Nature and Strategy of Product Innovations in SMEs: A Case Study-Based Comparative Perspective of Japan and India

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ABSTRACT

This paper traces the nature and strategy of product innovations of two SMEs in two different economic environments - one each in Japan and India. While the background of entrepreneurs and internal environment are similar, what distinguishes the two is the external environment. Though external sources of support appear similar outwardly, Indian external sources lack the much needed reputation for the capability of delivering productive assistance for technological innovations in manufacturing enterprises. That is why the Japanese SME could take advantage of its external sources but not the Indian SME. Further, the domestic market has ably supported and absorbed innovated products of the Japanese SME whereas the Indian SME has increasingly targeted its innovated products at the international market.1

Keywords: SMEs, technological innovation, entrepreneurship, Ota, Japan, Mysore, India

INTRODUCTION

Small & Medium Enterprises (SMEs) across industries have unrealized innovation potential (Chaminade and Van-Lauridsen 2006). According to Harrison and Watson (1998), SMEs are generally more flexible, adapt themselves better and are better located to develop and implement new ideas. The flexibility of SMEs, their simple organizational structure, their low risk and their receptivity to changes are the essential features for enabling them to be innovative both within the organization and in the external market (Ussman et al. 2001). Therefore, they are promoted, among others, as the 'seed bed of innovations' in industrialized countries. Empirical evidence shows that they are innovative even in industrializing countries like India (Bala Subrahmanya 2005).

Despite their important role in innovation, SMEs have a number of resource disadvantages (Lee 2005). They have limited financial and technical manpower resources, narrow external technical networks, small marketing resources, and lack of management skill (Rothwell 1983). These disadvantages are likely to be more intensive in industrializing countries than in industrialized countries. With this backdrop, this paper attempts to analyze the role of internal factors visà- vis external factors for product innovations carried out by a SME in India relative to Japan.

SMEs account for a considerable proportion of industrial enterprises, employment, and production in Japan as well as in India (Bala Subrahmanya 2003; Bala Subrahmanya 2006). Japan is rather the most industrialized economy whereas India is one of the rapidly industrializing economies today. Both these economies have been following exclusive policies for the promotion of SMEs: since WWII in Japan and since I Five Year Plan in India. Both the economies have their own policies for modernization and technology up-gradation of SMEs.

It is in the above context that the nature and strategy of product innovations carried out by two different SMEs - one in Tokyo, Japan and another one in Karnataka, India - are comparatively analyzed. Both the SMEs belonged to the engineering industry. Japanese SME is located in Ota ward in Tokyo city whereas Indian SME is located in Mysore, a growing industrial city of Karnataka state in India. Ota's industrial structure is dominated by machinery & metal industry and so is that of Mysore, though not to the same extent (PIO 2004; DIC, Mysore 2002). Similarly, SMEs' dominate the industrial structure of Ota as well as Mysore. But Ota has acquired international reputation for its product innovations whereas Mysore is little known on the industrial map of India, leave alone that of the world.

This article is structured to contain five sections. Section 2 deals with definition of concepts and describes briefly the Innovation Policies for SMEs in Japan and India. Section 3 presents the industrial structure of Ota and Mysore respectively. Section 4 analyzes the technological innovations carried out by two SMEs in two different countries and section 5 brings out inferences and makes propositions. …