Healthcare and Innovation

  • Piera MorlacchiEmail author
Living reference work entry



Innovation is viewed as fundamental in healthcare, leading to advances in medicine, and individual and public health but also to economic growth and generation of wealth. When people think about innovations in healthcare, they normally focus on technological innovations such as drugs, devices, and diagnostics that have advanced medical practice and the treatment of diseases, whereas clinical procedures and organizational and infrastructural innovations are normally overlooked. Therefore, there is a need to improve our understanding of the relation between healthcare and innovation, with a focus on the nature and direction of healthcare innovation.

Health and Healthcare

Health has been defined by the World Health Organization (WHO) as “a state of complete physical, mental and social well-being, not merely the absence of disease and infirmity” (WHO 1946). Healthcare can be viewed as the prevention, treatment, management of diseases and illnesses, and the preservation of health and well-being through the services delivered by healthcare providers. These healthcare providers include medical and allied health practitioners and professionals such as physicians, nurses, medical technicians, therapists, pharmacists, nutritionists, paramedics, complementary and alternative therapists, and community health workers. The healthcare system is the organization of the healthcare services to meet the needs of a target population. There is a wide variety of healthcare systems around the world which are characterized, for instance, by different levels of access, funding, and structure of provision of healthcare services. The main actors which are common to many healthcare systems are hospitals and other medical facilities (e.g., primary care centers, clinics, and other specialized medical facilities such as IVF clinics), universities and research institutes, industrial firms and their suppliers (e.g., pharmaceutical companies but also specialized suppliers of electronic components for medical devices and of reagents and animal models for scientific laboratories), governments and public agencies (e.g., National Institutes of Health (NIH) in the United States), regulators (e.g., Food and Drug Administration (FDA) in the United States and the National Institute of Clinical Excellence (NICE) in the United Kingdom), payers (e.g., third-party payers in the United States like Medicare and Medicaid), professional bodies and societies, medical charities, patient associations, the media, and the public at large. Most people have direct experience of part of the healthcare system constituted by the providers and facilities involved in the delivery of healthcare (e.g., physicians, nurses, and hospitals), whereas other parts of the system such as the healthcare industry (e.g., medical device sector) and the medical research community (e.g., research centers and academic institutions) are less visible. Healthcare is important also in economic and financial terms in many countries around the world. Healthcare is one of the largest and fast-growing industries in developed countries and consumes a high rate of gross domestic product (GDP) also in developing countries.


In order to understand healthcare innovation, it is useful to start with what is known about innovation more in general. Innovation refers to something new (e.g., a product, process, or an idea) and to the act or process of innovating, which is coming up with an innovation. Other terms used to indicate the innovation process or parts of it are technological change, technological progress, technological evolution, and technological development. Innovations can be classified according to “types” (e.g., new product, new methods of production, new ways to organize business) and to how radical they are compared to what is already in use (e.g., radical vs. incremental innovations). Among other findings, studies of innovation have pointed out, for instance, that although an important distinction is normally made between “invention,” “innovation,” and “diffusion” – where invention is the first occurrence of an idea, while innovation refers to the first attempt to use out an idea and diffusion to the spread of it in practice – those are stages of a continuous process. A “linear model of the innovation process” sees it as constituted by a sequence of activities that goes from basic research through applied research, targeted development, manufacturing and marketing, until adoption (or diffusion) and use. A more simplified version is a two-step model that distinguishes only between development and diffusion. The linear model of innovation assumes that either scientific research and technological development (“technology push” model) or market demand (“demand pull”) are the main drivers of innovation. Although the linear model has been shown inadequate to represent what happens in empirical terms where feedback mechanisms and loops among different stages can be observed, this simplified view of the innovation process remains widely held in the public at large and in some parts of the medical community. A more productive approach to understand innovation is to unpack different stages of the process such as development and diffusion, and the feedback mechanisms and loops among them. From studies of innovation in different domains, it became clear that the organization of innovation and innovation processes can have varying configurations in different contexts, and evolve over time (Von Hippel 2005). It follows that general findings and theories about innovation need to be developed and validated in specific contexts. This is the case for innovation in the context of healthcare where innovations and the processes that lead to their development and use have some specific characteristics.

Healthcare Innovation

The popular image of healthcare or medical innovation is the one in which a group of biomedical scientists in a research laboratory come up with an idea that moves in a linear manner from the bench to the bedside. However, studies have shown that this linear conceptualization of medical innovation is misleading. Important issues are related to the nature of healthcare innovations, their development, diffusion in healthcare organizations, and regulation.

The Nature of Healthcare Innovation

When people think about innovations in healthcare, they normally focus on technological innovations such as drugs, devices, and diagnostic that have advanced medical practice and the treatment of diseases such as antibiotics, pacemakers, and ultrasound. Other health innovations such as clinical procedures (e.g., minimally invasive cardiac surgery), organizational innovations (e.g., intensive care units or ICUs), and infrastructural innovations (e.g., information and communication technologies such as computer-based hospital information systems) have less visibility and have been less studied.

The Development of Healthcare Innovation

Although healthcare innovations and the dynamics of their innovation processes are quite diverse, studies have focused on the study of technological development in medicine and in particular drugs. General findings on technological development in medicine are the importance of the interaction between developers, clinicians, and regulators; the feedback mechanisms between different steps of the development process and between the development and use (including diffusion); and the importance attributed to randomized clinical trials to provide evidence of efficacy for new treatments. Pharmaceutical innovation is useful to illustrate some of these findings in the context of the development of new drugs. Research on pharmaceutical innovation has highlighted that it is science-based or depending on advances in life sciences (e.g., molecular biology), lengthy and expensive, and uncertain. The process of drug discovery has become increasingly complex and sophisticated. It was based on random screening of compounds to find new drugs until the 1940s, and later on began a transition to a more “guided” process or “drug development by design” drawing heavily on advances in molecular biochemistry, pharmacology, and enzymology until the 1970s and more recently on tools of genetic engineering. After a new drug has been identified, it goes through a development process that includes preclinical research (e.g., animal testing), clinical trials (i.e., testing in humans), and in some cases regulatory approval. Clinical trials are a set of procedures used to collect data on safety (e.g., adverse drug reactions and adverse effects of other treatments) and efficacy of new drugs, used both in the process of development and regulatory approval of new drugs and other therapeutic interventions. It can take between 10 and 20 years between the start of the process of discovery and when a new drug reaches the patients for normal clinical use, and many new drugs considered promising in drug discovery fail to do so. The development of a drug does not end necessarily with the adoption in clinical practice because new indications for an existing drug can be found (e.g., use of beta-blockers in the treatment of heart disease) or better compounds can be developed from learning by using in the treatment of patients. Close relationships among industry, academia, and government have always been crucial to drug discovery and development, because basic biomedical and clinical knowledge created in university and publicly funded settings are exploited in industrial laboratories, which also conducted basic research and drug discovery. However, over time, the division of labor between actors involved in the process has changed leading the industry to focus their investments more on final stages of drug development and testing and to leave the initial and more uncertain stages to academia and publicly funded research institutions.

Although the development of other medical technologies like devices and diagnostics is less studied than drugs, some general findings like the importance of the interaction between developers, clinicians, and regulators or casted difference of industry, academia, and government and the importance and role of research, regulation, and uncertainty also stand in these contexts, but some differences can be noticed (Blume 1992; Morlacchi and Nelson 2011). For instance, the process of development of new devices and diagnostics is in many cases shorter than drugs, even when regulatory approval is necessary before introducing a product on the market (e.g., hip replacements). Moreover, although the market in the medical device and diagnostic sectors is highly concentrated and populated by a few multinational firms, differently from the pharmaceutical sector (also including the biotechnology side of it), a large number of small firms that contribute to innovation dynamics is active in this market.

The Diffusion of Health Innovation

Research on the diffusion of medical innovations focuses on explaining why and how an innovation spread and got adopted in clinical practice or is generally used. Studies on the diffusion of innovations in healthcare organizations (e.g. Greenhalgh et al. 2004) pointed out the following factors: the nature of the innovation itself in terms of, for instance, complexity of use, relative advantage to existing technologies, and possibility to try and observe the innovation; the adoption and implementation processes also in terms of communication and influencing process (e.g., existence of innovation champions and lead users); and the organizational context and its immediate environment (e.g., reimbursement mechanisms that shape financial incentives for the purchasers such as hospital administrators to adopt new innovations, but also reputational effects brought by the adoption of new technologies).

The Regulation of Healthcare Innovation

In many countries, healthcare and healthcare practices are highly regulated (e.g., standardization of medical practice through guidelines which are issued by professional bodies with the aim of guiding decisions and criteria regarding diagnosis, management, and treatment in specific areas of healthcare). This extends also to healthcare innovation, where both innovations and the process that leads to their development and use are regulated. Healthcare innovations such as drugs and devices are reviewed and evaluated by appointed bodies in each country (e.g., in the United States is the Food and Drug Administration (FDA)) on the basis of data on safety and efficiency collected in some cases through clinical trials before they are introduced in clinical practice and released in the market. The level of scrutiny depends on the level of risks attributed to different products, and in some cases, the monitoring of their performances continues also after they have been introduced in the market (e.g., risky new devices such as pacemakers and heart valves are evaluated before their introduction in the market, but also after they are introduced in clinical practice through the compulsory reporting of adverse events and malfunctioning, and defective products can be ordered to be recalled).

Key Open-Ended Issues in Healthcare Innovation

There are a number of open-ended issues related to healthcare innovation, but three stand up in terms of importance: our current conceptualization of the healthcare innovation process; the role of users and other actors in this process; and whether healthcare technology can help to deliver a digital health revolution and patient-centered care.

The Conceptualization of the Healthcare Innovation Process

Although the nature of innovation process in healthcare can be characterized as dynamic and systemic, a linear view of the medical innovation process still prevails. The assumption of the linear model is that scientific knowledge developed through basic scientific research and engineering knowledge developed in the biomedical field or through technology transfer from other fields (such as in the case of laser and ultrasound) are driving innovation in healthcare. However, the linear conceptualization assumes first of all that it is possible to make a clear distinction between research and development on one hand and adoption and use on the other, whereas in many cases like medical devices but also therapeutic drugs, the development does not end with the adoption of an innovation, but there are incremental changes. Moreover, the development occurs not only in industrial R&D laboratories but also in the context of clinical practice. This is the case for laser that was introduced for ophthalmologic and dermatological purposes, but new indications of use were discovered in clinical practice such as in oncology, thoracic surgery, gynecology, and other specialties. An alternative conceptualization to the linear model is a dynamic (or more evolutionary) model where there are feedback mechanisms in the process between the phases of adoption and use, and applied research and development, i.e., after the introduction of the first-generation innovation in clinical practice through learning by using important information about improvements, can be generated and embodied in new generations of the innovation. The interactive and distributed nature across time and space and across areas of medical practice and institutions of healthcare innovation process can be labelled as “systemic”. It follows that approaches that study the systemic nature of the healthcare innovation process focus on the components of the system or actors and their interactions in specific contexts (see for example Morlacchi and Nelson 2011). The difference among some approaches is in the way in which they determine the boundaries of the systems: national and regional approaches focus on geopolitical boundaries, and sectoral or technology approaches identify actors that operate in the same product market.

The Role of Users and Other Actors in Healthcare Innovation

The development and use of new medical innovations are also shaped by the demand for these innovations, which is traditionally related to the needs and preferences of users like physicians and the end customers, i.e., the patients. Physicians are users of medical technologies but they play an important role also in their development, establishing a close interaction with manufacturers. The supply and demand of healthcare innovations has complex dynamics that go beyond the interaction between developers and users. In recent years, the innovation process in healthcare came to be more and more significantly influenced by other groups of actors such as hospital administrators, payers, and regulators but also patients and their families, patient (advocacy) groups, and the media. However, there is still a limited understanding of how the interaction of supply and demand influences the aim, direction, and rate of innovation in healthcare.

Healthcare Technology and the Digital Health Revolution

Technology is key to medical research and the delivery of healthcare and medicine. Healthcare technology saves lives and relieves suffering, and its innovations transform medical and care practice and create economic growth and great wealth. However, studies have shown that healthcare technology has also a big impact on raising costs of healthcare and its affordability. This poses ethical and social dilemmas and triggers debates about the costs of healthcare technology and high-tech medicine and the lack of affordability and sustainability of our current healthcare systems, in both developed and developing countries. “Value-based healthcare,” the goals of which is to lower healthcare costs and improve quality and outcomes, and the “creative destruction of medicine,” where mainly genomics and digital technologies can provide personalized care at lower cost, have been proposed and articulated in the popular media, policy, and academic circles, and by business as key ideas to frame the transformation of healthcare innovation and to implement a digital health revolution focused on patient-centered care (Topol 2012).

Implications for Theory, Policy, and Practice

There are a number of implications for theory, policy, and practice of healthcare innovation.

More Interdisciplinary and Critical Studies of Healthcare Innovation

Current studies of healthcare innovation are characterized by multiple approaches and undertaken in many separate academic fields, which result in fragmentation of our understanding of different issues and lack of cross-fertilization of ideas. Traditionally, approaches such as economics of innovation, health economics, and innovation management have focused on the economic, financial, and managerial aspects of innovation. Science and technology studies have taken more sociological and historical approaches to study the development and use of medical innovations (e.g. Blume 1992), focusing on the controversial and negotiated aspects of them such as in the case of allocation of resources between basic scientific research on finding cure for diseases and public health measures for prevention or ethical issues on emergent and promising but risky new technologies like xenotransplantation (i.e., the use of animal organs in humans) or stem cells. Critical studies in medical sociology, for instance, have investigated “biomedicalization” or how healthcare and medicine have become increasingly driven by science, technology, and industry on a global scale, leading to unpack and study in depth several processes such as the increasingly scientific and technological nature of medicine, the transformation on how biomedical knowledge is produced, distributed, and consumed, and the political economy of biomedicine (Clarke et al. 2003). An evaluation of healthcare innovations that aims to be comprehensive and multidimensional is a challenging undertaking. The multidisciplinary field of health technology assessment (HTA) examines beyond costs, efficacy, and safety the social, political, and ethical aspects of the development, diffusion, and use of health technologies (Lehoux 2006). The ethical aspects of healthcare innovation like organ donation, healthcare rationing, and questions related to emergent technologies in biology and medicine stem cells, genomics, and human enhancement are also studied in the field of bioethics. Although healthcare innovation has been extensively studied, what is still lacking is a more interdisciplinary and critical approach that can inform the transformation of the current nature and direction of its process and outcomes.

The Transformation of Healthcare Innovation

Healthcare and medicine in the twenty-first century are characterized by big challenges, emerging trends, and a clear need to transform healthcare innovation. In recent years, the biomedical perspective that is still dominant in health and medicine has been challenged by evidence that the steady reduction in mortality and increased longevity in many developed countries in the last century were mainly due to improved sanitation and nutrition and general improvements of living standards and not to advances in medicine. Furthermore, healthcare and medicine are becoming more and more driven by science, technology, and industry on a global scale and by standardization and evidence-based medicine. Finally, the current levels of healthcare expenditures are becoming unsustainable and health inequalities are raising, both in developed and in developing countries.

There are emerging trends and a process of transformation taking place in healthcare innovation. One of these trends is the rise of the complementary and alternative medicine (CAM) movement, where patients turn to health practices other than Western medicine (e.g., acupuncture, chiropractic, Ayurveda) to deal with illness and well-being. There is also an intense scrutiny by the biomedical community, the media, and the public at large of the pharmaceutical industry, previously considered unquestionable and viewed as the producer of life-saving products. Pharmaceutical productivity has declined and new drugs are difficult to come by, and the costs of developing them increased together with the total R&D expenditures. Moreover, there are still unmet medical needs and health inequalities, especially in areas such as infectious diseases where drugs are available but not affordable for many in developing countries. This prompted some discussions about the role of public and private sectors in healthcare that are leading to examples of social experimentation (e.g., public-private partnerships) and measures of cost savings and efficiency. Finally, the development of new technologies like genomics and ICT but also sensors and wearable devices is viewed by many as central to the disruption of medicine and healthcare and to address the demands of an aging population with ever-increasing levels of chronic conditions, while reducing costs, and the delivery of patient-centered care.

Conclusions and Future Directions

Although innovation is still viewed as fundamental in healthcare, leading to advances in medical practice, and individual and public health but also to economic growth and generation of wealth, a better understanding of the dynamics of high-tech medicine and its impact on the rising costs of healthcare pointed out that the fundamental problem in today’s healthcare systems is the weak correlation between the types of innovations generated by the innovation process driven by the medical research community and industry and the needs of healthcare delivery. The transformation of the nature and direction of the current healthcare innovation process in order to deliver a digital health revolution and patient-centered care is now a top priority for healthcare theory, policy, and practice.



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© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of ManagementUniversity of Sussex Business School, University of SussexBrightonUK

Section editors and affiliations

  • David F. J. Campbell
    • 1
    • 2
    • 3
    • 4
  1. 1.Unit for Quality Enhancement (UQE)University of Applied Arts ViennaViennaAustria
  2. 2.Faculty for Interdisciplinary Studies (iff), Institute of Science Communication and Higher Education Research (WIHO)Alpen-Adria-University KlagenfurtViennaAustria
  3. 3.Department of Political ScienceUniversity of ViennaViennaAustria
  4. 4.Department for Continuing Education Research and Educational Management, Centre for Educational Management and Higher Education DevelopmentDanube University KremsKremsAustria