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Process innovation strategy in SMEs, organizational innovation and performance: a misleading debate?

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Abstract

This article contributes to the study of process innovation as a growth strategy for SMEs, enriching and complementing the well-researched debate about product innovation. Thus, under-researched process innovation strategies are analyzed, and their antecedents and innovative performance implications explored. The results show that process innovation strategy is mainly shaped by the acquisition of embodied knowledge, which acts as a key mechanism for countering firms’ weak internal capabilities. As process innovation is mainly production oriented, performance consequences are measured using the production process indicators of cost reduction, flexibility and capacity improvement, avoiding traditional misguided measures based on sales, which are more product oriented. Drawing on information for 2,412 firms taken from Spanish CIS data, our results suggest that R&D efforts are not positively related to production process performance, but that the latter is improved by the synchronous co-adoption of organizational and technological innovation. SMEs conducting a process innovation strategy rely heavily on the acquisition of external sources of knowledge in order to complement their weak internal innovative capabilities, and their pattern of innovation shows clear-cut differences from traditional R&D-based product innovation strategies. The article uses a resource-based view framework to generate hypotheses.

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Notes

  1. Parisi et al. (2006) use the Cobb-Douglas production function and a Tornquist index of TFP growth and regressing Solow residual on the innovation dummies.

  2. For instance, Hall et al. (2009) report that for the period 1995–2003, 50.75 % of the firms introduced process innovation and only 34.85 % did the same for product innovation.

  3. This literature does not focus on innovative performance but on the demand for new skills [see Piva et al. (2005) for an integration of the literature].

  4. The same applies for the UK questionnaire (CIS3 and CIS4). Nevertheless, since 2008, the Spanish questionnaire modified and changed the variable in order to capture the idea of objectives (similar to “innovation goals,” related to technological trajectories in the sense of Dosi 1982) or factors for the decision to innovate. The same approach is observed in the CIS for the UK questionnaire: CIS5 and CIS6 versions mentioned factors or objectives, while the previous third and fourth version mentioned effects. Therefore, we used 2006 data and observed that innovation performance of innovation activities are treated coherently as output from the innovation strategy. Finally, it is important to notice that, although the CIS is standardized for Europe, each country has some peculiarities.

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Acknowledgments

Financial support provided by the Spanish Ministry of Economics is acknowledged (ECO:2010-17318) Innoclusters. Data availability from INE under the Safe-Place access contract is also acknowledged. The usual disclaimers apply.

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Authors and Affiliations

  1. Management Department (DOE), Universidad Politecnica de Valencia, Campus Vera s/n 7D, 46022, Valencia, Spain

    Jose-Luis Hervas-Oliver, Francisca Sempere-Ripoll & Carles Boronat-Moll

  2. Florida State University, Tallahassee, FL, USA

    Jose-Luis Hervas-Oliver

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  1. Jose-Luis Hervas-Oliver
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  2. Francisca Sempere-Ripoll
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Correspondence to Jose-Luis Hervas-Oliver.

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Table 4 Variables in the analysis
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Hervas-Oliver, JL., Sempere-Ripoll, F. & Boronat-Moll, C. Process innovation strategy in SMEs, organizational innovation and performance: a misleading debate?. Small Bus Econ 43, 873–886 (2014). https://doi.org/10.1007/s11187-014-9567-3

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