Innovation practice and its performance implications in SMEs in the manufacturing sector - Mile Terziovski Journal review presented by – Group: 2 Mousumi.

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Innovation practice and its performance implications in SMEs in the manufacturing sector - Mile Terziovski Journal review presented by – Group: 2 Mousumi Sen Gupta Khandakar Habib Anwar MD. Humayun Kabir Mohaimeen Kamal MD. Nurul Gani Mousumi Sen Gupta Khandakar Habib Anwar MD. Humayun Kabir Mohaimeen Kamal MD. Nurul Gani

Why SME is different from large organizations?  Reactive.  Fire-fighting mentality.  Resource limitations.  Informal strategies.  Flexible structures.  Lack of systems to keep tracks.

Contradictions between formal and informal strategies for SME Formal- Formal-  improve organizational capabilities.  helps to reduce cost.  enhance the clarity of employee’s Informal- Informal-  gain competitive advantages over large firms.  More innovative ideas are discovered.  enables to respond quickly to market uncertainty.

Both formal and informal strategies important for SME’s. Though there are contradictions in formal & informal strategies but both are important like-  Innovative ideas helps for new product development  Structured strategies helps to build an organizational  Managed innovation helps to attain cost efficiency

The study reviews the relation of innovation to SME performance in order to develop a theoretical mode Resource-Based View (RBV) and competitive advantage The VRIO framework Value(worth) Rareness(exceptionality) Imitability (costly for the competitors to imitate) Organization (Organizational Development) Literature review and theoretical model

Literature review and theoretical model.Continued How SMEs gain competitive advantage? How Large firms gain competitive advantage? Variables for the theoretical model are Knowledge, Routines, Strategy, Technology, Structure, And Culture

Development of the Theoretical Model and Hypotheses Five independent constructs : innovation strategy, formal structure, customer and supplier relationships, innovation culture, and technological capabilities. One dependent construct SME Performance Five Research hypotheses

Literature review and theoretical model.Continued Hypothesis 1 (H1): Innovation Strategy and SME performance Better Performance with formal strategies. SMEs’ perceptions regarding strategic planning.

Literature review and theoretical model.Continued Hypothesis 2 (H2): Formal structure and SME performance Organizational structure and Organizational size. Improvisation of Efficiency.

Literature review and theoretical model.Continued Hypothesis 3 (H3): Customer -Supplier Relationships and SME performance Developing Partnerships. Opportunities to new skills and Improving existing concept. Risk sharing.

Literature review and theoretical model.Continued Hypothesis 4 (H4): Innovation Culture and SME performance Flexible Innovation culture. Low resistance to change. Low risk aversion..

Literature review and theoretical model.Continued Hypothesis 5 (H5): Technological Capabilities and SME performance Single breakthrough of technological capability. Resources can commercializing their technology.

Methodology  A sample survey analysis Where – Sample size is 600 manufacturing SME in Australia. More than 50 percent respondents are CEO & Managing directors. Average size of 65 employees. NO significant biasness in the survey.

Data Analysis F1: Innovation Strategy F2: Formal Structure F3: Customer & Supplier Relationships F4: Innovation Culture F5: Technological Capabilities F6: SME Performance F1: Innovation Strategy F2: Formal Structure F3: Customer & Supplier Relationships F4: Innovation Culture F5: Technological Capabilities F6: SME Performance

H1: Significant (High Correlation) H2: Significant (High Correlation) H3: Not so much Significant (Limited Correlation) H4: Insignificant H5: Insignificant

DISCUSSIONS Basic Question: 1. Key drivers of innovation ? 2. How innovation practices of SMEs differ from those of large firms?

Answer: 1. Innovation strategy & formal structure 2. SME’s do not appear to use innovation culture

LIMITATION:  One respondent each w/in one individual SME’s.

FINDING:  Negative perception of relationship  SME’s are driven by fascination by NP&D

CONCLUSION:  Recognized the innovation culture & strategy.