Reading time: 2-3 minutes. This blog is about innovation and performance. 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.
Driving forces for innovations
One study, however, identified innovation drivers and their performance implications in manufacturing SMEs. Specifically, the researcher investigated two research questions: (1) What are the key drivers of innovation in manufacturing that lead to improved SME performance? and (2) How do the innovation practices of SMEs differ from those of large firms in the manufacturing sector?
The 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.
Innovation and performance
The study finds that innovation performance of small and medium-sized enterprises is likely to be improved by copying large manufacturing companies in terms of formal strategy and structure. Previous studies have also found that large companies are more innovative than small businesses in the manufacturing sector.
The study concludes that small and medium-sized businesses do not seem to use innovation culture in a strategic and structured manner. The implication is that manufacturing SMEs is likely to improve their performance by focusing on the link between innovation culture and strategy throughout the innovation process.
By learning from the results of the study, managers and leaders in SMEs, active in the manufacturing industry, can improve their performance from innovation by focusing on the following:
- Copy large manufacturing companies with regard to strategy and structure linked to innovation
- Focus on the link between innovation culture and strategy throughout the innovation process
Terziovski, M., 2010. Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: A resource-based view. Strategic Management Journal, 31 (8), 892-902.
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