Innovation In Small Firms Research Articles

The Effect of External Knowledge Sources on Organizational Innovation in Small and Medium Enterprises in Germany

Abstract Background: Firms increasingly depend on external actors for the process of generating innovation. Interaction with these actors might occur through an official collaboration agreement or via external actors as the source of information. Objectives: Although open innovation has received more attention, still less is known about its effect on organizational innovation. To fill this gap, this study investigates the impact of various external knowledge sources on the willingness of small and mediumsized enterprises to introduce organizational innovation. Methods/Approach: To achieve the proposed objective, the German Community Innovation Survey conducted in 2017 is used for the econometric analysis. Results: Different external sources of knowledge are relevant for the introduction of organizational innovation in small firms (customers in the private sector, competitors, conferences, and crowdsourcing) compared to medium-sized firms (customers in the private sector and industry associations). Conclusions: External knowledge sources are more important for small firms compared to medium firms, and those small firms are more likely to use various sets of external knowledge.

Financial Operating Systems

One of the most consequential yet unexamined developments in finance is the recent evolution of large financial technology platforms. In the first analysis of its kind, we scrutinize the world’s $89 trillion investment and asset management industry to explore the function of these systems, to consider their possible risks, and to develop a taxonomy for their regulation. This analysis is essential because these systems now play a critical role in asset management, rendering nugatory several layers of existing regulation. While the COVID-19 pandemic has caused havoc with economic activity, it has accelerated this process of digitization and concentration of financial control. The leading example of such a platform is BlackRock’s Aladdin, a system used to manage the risks relating to ten percent of the world’s investment assets and which institutional investors – as well as the U.S. government – admit they cannot operate without. Even greater concentrations of financial power are possible when Big Technology firms and finance unite. Ant Group, a spinoff of Alibaba, controls a financial ecosystem for over 1.2 billion clients – twenty-one percent of the world’s adults – covering all financial services, including payments, insurance, asset management, and deposits. Large U.S. financial and tech firms, including Facebook, Apple, and Google, are working hard to emulate Ant’s scale and scope, driving concentration into a small number of dominant digital finance platforms. Although Financial Technology is typically associated with small innovative firms, we argue that these giant digital finance platforms are already having a far greater impact on society. We identify the economic reasons for the dramatic ascendancy of these financial leviathans and propose a legal framework for mitigating their threats to national security, financial stability, consumer protection, antitrust and cybersecurity.

Корпоративний венчуринг як основа розбудови екосистем у глобальних координатах світу

In recent decades, we have all witnessed the emergence of qualitatively new trends in the development of corporate venturing, which justify its dynamic structural dynamics, global character, as well as diversified implementation mechanisms and a powerful influence on the dynamics of global scientific-technological progress. Corporate venturing is a system of measures, mechanisms and instruments for financing by the business structures, belonging to the corporate sector, of the processes of development, support, incubation, introduction and implementation of venture capital startups, innovative programs and projects materialized mainly among small innovative firms under the care of the parent divisions of multinational enterprises (MNE) and underlying the development in global coordinates deeply integrated at the horizontal and vertical levels of corporate venturing ecosystems. First of all, worth noting is the dynamic increase of the value scale of innovative venture capital financing of corporations and the growth of interregional asymmetry in its accumulation. Meanwhile, the activity of MNE in the field of corporate venturing indicates the growing inconsistency of the private monopolistic form of innovatizing the global production with the objective needs of national economic development in the context of technoglobalism. As a result, at the interstate, regional and supranational levels, the issue of the development of qualitatively new forms of scientific-technical cooperation of economic entities becomes actualized; the same is valid for the development of global innovative and professional networks of researchers, scientists and research staff; also the efficient combination of production resources, as well as the socialization of labor and the concentration of innovative capital in order to promptly solve the most relevant scientific and technical problems for the world community.

Innovation in small family firms: A qualitative multipla case study

Family firms, accounting globally for the majority of companies, are the backbone of many national and local economies. Despite their importance as both employers and producers/service providers, research on these firms, analyzing their innovative behavior or comparing it with other forms of companies, has often been describing them as more conservative and less risk-raking, generating thus less innovation compared with other types of businesses. The goal of this study was to analyze the scope innovative activities in family owned companies on the basis of an empirical qualitative survey, founded on descriptive multiple-case study analysis of fifteen small, locally operating family owned firms in retail and service-industry, which have successfully survived 5 or more years in business. It used semi structured interviews with family owners and focused on identifying their attitudes to innovation as well as their skills to apply innovations of various types, important for their market competitiveness. The results of the survey, contrary to some earlier findings pointing to family firms ́ conservativeness, showed that these firms, due to their specific organizational culture, rely on innovations substantially, though the main focus of their innovations tends to be on product/technological changes as well as innovations in clients ́ relations.

Accounting information in innovative small cap firms: evidence from London’s Alternative Investment Market

We posit that investors and social media users place more weight on cash flows than on earnings for innovative small cap firms and that, in turn, innovative small cap firms (i) manage cash flows more than earnings, and (ii) disclose more cash flow than earnings information on social media. Using a matched sample of innovative and non-innovative small cap firms listed on the London’s Alternative Investment Market (AIM), we document that the value relevance of cash flows (earnings) is higher (lower) for innovative compared to non-innovative small cap firms. Using Twitter to examine the demand of accounting performance measures, we find that Twitter users more frequently retweet and include as ‘Favorite’ information about cash flows, than information about earnings for innovative small cap firms. We then show that innovative small cap firms engage less intensively in earnings management and exhibit higher abnormal cash flows compared to non-innovative small cap firms. Innovative small cap firms emphasise more information in their tweets about cash flows and less about earnings compared to non-innovative small cap firms. Cross-sectional tests demonstrate that seasoned equity offerings provide additional incentives to engage in increasing abnormal cash flow management activities.

Business Owner‐Employees Contagion of Work‐Related Affect and Employees’ Innovative Behavior in Small Firms

The aim of this study was to explore cross‐level mechanisms stimulating employees’ innovative behavior in small firms, specifically emotional contagion between small business owners and their employees. Using data from three European countries and applying a multilevel approach, we tested how small business owners’ work‐related affect—enthusiasm and comfort—relate to their employees’ work‐related affect and innovative work behavior. The sample consisted of 85 small business owners and 711 employees from firms operating in the Netherlands, Poland, and Spain. Controlling for country, the results of multilevel modeling showed that small business owners’ work‐related affect was positively related to their employees’ work‐related affect. The hypothesized contagion of work‐related affect in small firms was, thus, supported. Employees’ work‐related affect, in turn, was positively associated with their innovative behavior. Employees’ work‐related affect mediated the relationship between small business owners’ work‐related affect and employees’ innovative behavior. The results also showed cross‐country differences in the strength of some of the relationships. The study is a step forward in understanding innovation in small firms, extending the insights gained from single‐level investigations.

Influence of Determinants on Innovations in Small KIBS Firms in the Czech Republic before COVID-19

There is still a lack of empirical evidence prevalent about innovation in knowledge-intensive business services (KIBS), and more particular, about determinants of innovations in small firms to sustain their future development. Studies in this area suggest that different determinants will affect different forms of innovation outputs of KIBS. This paper investigates the direction and the significance of these influences on propensity to innovate. The empirical evidence is based on quantitative and firm-level data gathered through an email questionnaire, which yielded 128 qualified responses from small KIBS in the Czech Republic. The analysis is based on binary logistic regression to identify the effects of determinants on the propensity to innovate. In addition to the consistent results produced by studies in this area, we found reverse relationships between innovation and selected determinants. Negatively evolving knowledge (especially lack of qualified employees) and market determinants (lack of information about the market), positively stimulated small KIBS towards the propensity to introduce organizational innovations (structural and human resources practices), followed by increasing intensity of competition positively related to introducing a new service to the firm (especially t-KIBS) and insufficient availability of business partners increasing the marketing efforts. It’s evident that some negatively evolving determinants perform as incentives or driving forces to specific types of innovations. The results of this study could also be useful for owners and managers in KIBS firms engaging in innovation activities and government support, or incentivize the propensity to innovate.

Non-technical innovation and entrepreneurship in project-based small service firms

Background: Because of doubts about the sufficiency of convention indicators to continually gauge innovative outcomes at the firm level, a burgeoning stream of scholars has shifted their empirical efforts to the theoretical development of non-technical innovations. Aim: This study investigates the contribution of non-technical, innovative, entrepreneurial and marketing endeavours to the development of superior entrepreneurship through two types of firm capabilities. Setting: Over several stages, a structured questionnaire form was formulated. Firstly, an extensive review of previous similar research was performed to identify the adoptable scale items. After adjusting the scales based on the feedback from the pre-testers, the final questionnaire comprised 55 items measured on a five-point Likert-type scale. Methods: A total of 155 valid questionnaires, with the inclusion of late-responses, were obtained and this represented a response rate of 22%. Particularly, a conceptual model connecting market orientation, organisational learning, non-technical innovation and entrepreneurship was tested using partial least square path modelling. Results: In considering the criticality of innovation as the fulcrum of service-based delivery, our model advances the existing empirical approaches with a more intangible dimensionality of innovative efforts. Overall, the model distinguishes that small service firms engaging in dual modes of non-technical innovation strategically nurture intangible capabilities, which in turn provides them with enduring performance outcomes in outperforming competitors. Conclusion: The findings could assist small firms in accomplishing new value creation via non-technical innovations.

Effects of public procurement of R&D on the innovation process: evidence from the UK small business research initiative

PurposeThe study aims to investigate how pre-commercial procurement (PCP) influences the activities, capabilities and behaviours of actors participating in the innovation process. Unlike much of PCP research underpinned by a market failure theoretical framework that evaluates the additionality of innovation inputs and outputs, this paper focusses on the role and capacity of PCP in addressing systemic failures impeding the process of innovation.Design/methodology/approachPCP effects on the innovation process were studied through a qualitative study of the UK small business research initiative (SBRI) programme. Data collection comprised 33 semi-structured interviews with key informants within 30 organisations and analysis of 80-plus secondary data sources. Interviewees included executives of technology-based small businesses, managers within public buying organisations and innovation policymakers and experts.FindingsThe UK SBRI improves connectivity and instigates research and development (R&D) related interactions and cooperation. Through securing government R&D contracts, small firms access relevant innovation ecosystems, build up their knowledge and capabilities and explore possible routes to market. Public organisations use the SBRI to connect to innovative small firms and access their sets of expertise and novel ideas. They also learn to appreciate the strategic role of procurement. Nonetheless, SBRI-funded small business face commercialisation and innovation adoption challenges because of institutional constraints pertaining to rules, regulations and public-sector norms of conduct.Research limitations/implicationsThe study contributes to existing PCP research by demonstrating innovation process-related effects of PCP policies. It also complements literature on small business-friendly public procurement measures by highlighting the ways through which PCP, rather than commercial procurement procedures, can support the development of small businesses other than just facilitating their access to government (R&D) contracts.Social implicationsThe study identifies several challenge areas that policymakers should address to improve the implementation of the UK SBRI programme.Originality/valueThe study demonstrates the effects of PCP on the activities, capabilities and behaviours of small businesses and public buying organisations involved in the innovation process.

The effect of the small-firm dominated ecology on regional innovation

Small firms are often viewed as the remedy of regional development and growth, but there is little empirical evidence if the cluster of innovative small firms thrives regional innovation performance. This paper attempts to answer a timely policy question of “How vital is small-firm dominated ecology for regional innovation?” by investigating the mix of firm size within a region. The results find that the effect of the proportion of small firms in a region is nonlinearly associated with the regional innovation activity, proposing that a mix-model of large and SME firms induces more innovation commercialization. The results of this study shed some light for policymakers to assess the “knowledge searching” strategies of firms when choosing locations.

Handling Innovation in Small Family Firms: The Role of Context

Innovation management in family firms is a paradoxical challenge. The constant tension between innovation and tradition confers to this topic a fascinating mystery area that calls to action scholarly efforts and further studies to underscore whether family firms are innovating or not. This debate becomes even more intriguing and interesting when family businesses are small-sized and embedded in local contexts strongly attached to traditions and cultures that inhibit change. Based on the curiosity of analyzing the innovation proclivity of small family firms rooted in such a context and building on previous studies that were focused on innovation in family run businesses, we deeply investigated two cases. Findings uncovered a twofold and opposite role of the context:  on the one hand, a constraint and, on the other hand, leverage of innovation. Interesting scholars and practical implications are discussed, and future studies are suggested.

Technology-Driven Innovation in Small Firms

Globally, small firms are important drivers of economic growth and prosperity. We describe how two small firms with very different goals use everyday digital technologies to create business opportunities and innovate. These two firms strategically use the technologies very differently in their business processes, external markets, and industries. We identify a variety of ways to effectively use these inexpensive technologies to innovate and provide guidelines for small firms on using the technologies to drive innovation.

Strategic antecedents of innovation: Variance between small and large firms

ABSTRACT Our study explores differences in enhancing innovation based on firm size. Framed through the resource-based view, we theorize and test antecedents of innovation including dynamic capabilities, strategic planning, and organizational structure. We operationalize firm size based on number of employees and also include firm revenues as an alternative proxy. We find that dynamic capabilities partially support innovation in both small and large firms. Secondly, we find strategic planning is valuable for small firm innovation and that organizational structure has a positive effect on large firm innovation. Results are largely consistent when comparing number of employees to revenues.

Evaluating the effect of organizational architecture in developing science and technology parks under differing innovation environments

Science and Technology Parks (STPs) are often used as tools to foster regional development. They seek innovations, innovators and encourage innovation amongst the constituent firms, including by networking and knowledge spill over between the inhabitants, Universities and sources of capital. The low success rate of STPs led us to investigate how STP architecture can best cope with a changing and challenging innovation environment, through start-up to early maturity and full maturity, in a preliminary effort to arrive at an evidence-based scheme to help avoid failure.Three different types of architecture were investigated: open (market), star (hierarchy), and closed strong (adhocracy, ambidextrous). Open (market) architecture suffered both from high transaction costs while not protecting against poor decision-making. Results show that it is very beneficial to have a central Cluster Initiative (CI) controlling the decision-making process (star hierarchy) in the early stages of STP development, where potential gains and losses are relatively modest. However in the early maturity stage with commitment to a high-growth trajectory, a high quality of decision–making is required amongst managers and decisions are best taken by the CI with the input of optimally two individual on-cluster firms. The situation where CI is supported by good-quality decisions from on-cluster firms – an ad hoc, ambidextrous situation – is superior when good innovations abound and the STP has acquired some maturity. However, in environments with a surfeit of poor-fit innovations, this becomes a high-risk strategy with high potential losses and indeed in this situation, retaining a hierarchical (CI only) decision process is most helpful, even when the quality of decision–making amongst CI managers is poor. Results indicate that success involves attracting enough small innovative firms which - in turn - attract larger firms, whose detailed sector-relevant insight improves CI decision-making.

Corporate hub as a governance structure for coupled open innovation in large firms

This paper addresses how the open innovation concept can be applied in large corporations aiming to work with small innovative firms. More specifically, we report an in‐depth qualitative study of how AstraZeneca, a global bio‐pharmaceutical corporation, designed and enacted a new mode of organizing for coupled open innovation, with an initiative called the BioVentureHub. The governance structure behind this way of organizing is explored and conceptualized, and we also analyse how this structure shaped the relations and the value being collaboratively generated and shared. Theoretically, the paper connects the governance literature with open innovation. From the analysis of the empirical case, we propose a distinct governance structure that we label as a corporate hub, and we distinguish it from other “open” governance forms, e.g. market, network and bazaar governance, and explain the potential value it brings for coupled open innovation between large and small firms.

Patent Trolls and the Market for Acquisition

Frivolous patent-infringement claims increase the cost of innovation for small businesses and force them to exit via premature and discounted acquisitions. This study investigates the effect of abusive patent-infringement claims by patent trolls on acquisitions of small firms. I exploit the staggered adoption of anti-patent troll laws in 35 states as a quasi-natural experiment and find that the laws have two effects on acquisitions. First, the number of acquisitions of small businesses by large firms declines after these laws are passed. Second, the anti-troll laws increase the acquisition price for large firms. I find that the market reflects the increased cost of acquisition following the passage of anti-troll laws as measured by the lower acquisition announcement returns. Moreover, I find evidence that large firms increase R&D expenditure after the adoption of state laws. Using a sample of acquisitions that are plausibly unaffected by the state laws, I disentangle alternative explanations such as local economic shocks, industry-wide changes and merger waves. Overall, the findings suggest that the anti-patent troll laws increase the value of small innovative firms.

The Drivers of the Total Factor Productivity

The Total Factor Productivity (TFP) is now widely recognized as an important factor in both long-term economic growth and short-term growth fluctuations. Researchers of the International Monetary Fund came to the conclusion that the growth of the TFP was the most important long-term factor in raising the living standards. Therefore, the IMF and academics from different countries has been scrutinizing the reasons for the slowdown in TFP and investigating the underlying factors. The low rates of GDP grow in Ukraine call for finding the drivers, one of which is TFP growth. It raises the importance of analysis of the factors promoting this growth in Ukraine. 
 The purpose of this work is to define TFP drivers, which would be most effective for Ukraine. TFP drivers in foreign countries are analyzed, TFP dynamics for Ukraine is calculated by use of Solow model, and TFP drivers over 2000–2017 are determined. 
 The analysis of publications about TFP drivers at global level shows that they include: international transfer of knowledge and technologies, activities of small innovative fast-growing firms, the enhanced quality of quality of education, the increased expenditures on R&D and innovations, especially by business sector, the increased investments in intangible assets, the intensified patent activity, access of enterprises to lending.
 The TFP dynamics in Ukraine, calculated by the Solow model, is characterized by high growth rates by 2012, a sharp fall in 2013-2015, and a return to the growth path in 2016-2017, but, as in the whole world, by very moderate pace. The factors contributing to this return are capital investment in intangible assets, the increasing patent activity of Ukrainian researchers, the intensified innovation in the high-tech sector. Factors constraining the TFP and the contribution of innovation to economic growth are a significant proportion of technology transfer in the form of “know-how, agreements for the acquisition (transfer) of technologies”, which holds back the widespread introduction of cutting-edge technologies, and the reduction of funding for R&D and innovation.
 Further studies should be focused on searching for political decisions promoting implementation of structural reforms aimed to solve the existing problems and eliminate their consequences, especially in of the innovation and education field.

Destination social capital and innovation in SMEs tourism firms: an empirical analysis in an adverse socio-economic context

This study examines the structural relationships between internal and external resources that explain the innovation of small tourism firms in adverse socio-economic contexts. Specifically, it analyzes two internal resources, human and organizational-technological capital, and the valuable intangible resources derived from social interactions between the agents in the destination (other companies, institutions, and community). The research hypotheses are tested by means of structural equation analysis applied to an empirical study of 180 tourism firms located in Isla Margarita (Venezuela). The findings confirm the importance of external resources derived from relationships with destination agents in the innovation behavior of tourism small and medium-sized enterprises (SMEs). While business social capital affects innovative behavior directly, other types of internal intellectual capital mediate the relationship between innovative behavior and institutional and community social capital. It is the first to address the local community’s role in the innovation of tourism SMEs. The importance of integrating firm and destination resources should inform SMEs’ innovation policies in adverse contexts where the scarcity of resources make vulnerable the economic, social and environmental sustainability.

High-performance work systems and innovation in Vietnamese small firms

This article examines the interplay between high-performance work systems (HPWS) and the innovation of Vietnamese small and medium sized enterprises (SMEs). Our conceptual model relies on the componential theory of creativity along with HPWS, learning goal orientation (LGO), and creativity and innovation to hypothesise both mediation and moderation mechanisms linking such a relationship. Using a sample of 133 SMEs, we find that (a) employee creativity mediates the pathway between HPWS and firm innovation and (b) LGO moderates the HPWS–employee creativity relationship. This article casts new light on the theoretical mechanism through which HPWS influence firm innovation and add to the understanding of HPWS within SMEs placing employees at the centre of debate.

Does a rural location matter for innovative small firms? How rural and urban environmental contexts shape strategies of agri-business innovative small firms

Purpose The purpose of this paper is to present qualitative evidence on strategies undertaken by 34 innovative small firms. Design/methodology/approach The sample of innovative firms is solely recruited from the agri-business sector that are located in contrasting environments varying from rural areas with low urban influence to areas with high urban influence and “main” urban or city areas. The authors discuss strategies in the light of a theoretical approach that incorporates a resource-based view, dynamic capabilities (DCs) and social network theory. Findings Although there is diversity in strategies across the 34 innovative small firms, irrespective of their “rural” or “urban” environment, qualitative evidence sheds light on differences in the way that strategies are pursued. Research limitations/implications The study indicates that small firms in rural environments can be just as innovative as their counterparts in urban environments; however, the authors demonstrate that they adopt different strategies, which have been shaped by their environment, to achieve innovation. The authors use the qualitative evidence to develop the theory of DCs and classify the sample into four clusters which marries the environmental context and innovative DCs. Originality/value The paper makes a contribution to a research gap on the way that the environment can shape management strategies in innovative small firms. It contributes to a limited literature in this area.