discovery driven growth
TRANSCRIPT
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Operations Management-II
Discovery Driven Growth
Prepared By: Kumar Pallav Priyam Mittal
Pooja Saini Pooja Dubey Neha Mittal
Ramendra Vikram Singh
Page | 1
Table of Content
S.No. Research Paper Title Author(s) Page No.
1. Co-Creation Experiences: The Next Practice in Value Creation
C. K. Prahalad & Venkat Ramaswamy
2-3
2. E-Delivery Channels in Banks – A Fresh Outlook
Dr.R. K. Uppal
4-6
3. Innovation in Healthcare Delivery Systems: A Conceptual Framework
Vincent K. Omachonu and Norman G. Einspruch
7-8
4. Innovative Strategies to Catalyze Growth Of Indian Life Insurance Sector -An Analytical Review
C. Bharti, C.D. Balaji & Dr. CH. Ibohal Meitei
9-11
5. Value Creation through IT-supported Knowledge Management? The Utilization of a Knowledge Management System in a Global Consulting Company
Karl Heinz Kautz & Volker Mahnke
12-13
6. Value Creation In Indian Pharmaceutical Industry: A Regression Analysis
Dr. N. Sakthivel
14-15
7. Relevance of Total Quality Management (TQM) or Business Excellence Strategy Implementation for Enterprise Resource Planning (ERP) – A Conceptual Study
Vidhu Shekhar Jha & Himanshu Joshi
16-18
8. Value Creation In E-Business Raphael Amit & Christoph Zott
19-20
9. The Consumer’s Process of Value Creation
Ravald Annika
21-22
10. Importance of Technological Innovation for SME Growth
M. H. Bala Subrahmanya, M. Mathirajan & K. N. Krishnaswamy
23-26
Page | 2
“Co-Creation Experiences: The Next Practice in Value Creation”
C K Prahalad and Venkat Ramaswamy
Objective:
The objective of this paper is basically to delve into the concept of value creation or rather about
the co-creation experiences. It explains the rapid shift from a product and firm centric view to
personalized consumer experiences.
Summary:
The traditional concept of value creation considered consumers to be outside the firm and the
process of value creation occurred inside the firm and outside markets. But with changing times,
consumers are well informed, connected, empowered and active consumers. They want to
interact with the firms and co-create value.
Co-creation is about joint creation of value by the company and the customer. It allows the
customer to co-construct the service experience to suit his needs. Products can be commoditized
but co-creation experiences cannot be. The basis for interaction between the consumer and the
firm are Dialog, Access, Risk-benefits and Transparency (DART). Dialog is set of conversations
between the customer and the firm. It must center on issues of interest to both the consumer and
the firm. Access and transparency are critical to have a meaningful dialog.
Co-creation puts the spotlight on consumer-company interaction as the locus of value creation.
Since no one can predict the experience a consumer will have at any point in time, the task of a
firm is innovating a robust experience environment. Once the firm centric view of value creation
is discarded and the co-creation view is accepted, the evidence of shift is visible in a wide variety
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of industries. Amazon and e-bay are the examples of facilitating the process of personalized
experiences.
The concept of co-creation is more than co-marketing or engaging consumers as co-sales agents.
The interaction becomes the locus of value creation; the interaction can be anywhere in the
system, not just at the conventional point of sale or customer service.
Conclusion:
With the change in the type of consumers that are more informed, connected, empowered and
active than ever, the focus is shifting from the traditional market approach to the co-creation
approach. This can be considered as an innovative method for value creation wherein the
consumer gets the chance to interact with the firms and co-create value.
Bibliography:
This research paper has been taken from http://connectone.in/images/Co-creation.pdf on
08/08/2011 at 6:56 P.M.
Page | 4
“E-Delivery Channels in Banks – A Fresh Outlook”
Dr.R. K. Uppal
The research paper titled “E-Delivery channels in banks – a fresh outlook” authored by Dr. R. K.
Uppal delves into the way the Information technology has revolutionized the entire banking
scenario. It focuses on the use of various technologies by the different banks of the country so as
to make banking transactions easier for the customer and to provide them various delivery
channels such as ATM, mobile banking, net banking, tele-banking etc.
Objective:
This paper shows how the involvement of advanced information technology has helped the
banking sector in its growth. The basic objective of this paper is:
• To study and analyze the technological developments in various banks (i.e. public, old
private, new private, foreign and state banks)
• To study and analyze the challenges before the Indian banks especially the public sector
banks.
Methodology:
The paper finds the share of each e delivery channels from total branches. The sample is taken
from the entire Indian banking industry constituted by the various categories of banks like the
nationalized banks, State Bank Group, Old private sector banks, new private sector banks and the
foreign banks.
The author has taken several parameters for consideration like:
Page | 5
• The extent of computerization in public sector banks
• Introduction of advanced technologies such as internet banking, net banking, tele-
banking.
• ATMs as a percentage of total branches.
Summary:
The paper shows how IT revolution has brought about a fundamental transformation in banking
industry. No other sector has been affected by advances in technology as much as banking and
finance. It has the most important factor for dealing with the intensifying competition and the
rapid proliferation of financial innovations. The paper analyzes the impact of new technology on
banking sector. The technology is changing the way business is done and opened new vistas for
doing the same work differently in most cost effective manner. Tele-banking and internet
banking are making forays such that branch banking may give to home banking. The major
points discussed in this paper are:
• Increase in the number of branches providing Core Banking Solution (CBS) which is
regarded as a precursor to other technological initiatives.
• The phenomenal increase in internet banking that is one of the reasons for the growth of
banking sector and the introduction of Mobile banking that is more popular in all bank
groups.
• The ATMs installed by the private sector and foreign banks were more than three times
of their respective branches. The ATM to branch ratio was much lower for other bank
groups.
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• The different challenges are – Increased competition, to adopt techniques to ensure
higher customer satisfaction, poor human resource management, investment mistakes in
IT made in past, under utilization of resources
• The paper also suggests some strategies to enhance e delivery channels in banks
particularly in public sector banks.
Conclusion:
The gist of the paper is that the more the advanced technology is used by the banks the better
will be their growth prospective. It focuses on the number of delivery channels introduced by
banks by adopting the latest technology. The major concern is for the public sector banks that are
using IT quite less as compared to new private sector and foreign banks. Since it is the survival
of the fittest, hence, the one making proper utilization of the IT in their operations will gain in
long term.
Bibliography:
This research paper has been taken from http://www.researchersworld.com/vol2/PAPER_19.pdf on
08/08/2011 at 19:23:47 HRS.
Page | 7
“Innovation in Healthcare Delivery Systems: A Conceptual Framework”
Vincent K. Omachonu and Norman G. Einspruch
Objective:
The objective of this research paper is to clarify the concept of healthcare innovation so that it
may become easier for health policymakers and practitioners to evaluate adopt and procure
services in ways that realistically recognize, encourage and give priority to truly valuable
healthcare innovations.
Methodology:
The authors have taken the references of various journals and research papers published by
others and themselves earlier which talk about the innovations and healthcare. Also they have
put a set of questions to help them with their research.
Summary:
The healthcare industry has experienced a proliferation of innovations aimed at enhancing life
expectancy, quality of life, diagnostic and treatment options, as well as the efficiency and cost
effectiveness of the healthcare system. Information technology has played a vital role in the
innovation of healthcare systems. Despite the surge in innovation, theoretical research on the art
and science of healthcare innovation has been limited. One of the driving forces in research is a
conceptual framework that provides researchers with the foundation upon which their studies are
built. This paper begins with a definition of healthcare innovation and an understanding of how
innovation occurs in healthcare. A conceptual framework is then developed which articulates the
intervening variables that drive innovation in healthcare. Based on the proposed definition of
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healthcare innovation, the dimensions of healthcare innovation, the process of healthcare
innovation and the conceptual framework, this paper opens the door for researchers to address
several questions regarding innovation in healthcare. If the concept of healthcare innovation can
be clarified, then it may become easier for health policymakers and practitioners to evaluate
adopt and procure services in ways that realistically recognize, encourage and give priority to
truly valuable healthcare innovations. Lastly, this paper presents 10 research questions that are
pertinent to the field of healthcare innovation. It is believed that the answers to these and other
such questions will hold the key to future advances in healthcare innovation research.
Conclusion:
Innovations in the healthcare delivery systems have several success parameters. These include
finding and supporting innovators, investing in early adopters, making early adopter activity
observable, trusting and enabling reinvention, create slack (including resources) for change,
leading by example, etc. The best of innovations may not be successful if the market or
environment is not ready for adoption.
Bibliography:
This research paper has been taken from http://www.innovation.cc/scholarly-
style/omachonu_healthcare_3innovate2.pdf on7/08/2011 at 8:45 P.M.
Page | 9
“Innovative Strategies to Catalyze Growth of Indian Life Insurance Sector
-An Analytical Review”
C. Bharti, C.D. Balaji & Dr. CH. Ibohal Meitei
Objective:
With more than 88 per cent of the population devoid of any form of social security, the poor
spread of insurance even after nearly a decade of liberalization is a cause of major concern.
Therefore this paper was written with the basic objective of designing a strategic roadmap for
kick starting growth in the insurance sector.
Methodology:
This paper is exploratory in nature and explores the various strategic options that can be
effectively implemented by the life insurers to improve the coverage and penetration of life
insurance. The authors have used secondary data which was sourced from business journals,
magazines and publications of the regulator.
Summary:
In 1818 life insurance business started in India with the establishment of oriental life insurance
company in Calcutta. But it failed in 1834. In 1829, the Madras Equitables started its life
insurance business in the Madras Presidency. After that in 1870 we saw the enact of British
insurance act and after that in last three decades, Bombay mutual (1871), Oriental (1874) and
Empire of India (1897) started in Bombay Residency. But however all of them were dominated
Page | 10
by foreign insurance companies. In 1921 Indian Life Insurance Companies act was the first
measure to regulate the life insurance. The Indian Insurance Companies act was enacted in 1928
and after that insurance act in 1938 was amended. The Insurance Amendment Act of 1950
abolished principal agencies. Due to unfair trade practices government nationalized the insurance
business. The LIC is the monopoly in insurance sector since the time insurance sector was
opened to private sector. In 1999 the insurance sector was opened for private participation and
since then 24 private companies have been granted license. During the last seven years capital of
Rs 962.5 has been generated by private players and out of that Rs 217.45 billion is due to foreign
partners. The industry services large number of life insurance policies in world. At the time of
opening the insurance was viewed as a tax saving device. The registered insurers in India as on
31 September 2010 in public sector are 1 in life insurance, 6 in general insurance and 1 in re
insurance. Whereas in private sector its 22 in life insurance, 18 in general insurance and zero in
re insurance. In 2009-10 the annual premium earned by insurance sector by LIC was 48.1
percent and by private players was 51.9 percent. In 2009 the single premium earned by LIC
increased 0.78 percent from 2008 and in 2010 it increased by 33.19 percent. In private sector the
growth in 2009 as compare to 2008 was negative i.e. -30.91 percent but in 2010 as compared to
2009 the growth rate was 10.13 percent. In case of first year premium LIC has a negative growth
in 2009 of -11.36 but in year 2010 the growth was 34.49 percent as compared to last year. But in
private sector first year premium growth rate was 1.29 in 2009 and 12.36 percent in 2010.
India is at 9th position in 156 countries in life insurance business. In 2009 the life insurance
premium in India grew by 10.1 percent while the global growth was only 2 percent. India’s share
in insurance in global market is 2.45 percent in 2009. Till 30 September 2010 40 companies has
been granted license, out of which 22 is in life insurance and 18 in general insurance. Only 20%
Page | 11
of the population is insured and insurance premium accounts for 2 percent of GDP as compared
to the world average of 7.8 percent. A burgeoning, middle class, high per capita saving and low
penetration are the key factors due to which foreign insurance companies are showing interest in
India. Per capita insurance premium in India is a mere US $6, one of the lowest in the world. In
South Korea it is US $1338 and in US it is $22550 and in UK it is $1589. India’s GDP growth
which was growing at over 9 percent declined to the range of 6 to 7 percent but has smartly
recovered and is expected to grow at 9 percent plus in the coming years.
Conclusion:
The global recession has definitely had a negative impact on the financial services industry
across the globe. The insurance industry is no exception and has been adversely impacted by the
recession. The Indian economy though it has slowed down, still remains the second fastest
growing economy in the world. Though the insurance sector is bound to feel the negative impact
of the recession, it would also make the players more strong, resilient and innovative.
Considering the fact that India is grossly uninsured and underinsured, insurance companies need
not panic.
Bibliography:
This research paper has been taken from www.scholarshub.net/vol2_i4/Paper_13.pdf on
08/08/2011 at 8:45 P.M.
Page | 12
“Value Creation through IT-supported Knowledge Management? The
Utilization of a Knowledge Management System in a Global Consulting
Company”
Karl Heinz Kautz and Volker Mahnke
Knowledge management – a set of management activities aimed at designing and influencing
processes of knowledge creation and integration including processes of sharing knowledge – has
emerged as one of the most influential new organizational practices.
Technically the knowledge management framework is supported by a web-based information
system, which itself is based on a well-known groupware platform and database system. The
knowledge management framework and its IT support are geared towards the organization’s
model for performing customer projects. This model consists of five phases: Phase one consists
of marketing activities where knowledge utilization in form of company presentations can and
should take place, and where in phase five, the project closure, knowledge - in the rhetoric of the
company - should be ha rested and submitted to the knowledge management system. The other
phases are concerned with carrying out the actual project, and, again, the knowledge available in
the knowledge management system should be used here.
Methodology:
The case analysis proceeds based on both qualitative interview and survey data among user
groups. We conducted a number of formal and informal interviews and studied company
documents concerning its policy towards knowledge management.
The large majority (89%) of the system users believes that the IT-supported knowledge
management system provides the company with a competitive advantage. Several reasons for
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what some might consider as relatively low adoption and use of the IT support and its underlying
framework are Technical advances concerning the internal network capacity might increase the
utilization of the knowledge management system. Better information and more training about the
framework and its IT support will possibly enhance the situation.
Conclusion:
Our research results have analyzed the extent and some impediments of IT-supported knowledge
management in a large, global consulting company. The study was explorative in nature and the
purpose of the used survey instrument was to collect empirical data to get first indications
concerning the objectives, the degree and the problems related to IT support for knowledge
management with regard to value creation in global consulting firms. The study might be
criticized for the size and selection of its sample. But even if the following
Results are biased and not representative for the whole organisation and the consulting industry
as such, they are valid for a small, but important segment of the company’s employees and, as
such, show some note-worthy trends. In summary, the knowledge management system.
Bibliography:
This research paper has been taken from http://inform.nu/Articles/Vol6/v6p075-088.pdf on
08/08/08 at 07:35 P.M.
Page | 14
“Value Creation in Indian Pharmaceutical Industry:
A Regression Analysis”
Dr. N. Sakthivel
Summary:
Maximizing shareholders value is becoming the new corporate standard in India. The returns can
either be in the form of dividends or in the form of capital appreciation or both. Maximizing the
shareholder value is considered as one of the fundamental goals of all business. There are a
number of value based management (VBM) frameworks, shareholder value analysis (SVA)
Rapport (1986) and Economic Value Analysis (EVA) developed by Stern Stewart (1990) are the
two well-known ones.
Impact of Eva (Economic Value Added) On Value Creation: The concepts of Economic
Value Added (EVA) and Market Value Added (MVA) or shareholder value creation or simply
called value creation were developed in order to reflect corporate performance more accurately.
Many researchers have supported EVA as the best internal determinant of MVA. Fatemi et al
categorized companies according to their ability to generate EVA and MVA. Companies with
high EVA and MVA are called “winners”, companies with a high EVA and low MVA are
“problem children”, companies with a low EVA and a high MVA are “holders of real options”
and companies with a low EVA and MVA are typified as “losers”. From the regression analysis
value creation tend to increase with increase in the levels of EVA for companies under
pharmaceutical industry. The companies with high level of EVA are very highly valued and
differ from valuation of companies with low and moderate EVA groups.
Impact of Productivity on Value Creation: Productivity is the basis for the creation of
competitive advantage. A company creates competitive advantage when the value of its sales on
the long term is higher than the total cost. When the market evaluates a company, it takes its
Page | 15
long-term productivity generating capacity into account. Thus competitive advantage and the
creation of value for shareholders are supported by productivity. from regression analysis it is
found that total productivity does not have explanatory power on value creation in short term, but
it has some influence on value creation in the long-run in respect of pharmaceutical companies.
Impact of Financial And Economic Variables On Value Creation: Value creation of a firm is
based on their overall performance. The overall performance of a firm, on the other hand, is
often measured and monitored using various financial ratios determined from its financial
records. Hence, analyzing the role of financial characteristics of the firms on their value creation
is very important and could give many implications to the corporate world. In addition to
financial variables, consideration of macroeconomic variables is also important as it would help
identify role of government financial policy on value creation of companies.
Conclusion:
On the whole, from the inferences of the entire results, it is found that the companies with high
level of EVA are very highly valued and differ from valuation of companies with low and
moderate EVA groups. So, it is clear that there is significant association between MVA and EVA
for companies under pharmaceutical industry It is strongly concluded that there is significant
difference in mean value creation across low, moderate and high total productivity for
pharmaceutical companies.
Bibliography:
This research paper has been taken from www.researchersworld.com/vol2/PAPER_22.pdf on
08/08/2011 at 11:22 P.M.
Page | 16
“Relevance of Total Quality Management (TQM) or Business Excellence
Strategy Implementation for Enterprise Resource Planning (ERP)
– A Conceptual Study”
Vidhu Shekhar Jha & Himanshu Joshi
Objective:
The aim of this paper is to understand the importance of Total Quality Management (TQM)
philosophy or Business Excellence Models-Strategy Implementation for ERP Implementation within
organizations.
Summary:
This paper talks about the Relevance of adopting TQM philosophies in successful ERP
implementation. TQM many definitions but still the essence and spirit remained the same. TQM
means continuous quality improvement to control organization performance where as ERP can be
defined as business solutions aimed at building strong organizational capabilities for improved
performance, better decision-making and competitive advantage. There are various factors like
business process reengineering (BPR), top management support, stakeholder involvement, open
communication etc. for establishing a total quality management (TQM) culture which plays
important roles in ERP implementation and without these factors ERP implementation cannot be
successful.
Over the past few decades, although ERP initiatives and quality management programs have evolved
independently from one another, both are considered as resources that require senior leadership
commitment, high levels of investment and organizational effort, that help organizations to gain
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competitive advantage. There are some set of critical success factor which are important for the
implementation of the total quality management like top management leadership for quality, supply
quality management, process management, employee training, and employee involvement,
measurement of perception etc.
ERP is not just a software package; it’s a way of doing business for productivity improvement for
effective decision making across the whole organization, integrated in the philosophy of TQM and
for their successful implementation every organization have to follow all the factors which are listed
in TQM and besides these other factors like ERP teamwork and composition, business plan and
vision, project management, software development and testing, monitoring and performance
evaluation.
In this research paper there is an example of Sundaram-Clayton Limited which is the largest
automotive component manufacturing and distributing group in India. SCL is the first company
which implemented TQM and ERP in their organization. The focus at SCL is total customer
satisfaction. Comprehensive integration of the supply chain through implementation of ERP
Programme has further enhanced SCL's responsiveness. They understand the importance of the need
to continuously honing the expertise of our human resources and learning from the best practices
across the world. Training is imparted not only to the employees but also the suppliers. Total
employee involvement and continuous improvement in every sphere of activity will be the twin
supports on which Sundaram-Clayton quality will stand" spreads across the entire organizational
value-chain, including marketing, operations, product development, finance, and personnel. Hence,
we see that the SCL’s strategic clarity about its long term goals has facilitated its journey towards
business excellence.
Conclusion:
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TQM brings problem solving techniques and continuous improvement opportunities, which facilitate
implementation of ERP systems. The effective use of TQM helps companies obtain the maximum
return on investment. TQM Strategy implementation will result in reducing the cost of ERP
implementation and will give a solid foundation of required enhanced human capacities and
capabilities, conducive organizational culture, optimal utilization of all resources and improved
processes. This will facilitate the change and transformation in an organization and enable them to
move towards Business Excellence.
Bibliography: This research paper has been taken from
http://mitiq.mit.edu/iciq/PDF/RELEVANCE%20OF%20TOTAL%20QUALITY%20MANAGEME
NT%20(TQM)%20OR%20BUSINESS%20EXCELLENCE%20STRATEGY%20IMPLEMENTATI
ON%20FOR%20ENTERPRISE%20RESOURCE%20PLANNING%20(ERP)%20A%20CONCEPT
UAL%20STUDY.pdfon 08/08/2011 at 09:40 P.M.
Page | 19
“Value Creation in E-Business”
Raphael Amit & Christoph Zott
Summary:
The main aim of the research paper is to explain that the established firms are creating new
online businesses, while new ventures are exploiting the opportunities the internet provides.
E-business has the potential of generating tremendous new wealth, mostly through
entrepreneurial start-ups and corporate ventures.
One would thus expect e-business to have attracted the attention of scholars in the fields of
entrepreneurship and strategic management.
Some theories are related to the value creation in E-Business we focuses on value chain
analysis, Schumpeterian innovation, the resource-based view of the firm, strategic network
theory, and transaction cost economics.
Each theoretical framework discussed above makes valuable suggestions about possible sources
of value creation. The authors believe that this reinforces the need for an identification and
prioritization of the sources of value creation in E-Business.
Each theoretical framework discussed above makes valuable suggestions about possible sources
of value creation. Many of the insights gained from cumulative research in entrepreneurship and
strategic management are applicable to E-business. However, the multitude of value drivers
suggested in the literature raises the question of precisely which sources of value are of particular
importance in e-business, and whether unique value drivers can be identified in the context of e-
business. The authors have also drawn attention to the fact that each theoretical framework that
might explain value creation has limitations when applied in the context of highly interconnected
electronic markets.
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The rapid pace of technological developments coupled with the growth of e-businesses gives
rise to enormous opportunities for the creation of new wealth.
There has been an attempt by the authors to contribute to theory development by investigating
the theoretical foundations of value creation in E-business. The focus of this paper is on new
wealth creation, which has occupied much of the entrepreneurship literature. This paper is a first
step in attempting to understand the strategic issues faced by e-business firms in the emerging
context of the Internet. It raises a number of interesting and challenging paths for future research
including such questions as:
(1) What are the sources of competitive advantage in online markets versus offline markets?
(2) Are strategy perspectives and tools that were formulated based on a competitive landscape
inhabited by offline firms still relevant in the new world of e-business?
The paper suggests that the emergence of virtual markets opens new sources of innovation (e.g.,
business model innovation) that may require a parallel shift in strategic thinking towards more
integrative, dynamic, adaptive, and entrepreneurial strategies.
Bibliography:
This research paper has been taken from http://www.uazuay.edu.ec/bibliotecas/e-
business/Value_Creation_in_E-Business.pdf on 08/08/2011 at 09:55 P.M.
Page | 21
“The Consumer’s Process of Value Creation”
Ravald Annika
Objective:
The purpose of this paper is to analyze value creation from a consumer perspective. The aim is to
learn how value emerges for the consumer.
Methodology:
The conclusions are based on a synthesis of evidence from literature studies in marketing and
axiology as well as empirical research in the automobile industry. The empirical study follows a
longitudinal qualitative research approach and consists of 44 in-depth personal interviews with 32
informants.
Summary:
The purpose of this paper is to analyze value creation from the customer’s perspective with an
aim to learn how value emerges for the customer. The author provides empirical findings on
customer value and value creation and adds to the present knowledge on value and value
creation. The findings show that value for the customer emerges in a variety of activities related
to use and ownership, but that use and ownership are not equivalent to value creation as value
does not always emerge. Based on the findings from empirical and theoretical sources, the author
concludes that value could be defined as a positive emotional response and it is proposed that
market offerings and relations to service providers do not contribute to the customer’s process of
value creation until a personal meaning has been ascribed to them by the customer.
Conclusion:
Page | 22
Value for the consumer emerges in a variety of activities related to use and ownership. The findings
however show that use and ownership are not equivalent to value creation. The findings from this
empirical study also reveal that the service provider’s role in all phases of the consumer’s process of
value creation not can be taken for granted.
Bibliography:
http://www.naplesforumonservice.it/uploads//files/RAVALD_THE%20CONSUMER%5C%27S
%20PROCESS%20OF%20VALUE%20CREATION.pdf on 08/08/2011 at 10:33 P.M.
Page | 23
“Importance of Technological Innovation for SME Growth”
M. H. Bala Subrahmanya, M. Mathirajan & K. N. Krishnaswamy
Objective:
To ascertain the growth rates of sales turnover, investment, and employment of innovative SMEs
and non-innovative SMEs. To probe the relationship between innovation and growth of sales
turnover of SMEs.
Methodology:
A semi structured questionnaire containing 60 questions related to charactestics of SME was
prepared. The validity and reliability of the questionnaire was ensured and based on the
knowledge and experience of the authors, discussions held with industry experts and
representatives of SME associations. A pilot study was also done on 10 enterprises of each of the
sector. In the absence of official database, the authors relied on databases of SME association.
They analysed innovative SMEs using correlation analysis, analysis of variance (ANOVA), and
regression analysis.
Summary:
Small and medium enterprises are considered as the driving force in the modern economies due
to their contribution in technological innovation, employment generation and export promotion
etc. This ability of SME’s to innovate gives competitive edge to the firm, industries and
economies. Technological innovation is unavoidable for firms who want to develop and maintain
Page | 24
a competitive advantage or gain entry in new market. It is easy for these firms to innovate
because they are more flexible, adapt better themselves and are better placed to develop and
implement new ideas. Technological innovation a firm should have technically qualified
manager, technically skilled employee and market demand for the innovative product. These
small firms explore new product ideas and most frequent way of achieving this includes contacts
with customers and close analysis of competitors are the major drivers of innovation. Through
technological innovations, SMEs intend to achieve either cost effective, quality improved,
improved versions of existing products, or altogether new products. It was observed that the
contribution of innovated new products was more to total sales than to profits. a significant
relationship between the share of innovative sales and sales turnover change of firms was
detected. It was observed that there is a strong association between innovation and turnover
growth. It was found that innovation helped SMEs to improve their performance in terms of
market share and diversified range of goods and services.. But all this is relevant to industrialized
countries and therefore their relevance to India might be questioned. Their size characteristics
revealed that size structure of the SMEs was more skewed towards micro and small enterprises
than towards medium sized enterprises. SMEs are generally known for informal innovations. A
greater proportion of SMEs in the auto sector is innovative relative to electronics and machine
tool sectors. A higher percentage of innovative SMEs have succeeded in converting their
innovations into sales in the auto component sector relative to electronic and machine tool
sectors. If innovative SMEs are able to convert their innovations into sales, they might be able to
increase their sales turnover and increase capacity utilization or energy utilization or manpower
utilization or improve inventory management or enter the international market. More than half of
the innovative SMEs have achieved sales growth due to their innovations. In the electronics
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sector, non-innovative SMEs registered negative growth in terms of investment and employment.
Overall, the growth analyses for the three sectors clearly indicate that innovative SMEs are better
off relative to no innovative SMEs. The correlation results indicate that there is indeed a
statistically significant positive correlation (at 0.01 levels) between sales growth and percentage
of innovation sales in total sales. The results clearly indicate that the percentage share of
innovated products in total sales has a significant influence on the average rate of growth of
GVA in innovative SMEs in all the three sectors. With a one percent improvement of innovated
products in total sales, the rate of growth of GVA is likely to improve by 0.50 per cent. However,
equally important is the increase in capital as well as labour. Thus if an innovative SME could
expand the scale of production in terms of capital and labour and achieve an increase in
innovation sales, it will be able to experience a significant improvement in the growth of GVA.
This enables us to conclude that innovation sales do contribute to firm growth in terms of GVA.
Conclusion:
A substantial proportion of SMEs in all the three sectors are innovative, mostly informally. Most
of the innovative SMEs attributed the origin of their innovations to a combination of (i) firm
level technological capability and (ii) market pressure due to external factors. Thus, both
‘technology push’ and ‘demand pull’ have contributed to the emergence of innovations. The
major objective of SME innovations was enhancement of competitiveness in the form of quality
improvement, cost reduction, extension of product range and replacement of phased out
products, apart from penetrating the international market. To conclude, our overall analysis lends
substantial credence to the argument that innovation contributes to the growth of firms.
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Bibliography:
This research paper has been taken from www.merit.unu.edu/publications/wppdf/2010/wp2010-
007.pdf on 08/08/2011 at 10:22 P.M.