Enhancing the Innovation Performance of Small and Medium-Sized Enterprises Through Network Embeddedness

Abstract

Based on Resource Based Theory (RBT), the competitiveness of Small and Medium-sized Enterprises (SMEs) depends on the uniqueness of resources used in the production and delivering of goods and services. Moreover, the innovation capability of SMEs is critical in enhancing their uniqueness. Various factors, however, could potentially influence SME innovation performance. This present study thus focuses on how SME innovation performance could be enhanced through the three dimensions of network embeddedness (relational, structural and cognitive). Founded on Resource Dependency Theory (RDT), the study seeks to demonstrate how SMEs could tap into the rich external resources within the networks they are embedded in. The study was based on 388 SMEs selected using a purposive sampling technique. A structured questionnaire was used for the data collection, with the data analyzed by structural equation modeling performed in Amos (v.20). The findings revealed that relational, structural and cognitive embeddedness had a positive effect on innovation performance, while structural embeddedness had the greatest impact on SME innovation performance. As such, SMEs seeking to improve their innovation performance through networks should pay critical attention to the network tie and density. Past studies on network embeddedness and innovation performance have shown conflicting results, and therefore this present study makes a notable contribution to the ongoing debate. Past studies have indicated a positive, negative, inverted u-shape, and even no significant relationship at all between the various dimensions of network embeddedness and innovation performance.