MANAGING PROCESS INNOVATION THROUGH INCREMENTAL IMPROVEMENTS - EMPIRICAL-EVIDENCE IN THE PETROLEUM REFINING INDUSTRY

This paper developed a present value index (PVI) model to offer a new solution to differing the effects of radical innovation and incrementa l improvement. After comparing the return from an initial-radical-proc ess innovation and the return from the incremental changes in petroleu m refining processes, it was found that incremental improvements gener ated higher returns than from its initial innovations. The findings su ggest that, in contrast to a conventional research and development (R& D) strategy with a focus on state-of-art innovations, manufacturing co mpanies should place sufficient emphasis on incremental capital and op erating improvements to fully exploit economic benefits from an innova tion.