Product innovation and competitive advantage in an area of industrial decline: the Niagara region of Canada

Abstract

This paper examines similarities and differences between small and medium-sized enterprises (SMEs) with different levels of reported product innovation. These SMEs are located in an area (the Niagara region in southern Ontario) that has suffered industrial decline during the last three decades. Furthermore, SMEs in this region are in traditional or late-cycle manufacturing sectors (e.g., fabricated metal). The research findings show that SMEs claiming to pursue product innovation are better performers in terms of total and export sales. SMEs with higher levels of product innovation rated the following strategies as significantly more important compared with SMEs with lower levels of innovation: the expansion of R&D efforts, incremental innovation, new product development, and new export market development. In contrast, SMEs with lower levels of product innovation emphasized the importance of cost-based pricing and their market development is focused on Canada. Both groups of product innovators have adopted similar types of process innovation, but the SMEs with higher levels of product innovation note higher levels of benefit from process changes compared with manufacturers with lower levels of product innovators. In a similar fashion, SMEs with higher levels of product innovation use external service inputs for problem-solving and business development in the face of a multitude of competitive problems within the local economy (such as the lack of skilled or specialist labor, tax burden, etc). In sum, SMEs pursuing innovation in traditional sectors in peripheral regions are showing better possibilities of adjustment in a dynamic global environment.