How Does Data Empower SMEs to Achieve Continuous Innovation? Implications From China

Abstract

Continuous innovation is one of the effective ways to enhance the performance of small and medium-sized enterprises (SMEs). While the contribution of data, a new production factor, to enhance continuous innovation performance is widely recognized, little is known about the mechanisms through which data empowers continuous innovation in SMEs. This study focuses on the under-explored issue of how data empowers SMEs to achieve continuous innovation. It applies the theoretical lens of empowerment to explain the process by which SMEs transform data resources into continuous innovation capabilities. Drawing on a multiple case study of four Chinese SMEs (including 15 semi-structured interviews, archival materials, and observations) through theoretical sampling, our materials were coded and analyzed based on the Gioia methodology. The results show that (1) SMEs can build digital platforms to break down organizational boundaries, allowing external stakeholders such as customers and suppliers to directly participate in innovation activities and leveraging data to directly propel innovation activities. Such SMEs usually adopt disruptive innovation. (2) SMEs can broaden and deepen their product expertise by collecting and analyzing data from customer feedback and data generated during production, and eliminate data silos between departments through data flow, thus achieving incremental improvements in products or technologies. These SMEs usually adopt incremental innovation. Based on these findings, we propose a theoretical model under the guidance of empowerment theory to demonstrate two distinct processes for data empowering continuous innovation in SMEs. Finally, we discuss our study’s implications for data empowerment and continuous innovation research and provide future research directions. We also offer some suggestions for SMEs seeking continuous innovation. On the one hand, SMEs should choose a continuous innovation route that suits them according to their resource acquisition capabilities. On the other hand, SMEs in related industries should jointly develop digital platforms, thus expanding the scope of data empowerment and promoting continuous innovation.