Innovation and the Operational Performance of Newly Established Small and Medium Enterprises in Taiwan

Abstract

New Enterprises have been sprouted out prosperously in Taiwan. According to business income tax data, 143 thousand new enterprises were established between 1996–1998, which accounts for about 25% of total number of enterprises, and 98.68% of these new enterprises are SMEs. In this research, a randomly sampled 1,047 new enterprises which established after 1996 were surveyed through telephone. The survey discovered that three-quarters of these new enterprises adopted at least one out of nine types of innovative activities which were listed in the questionnaire. The logistic regression results of this study show that three main areas of innovation which were grouped from the nine activities by principal component analysis all had a positive relationship with operational performance of new enterprises. Innovative action had the biggest impact on sales growth, whilst the cultivation of an innovative atmosphere and the ability to innovate within the organization had the biggest impact on profits. In short, entrepreneurs in Taiwan are actively innovating, and this innovation is reflected in the performance of their enterprises.