The construction industry encounters significant challenges in embracing innovation, primarily due to underfunding, existing barriers like the fragmented nature of the construction industry, unwillingness to change, and a lack of long-term perspective. Recognizing the essential role of innovation as a catalyst for progress, it is crucial to introduce novel ideas that challenge the status quo and drive industrial development forward. While there have been extensive discussions and advancements in implementing innovative practices within the construction industry, accurately determining the true impact of these innovations remains a complex task. This paper, through a comprehensive literature review, identifies various definitions and classifications of innovation within the construction industry and explores the concept of impact. The findings indicate that understanding innovation, along with its classification and impact assessment, is context-dependent, reflecting the multifaceted nature of the construction industry. Moreover, it is observed that most existing practices and frameworks, although adapted from other contexts, are not adequately tailored to meet the specific needs of the construction industry.