The innovation

An innovation is the successful introduction of ideas, perceived as new, into a given social system (Shepard, 1967). It is essential that as long as it is recognized as new in a given area or social group, it may be viewed as an innovation. This means that it may have existed earlier in another area or in the same area but in a different form. The definition is broad enough to be applied to phenomena such as television sets, rumours and cost accounting principles. It is not essential that the idea be new; only that it is perceived as new by an individual or unit of adoption. Newness is very subjective. As far as human behaviour is concerned, whether or not an idea is “objectively” new is measured by the lapse of time since its first use or discovery. If the idea seems new to the individual, it is an innovation (Rogers, 1995b). The newness of an innovation need not just involve new knowledge. Someone may have known about an innovation for some time but not yet developed a favourable or unfavourable attitude towards it, nor have adopted it (Rogers, 1995b).

From this perspective, the introduction of accrual accounting into the Sri Lankan public sector is considered as an accounting innovation. Although the elements of accrual accounting and public sector accounting standards are found in other developed and developing countries, it is a new idea to the Sri Lankan public sector organisations. Some government officials may have had prior knowledge about accrual accounting and standards, but may not have formed a favourable or unfavourable attitude toward its adoption by their organisation. Therefore, accrual basis accounting

42

practice and standards, discussed in Chapter 2, are considered to be an innovation for the purpose of this thesis.

Shepard (1967) described innovation as being: “when an organization learns to do something it did not know how to do before, and then proceeds to do it in a sustained way, a process of innovation has occurred (p.470).” It is not necessary that an innovative idea represent new knowledge; it might have been known to an individual, without him/her having developed a favourable or unfavourable attitude toward it (Rogers 1983). From this perspective, the introduction of accrual accounting and standards into the Sri Lankan public sector is considered as an innovation even though individuals had prior knowledge about the accrual basis accounting concept.

Innovation creates a kind of uncertainty in the minds of potential adopters (about its expected consequences), as well as representing an opportunity for reduced uncertainty in another sense (that of the information base of the innovation) (Rogers, 1995b). The uncertainty reduction through information embodied in the innovation itself represents the possible efficacy of the innovation in meeting an individual’s perceived need; this perceived benefit motivates individuals to learn about the innovation. Once such information-seeking activities have reduced the individual’s uncertainty about the innovation’s expected consequences to a tolerable level, a decision concerning adoption or rejection will be made (Rogers, 1995b). Thus, the innovation-decision process is essentially an information-seeking and information-processing activity in which the individual is motivated to reduce uncertainty about the advantages and disadvantages of the innovation.

3.3.1.1Characteristics of innovation

Why do certain innovations spread more quickly than others? And why do others fail? Diffusion scholars recognise five characteristics of an innovation that determine its success. The five characteristics of innovation, as perceived by individuals, help to explain their different rate of adoption. These characteristics are: relative advantage; compatibility with existing values and

43

practice; simplicity and ease of use; trialability; and observable results as shown in Figure 3.1. The success of an innovation depends on how well it evolves to meet the needs of more and more demanding and risk-averse individuals in a population.

Figure 3.1: Rogers’ characteristics of an innovation

The Relative advantage of an innovation refers to the extent to which the new idea is better than the one it is replacing. Relative advantage can be measured in terms that matter to the users, such as economic advantage, social prestige, convenience, or satisfaction. It does not matter so much whether an innovation has a great deal of “objective” advantage. What does matter is whether an individual perceives the innovation as advantageous (Rogers, 1995b). The greater the perceived relative advantage, the more rapid is its rate of adoption likely to be.

Qualities of an

innovation

44

Compatibility is the level to which an innovation is perceived as being consistent with values, past experience, and the needs of potential adopters in a given social system. An innovation will not be successful if it is not compatible with the values, norms and practice of the social system. A smoother transition in the social system allows a rapid adoption and acceptance of the new idea. Perera et al. (2003b) identified that incompatibility of an innovation appears to have significant explanatory power in the abandonment of transfer pricing in 1995. This is because the values, norms, and culture at the time of its introduction in 1991 were not conducive to the crucial secondary stage of adoption of the innovation by users.

Complexity refers to the difficulty for an adopter to understand and use the innovation. Some innovations are readily understood by most members of a social system; others are more complicated and will be adopted more slowly. New ideas that are simpler to understand are adopted more rapidly than an innovation requiring the adopter to develop new skills and understanding.

Trialability is the degree to which an innovation may be experimented with on a limited basis. New ideas that are trialled on an instalment plan will generally be adopted more quickly than innovations that are not divisible (Rogers 1995). An innovation that is trialable reduces uncertainty for the individuals who are considering the adoption, because they learn about the innovation by doing.

Observability is the degree to which individuals see the results of an innovation. The easier it is for individuals to see the results of an innovation, the more likely they are to adopt it. Such visibility stimulates peer discussion of a new idea, as friends and neighbours of an adopter often request innovation- evaluation information about it.

Reinvention is a key principle (or outcome) in the diffusion of innovation. As previously stated, the success of an innovation depends on how well it is able to reinvent the innovation so that it becomes more appropriate for the needs of the adopter individuals and groups. The history of the mobile phone is one such example. A good way to achieve this is to make users into partners in a

45

continuous process of redevelopment. Computer games companies and pharmaceutical corporations are examples of organisations that seek to make users active partners in improving innovations by supporting user communities or by applying participative action research techniques. Given that an innovation exists, communication must take place if the innovation is to spread beyond its inventor. In the next section, this second element of diffusion is discussed.