It refers to the ability to make major improvements and modifications to existing technologies, and to create new technologies. The notion of innovation capability applies to process technology, product technology as well as the way
in which production is organised and managed. Its importance derives from the fact that it is
presumed to contribute to dynamic competitive advantage of companies since it enhances their
capacity to keep up with, respond to, and initiate technological change on an ongoing basis. It is
crucial in a competitive economic environment characterised by fast change.