Innovation in small and medium-sized companies: Knowledge integration mechanisms and the role of top managers’ networks

Abstract

IntroductionPrevious research has delivered strong theoretical and empirical evidence that successful product innovations result from the of organizations to share and create new and relevant knowledge (e.g. Nonaka & Takeuchi, 1995). In particular, it is argued that the organizational combinative ability (Kogut & Zander, 1992), that is flexible integration of the specialized knowledge of various organizational members (Grant, 1996), plays critical role for innovations. Contrary to the past, as expertise could be centralized in single person who knew [...] the product technology, production process, and means to market goods to others (Griffin & Hauser, 1996, p. 192), now an intensive cooperation and knowledge flow between different functional specialties (e.g. Maltz et al., 2001, p. 72) as well as hierarchical levels (e.g. Aalbers et al., 2011) becomes an important precondition for product innovation. Past research has revealed that particularly for highly innovative products, knowledge integration within organizations plays crucial role in increasing new product performance (Tsai et al., 2012). Previous studies also identified number of integration mechanisms by which crossborder exchange of knowledge within organizations can be fostered (e.g. Griffin & Hauser, 1996; Leenders & Wierenga, 2002). For instance, in comprehensive review of empirical work into the success factors of new product development (NPD), Ernst (2002) found that cross-functional project teams have both direct and an indirect positive effect on the success of new products (Ernst, 2002). More specifically, as argued by Griffin and Hauser (1996, p. 204), such cross-functional product development teams lead to higher marketplace success and shorter times to market by decreasing the barriers of functionally specialized thought worlds, languages and organizational responsibilities and providing forum in which information is utilized better, decisions are made more effectively, and conflicts are resolved. In similar vein, Valle and Avella (2003) found that firms which use cross-functional teams, are characterized by more effective NPD process (that is, lower development times and costs, and superior products) and higher percentage of new products that are successful in the market.In addition to cross-functional teams, large number of empirical studies identified the support of senior management as critical success factor of NPD (e.g. Brown & Eisenhardt, 1995; Cooper et al., 2004a). Senior managers provide the NPD team with the financial and political resources necessary to accelerate the progress of development projects (Brown & Eisenhardt, 1995). Moreover, senior managers help the NPD team to align their projects with the firm's overall strategic orientation. Thus, as Aalbers et al. (2011, p. 5) point out, vertical cross-hierarchy ties can provide the team with access to knowledge and information of different nature than that which the team accesses through its horizontal cross-unit ties. Accordingly, the participation of senior management in the gate meetings is seen as an important mechanism for knowledge integration within the new product development process (e.g. Cooper et al., 2004a).While numerous studies have addressed multiple aspects of integration and its impact on innovation performance, one important issue is still under-explored. In the samples of previous empirical studies big organizations were largely overrepresented (e.g. Griffin, 1997; Hauschildt & Salomo, 2011) and the contingencies of small and medium-sized enterprises (SMEs) have not been considered in comprehensive manner. This is critical point, since, as Welsh and White (1981) note, a small business is not little big business. Thus, management principles that have proven to be successful in large companies may prove the opposite in SMEs (Welsh & White, 1981). As SMEs constitute over 99 percent of all companies in the European Union, reinforcing national economies by their employment offers and revenues (Eurostat, 2009), focused analysis of knowledge integration in these companies is important from both the theoretical and the practical perspective. …