The role of intermediary organizations in enhancing the innovation capability of MSMEs: evidence from a Chinese case

Abstract

Micro-, small- and medium-sized enterprises (MSMEs) are of great importance to national economies. However, due to their small size, the growth of MSMEs is vulnerable. Generally, MSMEs lack the capability to innovate on their own, and most MSMEs cannot grow into large and competitive firms. In this paper, we argue that intermediary organizations can integrate innovation resources for MSMEs and enhance the innovation capabilities of MSMEs. Through a case study of an intermediary organization in China, this paper confirms that intermediary organizations can expand the innovation resources available for MSMEs, help MSMEs scan and identify useful innovation resources, and provide expertise to MSMEs in utilizing innovation resources. While traditional resource-based theories maintain that a firm's internal heterogeneous resources can generate competitive advantages, this paper proposes that specialized intermediary organizations can also play the role of resource integrators for small firms and help small firms acquire and utilize external strategic resources. This research also provides insights to the literature about the growth of local firms in emerging economies. Although technological innovation projects require significant R&D investments and are difficult for local MSMEs to handle, this paper suggests that intermediary organizations can help MSMEs initiate innovation projects by expanding the resources available to MSMEs and by assisting them in maximizing the use of the resources at a reasonable cost. Finally, this paper provides some policy implications for firms and policy-makers in emerging economies.