Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: a resource‐based view

Small and medium enterprises (SMEs) in the manufacturing sector make a significant contribution to economic growth, yet most of the research into innovation management in the manufacturing sector has focused on large organizations. This article, however, identifies innovation drivers and their performance implications in manufacturing SMEs. Its study gathered survey data from a sample of 600 Australian SMEs and found that SMEs are similar to large firms with respect to the way that innovation strategy and formal structure are the key drivers of their performance, but do not appear to utilize innovation culture in a strategic and structured manner. This study therefore concludes that SMEs' performance is likely to improve as they increase the degree to which they mirror large manufacturing firms with respect to formal strategy and structure, and to which they recognize that innovation culture and strategy are closely aligned throughout the innovation process. Copyright © 2010 John Wiley & Sons, Ltd.     

Does R&D offshoring lead to SME growth? Different governance modes and the mediating role of innovation

Research summary : In this article, we address the role of R&D offshoring strategies in the sales growth of small‐ and medium‐sized enterprises (SMEs). We propose that different governance modes of R&D offshoring—insourcing versus outsourcing—may lead to growth, but that they differ in their effects. In turn, we argue that innovation mediates the relation between international R&D sourcing strategies and sales growth. Based on a large database of SME manufacturing enterprises in Spain, we find that offshore outsourcing positively affects sales growth both directly and indirectly, while offshore insourcing only affects sales growth indirectly via innovation results. The analysis reveals different contributions of each governance mode to sales growth and the mediating role of innovation in the relation between R&D offshoring and firm growth. Managerial summary : We analyze how different governance modes of international R&D sourcing—offshore insourcing and outsourcing—may contribute to growth in SMEs. Modes of offshore R&D outsourcing positively affect the growth of sales in two ways. One effect is direct, produced by improved efficiency, flexibility, enhanced resources, and access to new markets. And the other effect is indirect as offshore R&D outsourcing favors the achievement of innovations, and this in turn, positively affects firm growth. For their part, captive modes only exert an indirect effect. Offshore R&D insourcing contributes to the achievement of innovations, and thus, ultimately to firm growth in so far as these innovations enable SMEs to increase sales. Therefore, innovation results perform a mediating role in the relation between R&D offshoring and sales growth. Copyright © 2015 John Wiley & Sons, Ltd.     

Open Innovation in Practice: Goal Complementarity and Closed NPD Networks to Explain Differences in Innovation Performance for SMEs in the Medical Devices Sector

Cooperation with other organizations increases the innovation performance of organization, especially for small and medium‐sized enterprises (SMEs) as they encounter liabilities of “smallness” (e.g., limited financial resources, and manpower). In the medical devices sector, collaboration with external partners for NPD becomes increasingly important due to the complexity of the products and the development process. About 80% of companies in this sector are SMEs. These companies operate in a highly regulated sector, which affects the organization of the external network required for the new product development (NPD) process. SMEs are practicing extensively open innovation activities, but in practice face a number of barriers in trying to apply open innovation. This paper examines multiple network characteristics simultaneously in relation to innovation performance and thereby aligns with and builds further on configuration theory. Configuration theory posits that for each set of network characteristics, there exists an ideal set of organizational characteristics that yields superior performance. In this research, the systems approach to fit is used. Fit is high to the extent that an organization is similar to an ideal profile along multiple dimensions. This ideal profile represents the network profile that the 15% highest performing companies use. It is argued that the smaller the distance between the ideal profile and the network profile that is used, the higher the performance. The objective of this research is (1) to examine the relation between the ideal profile and innovation performance and (2) to examine which organization of the network profile is related to high innovation performance. Quantitative survey data (n = 60, response rate 61.9%) form the core of this research. The quantitative results are clarified and have been triangulated with qualitative interview data (n = 50). Our findings suggest the presence of an “ideal” NPD network profile (in terms of goal complementarity, resource complementarity, fairness trust, reliability trust, and network position strength): the more a company's NPD network profile differs from this ideal profile, the lower the innovation performance. In addition, the results of our study indicate that the NPD network profiles of successful and less successful SMEs in the medical devices sector significantly differ in terms of “goal complementarity,” while this is less the case for trust and resource complementarity labeled distinctive by previous research. Finally, results show that a relatively closed, focused, and consistent “business‐like” NPD networking approach, which is characterized by result orientation and professionalism, is related to high innovation performance. It is recommended that SMEs in the medical devices sector aiming to distinguish themselves from competitors in terms of innovation performance focus on goal complementarity while adopting such a business‐like attitude toward their NPD network partners.     

Patenting Activities and Firm Performance: Does Firm Size Matter?

Whereas prior research has provided valuable insights into the willingness of small and medium‐sized enterprises (SMEs) and large firms to engage in patenting, a comparison of the performance implications of patenting activities across small and large firms is still lacking. This gap is important because SMEs and large firms, having different resources and capabilities, might benefit from patenting activities in different ways. In particular, SMEs can be expected to benefit less from patenting activities in terms of protection against imitators than large firms. On the other hand, the propensity and ability of SMEs to license out their patents and generate additional revenue streams might be relatively higher than that of their large counterparts. This paper studies the impact of patenting on licensing, innovation, and financial performance for both SMEs and large firms, using multiple‐group path analyses on a sample of 358 manufacturing firms. Contrary to expectations, this study demonstrates that not only large firms, but also SMEs benefit from patenting in terms of commercializing product innovations. Moreover, for both SMEs and large firms, such increased innovation performance in turn contributes to higher profit margins. Patenting activities also increase the ability of SMEs and large firms to license out knowledge to external parties, and this positive effect is significantly stronger for large firms. However, neither in SMEs nor in large firms, these outward licensing activities generate short‐term financial benefits. Finally, the study demonstrates that patenting activities do not trigger significant cost disadvantages for either SMEs or large firms. Jointly, these findings provide unique insights in the value‐generating and cost‐increasing effects of patenting, suggesting that not only large firms, but also SMEs should consider patenting as a viable strategy to fully reap commercial benefits from their innovation activities. At the same time, they temper open innovation scholars’ expectations regarding the financial benefits of licensing out knowledge. Overall, these findings point to opportunities for optimizing the intellectual property management of both SMEs and large firms.     

Firm survival through a crisis: The influence of market orientation,marketing innovation and business strategy

As an outcome of the economic crisis, the global manufacturing sector is collapsing. Focusing on Chinese manufacturing small and medium enterprises (SMEs), this study investigates whether marketing innovation, defined as improvements in the marketing mix, can assist in withstanding the challenges of operating under the current economic conditions. A conceptual model linking market orientation, marketing innovation, competitive advantage and firm survival is tested using structural equation modelling. Three key findings are derived. First, the examined Chinese manufacturing SMEs had a greater perceived likelihood of survival had they developed and sustained a competitive advantage. Second, marketing innovation assisted in developing and sustaining competitive advantages based on differentiation and cost leadership strategies. Third, marketing innovation capabilities improved when the examined manufacturing SMEs were competitor oriented and had good inter-functional capabilities.     

Leveraging External Sources of Innovation: A Review of Research on Open Innovation

This paper reviews research on open innovation that considers how and why firms commercialize external sources of innovations. It examines both the “outside‐in” and “coupled” modes of open innovation. From an analysis of prior research on how firms leverage external sources of innovation, it suggests a four‐phase model in which a linear process—(1) obtaining, (2) integrating, and (3) commercializing external innovations—is combined with (4) interaction between the firm and its collaborators. This model is used to classify papers taken from the top 25 innovation journals, complemented by highly cited work beyond those journals. A review of 291 open innovation‐related publications from these sources shows that the majority of these articles indeed address elements of this inbound open innovation process model. Specifically, it finds that researchers have front‐loaded their examination of the leveraging process, with an emphasis on obtaining innovations from external sources. However, there is a relative dearth of research related to integrating and commercializing these innovations. Research on obtaining innovations includes searching, enabling, filtering, and acquiring—each category with its own specific set of mechanisms and conditions. Integrating innovations has been mostly studied from an absorptive capacity perspective, with less attention given to the impact of competencies and culture (including “not invented here”). Commercializing innovations puts the most emphasis on how external innovations create value rather than how firms capture value from those innovations. Finally, the interaction phase considers both feedback for the linear process and reciprocal innovation processes such as cocreation, network collaboration, and community innovation. This review and synthesis suggests several gaps in prior research. One is a tendency to ignore the importance of business models, despite their central role in distinguishing open innovation from earlier research on interorganizational collaboration in innovation. Another gap is a tendency in open innovation to use “innovation” in a way inconsistent with earlier definitions in innovation management. The paper concludes with recommendations for future research that include examining the end‐to‐end innovation commercialization process, and studying the moderators and limits of leveraging external sources of innovation.     

The determinants of innovation in green supply chains: evidence from an Italian sectoral study

Innovation processes are increasingly spreading through the unbounded universe of European small and medium enterprises (SMEs). It represents a fundamental opportunity especially for those SMEs operating in the so‐called ‘green economy’ sectors, in order to be competitive in a National, European and International market with their sustainable products and services. Drawing upon a database of over 300 enterprises operating within the eight defined green sectors, this paper assesses the determinants and drawbacks of innovation. In particular, by using an econometrical approach, we tested the following propositions: (1) small dimension of enterprises is not an obstacle to their innovation capabilities; (2) the adoption of an internationalisation strategy is an opportunity and a stimulus to innovation for SMEs; (3) cooperation with research centres, financial partners, trade association and public entities can help SMEs to overcome difficulties and help them to develop and offer innovative products and services, so to be competitive at an international level. The econometric analysis shows a positive impact of the variables ‘dimension’ and ‘level of internationalisation’ on innovation capabilities. In addition, cooperation with research centres and access to capital market are positively related with effective innovations.     

Open Service Innovation: The Role of Intermediary Capabilities

This study examines how intermediaries, in general, and those with digital service platforms specifically, engage with clients to help them innovate their services within their service ecosystem. Based on an embedded, longitudinal case study, the results reveal the cumulative development and deployment of technological, marketing, and co‐creation capabilities by intermediaries, and how these capabilities allow intermediaries to engage with clients, so as to enable clients’ open service innovation despite their internal challenges. In turn, this article extends theory on service innovation by clarifying the role and function of intermediaries in service ecosystems in enabling clients to leverage open service innovation. Second, this study contributes to resource‐based scholarship by clarifying how these three sets of capabilities and their micro‐foundations relate to each other. Despite the obvious importance of technological capabilities, online intermediaries are more than just “virtual” service platform providers. The intermediary’s technological and marketing capabilities assist clients in dealing with project‐related and organizational challenges to open service innovation. Acting as a higher‐order capability, co‐creation capabilities—through shaping marketing and technological capabilities over time and also through conditioning their deployment—improve the proficiency of these capabilities. The findings advance insights on the agential role of the intermediary’s co‐creation capabilities, purposefully developed and deployed to foster client engagement, and thus support service organizations in leveraging open service innovation.     

Why strategic factor markets matter: “New” multinationals' geographic diversification and firm profitability

This study examines firm profitability differences among “new” multinational enterprises (NMNEs) pursuing geographic diversification into two distinct types of geographic locations based on the development of strategic factor markets. Building on strategic factor markets theory, we propose that firm‐specific advantages of NMNEs contribute differentially to firm profitability because they evolve differently given strategic factor market differences in host compared to home countries. Using a sample of Korean manufacturing MNEs during the 1993–2003 period, we find that geographic diversification into resource‐poorer host countries has a positive relationship with firm profitability, whereas geographic diversification into resource‐richer host countries has a U‐shaped relationship with firm profitability. Our study demonstrates why strategic factor markets—an important and often overlooked contextual factor—matter in exploring rationales for geographic diversification. Copyright © 2014 John Wiley & Sons, Ltd.     

How Information Technology Assimilation Promotes Exploratory and Exploitative Innovation in the Small‐ and Medium‐Sized Firm Context: The Role of Contextual Ambidexterity and Knowledge Base

This research sheds new light on how information technology (IT) assimilation affects exploratory and exploitative innovation in the context of small‐ and medium‐sized firms (SMEs). This contextualization is important in establishing the boundary conditions for the theory, as well as generating specific managerial insights for SME managers. A sample of 248 U.K.‐based SMEs in the manufacturing industry demonstrates contextual ambidexterity (CA) mediates the relationship between IT assimilation and two types of innovation. This finding highlights that IT assimilation does not automatically promote innovation. Instead, IT assimilation represents a critical resource that enables the effective implementation of CA, which in turn affects innovation. This implies that SMEs cannot fully realize the potential of their IT assimilation and use it to enable innovation without implementing CA. Furthermore, this study differentiates between two different dimensions of knowledge base: knowledge breadth and knowledge depth. This study finds that knowledge breadth moderates the indirect IT assimilation–exploratory innovation relationship by influencing the effect of CA on exploratory innovation. Knowledge depth, on the other hand, moderates the indirect IT assimilation–exploitative innovation relationship by influencing the effect of CA on exploitative innovation. This finding implies that SMEs can benefit from their IT assimilation that enables them to engage in CA, which in turn allows them to perform innovation. However, it is apparent that the dimension of knowledge that SMEs hold internally can determine what types of innovation that they are able to perform.     

数字贸易赋能制造业质量变革机制与效应——来自跨境电子商务综合试验区的准自然实验

数字贸易已经成为全球发展的趋势。本文使用2009~2020年沪深A股制造业上市公司,以跨境电子商务综试区设立为“准自然实验”,探究数字贸易赋能制造业质量变革的作用机制与效应,结果发现:(1)设立跨境电子商务综试区能够显著提高企业全要素生产率,数字贸易推动制造业企业质量升级;(2)机制分析发现,数字贸易使得企业能获得和使用市场中更多的信息来满足消费者,提升了企业研发创新能力,进而提升企业质量。数字贸易对出口企业质量升级的影响大于非出口企业,数字贸易对两者的影响途径存在差异;(3)异质性分析表明,政治资源诅咒与基础设施限制,使数字贸易对非国有企业和高互联网发展水平制造业企业质量升级的影响更加明显;(4)数字贸易赋能制造业升级具有出口提升效应,数字贸易提升了制造业企业出口产品质量、产品种类与海外市场。本文结论对理解数字贸易在我国制造业质量改革中发挥的作用,以及数字贸易政策实践具有借鉴意义。     

Perspective: The Stage‐Gate® Idea‐to‐Launch Process—Update,What's New,and NexGen Systems*

Stage‐Gate has become a popular system for driving new products to market, and the benefits of using such a robust idea‐to‐launch system have been well documented. However, there are many misconceptions and challenges in using Stage‐Gate. First, Stage‐Gate is briefly outlined, noting how the system should work and the structure of both stages and gates. Next, some of the misconceptions about Stage‐Gate—it is not a linear process, nor is it a rigid system—are debunked, and explanations of what Stage‐Gate is and is not are provided. The challenges faced in employing Stage‐Gate are identified, including governance issues, overbureaucratizing the process, and misapplying cost‐cutting systems such as Six Sigma and Lean Manufacturing to product innovation. Solutions are offered, including better governance methods such as “gates with teeth,” clearly defined gatekeepers, and gatekeeper rules of engagement, as well as ways to deal with bureaucracy, including leaner gates. Next‐generation versions of Stage‐Gate are introduced, notably a scalable system (to handle many different types and sizes of projects), as well as even more flexible and adaptable versions of Stage‐Gate achieved via spiral development and simultaneous execution. Additionally, Stage‐Gate now incorporates better decision‐making practices including scorecards, success criteria, self‐managed gates, electronic and virtual gates, and integration with portfolio management. Improved accountability and continuous improvement are now built into Stage‐Gate via a rigorous postlaunch review. Finally, progressive companies are reinventing Stage‐Gate for use with “open innovation,” whereas others are applying the principles of value stream analysis to yield a leaner version of Stage‐Gate.     

Definition of innovation projects in small firms: A Spanish study

Small and medium‐sized enterprises (SMEs) are the main holders of the European economy and innovation projects are essential tools for SMEs to ensure their growth. A high percentage of innovation projects implemented by SMEs lacks planning and initial management, which causes the appearance of important problems for the SMEs survival. The authors have confirmed with a field study of 72 Spanish small firms that a lot of these problems arise from an incomplete project definition, so it is necessary to help SMEs to have a specific methodology that is appropriate to their own characteristics and projects. The statistical analysis shows how the project management knowledge helps to a better project definition, contributing to the project alignment with the company strategy. Also, it reveals other problems related to the project definition as planning, budget, market and financing. Of this analysis, it concludes that the definition phase supports the other phases and is essential in order to achieve project success. This paper presents an ‘integration model of factors’ that helps SMEs in the management of the definition phase of their innovation projects. This model relates the various areas of analysis needed to ensure their integration at the project definition. The relationships between the different model areas have been defined, showing the way to integrate the technical, economic and strategic outlooks of project objectives management in the definition phase of the project. This model has been implemented in 21 new innovation project definitions. The users' valuation has been very positive with a 90.4% of success and all of the model users are interested in implementing the model again in next projects. The main advantages highlighted were user‐friendliness, intuitive model and easy application.     

Knowledge,firm boundaries,and innovation: Mitigating the incumbent's curse during radical technological change

We explore the relationship between a firm's organization and its ability to face a radical technological change. We suggest that, during such a change, the presence of both in‐house upstream knowledge and downstream market linkages, within a firm's boundary, has its advantages. We test our predictions in the context of the robotics industry where manufacturers of mechanically controlled “brawny” robots, which were valued mainly for their payload capacity, faced the advent of electrically controlled “brainy” robots that emphasized accuracy and repeatability. We find that “preadapted” firms—the ones with prior relevant technological knowledge and with access to internal users of “brainy” robots—were the innovation leaders in the emerging new technology but were laggards in the old technology. Copyright © 2014 John Wiley & Sons, Ltd.     

Communities and managerial competencies supporting SMEs innovation networking: a longitudinal case study

Over the last few decades, the need for small and medium‐sized enterprises (SMEs) to rely on networking to get access to innovation and larger knowledge bases has become evident. This paper analyzes the birth and evolution of an Italian innovation community created by a group of SMEs searching for innovation. Coming from quite different fields, these SMEs converged around a challenging project in the field of biomedical and rehabilitation devices. The aim of the paper is twofold: (1) to investigate what type of competences and tasks have to be accomplished to effectively manage an innovation community (IC) and what managerial roles (promotors) emerge by crossing competences and tasks; and (2) to what extent community members' absorptive capacity (ACAP) influences their ability to acquire and exploit innovation generated by the community. Using an in‐depth longitudinal case study analysis, we identified three different stages in community evolution. We also studied which promotors' roles that emerged in each stage and determined their relationship both between each other and to community performance. Furthermore, we investigated to what extent an existing knowledge base in a specific domain and previous experiences in networking influenced community members' ability to exploit innovation. We found that a specific correspondence among competences and tasks is needed to guarantee community performance and that promotors should interact among themselves to enable the community to reach its goal. Concerning ACAP, we found that prior experience and familiarity in networking are not predictive of new knowledge exploitation.     

From Experience Dreams to Market: Crafting a Culture of Innovation

Do certain common principles guide uncommonly innovative companies down the risk-riddled road to value creation? Or do successful innovators break boldly through the barriers to new product development along pathways of their own unique making? Karen Anne Zien and Sheldon Buckler discern a strikingly consistent model of how companies craft and sustain cultures in which innovation is nurtured, rewarded, even demanded. An article by the authors in the September 1996 issue of JPIM recounts seminal tales from the cultures of innovation consciously nourished by 12 leading-edge corporations in the United States, Europe, and Japan. Gathered through an extensive series of interviews with key personnel in the management, technical, manufacturing, and marketing divisions of each firm, the stories revealed seven traits widely shared from one company to the next, irrespective of business focus, geography, or nationality. These traits, as discussed in this article, not only serve to reconcile the culturally contradictory demands of the three critical stages of innovation—the “fuzzy front end,” the product development process, and marketplace operations—but also condition the company as a whole to sustain its innovative capacity over time. The principles at work in highly innovative companies encompass corporate as well as individual attitudes and behaviors. On the one hand, company leaders demonstrate in every decision, action, and communication that innovation propels profitability. So, for the CD project at Sony, the R&D general manager heeded “a voice from above that does not question the possibilities and absolutely believes” in the potential of the enterprise. On the other hand, actively helping individuals create a linkage between their “work life” and longer term “life work” is a crucial step in generating an environment where innovation and high productivity flourish together. Thus, a divisional chief executive at ICI/Imperial Chemicals Industries recognizes the need to “create an environment where people will work at what they are best at doing and what they like doing best.” Although the trail to successful innovation inevitably follows the unique contours of any company's environment, some universal guideposts point the way.     

Bricolage as a Path to Innovativeness for Resource‐Constrained New Firms

Evidence suggests that both nascent and young firms (henceforth: “new firms”)—despite typically being small and resource‐constrained—are sometimes able to innovate effectively. Such firms are seldom able to invest in lengthy and expensive development processes, which suggests that they may frequently rely instead on other pathways to generate innovativeness within the firm. In this paper, we develop and test arguments that “bricolage,” defined as making do by applying combinations of the resources at hand to new problems and opportunities, provides an important pathway to achieve innovation for new resource‐constrained firms. Through bricolage, resource‐constrained firms engage in the processes of “recombination” that are core to creating innovative outcomes. Based on a large longitudinal dataset, our results suggest that variations in the degree to which firms engage in bricolage behaviors can provide a broadly applicable explanation of innovativeness under resource constraints by new firms. We find no general support for our competing hypothesis that the positive effects may level off or even turn negative at high levels of bricolage.     

SME–supplier alliance activity in manufacturing: contingent benefits and perceptions

We address the following two questions: how upstream vertical alliance (UVA) activity affects the performance of small and medium‐sized enterprises (SMEs); and how SME perceptions of that relationship influence the choice to engage in UVA activity. Using responses from a recent survey of business unit managers representing 200 SMEs, we find that UVA activity benefits SME performance when self‐selection effects are controlled. Instead of being a source of differentiation advantages, UVA activity leverages the SME's existing advantages. And, while SME perceptions appear to drive the self‐selection of UVA activity, those perceptions are inaccurate; the result is that the SMEs likely to benefit less from such activity engage in it more. Copyright © 2006 John Wiley & Sons, Ltd.     

Mapping the Topic Landscape of JPIM, 1984–2013: In Search of Hidden Structures and Development Trajectories

During the three decades since its inception in 1984, the JPIM has shaped the evolution of innovation research as a scientific field. It helped create a topic landscape that is not only more diverse and rich in insights, but also more complex and fragmented in structure than ever before. We seek to map this landscape and identify salient development trajectories over time. In contrast to prior citation‐based studies covering the first two decades of JPIM research, we benefit from recent advances in natural language processing and rely on a topic modeling algorithm to extract 57 distinct topics and the corresponding most common words, terms, and phrases from the entire full‐text corpus of 1008 JPIM articles published between 1984 and 2013. Estimating the development trajectory of each topic based on yearly publication counts in JPIM allows us to identify “hot,” “cold,” “revival,” “evergreen,” and “wall‐flower” topics. We map these topics onto the Product Development and Management Association (PDMA) Body of Knowledge categories and discover that these categories differ significantly not only in terms of their internal topic diversity and relative prevalence, but also—and arguably more importantly—in terms of their publication and citation trajectories over time. For instance, the PDMA category “Codevelopment and Alliances” exhibits only moderate topic diversity (7 out of 57 topics) and prevalence in JPIM (161 out of 1008 articles). That said, it is among the most dynamic categories featuring two evergreen topic (“Users and Innovation” and “Tools and Systems for Technology Transfer”) and three hot topics (“Open Innovation,” “Alliances and Cooperation,” and “Networks and Network Structure”) as well as a sharply growing annual number of citations received. Our findings are likely to be of interest to all those who are keen to (re)discover JPIM's topic landscape in search of hidden structures and development trajectories.     

Digital Machines,Space, and Time: Towards a Behavioral Perspective of Flexible Manufacturing

Recently, the diffusion of digital machines has further enhanced firms’ manufacturing flexibility, but also opened questions on potential challenges and implications in the production process. To respond to these timely issues, this study adopts a behavioral perspective and comparatively explores how four different types of digital machines—characterized by increasing degrees of manufacturing flexibility—affect the perception and use of space and time for routines within the production plant. To this end, 45 digital manufacturing machines, sampled across 14 firms in the British and Italian motorsport industry, were qualitatively observed and compared. A model emerges where four key mechanisms reshape (1) the interactive space around the machine, (2) the innovation activities performed in the machine space, (3) the time within activities involving the machine, and (4) the time perception. Such mechanisms mediate the relationship between manufacturing flexibility and firm performance. Further, data show how increasing digitalization in the manufacturing process enhances the establishment of new routines as flexible machines get introduced in the production. Finally, theoretical and practical implications related to fostering a behavioral perspective in innovation and operations management studies are discussed.