Innovation practice and its performance Innovation practice and its performance implications in SMEs in the implications in SMEs in the

manufacturing sectormanufacturing sector- Mile Terziovski

Journal review presented by – Group: 2

Mousumi Sen Gupta

Khandakar Habib Anwar

MD. Humayun Kabir

Mohaimeen Kamal

MD. Nurul Gani

Mousumi Sen Gupta 092-0363-560

Khandakar Habib Anwar 092-0338-060

MD. Humayun Kabir 092-0274-060

Mohaimeen Kamal 092-0594-060

MD. Nurul Gani 092-0275-060

Why SME is different from large Why SME is different from large organizations?organizations?

Reactive.Fire-fighting mentality.Resource limitations.Informal strategies.Flexible structures.Lack of systems to keep tracks.

Contradictions between formal Contradictions between formal and informal strategies for SMEand informal strategies for SME

Formal-Formal- improve organizational

capabilities.helps to reduce cost.enhance the clarity of

employee’s

Informal-Informal-gain competitive

advantages over large firms.

More innovative ideas are discovered.

enables to respond quickly to market uncertainty.

Both formal and informal Both formal and informal strategies important for SME’s.strategies important for SME’s.

Though there are contradictions in formal & informal strategies but both are important like-

Innovative ideas helps for new product development

Structured strategies helps to build an organizational

Managed innovation helps to attain cost efficiency

The study reviews the relation of innovation to SME performance in order to develop a theoretical mode

Resource-Based View (RBV) and competitive advantage

The VRIO frameworkValue(worth)Rareness(exceptionality)Imitability (costly for the competitors to imitate)Organization (Organizational Development)

Literature review and theoretical model

Literature review and theoretical model .Continued

How SMEs gain competitive advantage?

How Large firms gain competitive advantage?

Variables for the theoretical model are

Knowledge, Routines, Strategy, Technology, Structure, And Culture

Development of the Theoretical Development of the Theoretical Model and HypothesesModel and HypothesesDevelopment of the Theoretical Development of the Theoretical Model and HypothesesModel and Hypotheses

• Five independent constructs :innovation strategy, formal structure, customer and supplier relationships,innovation culture, and technological

capabilities.

• One dependent constructSME Performance

• Five Research hypotheses

Literature review and theoretical model .Continued

Hypothesis 1 (H1):Hypothesis 1 (H1):Innovation Strategy and SME Innovation Strategy and SME performanceperformance

•Better Performance with formal strategies.

•SMEs’ perceptions regarding strategic planning.

Literature review and theoretical model .Continued

Hypothesis 2 (H2):Hypothesis 2 (H2):Formal structure and SME Formal structure and SME performanceperformance

•Organizational structure and Organizational size.

•Improvisation of Efficiency.

Literature review and theoretical model .Continued

Hypothesis 3 (H3):Hypothesis 3 (H3):Customer -Supplier Relationships and Customer -Supplier Relationships and SME performanceSME performance

•Developing Partnerships.

•Opportunities to new skills and Improving existing concept.

•Risk sharing.

Literature review and theoretical model .Continued

Hypothesis 4 (H4):Hypothesis 4 (H4):Innovation Culture and SME Innovation Culture and SME performanceperformance

•Flexible Innovation culture.

•Low resistance to change.

•Low risk aversion..

Literature review and theoretical model .Continued

Hypothesis 5 (H5):Hypothesis 5 (H5):Technological Capabilities and SME Technological Capabilities and SME performanceperformance

•Single breakthrough of technological capability.

•Resources can commercializing their technology.

MethodologyMethodology

A sample survey analysis

Where – Sample size is 600 manufacturing SME in Australia.

More than 50 percent respondents are CEO & Managing directors.

Average size of 65 employees.

NO significant biasness in the survey.

Data AnalysisData AnalysisData AnalysisData Analysis

F1: Innovation Strategy

F2: Formal Structure

F3: Customer & Supplier Relationships

F4: Innovation Culture

F5: Technological Capabilities

F6: SME Performance

F1: Innovation Strategy

F2: Formal Structure

F3: Customer & Supplier Relationships

F4: Innovation Culture

F5: Technological Capabilities

F6: SME Performance

H1: Significant (High Correlation)

H2: Significant (High Correlation)

H3: Not so much Significant (Limited Correlation)

H4: Insignificant

H5: Insignificant

DISCUSSIONSDISCUSSIONS

Basic Question:Basic Question:

1. Key drivers of innovation ?

2. How innovation practices of SMEs differ from those of large firms?

Answer:Answer:

1. Innovation strategy & formal structure

2. SME’s do not appear to use innovation culture

LIMITATION:LIMITATION:

One respondent each w/in one individual SME’s.

FINDING:FINDING:

Negative perception of relationship

SME’s are driven by fascination by NP&D

CONCLUSION:CONCLUSION:

Recognized the innovation culture & strategy.