Intense competition in the marketplace is forcing organizations to examine the different ways by which they could enhance or retain their competitive advantage. Several organizations have generated sustained competitive advantage through a continuous stream of incremental, overarching, and discontinuous innovation. There is a burgeoning literature on the competitive importance of innovation and the linkage between innovation and organization renewal across industries and countries (Schoonhoven, Eisenhardt, and Lyman 1990; Morone 1993; Hamel and Prahalad 1994; Utterback 1994).
Central to the notion of technology as a competitive advantage for nations, firms, and industries is the significant role of small to medium-sized companies as a source of innovation during the early stages of new and emerging technologies (Abernathy and Utterback 1978). Several research studies (Rothwell 1983; Chanaron 1991; Khalil and Bayraktar 1994) have also attested that the rate of innovation by small and medium-sized enterprises (SMEs) has grown regularly and seems to be higher than that of very large corporations. For example, studies conducted by the U.S. Department of Commerce revealed that 50 percent of all innovations and 95 percent of all radical innovations since World War II have come from new or smaller firms (Timmons 1994). Despite the perceived importance of SMEs to technological innovation and international competitiveness, there is a paucity of research in the "management of technology" literature that emphasizes innovation within SMEs. It is only in recent years that this topic has become a subject of interest to academicians and practitioners alike (Birchall, Chanaron, and Soderquist 1996). Prior research evidence suggests that significant benefits can be reaped by firms (including SMEs) that integrate technological and innovation considerations with corporate-wide strategic development (Fusfeld 1989; Erickson et al. 1990; Pavitt 1990; Adler, McDonald, and McDonald 1992; Carrier 1996). Specifically, process improvements can help firms benefit from increased productivity and adaptability (Burgelman and Maidique 1988), and product innovation can increase a firm's sales by providing unique or higher-performance products (Burgelman and Maidique 1988; Harms 1990; Guimaraes and Liska 1993).
The purpose of this article is to report on these and other issues pertaining to managing innovation in French SMEs. The authors will examine the impact of such variables as actions for continuous improvement, pressures for cost cutting, aspects of the internal management system, innovativeness within each sector of the economy, and structures for managing product and process innovation in French SMEs.
Review of Literature
The limited research done in the area of technology and innovation in SMEs can be conveniently grouped into three research streams. The first concerns the definition and overview of technology and innovation in SMEs. Most existing literature limits the definition of the management of technology to the management of both internal and external R&D and to the management of the process of innovation within the firm (Rada 1987). Innovation, on the other hand, is viewed as the creation, development, and introduction of new products and services, or product and service components, or a new procedure or process for doing things to benefit one or more of the stakeholders in an organization (Birchall, Chanaron, and Soderquist 1996). According to Drucker (1985), systematic innovation involves the purposeful and organizational search for changes and the systematic analysis of the opportunities such changes might offer for economic or social innovation. He cites seven sources of innovation, among which are innovation based on process needs, changes in industry or market structure, and new knowledge.
The main thrust of overview articles have been to identify and highlight the critical success factors for innovative strategy in SMEs (Riedle 1989; Dodgson and Rothwell 1991; Bowen and Ricketts 1992), [TABULAR DATA FOR TABLE 1 OMITTED] and the importance of a marketing orientation and effective strategic formulation in successful small high-tech firms (Shanklin and Ryans 1984; Dodgson and Rothwell 1991; Roberts 1991; Oakey and Cooper 1991). …