Barriers in SMEs for incremental substitution of existing competitive advantages with continuous inn

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Barriers in SMEs for incremental substitution of
existing competitive advantages with continuous
innovation
Michael Nørager Copenhagen Business School and
Herning Institute of Business Administration and
Technology Kenneth Husted University of Auckland
Business School Auckland, New Zealand
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Agenda for the presentation

• Research question
• Methodology
• Basic idea and concept of the paper
• Contributions
• Further Research
• Questions

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Research question

• What are the characteristic differences between
  innovative and non-innovative SMEs?
• What kind of barriers are the non-innovative SMEs
  facing?
• How do these SMEs incrementally substitute their
  existing day to day production activities into
  competitive advantages based on innovation?

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Basic idea and concept of the paper

• There is a lack of focus on the non-innovative
  SMEs, in Denmark and throughout Europe.
• We are focusing on differences between innovators
  and non-innovators trying to add new knowledge on
  the transformation process from a less innovative
  SME to a more innovative SME.
• Through the interviews and the literature reviews
  we found four themes significant important to
  address compared to our research question
• Strategic intelligence and intension
• Management capacity and competencies
• Culture, training and employee attitudes
• External linkages and network

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Methodology

• We made an explorative study of four Danish SMEs
  - all of them in different phases of their
  transformation process towards being more
  innovative.
• In each company we made two interviews with the
  manager responsible for business development.
• In this particular part of the SME literature
  there is not enough details for deductive theory
  testing, hence we are following a more inductive
  procedure trying to set up a concept for how to
  overcome these barriers to innovate. (Theory
  building)

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Strategic intelligence and intension

• From several studies and our own interviews we
  are able to say that
• There is a strong correlation between strategy
  and innovation
• Not having an explicit written strategy (or
  innovation strategy) is a major barrier for
  developing innovation capabilities in SMEs
• The more explicit, apparent and articulated the
  strategy is the more likely the SME will be
  innovative.

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Management capacity and competencies

• Basic and core management abilities are often the
  differences between innovators and
  non-innovators.
• A central barrier is the lack of management
  competencies in relation to change management and
  handling resistance from the workers.
• Innovative firms are often using a more
  consultative and transformational management
  style e.g. different kinds of self management
  leadership styles.
• Whereas non-innovators often use more dominant
  and authoritarian management style.

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Culture, training and employee attitudes

• Depending on the staffs interpretation of the
  culture it can be either a strong support or a
  massive barrier for innovation.
• In general the culture and basic values have a
  huge impact on the overall behavior and
  performance.
• The most innovative firms train more staff
  (Freel 2005)
• HRM activities (especially systems or bundles)
  will to a significant higher degree stimulate the
  development of novel capabilities.

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External linkages and network

• Innovators have more external interaction with
  different players around the innovation process
  especially in vertical links.
• SME innovators are more active with external
  partners in relation to shared innovation
  projects.
• Non-innovators are less external orientated and
  they are in general not involved in any joint
  innovation activities.

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Conceptual model for innovation barriers in SMEs
Ability to manage barriers to innovate in
SME. (Management capacity and competencies)
Strategic intelligence and intension
P2
P3
Culture, training and employee attitudes
P4
P1
External linkages and network
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Propositions for the conceptual model

• P1 For non-innovative SMEs the preference of
  management style and the management behavior on
  short and long term is crucial elements in
  defining whether they will pass the barriers to
  innovate or they will stay non-innovators in the
  future.
• P2 If the firm has an explicit corporate
  strategy struggling to implement it on a day to
  day level, we expect it to have a positive impact
  on the non-innovative firms chances to overcome
  barriers to innovate. If the firm has an
  innovation strategy, we expect the relation to be
  even stronger.

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Propositions for the conceptual model

• P3 A dedicated culture and the level of training
  and education among managers and other staff
  members are positively related to the
  non-innovative firms chances to overcome
  barriers to innovate.
• P4 The number of external relations containing
  common innovation activities is positively
  related to the non-innovative firms chances to
  overcome barriers to innovate.

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Contributions

• The transformation process towards a more
  innovative profile can be started from any of the
  4 areas we have addressed in this paper.
• However due to the restricted resources we often
  see in SMEs we will argue that starting with a
  well-founded written strategy pointing out how
  the incremental transformation process can evolve
  in the future, will be the right place to start
  the journey.
• Action plans as extractions from the strategy
  should be able to point out when and how the SME
  should be working with
• Strategic intelligence and intension
• Management capacity and competencies
• Culture, training and employee attitudes
• External linkages and network

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Further Research

• The implications, we see, for further research on
  this topic, are to conduct systematic research on
  how non-innovative SMEs can combine the 4 areas
  to secure a successfully transformation process
  towards gaining competitive advantages from
  innovations.
• The intension is to develop a transformation
  typology which can categorise different tracks
  that the SMEs can follow in trying to overcome
  the barriers to become more innovative.
• From a methodology point of view we will try to
  build a grounded theory from interpretation of
  mainly qualitative data collected among SMEs who
  recently have been through a change process from
  a less to a more innovative performing firm.

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Questions

• Have you discovered any barriers for innovations?
• What do see as the most typical barrier to
  innovate?
• Have you been part of an organisation which have
  been through a transformational process from less
  to more innovative?
• What was the characteristic themes?