Strategies of innovation in smaller firms

The exploratory study described below identifies and examines the ways in which smaller firms respond to the product gaps which arise when their existing product bases no longer provide the sales and profit potential required to fulfil their managers' aspirations for corporate growth. It was concerned to ascertain how product gaps are actually identified by managers, and to investigate the relationships between the different types of gaps and firms' innovation strategies. Fifty-four strategies of innovation were examined in eighteen firms across several industries. Two distinct types of product gap emerged from the analysis: ‘positive’ and ‘negative’. Each reflected a different pattern of managerial perception of the strategic need to innovate, and each tended to be followed by distinctly proactive or reactive strategies of innovation with predictable consequences for the product-market position of the firm.