Innovation and Its Impacts on the Financial Performance of Businesses

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Table of Contents

Introduction
Literature Review
Research Proposal
Conclusion and Expected Outcomes
References

Introduction

Innovation is an important business strategy that studies have associated with high performance and competitiveness in SMEs. Innovation enables SMEs to develop unique products, services, as well as business processes that enhance their survival in the competitive market place (Rosenbusch, Brinckmann & Bausch 2011, p. 441).

Without innovation, start up and resources-constrained SMEs would find it difficult to compete established business in the marketplace. According to Laforet (2011, p. 381), extensive studies and research have been done innovation in SMEs.

Studies and researches have focused on innovation and its impacts on the financial performance of businesses, and the results of innovation on business. However, much remains unknown on how SMEs could achieve successful innovation. This little known concept is the basis of this research proposal.

Literature Review

Many studies have shown that innovation in business organization exists in three key streams: product, process and organization (Massa & Testa 2008, p. 393). Much of the available literatures have described innovation as the commercialization of an invention. Studies have also identified the attributes of innovation and classified them as either contents or intensity.

Massa and Testa (2008, p. 394) note that the contents classes of innovation include product and process, technological and architectural, as well as administrative and technical. Intensity, on the other hand, includes such concepts as incremental or radical, continuous or discontinuous, evolutionary or revolutionary, and minor or major among other classes. Despite the availability of immense literature on the same, little remains known on how SMEs could successfully achieve these classes of innovation.

According to Laforet (2011, p. 390), the major factors driving innovation in SMEs include the good attitude towards innovation, market environment, competition, customers needs, organization growth, and the management. Other factors from his study are business model, profitability, desire to improve working conditions, the life cycle of products, as well as the need for quality among other factors.

Laforet posits that the positive outcomes of innovation consist of market advantage, operational excellence, and employee satisfaction. In addition, improved financial performance, organization image and reputation, in-house expertise and technical know-how, acquisition of skilled human resources, as well as sustained innovation (Laforet 2011, p. 398).

The negative outcomes relate to such things as failure risks, employees dissatisfaction, rising staff turnover, damaged organization image and reputation, unprofitability, as well as uncontrollable Growth for SMEs. With all these information documented, the gap then is “how to SMEs achieve successful Innovation?”

Research Proposal

As a result of the underlying gaps in the available literature on SMEs innovation, this research proposes to examine how SMEs can achieve successful innovation. This study will seek to answer the research question from a qualitative-based approach. This approach will make use of case studies, focus groups, interviews and existing secondary literature.

Conclusion and Expected Outcomes

Innovation has invaluable benefits to business organization. Modern business has been greatly boosted by innovation as every businessman wants to be unique in doing business so as to maximize profits. Innovation and technology have become the key drivers of modern business and every company or firm is trying to come up with new innovations.

However, little information and knowledge is available on how SME can achieve successful innovation. In this regard, the expected outcomes of this study are to provide SMEs with quality information on how to achieve Successful innovation.

References

Laforet, S. 2011, “A framework of Organizational Innovation and Outcomes in SMEs.” International Journal of Entrepreneurial Behaviour & Research, 17(4), pp. 380- 408.

Massa, S & Testa, S 2008, “Innovation and SMEs: Misaligned Perspectives and Goals among Entrepreneurs, Academics, and Policy Makers.” Technovation, 28 (1), pp. 393-407.

Rosenbusch, N, Brinckmann, J & Bausch, A 2011, “Is Innovation always Beneficial? A Meta- analysis of the Relationship between Innovation and Performance in SMEs.” Journal of Business Venturing, 26 (1), pp. 441-457.

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Innovation and Its Impacts on the Financial Performance of Businesses

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