The Innovation Process and Financial Decisions

The literature has identified two different processes by which innovation of new products presents itself. The first, the Technology Push process, occurs when the innovation of a new product is spurred by a technology that the entrepreneur possesses. The second, the Market Pull process, occurs when demand for products that do not yet exist motivates the innovation. The premise of this article is that the type of the innovation process - Technology Push or Market Pull - is not exogenous, but endogenously determined by the corporation. Moreover, the innovation process is related to and jointly determined with financial decisions in the corporation, such as diversification decisions, going public decisions, compensation practices, governance structure, and ownership structure