Academic journal article Management & Marketing

A Risk Mitigation Model in Sme's Open Innovation Projects

Academic journal article Management & Marketing

A Risk Mitigation Model in Sme's Open Innovation Projects

Article excerpt

Abstract. SMEs are slightly overlooked in the open innovation literature, which provides a scarcity of studies on the risks residing in open innovation projects involving SMEs and even fewer attempts to assess the mitigation potential of these dangers. The limited literature written on SMEs and open innovation highlights the motives, the benefits and the barriers these engines of economy confront when embarking in open innovation projects. However, no particular attempt to further the research into managing and mitigating the effective risks triggered by open innovation in SMEs was found. Based on a survey conducted on 211 Romanian SMEs in the Romanian financial services and consultancy sector, this paper both explores the risks affecting the innovation performance of SMEs in collaborative relationships, and seeks to provide a conceptual model for overcoming these threats. Within the survey, our work highlights that open innovation in Romanian SMEs is impeded by risks related to insufficient financial resources, inexperienced, unmotivated and unwilling to cooperate people, poor adaptation to technological advances in the industry, knowledge sharing risks, weak social capital and noteworthy regulation risks. The research results indicate six factors as main risk mitigators: transparent communication among innovators, trust building, people empowerment, organizational learning and investment in knowledge, leadership, vision and convictions, proactiveness towards unethical behaviour. By undertaking this study we aim to contribute to the scarce literature on open innovation practices in Romanian SMEs and to shed light on the factors that a firm needs to approach in order to foster a culture for innovation and, in the same time, reduce the open innovation risks.

Keywords: open innovation, SME, risks, innovation performance, collaboration.

1. Introduction

According to Chesbrough (2003), open innovation highlights the innovative potential of external factors, since valuable ideas can come from inside or outside the company and can go to market from inside or outside the company as well. Although the phenomenon of open innovation has increasingly captured the attention of many researchers, we found few studies addressing open innovation from the SMEs perspective and even fewer which deal with this innovation strategy from the risk management point of view.

SMEs concentrate the majority of employees and revenues both at European level as at country level, respectively in Romania. SMEs in Europe comprise of about 23Meuro investment market that account for 99% of all businesses and represent 2nd/3rd of the total employment (Renaud, 2008). In Romania, the SME sector consists of 5 million employees (67% of total people employed in enterprises), 100 billion EUR revenues and almost 500.000 companies (Ziarul Financiar, 2013). The figures suggest a strong innovation potential for SMEs, which hasn't been yet studied in accordance to their power to mitigate risks encountered in the innovation process itself.

In addition, even if SMEs are generally thought of as high innovators, an overall look over the greatest economic sector (respectively SMEs) in Romania proves that the country lags far behind in innovation area. In the Global Competitiveness Index (2012) provided by the World Economic Forum, Romania ranks 77 out of 144 countries. In the innovation index Romania ranks 106 out of 144 signalling a low involvement of the business actors in the innovation process. This illustrates the existence of major risks that affect the innovation process, as ranked by respondents to the survey of the WEF, who were asked to select the five most problematic factors for doing business in Romania: corruption (17%), tax rates (14%), inefficient government bureaucracy (13%), access to financing (12%) and tax regulations (8%). Relevant for Romania and the working force is the poor social capital, since inadequately educated workforce (4%) and poor work ethic in national labour force (3%) are high on the list of obstacles in Romanian business environment (World Economic Forum - Global Competitiveness Report 2012 - 2013). …

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