Enhancing new product development capabilities of small- and medium-sized enterprises through managerial innovations

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Abstract

This essay aims at finding empirical evidence on which types of managerial innovations actually promote new product development (NPD) capabilities of small- and medium-sized enterprises (SMEs). We built this study upon empirical data derived from 650 German SMEs that took part in the Community Innovation Survey (CIS) 2011. We applied principal component analysis (PCA) to detect three different NPD capability factors. Our findings indicate positive effects of the following two types of managerial innovations: innovations in organisational procedures and in organisational forms. The results imply that the best bet for SMEs aiming at improving capabilities that are important for the first phases of NPD are changes in their organisational procedures. On the other hand, firms gearing toward advances in the final phases of NPD should concentrate internal changes on their general work organisation. Our paper demonstrates that SMEs can actively reinforce their NPD capabilities by implementing the right changes in their organisations.

Introduction

Markets have become progressively more competitive in recent years. To compete with the large players, small- and medium-sized enterprises (SMEs) often try to assert themselves through new product developments (NPDs). However, innovative products cannot be taken for granted since they require the full commitment of the organisation and its employees (Simon, Elango, Savelli, & Hougton, 2002). A compounding factor is that SMEs struggle with different obstacles, namely, limited resources (Garengo et al., 2005, Laforet and Tann, 2006) or skills shortages (Freel, 1999, Scott et al., 1996). These restrictions raise the question of how SMEs can improve their NPD capabilities.

There have been several attempts to support SMEs' NPD capabilities by policy changes (Klomp and Roelandt, 2004, Massa and Testa, 2008) and public funding (Belitz and Lejpras, 2014, Wonglimpiyarat, 2013). Other studies scrutinised how far networks among SMEs can advance their NPDs (e.g. Soh, 2003). While these analyses eminently contributed to the understanding of how SMEs can enhance their NPD capabilities by external means, they neglected the question of whether the NPD capabilities could benefit from the implementation of internal changes. More recent studies introduced in this regard the term managerial innovation as a new subject of analysis that discusses changes in organisational structures, processes, and systems (Birkinshaw et al., 2008, Damanpour and Aravind, 2012). It has been emphasised that these changes are generally important to firms (Büschgens et al., 2013, Hernández-Mogollon et al., 2010) by being related to firm and innovation performance (Saunila, Pekkola, & Ukko, 2014). Although managerial innovations can be considered as a basis for NPDs (Damanpour, Szabat, & Evan, 1989), the number of studies dealing with the potentials of managerial innovations is still limited. What aggravates the situation is that managerial innovations are not without controversy. For example, Naveh, Meilich, and Marcus (2006) found that managerial innovations will not promote innovations under all circumstances. Boer and During (2001) examined that managerial innovations require longer lead times than NPDs and are related to higher complexity; Damanpour and Evan (1984) highlighted complex measurements and evaluations of managerial innovations in contrast to NPDs. It is therefore worth investigating whether or not the efforts to implement managerial innovations pay off for SMEs in terms of improved NPD capabilities. This leads us to the following research question:

RQ: Do managerial innovations contribute to NPD capabilities of SMEs?

Our study aims to shed more light on this issue by investigating the effects of different managerial innovations on NPD capabilities of SMEs. The findings should make a contribution to the field of innovation management in general. What is more, it should enhance our knowledge on the relationship between NPD capabilities and managerial innovations in SMEs and support managers in their decision on whether or not managerial innovations should be implemented.

We begin by developing a conceptual framework on managerial innovations and NPD capabilities. The paper will then go on to the method applied in this study. Part 4 interprets the results of the data analysis and discusses the findings with those from other studies. Finally, we draw a conclusion and implications in the final part of this paper.

Section snippets

Managerial innovation

Research in the fields of innovation management has investigated NPDs in terms of new products or new processes thoroughly. Authors often make the distinction between incremental and radical innovations (McDermott and O’Connor, 2002, Oke et al., 2007) or product and process innovations (Presley, Sarkis, & Liles, 2000). These concepts have been challenged by scholars who ascertained that those categorisations are problematic insofar as they disregard structural differences between the firms'

Sampling and data collection

This study relies on quantitative data gathered by the Mannheimer Innovation Panel (MIP) in 2011 and provided by the Centre for European Economic Research (ZEW), which collected the data as part of the German contribution to the European Innovation Survey (CIS). We restricted the data set to merely research-intensive SMEs based on NACE Codes (20–21, 26–30), resulting in 650 firms with less than or equal to 250 employees. The sample's key data are shown in Table 1.

Independent variables

To determine whether managerial

Results and discussion

As the descriptive statistics in Table 4 show, managerial innovations have been realised by a minority of SMEs. This finding is consistent with those of Garengo and Bernardi (2007), who ascertained that SMEs focus their efforts on operational and technological activities rather than on organisational or managerial problems. As stated by Teece (1980) and Boer and During (2001), managerial innovations are resource intensive. Our observation is thus likely to be related to high efforts for SMEs.

Conclusion and implications

Investigating the effects of managerial innovation on NPD capabilities of SMEs was the main goal of the current study. Reviewing the recent literature on managerial innovation and revealing the roots of NPD capabilities in the theory laid the foundations of our research. Based on these insights, we divided managerial innovations into innovations in organisational procedures, innovations in organisational forms, and innovations in external relations. Nine items that derived from the literature

Tino Woschke is a doctoral candidate and research assistant at the Department of Business Administration, University of Applied Sciences Jena, Germany. He studied General Management and received his master's degree in 2013. His main research fields encompass innovation management, small- and medium-sized enterprises, and entrepreneurship.

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    Tino Woschke is a doctoral candidate and research assistant at the Department of Business Administration, University of Applied Sciences Jena, Germany. He studied General Management and received his master's degree in 2013. His main research fields encompass innovation management, small- and medium-sized enterprises, and entrepreneurship.

    Heiko Haase is a full-time professor of Entrepreneurship and Innovation Management at the Department of Business Administration, University of Applied Sciences Jena, Germany. He studied Industrial Engineering and received his PhD in Economic Sciences from the Ilmenau University of Technology in 2003. His research fields comprise entrepreneurship, small- and medium-sized enterprises, technology transfer, and intellectual property. He coordinates the Center for Innovation and Entrepreneurship of the University of Applied Sciences Jena.

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