ACHIEVING INNOVATION IN A LEAN ENVIRONMENT: HOW INNOVATIVE SMALL FIRMS OVERCOME RESOURCE CONSTRAINTS

Abstract

This paper examines how innovative small firms achieve innovation within lean environments. Writers taking a resource-based view (RBV) approach to innovation by small firms in lean environments have argued that they are resource-constrained through shortages of skilled labour, finance and social networks. This paper builds on the RBV approach by adopting a dynamic capabilities (DCs) lens to investigate how innovative small firms adopt and acquire DCs to achieve innovation in a lean environment in a small country with an open economy that is distant from major markets. We argue that entrepreneurs will engage in pragmatic solutions to overcome resource constraints. We provide qualitative evidence from a programme of 30 interviews and find that innovative small firms achieve innovation through ingenuity and patience. Our entrepreneurs use methods such as bricolage and bootstrapping and make cooperative arrangements with early adopters to maximise use of their limited resources.