Writers of literary fiction, I would imagine, tend not to have to invent many words - in cases where they do, they'd likely be important to the plot. It's different in science fiction. Since it favors the exploration of times and worlds removed from modern Earth, almost by definition it creates its own vocabulary: both to describe concepts that do not yet exist, like Isaac Asimov's coining of the term "robotics" when the word "robot" was only a few years removed from Czech, and to demonstrate ways in which the setting of a story diverges from ours. In the end, it's part of that effort to scratch together whatever verisimilitude can possibly be assembled - otherwise it may have a taste of artificiality to it. Imagine, for a moment, a sf story written in the 1980s and set thirty years later, in which everyone speaks exclusively of "cellular telephones." Real people don't talk like that. As things become common, their names shift and become simpler - at the expense of being less transparent to someone looking in from the outside.
I encountered something like that while reading through the January 1993 issue of Analog on the SkyTrain yesterday.
"He'd gotten his first taste of that particular hell on the Soarliner that had carried him up from Earth to the orbiting cylty of Newtonia. The long trip from there to Adonis, the huge cylstation which was the Consortium's Venus operations base, had been spent in an at least bearable half-gee."
- from "Leap," by Steven L. Burns
I had to stop for a few seconds when I hit the reference to "cylty" to figure out what it meant. When I puzzled it out to be a slamming-together of "cylinder city" - that is, an O'Neill cylinder. I can't recall any more references to cylties or cylstations elsewhere in the story, and this was on the first page. Still, I found it a good way to help bring the reader into the story, and I also felt a small surge of triumph when I picked out the likely meaning.
Not everyone reads like I do, though.
In one of my stories that's gathered a deep pile of rejections around it, in early drafts I made two references to something called a "lowai," in connection with a small automated quadrotor. I'd meant this to be a shortening of something like "low-functioning artificial intelligence" - that is, an AI that's capable of learning and adjusting its own programming in a basic way, but which isn't self-aware or particularly complex. I also liked the connection that could be drawn to "laowai," because what's more foreign than an artificial intelligence? (Don't answer that.)
Unfortunately, I wasn't really able to extend all this from my brain into the world. When the story went out to beta readers, they universally complained about "lowai," how they couldn't figure out what it was supposed to mean. I hemmed and hawed for a while and changed the reference in the next draft to "lowAI," which is hopefully more transparent but nevertheless looks stranger to my eyes - more artificial, more like something a science fiction writer would come up with and not like something people might actually say.