Iryna Ignatieva, Viktoriia Khomenko. Theoretical aspects of innovation potential formation in enterprises facing crisis conditions

DOI: https://doi.org/10.62204/2336-498X-2025-2-1

ECONOMICS

THEORETICAL ASPECTS OF INNOVATION POTENTIAL FORMATION IN ENTERPRISES FACING CRISIS CONDITIONS

Iryna Ignatieva,
Doctor of Economic Sciences, Professor,
National University of Kyiv-Mohyla Academy, Ukraine,
iignatyva@ukr.net; ORCID: 0000-0002-9404-2556

Viktoriia Khomenko,
National University of Kyiv-Mohyla Academy, Ukraine,
vo.khomenko@ukma.edu.ua; ORCID: 0009-0006-0949-2023

Annotation. Current global transformation trends and the evolving conditions under which business entities operate necessitate thoroughly examining how enterprises form and develop their innovative potential amid economic crises. This issue is especially relevant in analyzing key aspects of innovation activity, identifying the factors that influence innovation potential, and as- sessing the role of government support in stimulating innovation. Particular emphasis is placed on the interplay between crisis phenomena and accelerating innovation processes within com- panies. The article examines the structural components of innovation potential and substantiates the importance of strategic planning in ensuring sustainable economic development.
Keywords: innovation, enterprise innovation potential, development of innovation potential, economic crisis.

Introduction. Integrating the digital economy into business structures necessitates the development of new approaches to shaping the innovative potential of business en- tities. For many enterprises, particularly individual ones, a crisis or pre-crisis state often serves as a destructive factor hindering the formation of such potential. However, it is es- sential to recognize a shift in perspective: whereas the economic crisis has traditionally been viewed as an opposing force that suppresses innovation, modern research increas- ingly sees it as a powerful driver of innovation (Bilyk, 2015; Telyacha, 2009).

The term crisis originates from the Greek krisis, meaning «decision» or «turning point,» highlighting the dual nature of a crisis—as both a threat and an opportunity for transformation. A similar duality exists in the Japanese language, where the word for
«crisis» is represented by the characters 危機 (kiki), composed of 危 (ki) meaning «dan- ger» and 機 (ki) meaning «opportunity.»

This understanding uncovers the underlying significance of crisis phenomena that
not only destabilize the economy but also induce its transformation.

The definition’s origins subscribe to the theory espoused by J. Schumpeter in 1942, that economic crises act as a stimulus for innovation, leading to new forms of enterprise and the displacement of outdated structures. Numerous scholars have concluded that innovation activity not only intensifies during crises but also functions as an effective mechanism for overcoming crises at the national level and within individual enterprises.

This article aims to explore the function of economic crises as drivers of innova- tion processes and to substantiate the need to develop enterprises’ innovation potential to
facilitate their adaptation and recovery in the crisis process and aftermath.

Research by domestic and international scholars has focused on the impact of eco- nomic crises on enterprise innovation potential. They have explored not only the general patterns of this phenomenon but also specific aspects related to innovation management under conditions of economic instability.

Literature Review. The issue of innovation potential in times of economic crisis has been extensively explored in both domestic and international academic literature. Various works have examined the matter in Ukrainian academic circles in multiple di- rections. Bilyk (2015) considers the impact of global changes on the innovative evolu- tion of firms and national economies and the role of government assistance in moments of crisis. Telyacha (2009) and Dzyubina (2008) examine the dynamics of innovative development in periods of systemic crisis and offer a structural analysis of enterprise innovation potential. Yepifanova and Gladka (2018) focus on the key components of in- novation potential that determine an enterprise’s adaptability under economic instability.

Further contributions come from Kavtysh and Krush (2011) and Orlova-Kurylova (2017), who classify the factors shaping innovation potential and propose models for stimulating innovative activity across various levels of management during crises. Par- ticularly noteworthy are the recent studies by Ignatieva and Serbenivsky (2024), which explore the management of strategic potential in times of economic disruption and stress the importance of adaptive innovation strategies for maintaining enterprise competitiveness.

International literature also provides valuable insights into the relationship between crisis phenomena and innovation activity. Schumpeter (1942), in his early theory of cre- ative destruction, asserts that crises destabilize economic systems and spur technological innovation and the evolution of new business forms. According to K. Freeman (1997), economic downturns are industrial renewal engines that enable technological paradigm transformation. K. Christensen, in The Innovator’s Dilemma (1997), investigates how firms that pursue innovation during turbulent times often secure long-term advantages. Building on this, Teece (2018) develops the theory of dynamic capabilities, emphasizing that the capacity to adapt through innovation is vital to organizational survival and prog- ress in volatile environments.

Results and Discussion. The reviewed body of research shows that the economic crisis will spur companies to adjust to new realities despite its devastating impact. A key element that determines a company’s ability to do so is its innovation potential, which serves as a source for the long-term evolution and competitiveness of the enterprise.

Nevertheless, the scientific community has no standard approach to its definition. Some scientists view it as a system of interlinked means and resources, whereas others define it as the capacity for an enterprise to adopt innovations. A. Dzyubina in her work «Disclosure of the content of the concept of «innovative potential» and definition of its components» (2008) reviewed modern attempts to define the term «innovative poten- tial», concluded that other scientists have a narrow focus on only one side of this concept and proposed a broader definition. According to her interpretation, innovative potential is «the ability to innovatively develop an enterprise using all the resources necessary for this» (Dzyubina, 2008).

O. Shilova (2012) confirmed that resources alone cannot determine or be respon- sible for an enterprise’s innovative potential. The scientist notes that the company’s re- sources are essential to realizing the potential, but they are only one of its components. Among other necessary aspects of the innovative potential, Shilova highlights methods of effective enterprise management and a clearly defined system of tactical and strategic goals.

Research into the structure of innovative potential allows us to identify non-classical elements of such potential: market opportunities, erudition, human resources, technical and technological capabilities, information and communication system, the effectiveness of the motivational mechanism used by the business entity, the level of design and proj- ect work carried out by the business entity (Epifanova & Gladka, 2018).

Thus, based on the analysis and generalization of the available scientific literature on the interpretation of the concept of innovative potential and the isolation of its com- ponents, we can conclude that innovative potential is the ability of an enterprise to in- novate and further develop, involving all the resources necessary for this that are at the disposal of the company. The main elements of innovative potential are: compliance of the enterprise’s capabilities with market needs; erudition of personnel; human resources potential; flexibility and adaptability of production facilities; accuracy and completeness of data necessary for the implementation of innovative ideas; effective interaction of innovation entities, as well as the availability and possibility of conducting research.

Forming a company’s innovative potential is a multi-component and complex pro- cess that requires precise planning of its future actions and effective optimization and use of accumulated resources to achieve the set goals and potentially change its position in the market. Supporters of the system approach assume that such complexity and struc- ture of this process requires the presence of specific patterns that remain relevant at all times (Kavtysh & Krysh, 2011). Thus, the system approach makes it possible to identify key patterns:
1) The system is characterized by the heterogeneity of its constituent elements and complex hierarchical relationships between them.
2) The elements of the innovative potential are to some extent interchangeable.
3) When forming the innovative potential, internal processes are inseparable from external environmental factors.
4) The innovative potential can be reproduced and updated.
5) The formation of the innovative potential is based on a clear structure of its ele- ments.
6) Innovative potential, as a system, is constantly changing its elements.
7) The components of innovative potential demonstrate high adaptability to con- stant changes in the internal or external environment and the ability to counteract de- structive factors.
8) Innovative potential is unique because each system has its own resources and individual organizational structure.
9) The scale of the enterprise determines innovative potential, the specifics of its industry, and the nature of management decisions (Kavtysh & Krysh, 2011).

Among the identified patterns, the high adaptability of the components of innova- tion potential to both internal and external environmental influences plays a key role. Many researchers, analyzing the factors that shape innovation potential, identify two main categories: internal and external factors (Epifanova & Gladka, 2018; Kavtysh & Krush, 2011). The internal environment directly impacts innovation potential and is gen- erally considered more critical than external influences, often requiring immediate man- agerial intervention.

In their study «Features of the Formation of the Innovation Potential of Industrial Enterprises in Ukraine» (2011), O. Kavtysh and N. Krush offer a detailed classification of influencing factors. They categorize external factors into two types: those with di- rect influence — such as government bodies, legislation governing innovation activi- ty, partnerships, market competition, and the state of science and education at a given time — and those with indirect influence, including broader trends like scientific and technological progress, national and global economic conditions, as well as political, demographic, and environmental contexts. Internal factors include a sharply focused strategy, the availability of required resources, research and development activities, hu- man capital, and the enterprise’s ability to determine and cope with the operation’s risks.

Building on the classification of internal factors influencing innovation potential by I. Yepifanova and D. Gladka (2018), it is appropriate to expand the framework with a list of factors that may be categorized as endogenous:
1. Developmental history and enterprise image – includes historical data (e.g., time of establishment), legal characteristics (e.g., ownership structure, organizational char- ter), and economic records (e.g., credit history).
2. Strategic orientation – encompasses the enterprise’s goals, strategic priorities, and core values.
3. Corporate culture is defined by interpersonal dynamics within the team and the motivational framework.
4. Marketing performance – the effectiveness and adaptability of the enterprise’s marketing function.
5. Operational characteristics – specific features of the enterprise’s day-to-day op- erations;
6. Financial capacity – including capital reserves and key financial indicators such as liquidity, business activity, and financial stability.
7. Economic condition – including cost structure, capital intensity, and energy con- sumption.

Chang (2020) synthesized theoretical approaches to developing innovation poten- tial in companies and proposed a procedural algorithm for enterprises aiming to optimize the monitoring and development of their innovation capacity. The researcher outlines two key stages: forming innovation potential and evaluating its components.

In the first stage, the fundamental elements of innovation potential—human, intel- lectual, financial, and organizational resources—are identified, and specific functional requirements for each are defined. Then, the factors necessary to activate and strengthen these elements are identified and developed.

Each innovation potential component’s effectiveness indicators are analyzed at the evaluation stage. This analysis identifies the current innovation potential, development, and vulnerable areas. Chang (2020) notes that such an assessment helps enterprises un- derstand their current state and supports strategic innovation management to strengthen competitiveness.

Based on the above analysis, it can be concluded that the formation of innovation potential is a complex and dynamic process requiring:
• a clearly defined action plan for the enterprise;
• a thorough understanding of how to utilize available resources most effectively;
• analysis of threats from both internal and external environments;
• readiness to respond swiftly to emerging challenges.

Forming innovation potential in crisis conditions is complicated and requires a com- prehensive insight into economic patterns, adaptation processes, and strategic resource management. Crises develop both risks and opportunities, transforming business models and triggering the use of innovative strategies.

An economic crisis involves several economic processes: structural dysfunctions, recessions and their aftermaths, institutional dysfunctions, and external shocks in the form of geopolitical tensions or natural disasters. While these crises bear considerable economic costs for a country, they also provide structural reforms and innovation op- portunities.

A defining feature of economic crises is their cyclical nature, marked by recurrence at certain intervals and discernible patterns in their emergence and development. The following are four distinct phases that generally characterize the economic cycle:
1. A crisis is a slowdown in economic growth rates, lower production levels, and decreased prices.
2. Depression is a phase of standstill when the economic decline stops, but business remains low, and there is a pervasive lack of confidence in financial and govern- ment institutions.
3. Recovery is a slow return to production, employment, and consumption.
4. Upswing is a stage of economic expansion accompanied by heightened invest- ment and stimulated business activity that might ultimately drive the economy to overheating and lay the groundwork for a future crisis.

A common trigger for a new economic downturn is reduced aggregate demand, leading to falling production and rising unemployment. However, scholars such as S. Kuznets, C. Juglar, and J. Kitchin have expressed differing views regarding the causes and durations of economic crises:
• Kitchin cycles (3–4 years) reflect short-term fluctuations driven by inventory levels and shifts in market trends.
• Juglar cycles (7–11 years) are associated with investment dynamics and credit cycles.
• Kuznets cycles (15–25 years) relate to structural economic changes, including demographic transitions and technological innovations.

The earliest attempt to relate innovation to economic cycle crises was made by Schumpeter (1942), who theorized the concept of creative destruction. This concept holds that economic cycles are triggered by waves of innovation that overturn techno- logical paradigms and supplant old production structures. This remains a very applicable concept because today’s overarching thinking considers crises as the drivers of innova- tion-fuelled development.

For example, in Regularities of Innovation Development in Conditions of Systemic Crisis (2009), L. Telyacha asserts that crisis and innovation are inextricably linked and that crisis usually catalyzes innovation. Such innovation, in turn, stimulates economic growth and forms the basis for the transition into the recovery phase, eventually creating the conditions for a future crisis. According to Telyacha, crises necessarily result in the collapse or evolution of old economic systems and the need for new innovative solutions to restore and develop the economy.

Her findings echo Schumpeter’s theory and are endorsed by R. Bilyk (2015), who bases her conclusions on the evidence of European nations and illustrates that interna- tional changes in innovation have a positive impact on the long-term development of the economy and demographic indicators.

Bilyk also emphasizes the state’s critical role during times of crisis: the proactive support of scientific and technological progress. One of the most effective strategies she identifies is the creation of national innovation systems, which she defines as «an insti- tutional mechanism for the strategic, state-led governance of innovation processes as a core factor in socio-economic development» (Bilyk, 2015).

One of the most critical elements of state support for technological and scientific advancement includes offering sustainable financing for innovation activities. With diminishing access to conventional financing channels, such as bank loans, firms are forced to search for alternative channels for investment. These include venture capi- tal, government grants, international financial institutions, and collaborative partnership programs. Gensior (2024) identifies the challenge in raising finances due to the hesita- tions of banks, creditors, and investors, who see enterprises as risky endeavors that will not provide adequate returns.

Managing human resources is another vital aspect of building up innovation capac- ity in times of crisis. Companies need to invest in developing staff potential, stimulating creativity, inspiring a good corporate spirit, and creating flexible working conditions for the generation and speedy application of new ideas.

In this context, one often overlooked aspect of human resource management is em- ployee resistance to change. According to Gensior (2024), two primary causes under- lie this resistance: (1) a lack of acceptance or interest in proposed innovations, which may also reflect valid critical feedback; and (2) insufficient employee engagement in the transformation process, which in turn diminishes motivation and buy-in.

The next task of forming innovative potential in times of crisis is to maintain a clear structure of innovative potential. R. Mann (2023) proposed an adaptive mechanism for structuring the innovative potential of an enterprise, which he defines as «the unity of the totality of the components of innovative and investment potential». Since the elements of innovative potential are unique for each enterprise, the mechanism for its structuring will also be individual. However, Mann proposed several universal components, which include:
• resource-raw material component, which means the presence of the necessary re- serves of material resources;
• personnel, which indicates the level of qualification of employees and their moti- vation to improve their competence;
• production, which requires synergy of organizational and managerial decisions;
• institutional, which is determined by the level of development of institutions en- gaged in innovative activities;
• financial, which demonstrates the presence of the enterprise’s financial reserves and resources;
• consumer component, determined by the financial capabilities of product consum- ers (Mann, 2023).

O. Orlova-Kurylova contributed to the issue of forming innovative potential during the crisis in her work «Determinants of innovative activity in conditions of systemic crisis» (2017), in which she proposed a plan for implementing factors for ensuring in- novative activity in crisis conditions at different management levels. The scientist dis- tinguishes three levels: state or macro level, regional or meso level, and entrepreneurial or micro level.

At the state level, important factors are improving innovation policy, supporting innovation initiatives in the public sector, and involving international organizations in financing projects. Expanding business participation in developing priority scientific and technological areas and creating institutional support for innovative companies also play an important role.

At the regional level, interregional clusters are necessary for generating and com- mercializing knowledge, promoting financing of small and medium-sized innovative en- terprises, developing mechanisms for attracting investors, and supporting talented youth capable of creating new technological solutions.

At the enterprise level, key activities include developing innovative development strategies, searching for and training creative specialists, forecasting market trends, and actively attracting financial resources to implement innovative projects (Orlova-Kurilo- va, 2017).

The author proposes a comprehensive approach to stimulating innovation in crisis conditions, which would help increase the economy’s competitiveness and ensure sus- tainable development.

It is appropriate to add that the researcher emphasizes the interrelationship of all factors. If at least one of them is excluded, the plan loses effectiveness, making further innovative activity impossible.

Therefore, despite their destructive power, economic crises can catalyze change, contributing to the implementation of innovative strategies and technological solutions. An important task for enterprises in such conditions is to ensure the flexibility of man- agement processes, the strategic use of available resources, and the integration of the latest technologies to increase competitiveness and long-term sustainable development.

Conclusions. In summary, the research demonstrates that economic crises, despite their inherently destructive nature, can act as catalysts for technological advancement, accelerating the transformation of business models and the adoption of innovative prac- tices. Schumpeter’s concept of creative destruction, complemented by contemporary ap- proaches to strategic innovation management, underscores that an enterprise’s capacity to adapt and innovate under crisis conditions is a decisive factor in sustaining long-term
competitiveness.

The formation of innovation potential is a complex and multifaceted process that demands a systemic approach to resource management, the organizational flexibility to respond to change, and targeted support from the state. Critical elements include the expansion of public funding for innovation, the development of national innovation sys- tems, the implementation of anti-crisis management strategies, and the promotion of a corporate culture oriented toward technological progress.

Overall, the findings affirm the necessity of designing comprehensive policy and or- ganizational measures to strengthen enterprise innovation potential during periods of crisis, an essential foundation for ensuring economic resilience and progress in the face of contemporary global challenges.

References:

1. Bilyk, R. (2015). Peculiarities of the development of an innovation environment in Ukraine in the context of global competition. European Journal of Management Issues, 23(4), 27–35.
2. Chang, S. (2020). Formation of the innovative potential of companies: The result of systematization and generalization of basic research. University Scientific Notes, 90–102. https://doi.org/10.37491/unz.74.8
3. Christensen, C. M. (1997). The innovator’s dilemma: When new technologies cause
great firms to fail. Harvard Business Review Press. https://doi.org/10.2307/40252749
4. Dzyubina, A. V. (2008). Disclosure of the concept of “innovative potential” and definition of its components. Bulletin of Lviv Polytechnic National University, 628, 72–77.
5. Epifanova, I. Y., & Gladka, D. O. (2018). Innovative potential of the enterprise: Essence, components, and factors of influence. Economy and Society, 14, 354–360.
6. Freeman, C., & Soete, L. (1997). The economics of industrial innovation (3rd ed.). MIT Press.
7. Gensior, V. (2024). Innovative potential of the enterprise in a competitive environ- ment. Scientific Innovations and Advanced Technologies, 12(40), 692–704. https:// doi.org/10.52058/2786-5274-2024-12(40)-692-704
8. Ignatieva, I., & Serbenivskyi, Y. (2024). Strategic potential management in the con- text of energy resources provision. [Journal name missing].
9. Kavtysh, O. P., & Krush, N. P. (2011). Features of the formation of innovative po- tential of industrial enterprises of Ukraine. Modern Problems of Economy and En- trepreneurship, (6), 73–81.
10. Mann, R. V. (2023). Formation of an adaptive mechanism for structuring the in- novation and investment potential of domestic enterprises under the influence of post-conflict transformation. Digital Economy and Economic Security, 4(04), 104– 109.Orlova-Kurilova, O. V. (2017). Determinants of innovation activity in the con- ditions of systemic crisis. Scientific Bulletin of Kherson State University. Series: Economic Sciences, 25(1), 186–189.
11. Schumpeter, J. A. (1942). Capitalism, socialism, and democracy. Harper & Broth- ers.
12. Shilova, O. Y., & Chermoshentseva, E. S. (2012). Innovative potential of the enter- prise: The essence and mechanism of management. [Journal name missing].Teece,
D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic manage- ment. Strategic Management Journal, 18(7), 509–533. https://www.jstor.org/sta- ble/3088148
13. Telyacha, L. P. (2009). Patterns of innovative development in the conditions of sys- temic crisis. Visnyk of Khmelnytsky National University, (5), 111–114.