ABSTRACT
Competition is major driving force of tourism innovation, and the intensity of competition is being increased by globalisation. Innovation is probably the primary means by which firms can seek out competitive advantages to strengthen their position within these increasingly contestable markets. Innovations can target quality and cost, or simply first entrant advantages, but they all serve to increase its productivity, and either open-up or close the productivity gap to rival firms or destinations. The returns to firms from innovation are not automatically realised, as illustrated by the productivity paradox or the often disappointing returns from investments in information technology. This stems from time lags, the importance of co-innovations, and the inter-relationship of innovation with other factors which determine competitiveness. Competition is particularly intense in tourism because of the difficulties firms and destinations face in protecting their innovations. This stems from the importance of public goods, reliance on external suppliers of technology, and – above all – the intangible and highly visible nature of tourism services. One consequence of the difficulties of protecting innovation, and the complexity of the total tourism experience, is that firms have to seek to achieve a balance between collaboration and competition.
