity with other activities, its co-location, cooperation, the existence of synergies and its integration in networks. The literature has pointed out that tourism SMEs obtain significant advantages if they collaborate between each other. Clusters improve the innovation skills of companies (lesser costs of experimentation, a greater visibility, a better ability to respond to changes in demand), these advantages being the main motivation of a “tourism innovation system”. Research has also addressed the role of public authorities that frequently introduce regulations with the aim of favoring innovation, as well as improving the surrounding touristic attractions by means of investing for a greater enjoyment of the natural or cultural resources.

The literature about this issue shows that a debate exists about the existence of tourism innovation systems. Some works (Agnete et al., 2014: 48) underline there being systemic characteristics which maintain certain similarities with the “sectorial innovation

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system” concept, including public support mechanisms and funding. Nevertheless, it is necessary to remark that the stability of the relationships is not clear and that probably the tourism’s characteristics adapt rather to the model developed by Sundbo and Gallou (2000) known as “loosely coupled systems”, which are very common in the services sector. Innovations with a low degree of organization and not focused on the systemic learning and “experience-based” innovations may be found as typical characteristics of these systems. In addition, relationships are neither stable nor strong, and although behavior models change, a certain stability does exist over time, as do social norms, codes and rules for interactions. It should be added that in the case of tourism the client has a special relevance as a source of information, as stated in the sixth characteristic previously pointed out.

A frequently remarked aspect in works that study the systemic character of touristic activities is the scarcity or lack of relationships between companies, universities and research centers (Hjalager, 2010). Numerous empirical works have stated that R&D activities have not much importance as a knowledge creation source for tourism enterprises. In this sector, companies rarely have an R&D department or spin-offs arising from universities. Many works try to explain this touristic peculiarity. It is becoming a mainstream idea that knowledge acquisition processes in the tourism industry frequently occur in a complex and informal mode that is not as evident as in other sectors. Often the search processes are not scheduled and knowledge resources are vague. Consequently, some authors have stated the need for research and to broaden the approaches in this field as a means of acquiring a clearer view of the creation and technological transference processes. In this sense, various aspects that should be taken into account for future research are now pointed out.

b) The role of R&D, managers and personnel.

Hjalager (2002) defended that one of the reasons why R&D is not very important in the tourism industry is that SMEs dominate this sector. However, this author finds an exception in those companies that are part of a chain or franchise, since the participation in collaborative structures allows SMEs to surpass the difficulties for innovating. Franchise management is responsible for filtering and processing large quantities of information that can be available for franchisees and, thus, help them to update their activity constantly.

On the other hand, Hjalager (2002) remarks that the fact of few touristic companies having relationships with universities or research institutes does not necessarily mean that R&D-based knowledge is irrelevant in this sector. In her opinion, the matter is how this knowledge is converted into practical knowledge and whether it is useful for companies to make decisions. Besides, it should be considered that although touristic activities have traditionally not been closely related to R&D, the tourism industry is nowadays demanding more R&D-based knowledge to develop products.

Regarding the role of the staff in the transmission of information and knowledge, some authors have stated that highly-trained employees are the route through which academic knowledge is spread within tourism companies. Nonetheless, the level of training in these activities is generally low (Hjalager, 2002), and furthermore a high ratio of staff rotation -as well as a high rate of seasonality- exists in tourism compared to other sectors. The low level of education is frequently remarked in the literature (Agnete et al., 2014) as an obstacle for the interaction between academics and companies. This is one of the factors that some authors have used to question the existence of touristic innovation systems, since it hinders institutional relationships. Other authors have added the difficulties that come from the cultural differences between companies and academics. Yet from a spatial or relational proximity approach, employees have been pointed out as a relevant source of knowledge and

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information to improve the innovation ability. In this regard, some researchers have distinguished between formal and tacit knowledge, underlining the important role of the latter within organizations to facilitate or make possible the transference of technology incorporated in products or organizational processes. From that point of view, staff rotation has been considered a key aspect to incorporate tacit knowledge into the company. In this sense, some works distinguish between encoded and decoded technology related to the transference of knowledge by the personnel (Jacob et al., 2007).

On the other hand, in the literature about the role of employees as a source of knowledge, some research focuses on emigrants, who are considered as having a certain knowledge that can be relevant for carrying out innovations. Emigrants may, for example, have knowledge about different cultures and languages that can be useful to introduce new product innovations. By the same token, returnee emigrants may bring with them to their country of origin knowledge acquired in the destination country. Nevertheless, more research is needed about this point.

c) Acquisition of embodied technology

As Hjalager (2002) has pointed out, the fact of R&D-based knowledge purchase being very low in the tourism industry, whose companies are scantly linked to Universities or research institutes, does not necessarily mean that the tourism industry does not acquire technological knowledge. One of the current tourism innovation’s characteristics is that companies increasingly purchase technology embodied in goods. In this way the tourism sector’s characteristic low level of R&D is balanced, considering that the result of R&D embodied technology is acquired indirectly (e.g., a drinks vending machine, a thermomix or an industrial blender). From this point of view, Jacob at al. (2010) expound that it is easier to transfer technology embodied in products than technology embodied in processes. The former, as encoded knowledge, presents a potential high-risk of spillover to other companies. On the other hand, the transference of process technology requires personnel movements and staff rotation may be a source of this transference between companies.

On the other hand, numerous touristic activities purchase products that have integrated innovations, reducing the need for highly-qualified human resources able to develop new knowledge. These competences are imported from some product suppliers, who in turn are linked to equipment and technology producers (e.g., the purchase of ready meals by a restaurant or bar). Thus, a part of the production can be outsourced to other, more professional companies, probably closely located to the touristic company, but having a larger research capacity.

d) Formal and informal relationships between agents (interactional patterns)

As previously analyzed within the fifth point of the previous section, a peculiarity of numerous activities that make tourism companies inclined toward integration into networks is that they are capital and workforce-intensive. From this angle, networks ease the acquisition of know-how resources that are necessary and help firms to minimize the risk that large capital investments imply. Likewise, the characteristic subcontracting of tourism activities (e.g., consultants, academics, other services, etc.) has been related to the creation of networks. Nevertheless, the literature on this topic presents various unresolved questions concerning the creation and importance of networks within touristic activities.

Some authors defend that service companies in general, and touristic firms in particular, are less inclined to take part in networks than industrial companies. This is due to

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the fact that, unlike what occurs in the industrial sector, imitation is much easier and keeping an innovation as a secret is much more difficult. As a consequence, touristic companies avoid participating in networks with a view to sharing its “non-patentable” innovations as little as possible. From this perspective, service companies are more inclined to competition than networking (Hjalager, 2002). Notwithstanding, other authors argue the opposite: touristic innovation requires networks and cooperation systems, since tourists who travel to a destiny demand different touristic services and thus companies are mutually dependent and need to develop common “destination-innovations”.

In this scenario, research has tried to discover if touristic companies are indeed generally inclined to cooperate and participate in networks. Specifically, prior research has studied whether networks or cooperation agreements have an influence on the degree of innovation of tourism companies or, on the contrary, whether innovation makes tourism companies be more cooperative. Once again, the results are not conclusive and although it is generally assumed that cooperation is the independent variable within this relationship, it is a complex and dynamic relationship that is difficult to understand.

In this framework, a number of studies have been carried out with the aim of identifying collaboration relationships and channels used for knowledge exchange. These studies have analyzed if companies share a specific sectorial knowledge base in such a way that innovation patterns can be identified. From this perspective, the need of better knowing the employees’ role, the information obtained in markets and the public support for innovation of tourism companies have been pointed out.

Networks analysis can also be done under a geographical-territorial perspective. In this framework, the importance of proximity and social relationships for knowledge transference has been remarked. Some research concludes that numerous tourism companies learn by imitation, mobility and exchanges between each other. These works underline that learning via observing competitors is particularly common within the tourism industry, where creative imitation processes occur. The innovative ideas are more likely to come from consultants, external to cluster agents, by the mobility of individuals and relationships with companies working in various knowledge fields. From this perspective, university students have been considered as intermediaries who can link universities and companies. This last consideration is not widely backed up according to the literature.

On the other hand, there seems to exist a relative agreement on the fact of development dynamics in tourism having their own characteristics that cannot be fully explained by the logic of agglomeration. Concerning this, some authors have stated that the origin of agents is very diverse and interaction between local business owners and global tourism communities creates new innovation knowledge and opportunities, based mainly on spatial and social relationships, which do not correspond with traditional analytical categories. This is relevant for GVC analysis suggesting that these can significantly influence tourism innovation. For instance, according to the literature, there is empirical evidence of hotels that belong to an international chain are more inclined to be innovative and to have human capital with greater abilities and skills.

Hjalager (2010) shares the point of view that inter-company relationships are essential for information transfers, inspiration, and, eventually, innovation. She indicates that research has documented that an accumulative growth exists in specific locations where conditions are particularly favorable for tourism innovation, suggesting that the approach of innovation systems can be used within tourism innovation analysis. Nevertheless, she also recognizes the conclusions of other authors’ works which have observered that social networks are weak in

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tourism and that this sector has a limited inclination toward learning from others and close collaboration agreements.

Finally, some authors have remarked that tourism innovation takes place in a long value chain in which some manufacturing industries provide inputs for the tourism sector. Consequently, spill-over and spill-back occurs within the suppliers industry (OECD and Eurostat, 2005) and this could balance the lack of tourism innovation.

e) The sectorial involvement and public institutions.

As Hjalager (2002) points out, tourism is based to a great extend on free goods: natural resources, cultural attractions, urban landscapes, etc. These resources are frequently managed by public authorities whose actions regarding them can deeply affect the tourism activity of the area where they are located. Likewise, public actions can improve the accessibility (airport, flights, roads, etc.) and the offer of activities (routes, cycle tracks, land for attractions, sports equipment, conference infrastructures, museums, etc.) which affect the touristic activity and innovation. From this angle, other authors have pointed out that tourism innovations should be considered in a broader economic context than that of tourism. However, the impact of these actions on tourism in general and the innovation of the sector’s companies in particular is not really known.

On the other hand, the public sector can influence tourism activities by means of regulations. These frequently contain substantial knowledge that is spread to potential users (e.g., stricter hygiene or fire-fighter standards will cause a learning process in the companies affected). Until now, Hjalager (2002) states, research on tourism has not sufficiently considered the impact of regulations on the companies’ survival, innovation and professionalization.

f) Tourist / client involvement in the innovation process

Agnete et al. (2014) defended that clients are a very important source of knowledge for innovation, especially when experience-based tourism is addressed. This kind of tourism has lately been attracting the attention of an increasing number of researchers. Among the works carried out in this field, research on the "experience economy” stands out. Under this approach, a number of works have made diverse contributions: the differences between hedonism and use when products are consumed have been point out; it has been suggested that the experience by consuming the product should be considered as a part of the product’s added value; it has been demonstrated that an increasing demand and consumption of experience-based products exists which encourages innovation in this field. From a macroeconomic perspective, an increasing transformation in value creation has been observed. This started by focusing on physical goods and has recently turned into “experience-based” services (Agnete et al., 2014).

The “experience economy”, which is still in its early stages, presents some basic specific characteristics that are totally or partially similar to the “service economy”. For instance, a coffee can be had simply as one more consumer product, without anything further, or while enjoying a well-decorated ambiance, music and a great service that convert it into a unique experience. Consequently, enterprises which provide experience-based services and others are working with a different logic. In addition, a major part of experience-based services requires an active participation by the client because these services are co-created and the client intervenes as a consumer but also as a producer.

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Although it cannot be stated that all companies are moving toward the creation of experiences, this shift in the direction of experience-based services means new challenges for tourism innovation. Besides, research has highlighted that firms specialized in experience-based tourism tend to be very innovative and to develop different kinds of innovation simultaneously, supporting recent theories which have stated that technological and non-technological innovations support and complement each other (Agnete et al., 2014: 124). From this perspective, some authors have stated that perhaps some kinds of interactions with clients can be identified as innovations. An increasing interest in knowing the characteristics of the value creation in services can also be observed, despite co-creation processes not yet being well known (Agnete et al., 2014: 18-19).

Generally, the degree of consensus about the importance of the client is really high not only for experience-based services but also for the tourism in general. Empirical works back up the idea of continuous learning and the acquisition of knowledge about clients being a characteristic of tourism companies.

3. TOURISM INNOVATION CONCEPT AND TYPOLOGIES

3.1. Tourism innovation concept and delimitation

As Hjalager (2010) points out, the lack of specific definitions for tourism innovation is a challenge that complicates a comparison between levels of innovations in different countries or between different touristic activities within the same country. The concepts or approaches used within tourism innovation research tend to be based on other sectors or activities. Hence, they do not take into account tourism’s peculiarities and may leave part of these innovations concealed. Therefore, as suggested by some authors, such as Camisón and Mofort-Mir (2012), it is possible that more tourism innovation exists than that detected via the habitually used approaches.

In the attempt to find a definition of innovation that takes into account the peculiarities of the tourism industry, contributions have been made that focus to a greater or lesser extent on some of the aspects mentioned in the previous section. Thus, aiming to introduce the risky nature of innovation for tourism and the role of the consumer in the final perceived value of products, the OECD proposes the following definition of innovation:

“…a process of creating new value … geared first towards customers, as the main arbiters of business competitiveness, but one that can also involve other stakeholders as major beneficiaries, such as the organisation itself (employees), shareholders (profitability), external partners, etc.” (OECD and Eurostat, 2005)

From a wider perspective, frequent for many empirical works, innovation has been understood as all that can be typified as “new”, meaning different from that which is common or the company’s previous practices. The following definition by Kanter is a good example of this conception (Agnete et al., 2014, p. 4):

“Innovation refers to the process of bringing any new, problem-solving idea into use. Ideas for reorganizing, cutting costs, putting in new budgetary systems, improving communication or assembling products in teams are also innovations. Innovation is the generation, acceptance and implementation of new ideas, processes, products, or services. Acceptance and implementation are central to this definition; it involves the capacity to change or adapt.”

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Another example of a definition which tries to take the peculiarities of tourism innovation into consideration from a broader perspective is the following by Pickersgill and Edwards (Agnete et al., 2014: 251):

“innovation is a complex, multiple dimensional process that involves scientific and technical expertise, technical and educational infrastructure, integrated product and supplier networks and effective management and marketing strategies and government support”

These and other definitions try to understand the peculiarities of tourism innovation. Nevertheless, a great degree of dissatisfaction still exists with the approaches to the concept that have taken place until now. It is therefore a field in which an important labor is still needed.

3.2. Classifications

Innovation is a broad and diverse phenomenon. In order to approach its determinants, characteristics and effects it is necessary to provide a taxonomy or typology which captures its heterogeneity. There are two main criteria to classify innovation at the firm level: the content and the level of novelty.

a. The content of innovation

Regarding the content of innovation, it is necessary to take into account that tourism products are characterized by two common features: intangibility and interactivity. As a consequence, clients play an important role in the development of tourism innovation (Tejada and Moreno, 2013). Therefore, innovation in the tourism sector –as in other service industries- is not adequately captured by the technological product and process concept (OECD and Eurostat, 2005). In this respect, innovation studies traditionally differentiate between technological/technical innovation and non-technological innovation; that is, organizational/administrative innovation (Camisón and Monfort‐Mir, 2012).

Moreover, the Oslo Manual for innovation studies, based on the Schumpeterian approach (Schumpeter, 1934)1, distinguishes four types of innovations: product innovations, process innovations, marketing innovations and organizational innovations. This classification is broad enough to be applicable to all the sectors. This Schumpeterian taxonomy has been intensively used in tourism in order to look for innovation types and analyze their effects (Hjalager, 2010). Yet, as previously pointed out, it is convenient to adapt the definition and considerations of the Oslo Manual guides to the particular characteristics of tourism activities.

In this respect, the distinction between products and processes is often blurred when considering the services sector and particularly tourism. Since in services production and consumption occur simultaneously, the process development is difficult to separate from the final output perceived and consumed by the tourists. However, the OECD’s Oslo Manual provides particular definitions of the innovation categories that are basically applicable for tourism products.

A product innovation is “the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses” (OECD and Eurostat,

1 Schumpeter (1934) distinguished the following categories of innovation: new products, new methods of

production or sales, new sources of supply of raw material or semi-finished goods, opening of new markets and new industry structures.

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2005). This conceptualization includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics. Particularly, product innovations in services can include significant improvements in how they are provided (for example, in terms of their efficiency or speed), the addition of new functions or characteristics to existing services, or the introduction of entirely new services (OECD and Eurostat, 2005).

A process innovation represents “the implementation of a new or significantly improved production or delivery method” (OECD and Eurostat, 2005). This includes significant changes in techniques, equipment and/or software in order to decrease unit costs of production or delivery, increase quality, or to produce or deliver new or significantly improved tourism services. These improvements can be also introduced in ancillary support activities, such as purchasing, accounting, computing and maintenance. Furthermore, according to the OECD’s Oslo Manual, the implementation of new or significantly improved information and communication technology (ICT) also implies a process innovation if it is intended to improve the efficiency and/or quality of an ancillary support activity. This type of process innovations in ICT has played a crucial role in the tourism sector over recent decades and it remains crucial nowadays (Nicolau and Santa-María, 2013).

A marketing innovation is “the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing” (OECD and Eurostat, 2005). Marketing innovations seek increasing the firm’s sales by means of better addressing customer needs, opening up new markets, or newly positioning a firm’s product on the market. To be considered an innovation, the marketing method cannot have previously been applied in that firm, due it being able to be adopted from another firm or organization. New marketing methods in product placement primarily include the introduction of new sales channels, such as the using a franchising system for the first time, of direct selling or exclusive retailing, and of product licensing. New marketing methods in product promotion involve the use of new concepts for promoting a firm’s tourism services, such as the first use of a significantly different media or technique for the promotion of the tourism products or changes in the firm’s branding. Innovations in pricing involve the use of new pricing strategies to market the firm’s services, i.e., the first use of a new method for varying the price according to the level of demand. However, new pricing methods whose sole purpose is to differentiate prices by customer segments do not represent innovations according to the Oslo Manual’s specifications. The introduction of loyalty programs in hotels or the appearance of Global Distribution Systems can be pointed out as examples of marketing innovations (Hjalager, 2010).

An organizational innovation is “the implementation of a new organizational method in the firm’s business practices, workplace organization or external relations” (OECD and Eurostat, 2005). Organizational innovations seek to reduce administrative or transaction costs, improve workplace satisfaction (and thus labor productivity), gain access to non-tradable assets (such as non-codified external knowledge) or reduce costs of supplies. To be considered innovations, the organizational method implemented cannot have been applied before in the firm and must be the result of strategic decisions.

Organizational innovations in business practices pose the implementation of new methods for organizing routines and procedures for the conduct of work. For example, those oriented to improving learning and knowledge sharing within the firm (creation of databases of best practices, lessons and other knowledge, new education and training systems or the implementation of quality-management systems). Innovations in workplace organization involve the implementation of new methods for distributing responsibilities and decision

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making among employees, as well as integrating new models of different business activities. According to the Oslo Manual, new organizational methods in a firm’s external relations imply new ways of organizing relations with other firms or public institutions, such as the establishment of new types of collaborations with research organizations, customers, clients or suppliers.

Many innovations introduced by firms may be difficult to classify because they share characteristics of different types of innovations or they may imply different types of innovation at the same time. Frequently, some kinds of prior innovation types are closely related and as soon as a change starts, another linked innovation is generated in the value chain. For instance, technological changes can improve the services provided while they can also affect the way the marketing is carried out.

Other authors have proposed modifications based on Schumpeter’s and the OECD’s classifications. Thus, Hjalager (1997) differentiates between product innovations, classical process innovations, process innovations in information handling, management innovations, and institutional innovations.

Likewise, Hjalager (2002 and 2010) takes Schumpeter (1934) as a reference to point out that innovations occur in a sole traditional innovation category or within a combination (product, process, management and marketing). But she adds two more categories: logistic innovations and institutional innovations. Logistic innovations include a re-composition of external commercial relationships (liaisons), which may affect the company’s position within the GVC. Managed flows can be of materials, transactions, information and clients; for example, vertical integrations within the restoration and food industry, or computer reservation systems and online marketing. Institutional innovations go further than the individual company, since they represent collaborative and regulatory structures within the small or large communities. They can be transversal to the private and public sectors and establish new game rules. New institutions can extend widely, affecting the businesses of numerous companies and their clients. Some examples are: changes in the conditions of companies’ financing, a legal reform that significantly affects health tourism, an alliance with other companies to collaborate in any field, etc.

Furthermore, Orfila-Sintes and Mattsson (2009) in their study of innovation in the hospitality sector differentiate between four types of innovation: management, external communications, service scope and back-office.

b. The innovations’ level of novelty

Johannessen et al. (2001) propose three important questions in order to analyze innovation: what is new; how new it is, and to whom it is new. They defend that innovation studies should clarify the answers to these questions that delimitate their approach at the very beginning of the study. Only in this way is it possible to compare the results of different studies.

By definition, all innovations must contain a degree of novelty, but this degree can vary. Several classifications have been proposed in this respect. Dewar and Dutton (1986) distinguished between incremental and radical innovation. Incremental entails “linear, cumulative change in a process or product, representing minor improvements or simple adjustments in current technology”, while radical is “nonlinear, paradigmatic changes, representing significant departures from existing practice or knowledge”. This classification is used in many studies (i.e., Martínez-Ros and Orfila-Sintes, 2009; Chang et al., 2011). Radical innovations are fundamental improvements that represent revolutionary changes in

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technology whereas incremental innovations pose minor improvements or simple adjustments in current technology. The different nature of radical and incremental innovations has a direct relationship with the risk and cost of the introduction and implementation of the innovation, which are much higher in the case of radical innovations. Damanpour (1996) points out that radical innovations cause important changes in a firm’s organization, which imply a substantial break with the existing practices. Yet incremental innovations represent an evolution from previous practices. This differentiation introduces an idea of continuity or discontinuity in the innovation process: radical innovation poses a breakthrough from previous technology or practices, whereas an incremental innovation represents a modification or improvement from a previous innovation (Martínez-Ros and Orfila-Sintes, 2009).

To measure the innovation’s radical intensity, some distinct criteria have been proposed (Martıínez-Ros and Orfila-Sintes, 2009):

Novelty degree.

Magnitude of the change’s cost: the more process and product technology it requires and the greater are the changes, the costlier it is.

Degree of risk-related knowledge incorporation. Radical innovations introduce technological revolutionary changes and, therefore, a new knowledge that breaks with existing practices.

The introduction of fundamental changes within the organization’s structure, procedures and activities that break with the existing practices.

Incremental and radical innovations are interrelated. On the one hand, incremental innovations can be originated by improvements from a previous radical innovation. Nevertheless, the process of introduction of incremental innovations could represent a learning process (Gallouj and Weinstein, 1997) that allows for the development of the resources and capacities necessary for the introduction of radical innovations. In this respect, the results of each type of innovation can contribute to the results of the other type (Damanpour, 1996; Martínez-Ros and Orfila-Sintes, 2009).

In addition, the OECD differentiates between new to the firm, new to the market, and new to the world innovations (OECD and Eurostat, 2005). Any product, process, marketing or organizational method introduced by a firm, but already implemented by other firms, represents a new to the firm innovation. In the case of new to the market and new to the world innovations, the improvements have been implemented by the firm for the first time in the market/industry or worldwide.

In this respect, the market is simply defined as the firm and its competitors and it can include a geographic region or a type of product. The geographical definition of the market is led in this case by the firm’s own view and thus may include both domestic and international firms. This introduces an element of subjectivity that can blur the results since two firms operating in the same area could have different interpretations about the geographical boundaries of their target market.

Firms that introduce new to the market and worldwide innovations create new ideas and knowledge through these firms, assuming a key role in the changes in the industry. Nonetheless, the economic impact of the innovations also depends on their adoption by other firms. Therefore, new to firm innovations are relevant and cannot be neglected. Some studies

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focus specifically on innovation adoption in the tourism sector (i.e., Hung et al., 2011). This classification, based on the degree of novelty, can be therefore used to differentiate market leaders and followers and examine patterns of innovation diffusion.

An innovation is new to the world when the firm is the first to introduce the innovation for all markets and industries, both domestic and international. Worldwide innovation is consequently very rare, therefore researchers can consider that introducing questions on new to the market in their surveys is sufficient to examine the degree of novelty for innovations. The assessment in this respect depends also on the country, the sector and the type of firms that will be included in the survey.

The term disruptive innovation has also been proposed to refer to those innovations that rarely appear and tend not to fit into the traditional categories that users value, such as the customer service’s quality. They introduce new attributes into the market that can occasionally be accepted although often in a delayed manner. This type of innovation creates new markets and value chains “disrupting” the existing ones.

Aldebert et al. (2011) introduce an additional type of innovation together with market and firm innovations. They also consider the application innovation defined as a minor innovation consisting of “improvements (in terms of performance or cost) to a simple product, through the use of higher performance components or materials, or a complex product through the introduction of changes to one of the integrated technical subsystems”.

Krizaj et al. (2014) point out that innovation can be described as the intermediate stage in the continuum between invention and adoption. Invention represents major developments in science or technology without already known implications. Adoption characterizes a firm's first introduction of existing, already known solutions. In this respect, they consider that the adoption of innovation is the most important approach toward innovation in the tourism sector. Innovation adoption can have an important impact on tourism development. It can significantly increase the competitiveness of the destinations and differentiate between similar destinations (Keller, 2006; Krizaj et al., 2014).

There are other classifications of innovation that take into account other issues. Thus, Hjalager (2002) applies a previous classification introduced by Abernathy and Clark (1985) to the tourism sector. These authors proposed a typology based on two criteria: on the one hand, whether the innovations disrupt or make existing business linkages obsolete, or whether they conserved or reinforced existing linkages between companies. The second criterion is related to the knowledge and competences used for the production of the new products or services. Combining these two aspects, four types of innovation can be identified: regular, niche, revolutionary and architectural.

- Niche innovations: focus on new forms of cooperation that tend to challenge the collaborative structures but not the competition and knowledge. They are closely related to business opportunities. For example, the introduction into a market of a new kind of company such as a new franchise or foreign investor, complementary products suppliers or marketing alliance agreements with specialized tour operators with the aim of reaching new groups of clients.

- Architectural innovations: introduce new structures and re-define the relationships with existent clients and markets. They tend to totally change the structures and establish new rules that remodel the concept of tourism. They imply changes not only within the industry, but also the society; for instance, the use of a new resource, such as Arctic tourism, where the

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building of made-of-ice hotels and attractions require new designs, building companies, equipment, etc.

- Revolutionary innovations: introduce new technologies that revolutionize the services provided but neither the external structures nor the target groups. This has a radical effect on the competences. The whole sector can be affected by the changes in the skills and competences required throughout a long period. At the company or destination level, revolutionary innovations may spread new technologies so that employees either change the procedures that they previously carried out or even abandon them.

- Regular or incremental innovations: are developed with the existing competences and relationships. Some examples of regular touristic innovations include: new investments in structures, such as larger hotels with a wider offer, or increasing the quality standards for some well-defined aspects.

Table 1 reviews the classifications of tourism innovation used in the literature, including some additional classifications.

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Table 1. Typologies of tourism innovation

OECD and Eurostat (2005) classification: Used by Tejada and Moreno (2013), Nicolau and Santa-María (2013), Aldebert et al. (2011)

Product innovation, process innovation, marketing innovation and organizational innovation

Hjalager (1997) Product innovations, classical process innovations, process innovations in information handling, management innovations, and institutional innovations Regular, niche, revolutionary and architectural (Abernathy and Clark’s approach, 1985)

Hjalager (2002) Product innovations, process innovations, management innovations, logistic innovations and institutional innovations

Hjalager (2015) - Changing the properties and varieties of the goods and services as they are experienced by the tourists - Increasing social and physical efficacy, for example, the power of the tourists to produce the benefits for themselves - Increasing productivity and efficacy in tourism enterprises and restructuring the input factors, such as energy, labor, capital, and land - Forming new destinations - Enhancing mobility to and within destinations - Altering the way of passing information within and across organizational boundaries - Changing the institutional logic and the power relations

Jacob et al. (2003) Product, process, delivery, internal organization, external organization, market.

Hjalager and Flagestad (2012) Core product/service innovations related to wellness traditions, product diversifications which expand the notion of well-being, technological innovation and new methods of providing services, and institutional innovations

Volo (2006) Product, process, delivery, organization, markets and marketing

Pikkemaat and Peters (2005) Innovation activities by specific functional areas (quality assurance, gastronomy, marketing, human resources, product bundling, wellness, information technology, operational procedures, strategy development, and animation)

Smerecnik and Andersen (2011) Sustainable innovations types: environmental management systems, renewable energy technologies, energy‐efficient building design, community environmental advocacy, purchasing reusable products

Martínez-Ros and Orfila-Sintes (2009) Technological innovation in areas: Quality management, environmental quality management, hardware and computer systems, ICT in external management, ICT in internal management, kitchen equipment, restaurant equipment, room facilities, maintenance and saving in supplies, security systems, laundry and cleaning.

Pérez et al. (2006) ICT, productive process, management process, total innovations

Orfila-Sintes and Mattsson (2009) Management, external communications, service scope, back-office (hotel industry)

Sundbo, Orfila-Sintes and Sørensen (2007) Technological innovation (incorporation of technological novelties or improvements) and Widened service (expansion of the services offered so as to increase added value to the stay)

Vila, Enz, and Costa (2012) Product innovations, Process innovations, Knowledge of the market (distribution channels, web-based communication, customer loyalty, information sharing, and marketing innovations) and Management innovations (changes in organizational structures, policies, nonoperational processes and the informal culture)

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4. SMES AND THE MEASUREMENT OF INNOVATION IN THE TOURISM INDUSTRY

The aim of this section is to analyze the measurement of innovation in the tourism industry at the company level, in particular tourism SMEs.

In the first place, the main indicators and databases developed for measuring innovation performance in the manufacturing and service sectors in the European Union are reviewed in order to explain the degree to which these scoreboards can adequately measure innovation in tourism SMEs.

Innovation Union Scoreboard (IUS)

The annual IUS provides a comparative assessment of the research and innovation performance of the EU Member States and the relative strengths and weaknesses of their research and innovation systems.

Following the methodology of the previous editions (since the introduction of the European Innovation Scoreboard in 2001), this scoreboard captures a total of 25 different indicators, distinguishing between eight innovation dimensions and three main categories of indicators, as follows:

a) Enablers: they capture the main drivers of innovation performance external to the firm and differentiate between 3 innovation dimensions:

- ‘Human resources’: this category includes 3 indicators and measures the availability of a high-skilled and educated workforce. The indicators capture new doctorate graduates, a population aged 30-34 with completed tertiary education and a population aged 20-24 having completed at least upper secondary education.

- ‘Open, excellent and attractive research systems’: this category includes 3 indicators and measures the international competitiveness of the science by focusing on international scientific co-publications, most cited publications and non-EU doctorate students.

- ‘Finance and support’: this category includes 2 indicators and measures the availability of finance for innovation projects through venture capital investments and the support of governments for research and innovation activities by means of R&D expenditures of universities and government research organizations.

b) Firm activities: are the innovation efforts at the firm level; differentiating between 3 innovation dimensions is also considered:

- ‘Firm investments’: this category includes 2 indicators of both R&D and Non-R&D investments that firms make in order to generate innovations.

- ‘Linkages & entrepreneurship’: this category includes 3 indicators measuring innovation capabilities by looking at SMEs that innovate in-house and collaboration efforts between innovating firms and research collaboration between the private and the public sector.

- ‘Intellectual assets’: this category captures different forms of Intellectual Property Rights (IPR) generated as a throughput in the innovation process including PCT patent applications, Community trademarks and Community designs.

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c) Outputs: are the effects of firms’ innovation activities, and differentiating between 2 innovation dimensions is considered in this scoreboard:

- ‘Innovators’: this category includes 3 indicators measuring the share of firms that have introduced innovations into the market or within their organizations, covering both technological and non-technological innovations and employment in fast-growing firms of innovative sectors.

- ‘Economic effects’: this category includes 5 indicators and captures the economic success of innovation in employment in knowledge-intensive activities, exports of medium and high-tech products, exports of knowledge-intensive services, sales due to innovation activities and license and patent revenues from selling technologies abroad.

The Innovation Union Scoreboard uses the most recent statistics from Eurostat and other internationally recognized sources such as the OECD and the United Nations (see Table 2). In particular, one of the main data sources of IUS indicators is the Community Innovation survey, CIS (Eurostat, 2015).

Community Innovation Survey (CIS)

The CIS (Eurostat, 2015) is a survey of innovation activity in enterprises. The survey is designed to provide information on the innovativeness of sectors by type of enterprises, on the different types of innovation and on various aspects of the development of an innovation, such as the objectives, the sources of information, the public funding and the expenditures.

The CIS provides statistics broken down by countries, types of innovators, economic activities and size classes. The survey is currently carried out every two years across the European Union, some EFTA countries and EU candidate countries.

In order to ensure comparability across countries, Eurostat, along with the countries, developed a standard core questionnaire, accompanied by a set of definitions and methodological recommendations. CIS’s 2012 concepts and underlying methodology are also based on the Oslo Manual’s third edition of 2005.

However, this data source presents a twofold limitation to the analysis of innovation behavior of tourism SMEs. Regarding the size of firms, the CIS does not cover firms with less than 10 employees. Therefore, an extensive share of small tourism firms are excluded (Krizaj, Brodnik and Bukovec, 2014; Camisón and Monfort-Mir, 2012). Secondly, the CIS does not provide disaggregated data to allow the identification of most tourism activities (Camisón and Monfort-Mir, 2012; Hjalager, 2010).

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Table 2. Innovation Union scoreboard indicators2

Fuente: Innovation Union scoreboard 2015 (European Commission, 2015).

A second objective of this section is to briefly review the latest academic research on innovation in tourism with special attention to two issues: the measurement of innovations at the company level and the innovative activity of small and medium enterprises (SMEs).

Recent reviews of the literature on innovation in tourism describe this theme as a young and complex phenomenon. Moreover, they highlight the need for more theorizing and empirical studies on almost all aspects of the phenomenon (Thomas and Wood, 2014; Tejada and Moreno, 2013, Hjalager, 2010; Hall and Williams, 2008). Hjalager (2010:6) claims that

2 See Annex C of IUS for definitions of indicators.

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"there is a lack of consistency in definition and measurement of rates of innovation, which could facilitate comparisons across industry sectors and national borders". In the same line, Hall and Williams (2008) find that more quantification is essential to consolidate tourism innovation. This section responds to these calls by examining empirical studies that identify the major information on how to measure innovation in tourism SMEs (Table 3).

Jacob, Tintoré, Aguiló, Bravo and Mulet (2003) make a pioneer empirical contribution to measure innovation in tourism firms. They conduct a pilot study on the innovative activity of a small number of tourist companies of great economic importance in the Balearic Islands (Spain). One of the main indicators explored is the number of innovations per enterprise. Nevertheless, it has not been used widely in further similar surveys - with a few exceptions, such as Krizaj, Brodnik and Bukovec (2014).

In the study of Jacob et al. (2003) up to six innovation categories are measured (product, process, delivery, organization, markets and marketing). Likewise, Volo (2006) distinguishes the same categories of innovation, but in this case for Sicilian tourism SMEs. Nonetheless, her main purpose is to analyze how each innovation type affects the tourist experience.

On the other hand, some studies explore the influence of market or firm characteristics on incremental or radical innovations (Chang, Gong and Shum, 2011; Martínez-Ros and Orfila-Sintes, 2009).

A few researchers are very specific and descriptive when defining the types of innovations, for example, Hjalager and Flagestad (2012) who categorize product innovations in well-being tourism in the Nordic countries. On the contrary, other studies choose to adopt the OECD’s and Eurostat’s (2005) classification of firm innovations: product, process, marketing and organizational (Nicolau and Santa-María, 2013; Tejada and Moreno, 2013). This option has the advantage of being able to do cross-sectoral and national/regional comparisons.

In other research, the main objective is to focus on studying the impacts of tourism firms´ innovation on certain variables. Examples are business performance (Mattsson and Orfila-Sintes, 2014; Grissemann, Plank and Brunner-Sperdin, 2013), market orientation and ICT use (Jiménez-Zarco, Martínez- Ruiz and Izquierdo-Yusta, 2011).

Pikkemaat and Peters (2005), Tejada and Moreno (2013) and Volo (2006) research the particularities of innovation in tourism SMEs- in Alpine regions, Andalusia (Spain) and Sicily (Italy), respectively. The results provide strong evidence that small tourism firms perform differently than larger tourism firms.

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Table 3. Recent studies measuring the innovation of tourism enterprises

Topics Empirical study

Camisón and Monfort (2012) Review the measurement of innovation in the tourism industry at the company level

Comparative analysis with data extracted from Spanish Survey on Innovation in Firms (INE, 2008)

Chang, Gong and Shum (2011) Measurement radical/incremental innovations 196 independent hotels and restaurants of China

Grissemann, Plank and Brunner-Sperdin (2013)

Analyzes the interplay between innovation, customer orientation, and business performance in the hospitality industry

203 hotels of Alpine regions

Hjalager (2015) List of 100 innovations and their impacts of tourism

Hjalager and Flagestad (2012) Categories of product innovation in well-being tourism 110 case investigations with stakeholders in 5 Nordic countries (24 in Denmark, 26 in Finland, 20 in Iceland, 25 in Norway and 15 in Sweden)

Jacob and Groizard (2007) A comparison between the number and the type of innovations among firms located in the original destination (Balearics) and two Latin American destinations

25 Hotels of Balearic firms in Latin-American and Caribbean countries (17 Mexico and 8 Dominican Republic)

Jacob, Florido and Aguiló (2010) Measurement of environmental innovation activity 300 firms of the Balearic Islands (Spain)

Jacob, Tintoré, Aguiló, Bravo and Mulet (2003)

Measurement of innovation categories: product, process, delivery, organization, markets and marketing

20 tourism firms of the Balearic Islands (Spain)

Jiménez-Zarco, Martínez-Ruiz and Izquierdo-Yusta (2011)

Influence of market orientation and ICT use on innovation 100 Spanish tourism firms

Krizaj, Brodnik and Bukovec (2014) Measurement of newness level of innovations 351 Slovenian tourism firms

Martínez-Ros and Orfila-Sintes (2009)

Measurement of radical/incremental innovations 331 hotels of the Balearic Islands (Spain)

Mattsson and Orfila-Sintes (2014) The dynamics of hotel innovation andtheir impact on hotel performance 331 hotels of the Balearic Islands (Spain)

Nicolau and Santa-María (2013) Innovation effects on hotel market value 24 innovations of two hotel companies (Sol Meliá and NH)

Pikkemaat and Peters (2006) Innovation activities by specific functional areas and ranking of degrees of innovation (0-3)

107 SME hotels of the Alpine region

Sundbo, Orfila-Sintes and Sørensen (2007)

Innovative behavior of tourism firms: comparative studies of Denmark and Spain

2 surveys in the Balearic Islands: 300 tourism firms+331 hotels 2 surveys in Denmark: 170 tourism firms+98 tourism firms

Tejada and Moreno (2013) Measurement of product innovation, process innovation, marketing innovation and organizational innovation

125 SME hotels of Andalusia (Spain)

Thomas and Wood (2014) A tool to measure the absorptive capacity of the hotel sector 259 UK hotels

Volo (2006) Impact that innovation types (product, process, delivery, organization, markets and marketing) have on tourism experience

SME tourism in Sicily (Italy)

Source: Self-elaboration.

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5. CONCLUSION

This paper has aimed at presenting a framework for the study of touristic innovation, taking into account the peculiarities that characterize the activities integrated into this sector. For this purpose, firstly some special characteristics related to knowledge transfer and creation in the tourism industry were analyzed. Secondly, a review of the different definitions and typologies of tourism innovation has been carried out. Thirdly, an introduction to the measurement of innovation in touristic SMEs has been proposed, based on the recent literature in this field.

This analysis reveals the existence of a certain dissatisfaction with the definition and classification of tourism innovation –considering the peculiarities of this sector. Proof of this is that the previous innovation tipologies are discussed and new proposals continue appearing (such as the business model innovation, interaction with clients, innovations, etc.). Overall, the OECD’s innovation in the Oslo Manual for innovation studies represents a consistent and rigorous conceptual framework to classify tourism innovation at a firm level and it is still the base for the majority of studies in this field. Nevertheless, its application in empirical research in tourism requires specific adaptations and clarifications associated with the characteristics of this sector.

Some authors have tried to value the degree of novelty of new products or other innovative activities in companies. In this respect, a controversial issue arises: Is it a better approach to define innovation as the introduction of any development which is new for the company or should it be new to the market? Generally, a novelty for the company’s market is required, although “new to the firm” innovations are studied in numerous works. In the end, there is not a unique answer for this problem and the most convenient definition in each case will depend on the research objetives. Moreover, it is convenient to take into account that “new to the firm” innovation, though it comes basically from imitation, is often accompanied by small incremental innovations. This leads us to the distinction between radical and incremental innovations and to the definition of what is really a radical innovation in tourism, an issue that is also discussed in the literature, though without a clear agreement being reached. The introduction of the concept of disruptive innovations is an attempt to respond to the problems that the definition of radicality presents. A disruptive innovation modifies the market structure causing problems to the competitors because clients move toward the new product, which offers an additional value.

A number of studies have observed that tourism does not demand many R&D services. However, this is compensated by the acquisition of embodied technology and staff mobility as sources of innovation diffusion and knowledge transmission which are very intense in this sector. According to some authors, personal training plays a fundamental role within the creation of internal knowledge and the adaptation to that which is external. The staff can also be a way of acquiring external knowledge depending on its characteristics and the networks which the company is immersed in. According to the capabilities and resources approach, the companies’ absorption capability includes the use of means thorough which knowledge is identified, acquired and applied, the staff´s characteristics being a fundamental asset for this process, especially its executive personnel. On the other hand, the caracteristics of the staff condition the acquisition and transfer of formal and tacit knowledge (encoded and decoded technology), staff rotation playing an important role in this respect. It is also worth noting that some touristic companies purchase from suppliers elaborated products that incorporate professional knowledge (e.g., readymeals), avoiding hiring more trained/qualified personnel.

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The importance of the role played by the client, as a source of knowledge in touristic activities in general and especially in experience-based activities, has been often underlined. The “experience economy” has a particularly important application in the tourism industry, where it is experiencing a fast growth. Research has pointed out that firms which focus on experience-based tourism are very innovative and tend to carry out distinct types of innovation at the same time. This fact supports recent theories which point out that technological and non-technological innovations reinforce and complement each other. Nevertheless, the “experience economy” is yet in its early stages of development.

Public authorities have a peculiar role in tourism innovation, in comparison to other sectors, since public interventions in tourist destinations have a direct impact on or are part of the innovation of a touristic package. As mentioned before, tourism innovations should be analyzed in a broader economic context than that of touristic activities, answering question such as: How does an improvement of the touristic offer or the historical-cultural heritage influence the services provided by tourism companies and, therefore, their innovations? Or, from another angle of public action, how does a change in the health, safety or environmental regulations influence the tourism activity and innovation in this sector? These issues have barely received attention in the literature and are key aspects to better know innovation processes within the tourism industry.

Institutional innovations are another aspect of tourism about which there is still a lack of knowledge, since an agreement does not even exist on the degree of influence of numerous forms of collaboration and interaction between companies. Networks and, within them, cooperation as a source of knowledge acquisition is an issue discussed in the literature. Some works suggest that relationships between companies within some value chain organization, such as the franchise system, motivate innovating. Developing classifications concerning this kind of innovations can be really interesting to better know the processes that they generate.

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