Innovation and Economic Performance of Ancillary SMES: An Empirical Analysis

Abstract

Small and medium enterprises (SMEs) need to enhance their performance to survive and grow in the era of globalisation, and innovation is one of the main factors for achieving this. This chapter examines the nature of innovations carried out by ancillary SMEs in the Indian automobile industry and how these innovations contribute to their economic performance. SMEs were able to achieve significant innovations in terms of new product developments, product modifications, process improvements and raw material selection where as their innovations related to R&D allotment were average only. Analysis using multiple regression model revealed the positive contribution of innovation, along with labour for enhancing economic performance of SMEs. Quantile regression analysis showed that SMEs having high economic productivity tend to make more of use their innovations for economic performance than SMEs with average economic productivity.