Issues in Innovation for Norwegian SMEs

Article excerpt

INTRODUCTION

Innovation is frequently viewed as the key to success in many arenas, from individual businesses to a nation's general economic growth. It is seen as a vital element in economic growth in Norway (Norwegian Ministry of Trade, 2010), where the economy is dominated by small and medium-sized businesses (Norwegian Ministry of Trade, 2010). SMEs, however, face significant challenges in their attempts to innovate due to their small size and limited resources. According to Eurostat (2009), larger companies are more likely than SMEs to control the resources necessary for innovation, including human and financial capital.

This study uses data from the Eurostat Community Innovation survey to more closely examine innovation by analyzing the self-reported effects of innovation on Norwegian SMEs. These reports effects are compared by business size, including small (10-49 employees), medium (51-249 employees) and large (250 or more employees) businesses. In the next section, a brief review of the motivation for innovation is presented, followed by the methodology, results and analysis of this study.

THE IMPORTANCE OF INNOVATION

Innovation is a dynamic process which can adapt as necessary to deal with changes in resources, technology or economics or even changes in a firm's expectations for innovation (Australian Institute for Commercialisation, 2011). According to Tony Blair, "Innovation is absolutely essential to safeguard and deliver high-quality jobs, successful businesses, better products and services for our consumers, and new, more environmentally friendly processes" (Gannon, 2007). Business performance has been linked to overall innovativeness as innovative firms are up to twice as profitable as other firms (Akgun, Keskin, Byrne & Aaren, 2007; Gannon, 2007; Gilmore, 2009; Tidd, Bessant & Pavitt, 2005). In a study of British SMEs, innovative firms were more likely to be operating profitably while non-innovators were more likely to be struggling (Gray, 2006). Charan and Lafley (2008) contend that innovation not only promotes growth but also enhances a variety of capabilities that improve the ability to enter markets and attract customers. They state that by discovering new ways of doing things, employees also become more energized and productive, further leading to improvements in financial performance.

Product or service development may be the most familiar form of innovation, but other types include processes, logistics, marketing and business model innovation (Australian Institute for Commercialisation, 2011; Charan & Lafley, 2008). Developments in the internet that have allowed companies to expand their marketing channels to include websites are a prime example of marketing innovation. Strategic partnership that allow for collaboration with clients, distributors and suppliers represent innovation in business models.

Both the strategy for innovation and the measure of success for innovation is based on a firm's motivation for innovation (Australian Institute for Commercialisation, 2011). Without clear goals for innovation, commercialization of the results of innovation is not likely (Fischer, Polt & Vonortas, 2009). It is also important to determine partners' motivation for innovation. If a partner's goals are not being achieved, enthusiasm will wane and future collaboration could be endangered.

According to the Australian Institute for Commercialisation (2011), common goals for innovation include developing a new product, selling or licensing the results of innovation, protecting or expanding market share, increasing recognition in the marketplace, better retaining staff and improving operational efficiency. Similarly, the report to Nordlandsforskning by Madsen and Brastad (2005) regarding Innovation Norway showed that among those Norwegian firms that received financial assistance in innovation, product development was the most common area of increase competence, followed by production processes, market development, use of advanced technology, organization and management, and national and international network development. …

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