Flexible strategic frameworkfor managing innovation from

perspective of continuityand change

A study of SMEs in IndiaVijay Gupta and Bindu GuptaIMT Ghaziabad, Ghaziabad, India

Abstract

Purpose – This research study identifies the factors influencing innovation and technologymanagement in Indian manufacturing small- and medium -sized enterprises (SMEs) with a focus onthe auto-ancillary sector. The study further investigates the impact of types of innovation on businessperformance. The purpose of this paper is to come up with a flexible strategic framework formanaging innovation and technology in SMEs from a perspective of continuity and change.Design/methodology/approach – The data on which this study is based were generated throughsecondary research using published sources and primary research. The study was done through groupdiscussions with industry experts and personally focused interviews with 88 entrepreneurs fromSMEs selected using a structured questionnaire.Findings – The study shows SMEs pursuing more types of innovations display higher performancelevels when compared to those pursuing fewer types of innovations. SMEs pursuing more types ofinnovations are significantly different from less innovating firms from the perspective of underlyingchange forces.Originality/value – This research paper represents one of the few efforts to study innovation andtechnology management in SMEs and come up with a flexible strategic framework for managingforces of continuity and change for guiding this sector for long-term survival and growth. The flexibleframework suggested, and the continuity and change matrix (C-C matrix), can be of interest toresearchers and practising managers to validate the applicability for other sectors. The frameworksuggested can be adapted for application in a global context.

Keywords Strategy, Innovation, Change management, SMEs, Flexibility, Corporate strategy,Small- and medium-sized enterprises, Continuity and change, Auto-ancillary, Business impact

Paper type Research paper

IntroductionWith increasing globalization, the opening up of international trade, the complexitiesof changing demographics along with high expectations from consumers, innovationand technology management by business firms – mainly small- and medium -sizedenterprises (SMEs) – has become a key competitive factor in emerging economies.SMEs cover a wide spectrum of industries and play an important role in bothdeveloped and developing economies. SMEs have a prominent position in thedevelopment of the Indian economy. However, SMEs face a lot of challenges inpursuing innovation and technology development and commercializing these into

The current issue and full text archive of this journal is available atwww.emeraldinsight.com/1463-7154.htm

Received 24 May 2013Revised 10 July 2013Accepted 18 July 2013

Business Process ManagementJournalVol. 20 No. 3, 2014pp. 502-522r Emerald Group Publishing Limited1463-7154DOI 10.1108/BPMJ-05-2013-0061

The author would like to thank the editors and reviewers of the Business Process ManagementJournal, Professor Sushil, Professor Strategy and Dean Academics at IIT Delhi for their valuablecomments and suggestions during preparation of this research paper.

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products and services for improving their profitability. According to Edwards et al.(2005), our understanding of innovation in SMEs is relatively poor. Hyvttinen (2006)states that, for creating markets for innovations, developed and fixed interfacestandards and exceptional features for technology programmes are interesting fromthe point of view of innovating SMEs. SMEs generally lack long-term perspectives asthey struggle for survival on a day-to-day basis. Holmes and Ferrill (2005) suggeststhat the introduction of road-mapping into the SME manufacturing sector in Singaporecould improve the future outlook of these companies from the traditional four to sixmonths to an average of three to five years. One of the factors limiting innovation andmarketability could be a lack of top-level leadership. Most start-ups and SMEs arefounded and managed by technocrats who have developed one idea or a product, butwho may have limited overall business perspectives. Aslan et al. (2011) states thattransformational strategic leadership, through environmental uncertainty perception,significantly affects strategic change and innovativeness in SMEs.

This research study investigates the underlying factors from the perspective offorces for continuity and change influencing innovation and technology managementin Indian manufacturing SMEs. It also examines the differences between moreinnovating and less innovating SME firms and impact of this factor on overallperformance. The study was carried out using a structured questionnaire andpersonnel interviews in over 88 SMEs in India, analysing the data and ending up witha flexible strategic framework for innovation and technology management. The resultsof the factor analysis indicated five underlying factors of forces for change influencinginnovation and technology management and five underlying factors for continuityforces. The results of discriminant analysis of the significant predicting variables ofinnovation suggest that factors of forces for change are useful in differentiatingbetween more innovating and less innovating firms. Further, more innovating and lessinnovating firms were found to be significantly different with regards to results ofinnovation on reputation, market share and profitability. The continuity and changeframework has been validated using the data from the above study.

ObjectivesThe objectives of the study were:

(1) to identify and study the underlying factors for forces of continuity and changeinfluencing the innovation and technology management in SMEs;

(2) to study the impact of innovation as more innovating and less innovatingSMEs on business performance; and

(3) validating the flexible strategic framework developed for innovation andtechnology management in SMEs though primary data collected as a part ofthis research.

Literature reviewIn today’s globalized business environment SMEs exert a strong influence on theeconomic growth and technological development of a country through their ability toinnovate new products and processes, according to Zhu et al. (2006). According toHarrison and Watson (1998), SMEs are generally more flexible, adaptable and arebetter located to develop and implement new ideas. Ussman et al. (2001) states thatSMEs’ flexibility is the essential feature that enables them to innovate both within the

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organization and in the external market. The research study finds strong links betweeninnovation, pursuing incremental process change, sales growth and a preference forexpanding R&D, new product development, and finding new export markets accordingto Bagchi-Sen (2001) and Dell’Era et al. (2010). Freel (2000) states that innovatorsare more likely to experience growth than non-innovators. According to Harrison andWatson (1998), innovation may be one of the core competencies necessary for SMEsto survive and grow. Innovation can be a competitive weapon for SMEs, according toDrucker (1995).

Caloghirou et al. (2004) studied the impact of industry and firm-specific factors onthe profitability of business firms using survey and census data on a sample of Greekmanufacturing firms. Laforet (2013) examines organizational innovation outcomesin SMEs. Based on company interviews and a mail survey, the findings revealorganizational innovation results in enhanced productivity, margins, market leadershipand working environments. Vande et al. (2009) investigates whether open innovationpractices are also applied by SMEs. Kumar (2010) probes the extent and diversity ofassistance received by SMEs from original equipment manufacturers throughsubcontracting, and its influence on technological innovations and the economicperformance of SMEs in the Indian automobile industry. Van Gils and Zwart (2004)focuses on the role strategic alliances can fulfil within the knowledge acquisition andlearning processes of SMEs. The empirical findings indicate that only a limitednumber of SMEs are involved in strategic “knowledge-sharing” alliances. A studyindicates that SMEs could achieve a close balance of explorative and exploitativeinnovations through correctly shaping international organizational structures andadopting appropriate leadership styles, according to Chang and Hughes (2012).Dickson et al. (2006) utilizes a sample of 456 SMEs from eight countries and examineshow the resource capacity of the SME and the institutional environment are relatedto perceptions held by the owners and managers about the opportunistic behaviour ofalliance partners. Empirical data suggest that there are four broad strategic typesof international SMEs, namely, an entrepreneurial/growth-oriented group of firms, acustomer-oriented group, a product/inward-oriented cluster and a further group offirms that lacks strategic orientation. According to Huergo (2006), estimation of aninnovation production function with a panel of Spanish manufacturing firms showsthat the planning and monitoring of the innovation process and the hiring of personnelwith special skills for technological activities are significant sources of innovation.Leiponen and Byma (2009) states that most of the small firms examined find thatinformal means of protection for innovation, such as speed to market or secrecy, aremore important than patenting. Kohn and Hu (2006) identifies some of the barriers toSME adoption of innovation software in Germany. Munir et al. (2011) presents theinitial results of a retrospective study on capabilities development and their effects onfirm competitiveness across a sample of successful SMEs in leather, sports andsurgical instruments clusters.

Abulrub et al. (2012), states that new state-of-the-art technology is becoming theinnovative tool in new product development (NPD), in various sectors. Liu et al. (2012)explores the economic effect and management effect in SMEs through a theoretic modelof technological innovation engineering. Christensen (2002) addresses the comparativelong-term organizational dynamics of management of innovation and technology in twodifferent types of technology-based industrial companies. Lichtenthaler (2007) states thatthe trend towards active technology licensing is remarkable because of the substantialmanagerial difficulties of many firms. These difficulties result from imperfections in the

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technology markets. Liu and Tsai (2007) examies Taiwanese hi-tech companies byconducting a series of innovation management activities. Corporate status andinnovation tendencies are considered in a discussion of the relationship betweeninnovation management and new product development. Lichtenthaler (2007) presents theresults of a questionnaire-based benchmarking study in 154 medium-sized and largeEuropean firms spanning multiple industries on external technology commercialization(ETC). Song et al. (2008) examines the relationship between strategic type anddevelopment of distinctive marketing, market-linking, technology and informationtechnology capabilities to implement innovation strategy. They find that Japanese firmshave greater technology and IT capabilities than US firms of the same strategic type.Smith et al. (2008) discusses the inductively derived model that presents the importantrelationships identified between the factors to present a holistic view of innovationmanagement. Pellissier (2008) explores the convergence of innovation and research,focusing on the development of a conceptual model in terms of the technology requiredfor the accomplishment of this convergence. Rammer et al. (2009) investigates the impactof in-house R&D and innovation management practices on innovation success in SMEs.Gomes and Kruglianskas (2009) studied the relationship between practices for managingexternal sources of information and the innovative performance of the enterprise. Theresults suggest a trend towards an increasing use of external sources of technologicalinformation. Lee et al. (2008) suggests that a matrix analytic network process (ANP)model with sensitivity analysis is first developed to select the most appropriateNPD mix.

Bjork and Magnusson (2009) explores the interrelationship between innovation ideaquality and idea providers’ network connectivity. Igartua et al. (2010) analyses the useof innovation management techniques and tools by a leading Spanish elevatormanufacturer’s research unit in implementing its open innovation strategy. Erzurumlu(2010) discusses how open innovation through inter-firm collaboration and strategicalliances may generate value for competing suppliers by stimulating the adoption ofnew component innovations by the downstream supply chain. Golovatchev et al. (2010)discusses a rating mechanism that helps companies to decide when to adopt aninnovation and to develop new products and services. Blindenbach-Driessen et al.(2010) has carried out a qualitative comparison of several alternative performancemodels for innovation management in SMEs. Bjork et al. (2010) states that firms canbenefit from more deliberate approaches to ideation, in particular if these are broad andbalanced and focus on building capabilities that formalize the informal.

The above literature focuses on one or more aspects of innovation and technologymanagement, some focus on business continuity by maintaining the status quo andsome discuss approaches towards radical change to move into a new business area.There is a need to study innovation and technology management from the perspectiveof continuity and change in a balanced manner.

Continuity and change forcesSushil (2005) defines flexibility as the art of balancing full rigidity and complete lackof control. Flexibility enables a firm to be agile and also generates spontaneity.Continuity and change are the key parameters of strategic management. Quinn(1978) states that most of the strategies were based on continuity and gradualincrementalization. Gupta (2009) states that forces of continuity and incrementalchanges are not enough to decide the future strategies of the organization.According to Mintzberg (1994), the need to include change in strategic thinking has

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become essential. The concept of strategic flexibility and transformation isdiscussed by Wah (1989). Kotter (2007) identified the issue of change as one ofthe key factors in why transformation efforts fail. Porter (1980) explored the effectof change in competitive strategy. Kaplan and Norton (2000) focuses on thedifference in perceptions between top- and operation-level strategies. Kaplan andNorton (2006) focus on ways to implement a new strategy without disrupting anorganization. Cannon (1996) focuses on the paradox of continuity and change, andmany other tensions and dilemmas. Macduffie (2006) examined the turnaround andstrategies followed by Carlos in Japan. Wong and Zechariah (2009) proposes puttingbusiness continuity planning into the long-term corporate planning process. In thelast two decades, globalization has made the business environment highly turbulentand the concern of “change” has received immense interest from both strategicthinkers and practitioners. Many new theories, such as crafting strategy (Mintzberg,1994), strategic flexibility (Volberda, 1998; Sushil, 2005), complexity and chaos (Wah,1989) and strategic change and transformation have taken centre stage. Theevidence of a confluence of continuity and change is brought out in many spheres,such as corporate governance, the role of first line manager (Colin, 2005),organizational identity (Chreim, 2005), active waiting (Sull, 2005) and countrymodels such as a German model (Sigurt, 2004). Not only the paradox of continuityand change, but also many other tensions and dilemmas have created a new strategyrevolution (Cannon, 1996). Hammer (2007) suggests a process-based transformationmodel for companies dealing with continuity with incremental change. David (2000)focuses on the strategy adopted by many MNCs to enter developing countriesthrough local partners. Various factors are discussed as reasons for the failure ofgood strategies by Jackson (2005).

Gupta (2009, 2010, 2011, 2012) and Sushil (2005) have identified the factors for forcesof continuity and change that need to be studied in greater detail in order to develop aflexible strategic framework for innovation and technology management in anorganization. The detailed methodology for arriving at the factors has been discussedat length in the abovementioned author’s earlier work.

As discussed above, SMEs, due to their inherent limitations, are more prone to beaffected by changes in the external environment and competitive forces whencompared to large and mid-sized companies. Almost all the studies above focus oneither continuity or change for innovation management. In the case of automotiveSMEs studied especially, incremental change or continuity is more prevalent forinnovation management as SMEs with limited resources may find it difficult to find theresources needed for a breakthrough or a significant change in innovationmanagement. There is, therefore, a need to study the underlying factors with theperspective of forces for continuity and change on innovation management in SMEs,and to come up with a flexible strategic framework for their survival and growth inthis highly competitive global business environment.

Research designResearch methodologyExploratory research:.

. collection of the Primary Data using a detailed questionnaire to be filled out bythe owners or senior management of SMEs; and

. detailed literature review to understand the work done in this field so far.

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Scope of the study:

. study of sources of innovation, innovation management practices inauto-ancillary SMEs.

Method of data collection:

. primary data collection – focused discussion and interviews of executives ofSMEs, using a structured questionnaire (Appendix). (No secondary data wasavailable on area of study.)

MethodologySample. Individual firms were the sample units for the study. The samplingtechnique was by means of convenient sampling. Around 300 SMEs were contactedand a total of 88 SMEs participated in the survey. Most of these SMEs are themembers of different associations such as the Ghaziabad Management Association,the Noida Management Association and the Auto Component ManufacturingAssociation (ACMA).

Data were collected from a structured questionnaire through one-to-one interviewswith the top management of SMEs. In most of the cases the owner of the SMEcompleted the questionnaire, in other cases the head of production responded to it. Theorganizations that responded to the survey ranged in size from 21 to 1,000 employees,with an average of 160.52 employees.

Questionnaire. The questionnaire included the following sections:General information. In the first section of the questionnaire, the respondent SME

was asked to give information about the SME in terms of product(s) manufactured,year of inception, no. of employees, total investment, total turnover, etc. Respondentsalso were asked to indicate whether their firm had introduced product, process, andmanagement innovation during the previous four-year period 2007-2011 (1¼ yesand 0¼ no).

Underlying factors for change forces influencing innovation: It included 18statements related to facilitating factors of innovation. Respondents firms wereasked to indicate to what extent these factors were present in their firm duringthe four-year period (2007-2011) on a five-point likert scale (1- strongly disagree,5 – strongly agree).

Underlying factors for continuity forces influencing innovation: It included15 statements related to constraints of innovation. Respondents were asked toindicate to what extent these factors worked as constraints to their innovationactivities or influenced to their decision not to innovate during the four-yearperiod (2007-2011), on five-point likert scale (1- strongly disagree, 5 – stronglyagree).

Impact of innovation. It was measured in terms of market share, profitability andreputation of the firm. Respondents were asked to report to what extent these were theimportant effects as result of goods or services and/or process innovation during thefour-year period 2007-2011 on five-point likert scale (1- strongly disagree, 5 – stronglyagree).

Sources of innovation. Firms were requested to rate various sources of innovationsuch as suppliers of equipment, clients, consultants, conferences, universities, etc.,in terms of how important these have been for their innovation activities duringthe four-year period 2007-2011 on a five-point Likert scale (1 – strongly disagree,5 – strongly agree).

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In the last part of questionnaire, firms were requested to comment on theirapproaches towards innovation. Each company was asked if they carried out any or allof the following types of innovations during the last three years:

(1) product innovation:

. changes or improvement in the current products; and

. market new products (through process innovation).

(2) process innovation:

. change or improvements in manufacturing process; and

. acquisition of new equipment’s (for existing or new processes).

(3) Management innovation:

. changes or improvements in management issues (processes);

. changes or improvements in purchases or provisioning (processes); and

. changes or improvement in sales (processes).

Analysis. The data collected in this survey were analysed using SPSS package. Thedata were analysed using statistical tools such as descriptive statistics, factor analysisand analysis of variance (ANOVA).

Two rules were used to select items that best represent each of the factors.First, all selected items had to have a factor loading 40.50, the point at whichloadings are considered to be practically significant (Hair et al., 2006). Second, itemshad to clearly load on one factor; items with similar loadings on both factors were notincluded.

Characteristics of SMEs surveyedA total 88 SMEs from the National Capital Region (NCR) of India participated in thesurvey. In total, 76.1 percent were involved in making auto components and 23.9percent were from other manufacturing sectors such as yarns, cloth, specialitychemicals, machines, papers and plastic products, etc. In total, 18.2 percent haveinvestments of o25 lakh, 45.5 percent have invested between 25 lakh and five crore,22.7 percent between five crore and ten crore and the rest, 13.6 percent, haveinvestments of more than ten crore. With respect to turnover, 44.3 percenthave turnover of o10 crore, 31.8 percent between ten and 50 crore, 15.9 percentbetween 50 and 200 crore, and 8 percent above 200 crore.

Among the responding SMEs in the survey, it was found that a large percentagehad new or significant product, process and management innovations between 2007and 2011. A total of 72.7 percent had carried out product innovation, 78.98 percentcarried out process innovation and 72.33 carried out management innovationbetween 2007 and 2011. Process innovations were done more in SMEs fromauto-ancillary sector (80.6 per cent) than in SMEs from other manufacturing sectors,while product innovation was done more in other manufacturing sectors(73.8 per cent) than in the auto-ancillary sector (72.4 per cent). The SMEsintroducing new or incremental improved product, process and managementinnovations were named as “innovating firms”; other responding SMEs which didnot introduce any type of new or incremental innovations were named as “non-innovating firms” in the present study.

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Findings and analysisResults of survey and analysisFactor Analysis . A study of 88 SMEs was carried out using a structured questionnaire.Out of these 67 were from the auto-ancillary sector and 21 from other industriesas indicated above. A factor analysis brought out the following factors. Tables I and IIhave summarized the results of the factor analysis.

Underlying factors for continuity forces influencing innovation and technologymanagement:

All the items were found to have a KMO value higher than 0.60. The KMO statisticsfor the sample data set was 0.68 and the Bartlett test showed that non-zero correlationsexisted at the 0.000 significance level. Fifteen items were subjected to principalcomponents analysis with varimax rotation. Five factors emerged with eigenvalues41.0 and these factors explained 67.94 per cent of the variance. The first factor wasnamed as “infrastructure and technology”, factor 2 as “culture”, factor 3 as “financialresource (lack of)” and factor 4 as “customer base”. Factor 5 was “Government policyand support”. The cronbach a reliability was 0.78 for factor 1, 0.77 for factor 2, 0.72 forfactor 3 and 0.58 for factor 4. (Table I). Underlying factors for forces of continuity havebeen summarized below:

(1) infrastructure and technology;

(2) lack of financial resources;

(3) culture;

(4) customer base; and

(5) government policy and support.

Component

1 2 3 4 5

Economic risk 0.247 0.069 0.667 0.421 �0.007

Innovation cost 0.113 0.398 0.708 �0.016 �0.154

Access to financial resources 0.335 0.037 0.706 �0.052 0.208

Lack of qualified staff 0.810 �0.037 0.297 0.006 �0.005

Problems in retaining qualified employees 0.801 0.031 0.277 �0.014 �0.023

Lack of internal training 0.288 0.687 0.226 �0.111 0.198

Employees resistance to change �0.012 0.790 0.265 0.206 �0.040

Manager resistance to change 0.058 0.882 0.015 0.020 �0.025

Lack of information about technology 0.641 0.247 0.081 0.257 0.256

Lack of information on market 0.598 0.325 �0.169 0.295 0.266

Market dominated by established players 0.271 0.044 0.164 0.681 �0.237

Uncertain demand �0.014 �0.004 �0.070 0.831 0.248

Insufficient government support 0.140 �0.066 0.009 0.048 0.800

Economic turbulence �0.027 0.256 0.404 0.455 0.418

Lack of external partner 0.085 0.280 0.516 0.020 0.486

Percentage of variance 16.279 15.715 14.850 11.685 9.426

Reliability coefficients 0.78 0.77 0.72 0.58

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Table I.Results of factor analysis

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Table II.Results of factoranalysis for changeforces influencinginnovation andtechnology management

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Underlying factors for change forces influencing innovation and technologymanagement:

Before conducting factor analyses, a sampling adequacy test was computed usingthe Kaiser-Meyer-Olkin (KMO) statistic. All the items were found to have a KMOvalue higher than 0.60. The KMO statistics for the sample data set was 0.69 andBartlett test showed that non-zero correlations existed at the 0.000 significance level.Eighteen items were subjected to principal components analysis with varimaxrotation. Five factors emerged with eigenvalues 41.0 and these factors explained61.89 per cent of variance. Because all items loaded above 0.50 on their intendedfactor and had relatively low cross-loading, there is evidence of factorial validity forthe measure used. The first factor was named as “internal environment and corecompetence”, factor 2 as “globalization”, factor 3 as “technology and resources” andfactor 4 as “customer needs” and factor 5 as “M&A”. The cronbach a reliability was0.76 for factor 1, 0.72 for factor 2, 0.70 for factor 3 and 0.60 for factor 4 and 0.58 forfactor 5 (Table II). In general, a value of 0.6 is considered adequate for internalconsistency (Hair et al., 1995). Underlying factors for forces of change have beensummarized below:

(1) globalization;

(2) customer needs;

(3) technology and resources;

(4) culture and core competence; and

(5) M&A.

Analysis – “More innovating” and “less innovating” SMEs . The responding SMEs wereasked to report on seven types of innovations which belonged to product,process and management innovation. The firms which had done three or fewer typesof innovation were named as “less innovating firm” and those which had donefour or more types of innovations were named as “more innovating firm” in the presentstudy. The results of the t-test indicated that there were significant differencesbetween more innovating and less innovating firms from the auto-ancillary sector interms of globalization (t value¼ 2.46, po0.027) and customer base (t value¼ 2.57,po0.020). Firms which were innovating had better “globalization” (M¼ 4.13) and“customer base” (M¼ 3.99) compared to less innovating firms (M¼ 3.63 and 3.53,respectively).

Further analysis was done for each type of innovation and factors for change forcesinfluencing innovation and technology management. Based on the responses ofresponding SMEs, firms were categorized as “innovating firms” (if responded “yes”)and “non-innovating firm” (if responded “No”) for each innovating activity.

Product innovation. Changes and improvement in current products – results of t-testfor indicated that “innovating” and “non-innovating” auto-ancillary firms vary interms of “globalization” (t value¼ 2.23, po0.043) and “technology and resources”(t value¼ 2.14, po0.036). The firms which were innovating had better “globalization”(M¼ 4.14) and more “technology and resources” (M¼ 3.96) than firms which were notmaking “changes and improvement in current products” (M¼ 3.64, and M¼ 3.58,respectively).

Marketing new products. Results of t-test indicated that “innovating” and“non-innovating” auto-ancillary firms varies in terms of “customer needs”

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(t value¼ 2.43, po0.018). The firms which were innovating in terms of “marketing newproducts” found more demand from “customers” (M¼ 4.03) than firm which were not(M¼ 3.68).

Process innovation. Change and improvement in “manufacturing process” and“acquisition of new equipment”. Results of t-test for process innovation indicated nosignificant differences in “innovating” and “non-innovating” auto-ancillary firms fordrivers of innovation.

Management innovation. Change and improvement in management issue – formanagement innovation, results of t-test indicated that “innovating” and“non-innovating” auto-ancillary firms varies in terms of “globalization”(t value¼ 2.15, po0.048). The firms which were innovating they reported better“globalization” (M¼ 4.14) than firm which were not innovating (M¼ 3.66).

Change and improvement in purchase. Results of t-test indicated that “innovating”and “non-innovating” auto-ancillary firms varies in terms of “globaization”(t value¼ 2.41, po0.021) and “technology and resources” (t value¼ 2.12, po0.039).The firms which were innovating reported better “globailzation” (M¼ 4.19) and havemore “technology and resources” (M¼ 4.00) than firm which were not innovating(M¼ 3.81 and M¼ 3.69, respectively). Furthermore, the auto-ancillary firms makingmanagement innovations in terms of “change and improvement in sales” varysignificantly from non-innovating firms in terms of perceived changes in “customerneeds” (t value¼ 2.04, po0.050) and these firms perceived more changes in “customerneeds” (M¼ 3.90) than non-innovating firms (M¼ 3.57).

Continuity and change matrix (C-C matrix). Data collected were analysed. Theaverage score of factors for continuity forces and the average score of factors forchange forces for more innovating and less innovating auto-ancillary SMEs isplotted on a 5-5 scale with average scores for underlying factors for continuityforces on x-axis and average score for underlying factors for change forces on y-axis(Figure 1). Average score for underlying factors for continuity forces andunderlying factors for change forces for more innovating companies is 3.0055and 3.7737 and less innovating companies is 3.1083 and 3.4783, respectively.It is found that in case of average score of underlying factors for continuityforces, there is no significant difference between more innovating and less

5

More Innovating Cos (3.0055,3.7737)×

xLess Innovating Cos(3.1083, 3.4783)

2.5

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Sco

re fo

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s fo

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0 2.5 5Average Score for underlyingfactors for Continuity Forces

Figure 1.Continuity andchange matrix

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innovating companies. However, in case of average score for underlying factors forchange forces, there is a significant difference between more innovating and lessinnovating companies. The C-C matrix [21] and [43] for managing innovationand technology in SMEs clearly shows the difference between more innovatingcompanies and less innovating companies as explained in the next section onimpact of innovation.

Impact of innovation on business performance. The results of t-test for impact ofinnovation for more innovating and less innovating auto-ancillary firms indicatedthat less innovating and more innovating firms varies significantly in terms ofprofitability (t value¼ 2.14, po0.050), market share (t value¼ 2.39, po0.030) andreputation (t value¼ 2.59, po0.019). The more innovating firms are more profitable(M¼ 3.95), have better market share (M¼ 3.80), and better reputation (M¼ 4.27)compared to less innovating firms (M¼ 3.25, 3,17, and 3.75, respectively).

Managerial implications of the results of the studyThe C-C matrix presented is a matrix with an average score for underlying factorsfor forces of continuity and an average score for underlying factors for forcesfor change. The average score for underlying factors for continuity forces formore innovating SMEs and less innovating SMEs is quite close (3.1083 and 3.0055,respectively). t-Test result also shows that there is no significant differencebetween them. Automotive ancillary SMEs, in the sample we have selected, areTier II and Tier III suppliers to automotive OEMs in India. Due to the sheerinertia of this growing sector, all companies are required to carry on business asusual and therefore there is not much difference between more innovating and lessinnovating SMEs in the average scores for underlying factors for continuity forces(Table III).

The average score of underlying factors for forces of change for less innovatingcompanies and more innovating companies is quite different (3.4783 and 3.7737respectively). t-Test result also shows that there is a significant difference betweenmore innovating SMEs and less innovating SMEs. These enterprises, beingauto-ancillary to large auto OEMs, generally do not have the time and resources tocarry out breakthrough innovations in any area. These SMEs are mainly engaged inincremental innovation in product, process or management areas. We included in oursurvey their responses to seven types of incremental innovations in product, process

Sources of innovation n Mean SD

Conference, trade fairs or exhibitions 67 3.97 0.870Technical, industry or service standards, etc. 67 3.96 0.475Clients or customers 67 3.94 0.756Professional and industry association 67 3.88 0.640Scientific journals and trade/technical publications 67 3.73 0.845Within firm 67 3.68 0.742Suppliers of equipment, material services 67 3.61 0.797Competitors 67 3.25 0.959Consultants, commercial laboratories or private R&D institutes 67 2.91 0.917Universities or other higher education institutes 67 2.50 0.802Government institutes 67 2.37 0.880

Table III.Sources of

innovation forauto ancillary SMEs

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or management areas. The companies which are carrying out incremental innovationin three or fewer types only are termed as less innovating companies and thosecarrying out incremental innovation in four or more types are termed as moreinnovating companies.

The results clearly shows that more innovating companies are much moreeffective in terms of better business performance (measured in terms of impact ofinnovation on business performance – profitability, market share and reputation,respectively).

The managerial implications of these results are that it is not enough forthis sectorto continue innovating only in one or two areas or types. They need to broaden theirinnovation initiatives in as many types of innovation as possible. The cumulativeimpact of more types of incremental innovations leads to significantly better businessperformance and results, as the analysis of the study clearly shows.

The above study has identified five underlying factors for forces of continuity andfive underlying factors for forces for change influencing innovation management. Thestudy has also shown the influence of underlying factors of forces for change on moreinnovating and less innovating companies. In addition, the C-C matrix developed abovehas also shown that, in the case of the automotive SMEs studied, the impact ofincremental change in the average score of underlying factors for change forces onoverall company performance is significant when compared to incremental changein the average score of continuity forces.

ConclusionsThe study clearly brings out the underlying factors for forces of continuity andforces of change which influence the management of innovation and technology.Five underlying factors have been identified for forces of change and another fiveunderlying factors for forces of continuity, based on analysis. The C-C matrixdeveloped, based on the average score of factors of continuity on the x-axis andaverage score of factors of change on the y-axis, discussed above, clearly shows thedifference between more innovating firms and less innovating firms on overallbusiness performance. The impact of marginal increase in the average of underlyingfactors for change has an insignificant impact on overall business performance.However, the impact of a marginal increase in the average score of underlying factorsfor change forces has a significant impact on overall business performance. This canbe explained by the fact the automotive industry is a highly competitive industry andtherefore all companies are carried by pressing demands due to growth of the OEMsthey supply. They struggle to carry out the minimum innovations demanded bycustomers in one or two areas only. However, this is not enough to achieve higherbusiness performance. Companies need to focus more on underlying factors forchange forces to improve the effectiveness of their Innovation and TechnologyManagement initiatives and also to achieve a higher impact of innovation andtechnology on the company’s overall performance. The study clearly brings outthat all SMEs need to pursue all types of the innovations defined aboveto continue to survive and grow. The proposed framework can be applied in otherbusinesses for managing strategies for sustenance and growth.

LimitationsThe study was carried out in NCR of India. The small sample size of the study maynot fully represent the Indian automotive ancillary industry. Therefore, perhaps a

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broad-based study with a larger sample size is needed to reconfirm the aboveconclusions and their global applicability.

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Further reading

Amara, N., Landry, R., Becheikh, N. and Ouimet, M. (2008), “Learning and novelty of innovationin established manufacturing SMEs”, Technovation, Vol. 28 No. 7, pp. 450-463.

Higgins, J.M. (1996), “Achieving the core competence-it’s as easy as 1, 2, 3,y47, 48, 49”, BusinessHorizons, Vol. 39 No. 2, pp. 27-32.

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O’Regan, N., Ghobadian, A. and Sims, M. (2006), “Fast tracking innovation in manufacturingSMEs”, Technovation, Vol. 26 No. 2, pp. 251-261.

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Appendix. Survey to identify the factors for innovation in SMEs in India

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Please rate the following statements using the scale below

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Once again, I thank you for your kind assistance.

Corresponding authorDr Vijay Gupta can be contacted at: dr.vkgupta@gmail.com

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