Uncovering Barriers to Complex Incremental Product Innovation in Small and Medium‐Sized Financial Services Firms*

Developing new products is of the highest importance for the survival of firms. This not only refers to really new products, but firms also need to invest in modifying their existing products. Small and medium‐sized companies are no exception to this rule. The present study focuses on the innovative activities of small and medium‐sized financial service companies and aims to answer how small and medium‐sized financial services firms organize their product innovation processes and what the main barriers during these innovative attempts are. Data from 30 financial small and medium‐sized enterprises were collected to address these issues. The data showed that the firms in our study experience problems in terms of resources, project‐based working, incentives, and information technology, despite the fact that the innovative efforts are aimed at modifying existing services. Although these issues may not be totally unexpected, the results from this study do point at some interesting distinctions with the previous literature. Furthermore, it is suggested that the impact of the barriers may be of lower importance than is often assumed in the innovation literature.     

Technological Collaboration: Bridging the Innovation Gap between Small and Large Firms*

This paper analyzes how technological collaboration acts as an input to the innovation process and allows small and medium‐sized enterprises to bridge the innovation gap with their bigger counterparts. Based on a large longitudinal sample of Spanish manufacturing firms, the results show that though technological collaboration is a useful mechanism for firms of all sizes to improve innovativeness, it is a critical factor for the smallest firms. The impact of this collaboration varies depending on innovation output and type of partner. Specifically, the impact of collaboration in small and medium‐sized firms is more significant for product than process innovations. Regarding type of partner, vertical collaboration—with suppliers and clients—has the greatest impact on firm innovativeness, though this effect is clearer for medium‐sized enterprises than for the smallest firms.     

Advertising as an Entry Deterrent: Evidence from UK firms

Advertising is widely considered to be an important isolating mechanism through which firms may defend an established competitive advantage. However, there is relatively little empirical evidence on the extent of the strategic use of advertising either to deter or in response to entry. In this paper, I report on a study of the advertising practices of 843 medium‐sized and large UK‐based firms. Nearly one‐quarter of all the advertisers surveyed state that they attribute importance to entry deterrence as an aim of their advertising. Further, one in five managers of advertising firms state that they would increase advertising expenditure if a new rival company appeared in their market. It is also apparent that there is a strong correlation between the perceived importance of advertising as an entry‐deterring tool and the intensity of advertising spending. Multivariate modelling provides confirmation that the existence of a sheltered market position, and the profitability that typically accompanies this, provides a statistically significant determinant of the decision to use advertising as a strategic entry‐deterring weapon.     

Marketing planning in the larger family business

In recent decades a considerable literature on marketing planning has accumulated. The larger part relates to marketing planning in big firms with specialized, professional managers. There are books on the subject, like that of Malcolm McDonald which has gone through several editions, and there is also a steady stream of articles in the academic journals. In addition, the marketing planning activities of big firms are referred to by many more writers in the overlapping but broader contexts of “strategic marketing” and “strategic planning”. A lesser part of the literature relates to marketing planning in small firms. The small firms in question are usually very small. Typically they are owner‐managed and employ just a handful of people in a single location. The purpose of this study is to fill a gap in the literature by examining a medium‐sized firm; a category which seems to have been neglected by researchers.

Most modern economies are characterized by a significant group of middle‐sized firms, still owner‐managed, but with multi‐million dollar turnovers. Many of these remain family companies and constitute an important reservoir of business initiative. One such family business is the focus of this study. Given the relative lack of scrutiny of such firms to date, the author decided to conduct an in depth evaluation from within one large, family firm rather than seek by means of questionnaire to obtain information from a significant sample of the group. The results of the study suggest that neither the existing typologies of small firm approaches to marketing nor the formal models of marketing planning attributed to big companies necessarily characterize the marketing planning and management of larger, family businesses.     

Fueling Innovation through Information Technology in SMEs*

This paper describes a study that investigates the mediating effects of information technology (IT) on the relationships among product and process innovations and firm performance (measured in multiple profitability and growth rate metrics). Using structural equation modeling on a sample of 397 small and medium‐sized enterprises (SMEs), we find evidence that (1) increases on the strategic emphasis placed on innovation, both product and process, positively impact the prominence managers place on IT; (2) the impact of innovation (both product and process) on performance (both profitability and growth) is primarily indirect, felt via the mechanism of the importance managers place on IT; and (3) an increased emphasis on IT abets managers' perception of their firms' performance, as compared with that observed among peer firms (other SMEs).     

Establishing a new business venture unit within a firm

The rapid growth of the United States as a whole is basically a story of the discovery and adoption of novel and improved ways of satisfying wants and needs. Previously, these wants and needs have been championed by individuals such as J.P. Morgan (finance), James B. Duke (tobacco), Andrew Carnegie (steel), Cornelius Vanderbilt (railroads), and John D. Rockefeller (oil). Each of these entrepreneurs commercialized a new idea or invention—the essence of the innovation process. Each bridged the gap between science and the marketplace by developing and commercializing a marketable innovation.Although even more of a need to reach the market as quickly as possible exists today, the majority of the innovations commercialized each year come from new or smaller organizations-often the ones with the least amount of capability and resources to accomplish the task. Existing businesses, especially larger ones, are in a much better position to bridge this gap. These companies have the existing financial resources, business skills, and usually the marketing and distribution systems to successfully commercialize a new innovation. Recognizing this capability, large companies have tried to instill an entrepreneurial spirit or an internal venturing program in an attempt to increase the amount and success of new offerings. This activity has taken on a variety of forms, one of which is the new business venture unit.What are the characteristics of a new business venture unit? Are they more successful at introducing new products than autonomous entrepreneurs? These and other questions were addressed in a research project of Fortune 1000 firms consisting of a mail questionnaire and in-depth personal interviews.The majority of these firms did not have a new business venture unit (70%). Of those firms that did, the average age of their unit was 5.3 years and the range of ages was from a few months to 20 years. In addition, the range of employees in the new business venture unit varied greatly: from one to 100. Firms in the primary product lines of chemical and medical products, computers, beauty products, and feminine products tended to have new business venture units more than did firms in other product areas. These units contained a variety of departments, including marketing (the most frequent), finance, and research and development. Through modest increases in the number of new products introduced each year, the new business venture units also significantly increased the per- centages of sales attributed to products introduced within the previous three years. A good environment for a successful new business venture unit included: encouraging new ideas; allowing mistakes and failure; making available the resources of the firm; encouraging teamwork; establishing broad per- formance goals and an appropriate reward system; and having top management strongly support the unit.     

Responsible family ownership in small‐ and medium‐sized family enterprises: an exploratory study

The concept of responsible ownership was originally developed with reference to large, publicly held firms. However, the relevance of small‐ and medium‐sized closely held firms, such as family firms, in all economies and the specific governance and organisational characteristics of these firms require further examination of the responsible ownership concept and its operationalisation. Based on the existing literature, we define the construct of responsible family ownership to fill this gap in responsible ownership theory. We propose a scale that can be used to assess the responsible family ownership construct in small‐ and medium‐sized family enterprises. The data used in this exploratory study were collected in an ad hoc survey answered by a representative sample of 84 small‐ and medium‐sized family enterprises. The study contributes to the responsible ownership literature by presenting the responsible family ownership construct, a key driver of balance in family and firm systems that is therefore critical to the health of small‐ and medium‐sized family enterprises. In addition, a scale is proposed as a means to operationalise the construct and to derive practical implications for the governance of this kind of firms.     

Adjusting to BRICs in Glass Houses: Replacing Obsolete Institutions and Business Models

Global adjustment to the rise of the BRIC and other emerging economies is an important challenge for firms in the advanced economies. Emerging market firms increasingly trade and invest globally while monetary imbalances continue to rise and hobble advanced economy firms. Advanced country firms feel like they live in glass houses as the tectonic forces of technology, demographics, globalization, sustainability, and climate change force obsolescence in their business models. In this article, this overseas projection of economic power by the rising new economies is illustrated by the Indian and Chinese overseas economic expansion focused on Africa. This analysis shows that noneconomic state‐driven entities are likely to be a significant part of the rise of South‐South economic trade and investment flows and it poses theoretical and practical problems for existing market‐based economic and geopolitical institutions. Global adjustment to these new realities is also challenging as existing multilateral institutions seem to be inadequate. These changes in the global environment have significant implications for policy makers and managers of global companies. © 2013 Wiley Periodicals, Inc.     

Entry barriers of small and medium‐sized software firms in the Japanese market

The Japanese software market size was U.S. $131,773 million in 2004. Due to limited domestic software production, Japan is highly dependent on imported software products. Despite the market potential for foreign software firms in Japan, almost no research exists on what kind of challenges foreign software firms encounter when they are entering the market. To fill this gap, this article investigates the entry barriers of small and medium‐sized software firms in the Japanese market by using a multicase study. The findings suggest that most of the barriers are firm‐specific and mainly related to firms' resources and capabilities to operate in the market. The entry barriers encountered also seem to differ somewhat from earlier investigations, which have mainly targeted large manufacturing firms. The new observations included common barriers related to the intensive information flow of customization and localization needs and market requirements of software products. The findings are useful for both practice and further research. © 2007 Wiley Periodicals, Inc.     

Identity and social responsibility policies: Six large corporations examined

Managers in all industries reach a time in their careers when they must answer certain questions about their firms. They are required to deal philosophically with the questions of social responsibility and identity; failure to do so may limit the firm's growth. The author examines management strategies and policies related to responsibility and identity as they have been resolved in six large firms, all highly oriented to consumer products. The firms include Ashland Oil and Refining Company, Standard Oil of Ohio, General Electric, Procter and Gamble, Kroger, and Federated Department Stores. Each has a special identity and egocentrism. Guidelines established by these six companies may help other businessmen and managers in reaching decisions for themselves and their organizations.     

Innovation,formal vs. informal R&D,and firm size: Some evidence from Italian manufacturing firms

On the basis of data from two recent surveys on innovation diffusion in Italian manufacturing industry, this paper shows that informal R&D is an important part of the total R&D undertaken by small and medium sized firms. Nevertheless, when an output indicator such as the number and the nature of the innovations introduced by firms of different size is used, it emerges that small firms have introduced mainly incremental rather than major innovations. The paper therefore suggests that systematic R&D undertaken by large firms within structured laboratories is more effective (in terms of product innovations) than occasional R&D carried out by small firms.     

The Business(es) of the Chinese State

The state industrial sector is the Achilles heel of China's otherwise remarkable economic performance over the past two decades. Most other countries in transition from socialism have transformed SOEs into commercial entities through systematic, market‐driven restructuring and privatisation to become more efficient and competitive. In China, a series of innovative, if often administrative, insitutional reforms since 1978 have begun to achieve the Chinese authorities' goal of ‘separating governemtn from business.’ But the Chinese State still maintains ownership of key enterprises, and government agencies carry out shareholder functions typically performed by private owners in a market economy. Although privatisation and restructuring of SOEs is occurring, it mostly pertains to small and medium sized firms. For the principal businesses, by contrast, the creation of large state enterprise groups and holding companies (and experiments in other forms of ‘state asset management’) have become the main form of restructuring. Today, China's SOEs still account for more than one‐quarter of national production, two‐thirds of total assets, more than half of urban employment and almost three‐quarters of investment. While direct budgetary subsidies have declined, explicit and implicit subsidies are still making their way to prop up loss‐making SOEs through the financial system and other routes. At the same time, SOEs are still producing non‐marketable products, resulting in a sizeable inventory overhang. These inefficiencies and distortions represent a drain on the country's resources and thus present a challenge to the Chinese leadership for reform. This paper sheds light on these challenges by analysing the incentives and constraints on China's SOE reform programme. Four critical aspects of the reforms are highlighted and evaluated against the backdrop of international experience: clarification of property rights; establishment of large group/holding companies and other new organisational structures; improved corporate governance incentives; and implementation of international financial accounting and auditing practices. The paper concludes with policy recommendations.     

Board Composition in Small and Medium‐Sized Family Firms*

This study focuses on the determinants of board composition in Belgian small and medium‐sized family firms. It extends the empirical literature on board composition in private small and medium‐sized family enterprises by integrating several dimensions of the “family component” in the research model. Furthermore, using a multinomial logit model, we examine in which circumstances family firms opt for (1) a family board, (2) an inside board, or (3) an outside board. Results suggest that family‐related contingency variables are far more important than CEO‐related or control variables, giving support to the argument that board composition in family firms is a reflection of the family characteristics and objectives. Moreover, the results suggest that a resource dependence and added value perspective explain more of the variation in board composition than agency considerations.     

Small Firm Growth: Intentions, Implementation and Impediments

Recent evidence suggests that many small to medium sized enterprises (SMEs) in the UK experience difficulty growing from the start-up phase into larger well established firms. This research uses survey data from UK instruments, printing and software SMEs to explore the attitudes of SME managers towards growth, to identify the strategies they pursue to achieve growth, and to establish the main factors they perceive to be limiting their growth. We find that although most managers profess to value growth and follow expansionary strategies, the main limits on the growth of SMEs are the intensity of competition stemming from the recession, and the inability or unwillingness of management to deal with the increased administrative burden arising from expansion.     

Firm Leadership and Innovative Performance: Evidence from Seven EU Countries

This paper considers the effect of different firm leadership on the innovative performance of firms from seven EU countries. We investigate whether owner-led or manager-led firms achieve a larger share of their turnover with product innovations. Economic theory does not propose clear answers to this question. In the empirical analysis, it turns out that the manager-led firms are more active innovators: the share of sales based on new products is larger if firms' managers do not hold any of the firms' capital. Surprisingly, there are no differences between the seven countries included in the regression analysis.     

Syndicated investments by venture capital firms: A networking perspective

The networking of 464 venture capital firms is analyzed by examining their joint investments in a sample of 1501 portfolio companies for the period 1966–1982. Some of the factors that influence the amount of networking are the innovativeness, technology, stage, and industry of the portfolio company. Using the resource exchange model, we reason that the relative amount of networking is explained primarily by the degree of uncertainty associated with an investment rather than by the sum of money invested.Among the findings of our study about venture capitalists are the following:The top 61 venture capital firms that managed 57% of the pool of venture capital in 1982 had an extensive network. Three out of four portfolio companies had at least one of the top 61 venture capital firms as an investor. Those top 61 firms network among themselves and with other venture capital firms. Hence they have considerable influence.Sharing of information seems to be more important than spreading of financial risk as a reason for networking. There is no difference in the degree of co-investing of large venture capital firms—those with the deep pockets—and small firms. Furthermore, where there is more uncertainty, there is more co-investing, even though the average amount invested per portfolio company is less. That, we argue, is evidence that the primary reason for co-investing is sharing of knowledge rather than spreading of financial risk. Venture capital firms gain access to the network by having knowledge that other firms need.It is likely that there will be increasing specialization by venture capital firms. Knowledge is an important distinctive competence of venture capital firms. That knowledge includes information such as innovations, technology, and people in specific industry segments. Among the portfolios of the top 61 venture capital firms are ones with a concentration of low innovative companies, others with a concentration of high innovative technology companies, and others with a no particular concentration. As technology changes rapidly and grows more and more complex, we expect that venture capitalists will increasingly specialize according to type of companies in which they invest. Only the largest firms with many venture capitalists will be like “department stores,” which invest in all types of companies. The smaller firms with only a few venture capitalists will tend to be more like “boutiques” which invest in specific types of companies, or in specific geographical regions around the world.We think that the networking of venture capital firms has the following implications for entrepreneurs:Entrepreneurs should seek funds from venture firms that are known to invest in their type of product. It speeds the screening process. If the venture capital firm decides to invest, it can syndicate the investment through its network of similar firms. And after the investment has been made, the venture capital firms can bring substantial expertise to the entrepreneur's company.Entrepreneurs should not hawk their business plans indiscriminately. Through their networks, venture firms become aware of plans that have been rejected by other firms. A plan that gets turned down several times is unlikely to be funded. Thus it is better to approach venture capital firms selectively.The extensive network of the leading venture capital firms probably facilitates the setting of a “market rate” for the funds they invest. The going rate for venture capital is not posted daily. Nevertheless, details of the most recent deals are rapidly disseminated through venture capitalists' networks. Hence, that helps to set an industry-wide rate for the funds being sought by entrepreneurs.Lastly, we give the following advice to strategic planners:Venture capital firms share strategic information that is valuable to others outside their network. Since they often invest in companies with emerging products and services, venture capitalists gather valuable strategic information about future innovations and technological trends. Thus, strategic planners should tap into venture capitalists' networks, and thereby gain access to that information. It is sometimes information of the sort that can revolutionize an industry.     

Does the Market for Top Executives Work? CEO Pay and Turnover in Small U.K. Companies

This paper presents the results of our investigation into the operation of the managerial labour market in small and medium sized manufacturing companies. Using a sample of some 40 or so companies we study the sensitivity of managerial pay and tenure to company performance. Managerial pay in this type of firms is much lower than the six digit figures quoted for large public companies and CEO turnover is much higher than we expected. We find some evidence to suggest that pay in small companies is sensitive to sales growth and that CEO tenure in public companies responds to the growth in sales.     

The effect of the degree of ownership control on firm diversification,market value,and merger activity

This paper provides additional evidence that manager-controlled firms do not pursue the same objectives as owner-controlled firms. Using recent data of the Fortune 500, it is shown that 1) manager-controlled companies have a significantly greater tendency to engage in conglomerate mergers than do firms with strong owner control; 2) the income streams of manager-controlled firms are more diversified than those of companies with strong owner control; 3) individual owners tend to monitor their managers closely even if their ownership interest is relatively small, while financial institutions that are owners do not monitor closely unless their interest is large; and 4) the value-to-sales ratio is lower for manager-controlled companies than for owner-controlled ones.     

The relationship between CSR and corporate strategy in medium‐sized companies: evidence from Italy

The paper responds to the recent calls for further evidence on corporate social responsibility (CSR) in small and medium‐sized enterprises (SMEs). Drawing on the extant literature, the authors identify four characteristics contended by academicians as peculiarities of SMEs’ approach to CSR: the intrinsic relationship between CSR and corporate strategy motivated by the need to continuously dialogue with stakeholders; the centrality of the entrepreneur's ethos in CSR decisions; the coexistence and the cross‐effect of economically instrumental and ethically motivated CSR policies; and the finalization of CSR initiatives to specific firm growth objectives. These four peculiarities are explored in the case of an Italian medium‐sized company operating in the furniture industry. The outcomes show how the four peculiarities are salient in analyzing the CSR approach by the company and suggest areas for further research aimed at developing a thorough theory of CSR in SMEs. In particular, we deepen the analysis of the nature of the uniqueness of medium‐sized companies’ approach to CSR, providing possible interpretations of the reasons making medium‐sized companies’ approach to CSR different from both small and large companies.     

A Conceptual Framework That Identifies Antecedents and Consequences of Building Socially Responsible International Brands

Research on the reputation of international firms using branding philosophies for offering products that are harmful for customers, through business‐to‐business networks, has until now yielded inconsistent results. Although the literature recommends socially responsible behavior of firms offering branded products as one of the determinants of brand reputation, it fails to satisfactorily identify the factors that would particularly enable a brand offering controversial products to be recognized as a socially responsible brand. Authors use the inductive approach to examine existing research and review anecdotes to build a model that will allow brand managers to develop recognition of an ethical and socially responsible brand while offering controversial products such as tobacco or gambling. In addition, the role of business customers of an international brand is also reviewed to understand if they can moderate the causal relationship between the socially responsible image of the brand and brand reputation. Guidelines for future research on the propositions made are provided in this article. © 2015 Wiley Periodicals, Inc.