The nature of SME co-operation and innovation: A multi-scalar and multi-dimensional analysis

Recent work on SMEs and networks has emphasised the importance of external co-operative ties in enhancing firms’ innovative performance. These external ties provide resource constrained SMEs with access to a wider set of technological opportunities through information sharing and resource pooling. Previous studies of the SME innovation–cooperation relationship have used categorical measures to capture tie existence which, while providing some useful insights, largely fail to capture the strength of co-operative relationships and/or the variety of relational directions in which co-operation occurs. This study aims to address this measurement deficiency and explore the SME innovation–cooperation relationship by designing and utilising measures that capture both the multi-scalar (strength) and multi-dimensional (variety) nature of co-operation and innovation. We then apply these measures to a survey of UK manufacturing SMEs. Data is obtained for 371 SMEs, and we then assess the innovation–co-operation relationship within a multivariate regression framework. We find that the strength of cooperative ties across a range of productive activities within the value chain are important facilitators for SME innovative capability; this is true for both product and process innovation. However, we find that SME co-operation with rivals (co-opetition) has no significant impact upon innovation. Our results have significant implications for both supply chain managers and policy-makers interested in enhancing innovation among SMEs. In particular, we argue that SME innovative activity benefits from good, close dyadic relations within the supply chain, while more generally policy should be geared towards nurturing and sustaining SME innovation networks.     

Customer collaboration,service firms' diversification and innovation performance

To sustain competitive advantage, service firms must adapt to the market environment, often by means of diversification and innovation. While extensive research has focussed on the role of customer collaboration in service firm innovation performance, fewer studies have examined the role of firm diversification in this relationship. This study draws on the resource-based view and dynamic capability literature to explore relationships between customer collaboration, diversification and innovation performance of service firms. A conceptual framework was developed and tested using a survey of 156 mining equipment, technology and services (METS) firms in South Australia, and case studies. The findings indicate that service and market diversification mediate the relationship between customer collaboration and innovation performance. Importantly, our findings demonstrate that customer collaboration has no direct effect on the innovation performance of service firms. The research helps practitioners and policymakers to understand the importance of enhancing collaboration across supply chains to build diversified and resilient to downturns in traditional sectors service economies.     

The influence of firms' technological capabilities on export performance in supplier-dominated industries: the case of ceramic tiles firms

In this paper, we study the effects that firms' technological capabilities, as an expression of their technological innovation strategy, have on their international competitiveness. In doing so, we draw on export and international trade literature to justify the influence that the firms' technological activity has on their export performance. In addition, we use concepts derived from the literature on technological innovation to identify different capabilities that the firms may develop to manage their innovation process, i.e., those related to investment, production and co-operation. These constitute the basis of our hypothesis, in which the technological innovation capabilities identified are related to firms' export performance. Empirical work is carried out on a sample of 88 Spanish exporting firms belonging to the ceramic tiles industry, which is characterized as being a supplier-dominated industry. Data were mainly gathered through a postal survey directed at firm managers. Our findings show that technological innovation capabilities have a positive impact on export performance. Specifically, results show that investment in internal non-R&D innovative activities, such as engineering design and pre-production, exerts a positive influence on export performance. However, neither investment in R&D nor investment in external acquisition of technology exerts any influence on export performance. In addition, our findings show that production capabilities have a positive effect linked to both improvement and imitation of products and processes. Regarding co-operation, export performance is related to capabilities that derive from co-operation with universities and research institutes rather than co-operation with other companies.     

Success and Failure in New Industrial Services

The critical role of innovation has long been recognized in physical goods; however, the development of innovative services has received much less attention. The research described here reports on an early major study of success and failure in new industrial services. Building on her integration of two literatures on new product innovation and services marketing, Ulrike de Brentani reports how companies measure new service performance and the factors which are associated with success. She reports that new industrial services share some important success factors with physical goods, such as the firm's market orientation, a formal service development process, project synergy and a truly superior new service offering. Yet she finds that firms must adjust their approach to the distinctive character of services, including customer perceptions of service quality, features that successfully differentiate services in competitive terms and cost reduction.     

The moderating effect of innovative capacity on the relationship between real options and strategic flexibility

In dynamic sectors, organizations should be capable of adapting to unpredictable environmental conditions. Strategic flexibility grants organizations the capacity to respond to the changes in their environment in the direction required, renewing their strategies and making the required organizational changes. The goal of this study is to analyze how the use of real options relates to strategic flexibility from a managerial capacity perspective. Through an empirical study performed on European firms, we confirm that innovative capacity exercises a moderating role between real options and strategic flexibility. The fact that a firm's management has foreseen and contemplated real options does not necessarily lead to their execution; they must also be accompanied by some innovative capacity.     

Non‐R&D innovation and firms’ new product performance: the joint moderating effect of R&D intensity and network embeddedness

Non‐R&D innovation increasingly plays a critical role in explaining firms’ new product performance. Yet, there has been little research on the consequences and contingent mechanisms of non‐R&D innovation for firms embedded in collaborative network environments. To address this research gap, we investigated a conceptual framework of non‐R&D innovation using data drawn from Chinese manufacturing firms. First, we found that non‐R&D innovation positively affects firms’ new product performance. Second, we discovered that high R&D intensity positively strengthens the impact of firms’ non‐R&D innovation on new product performance. Third, we provided critical analysis of the role of non‐R&D innovation in promoting new product performance, accomplished by enhancing R&D investment while simultaneously improving the degree of network embeddedness. Our findings extend both the non‐R&D innovation literature and open innovation literature while providing managers with several key recommendations.     

Across the threshold: Role of performance and compatibility in innovative new products' market penetration

Both academicians and practitioners agree that there exists a critical threshold to cross for an innovative new product to be able to achieve ultimate market penetration. In this article, the authors characterize the threshold as depending upon innovation characteristics: performance and compatibility, in particular. Based on the insights from evolutionary games, several numerical simulations are conducted to investigate how the critical threshold changes as each parameter representing the innovation characteristics undergoes a change. The analysis results confirm that relative advantage and compatibility are of critical influence in impacting the threshold and thus the successful market entry. Moreover, the effect size was different depending on the size of the firm's proprietary customer base. Based on the findings, discussion on new product design strategies for companies having different market positions (i.e., new start-up firms, established firms, and incumbent market leaders) is provided.     

Software innovativeness: outcomes on project performance, knowledge enhancement, and external linkages

The purpose of this study is to investigate the relationship between product innovativeness and groups of outcomes flowing from the computer software product development process and the associated knowledge acquisition process. Data from interviews of managers in 94 software projects are analysed, and three groups of outcomes are measured: project performance, knowledge enhancement, and the strengthening of linkages to external actors/sources. The high innovative products show higher project performance for all measures of project performance compared with low innovative products. Similar results were found for all measures of personnel knowledge enhancement outcomes. Changes in the importance of linkages to nine different external sources of knowledge used by the firms during the knowledge acquisition process, also show some positive outcomes with respect to rising innovativeness levels. Strengthening of external linkages is found for 66% of the investigated linkages between one or two innovativeness levels. Of these, the linkages to hardware manufacturers, co-operation partners, and universities and other research institutions show strengthening when high innovativeness products are compared with low-level products. As the project performance and knowledge enhancement outcomes are due, in part, to knowledge gained within linkages to external actors/sources, managers could consider whether giving special attention to managing these linkages would be a winning innovation strategy for their particular firm.     

Achieving superior innovation-based performance outcomes in SMEs through innovation resource-capability complementarity

Firms are increasingly identifying new avenues to enhance their market position. One such effort involves the firms' ability to continuously learn. Learning has the capacity to enable firms to develop and implement more efficient and effective innovation-focused strategies, resulting in the ability to develop and deliver more products in a timelier manner. This study tests the relationship between innovation resource-capability complementarity and innovation-based performance. This study further elaborates that while innovation resource-capability complementarity drives innovation-based performance; their relationship will be enhanced via the firms' possession of superior learning capability. The findings show a significant effect of innovation resource-capability complementarity on innovation-based performance. The results also show that firms that possess superior learning capability are willing to question their operational processes and routines and make adjustments following the feedback obtained from customers and channels; thereby enhancing their abilities to develop more new products and increase their speed in delivering products to the customers.     

How international SME's vicarious learning may improve their performance? The role of absorptive capacity,strength of ties with local SMEs,and their prior success experiences

This study investigates whether inter-firm relationships can raise innovation and overall performance during SME internationalization, focusing on how SMEs learn from firms in transnational markets and the nature of such relationships. It contributes to research by proposing the role of vicarious learning from networked firms in the host country to improve their absorptive capacity (ACAP), innovation, and overall performance. In particular, this study proposes the moderating roles of the strength of ties with and prior success experience of SMEs in the host country market for enhancing international SMEs' vicarious learning to improve their ACAP, innovation, and overall performance. Structural equation modeling was applied to a sample of 163 valid responses received from international SMEs operating in various industrial sectors in Saudi Arabia. The obtained results support the significantly positive role of international SMEs' vicarious learning from local firms in developing their ACAP and enhancing their innovation and overall performance. However, international SMEs must have strong ties with local firms and learn from such firms' prior success experiences to derive these benefits fully.     

Innovation management techniques and tools: a review from theory and practice

Knowledge is considered to be an economic driver in today's economy. It has become a commodity, a resource that can be packed and transferred. The objective of this paper is to provide a comprehensive review of the scope, trends and major actors (firms, organizations, government, consultants, academia, etc.) in the development and use of methods to manage innovation in a knowledge-driven economy. The paper identifies the main innovation management techniques (IMTs) aiming at the improvement of firm competitiveness by means of knowledge management. It will specifically focus on those IMTs for which knowledge is a relevant part of the innovation process. The research study, based on a survey at the European level, concludes that a knowledge-driven economy affects the innovation process and approach. The traditional idea that innovation is based on research (technology-push theory) and interaction between firms and other actors has been replaced by the current social network theory of innovation, where knowledge plays a crucial role in fostering innovation. Simultaneously, organizations in both public and private sectors have launched initiatives to develop methodologies and tools to support business innovation management. Higher education establishments, business schools and consulting companies are developing innovative and adequate methodologies and tools, while public authorities are designing and setting up education and training schemes aimed at disseminating best practices among all kinds of businesses.     

Understanding the role of service innovation behavior on business customer performance and loyalty

Providing new services to customers gives firms a competitive advantage in the market. Consequently, firms strive to develop innovative service that delivers new value propositions to customers and leads to customer satisfaction and the acquisition of new customers. The authors investigate the relationship between the innovative behavior of service providers, business customer performance, and business customer loyalty in the safety industry. The study's results show that technology-oriented and co-creation-oriented innovative behavior leads to business customer performance. Business customer performance is closely related to recommendations and re-contracts. Moreover, the degree of safety involvement has a moderate effect between service innovation and business customer performance. The findings have important theoretical and managerial implications for service innovation for researchers as well as service providers.     

Winning through innovation and marketing: Lessons from Australia and Vietnam

We examine the role of innovation and marketing, two functional capabilities that have the capacity to play a major role in creating superior marketplace performance in firms. Our study of the two capabilities and firms' marketplace performance also takes into account the contribution of entrepreneurial orientation (EO) and market orientation (MO) to our focal functional capabilities and marketplace performance. The results of a study of firms in Australia and Vietnam show innovation capability, marketing capability mediate the effects of the firm's MO on its marketplace performance. The results also show that the interaction of innovation and marketing capabilities significantly influences firms' marketplace performance more than they do individually. Finally, our results show that MO partially mediates the relationship between EO and innovation and marketing capabilities.     

A new perspective on open innovation: established and new technology firms in UK bio‐pharmaceuticals

The aim of this paper is to explore open innovation (OI) implementation and its impact on firm innovation performance in sectors experiencing technological discontinuities. The paper employs the framework of inbound, outbound and coupled OI to identify processes reflecting sourcing, externalising and exchanging knowledge across organisational boundaries on upstream and downstream innovation activities and explores their impact on the innovation performance of new and established technology firms. The empirical setting is the UK bio‐pharmaceuticals sector during 1991 and 2001, a paradigmatic era of discontinous change and intensified OI implementation. First, our findings show that new technology firms (NTFs) and established technology firms (ETFs) differ in their extent and patterns of inbound, outbound and coupled OI, reflecting that they implement OI to manage their competences in light of technological change. Second, we identify a complex and multifaceted relationship between OI and patenting performance, with NTFs experiencing enhanced performance from some OI processes while ETFs experiencing challenges. The paper suggests that delineating OI into inbound, outbound and coupled, along upstream and downstream activities, offers a deeper understanding of the role of OI in innovation, guiding selective implementation in pursuing enhanced innovation performance during periods of discontinuous technological change.     

Innovation orientations and their effects on business performance: contrasting small‐ and medium‐sized service firms

This study examines the relative performance of small‐ versus medium‐sized service firms with respect to innovation orientations and their effect on business performance. We examine the effect of innovation on business performance between the two groups of firms, exploring differences in innovation orientation on performance between the groups of small‐ and medium‐sized firms. We also examine differences within each group, exploring the extent to which innovation focus differs within each group. The empirical data were drawn from 180 managers in Australian service small and medium enterprises. The findings suggest that while there is no difference between small‐ and medium‐sized firms with respect to their innovation orientations, significant differences exist between the firm's size with respect to the effect of innovation orientations on business performance. Specifically, exploitation innovation has a stronger effect on business performance among small firms compared with medium‐sized firms, and exploration innovation shows a stronger effect on business performance among medium‐sized firms compared with small firms. Overall, the findings show important relative differences between innovation orientations and business performance across different sized firms.     

Firms' knowledge‐sharing strategies in the global innovation system: empirical evidence from the flat panel display industry

This paper explores the relationship between firms' strategies to share knowledge with their innovation system and innovative performance. The empirical analysis showed that many firms designed strategies to share technological knowledge with competitors, and those firms that shared knowledge with their innovation system earned higher innovative performance than firms that did not share knowledge. In addition, firms that interacted with their global innovation system earned higher innovative performance than firms that interacted with only their national innovation system. These results should help managers and researchers understand how to devise technology strategies in globally integrated industries. Copyright © 2003 John Wiley & Sons, Ltd.     

Innovation promoters — A multiple case study

This paper empirically examines the role of innovation promoters in loosely-coupled inter-organisational innovation projects. With a starting point from existing literature on innovation promoters, it seeks to develop a theoretical framework for analysing the particular challenges of inter-organisational innovation projects. Data from seven inter-organisational innovation projects provides the empirical setting of the paper, and these data are analysed on the basis of an inductive, interpretive approach. The paper results in the development of four types of innovation promoters (power, expert, process and relationship). In addition, the results indicate the substantial challenges of dividing the labour between several promoters in inter-organisational innovation projects. The paper concludes with some managerial and research implications.     

Interorganizational Collaboration and Innovation: Toward a Portfolio Approach*

In the literature on innovation, interorganizational collaboration has been advanced as beneficial for the innovative performance of firms. At the same time, large‐scale empirical evidence for such a relationship is scarce. This article examines whether evidence can be found for the idea that interorganizational collaboration supports the effectiveness of innovation strategies. This article empirically addresses this research question by analyzing data on Belgian manufacturing firms (n=221) collected in the Community Innovation Survey, a biannual survey organized by Eurostat and the European Commission aimed at obtaining insights into the innovation practices and performance of companies within the various European Union (EU) member states. Tobit analyses reveal a positive relationship between interorganizational collaboration and innovative performance. At the same time, the impact on innovative performance differs depending on the nature of the partner(s) involved. These findings strongly suggest the relevance of adopting a portfolio approach to interorganizational collaboration within the context of innovation strategies.     

Innovation Field Orientation and Its Effect on Innovativeness and Firm Performance

New product development (NPD) has become a prime source for gaining a competitive edge in the market. Although a large body of research has addressed the question of how to successfully manage individual innovation projects, the management of a firm's new product portfolio has received comparably less research attention. A phenomenon that has recently emerged on the research agenda is innovation field orientation. Such orientation is understood as the deliberate setup and management of multiple thematically related NPD projects. However, the facets and effects of innovation field orientation are still unexplored. In particular, this study is interested in (1) developing a concept of innovation field orientation, (2) investigating the extent to which innovation field orientation is an established part of the corporate strategic planning practice, and (3) assessing the direct and indirect performance effects of innovation field orientation. For the empirical analysis, data were collected through a mail survey and document analyses from 122 publicly listed firms. Tobin's q was used as an objective performance metric directly related to shareholder value. The results confirm that innovation field orientation is a phenomenon that prevails in practice. In addition, all defining aspects of this orientation have either direct or indirect effects on firm performance. Hence, those firms that deliberately specify and manage innovation fields have a more innovative product portfolio and are more successful than others. Specifically, the findings underline the performance relevance of formally framing innovation fields and assigning a critical mass of resources to them. In addition, empirical support is lent to the suggestion that innovation field orientation has strong indirect performance effects mediated by the innovativeness of the firm's new product portfolio. This implies that firms that deliberately specify focus areas, assign resources to, provide organizational framing for, and stimulate synergies between related NPD projects stand a better chance to achieve a more innovative new product portfolio. This again is highly appreciated by investors and results in a superior stock market evaluation of these firms.     

Innovation through Experience Staging: Motives and Outcomes

There is a growing recognition of the opportunities of innovation through experience staging. The literature, however, tends to focus on high‐profile examples of firms from largely hedonic sectors, such as entertainment and hospitality. These cases provide vivid and persuasive examples, but they fail to address how firms outside these sectors can join the experience economy—a term coined in 1998 by Pine and Gilmore—by developing new products and services with experiences at their core. The paper reports on two studies undertaken to examine why firms that do not belong to sectors that are largely hedonic innovate through experience staging and how they benefit from doing so. The first study is an in‐depth case study of 15 diverse firms, which examines these firms' motives for pursuing innovation through experience staging. The second study is a two‐year longitudinal quantitative survey of 131 small‐ and medium‐sized firms (SMEs) to address the question of the benefits that firms that do not have strong brands can gain by from innovation through staging experiences. The first study provides the basis for classifying firms along two dimensions depending on the nature of the new products or services (referred to collectively as offerings) they create. The first dimension has to do with whether new offerings have a functional or experiential core. The second dimension has to do with the degree of experiential augmentation applied to offerings. The first study suggests that firms adopt an experience‐staging strategy to innovation based on both outward‐facing and inward‐facing motives. The outward‐facing motives include improving a firm's image in its market, entering new markets, and attracting new customers. The inward‐facing motives include improving a firm's attractiveness to employees and increasing profitability. The results of the second study suggest that creating offerings with an experiential core can contribute to success by enhancing a firm's image, its attractiveness to employees, and its ability to enter new markets. Moreover, experiential augmentation contributes to profitability, new customer attraction, and employee attractiveness. This research has important implications for theory and practice. In the first place, this research extends existing theory about experience staging to firms outside sectors that are largely hedonic. In the second place, the managerial implications are that innovation through experience staging can be an effective way for SMEs, even those outside industries, such as entertainment or hospitality, to create competitive advantage.