Academic journal article Review of Business & Finance Studies

Identification of Innovation Capabilities for Micro and Small Enterprises in Morelos, Mexico

Academic journal article Review of Business & Finance Studies

Identification of Innovation Capabilities for Micro and Small Enterprises in Morelos, Mexico

Article excerpt

ABSTRACT

Innovation is usually associated with the use of new technology or with important research and development departments, leaving micro and small enterprises (MSE) lacking. Our research shows that MSE can find success by doing things differently, better, quicker and more cost efficiently. Unfortunately, the innovation level of MSEs is hard to evaluate because most innovation models have been developed for medium and large enterprises. This paper's main objective is to determine indicators that can efficiently measure innovation in MSE in Morelos, Mexico dedicated to service and commerce activities. Three innovation models were analyzed: "Innovating for the next three billion" report by Ernst & Young, "Measurement of basic processes and innovation enabling" and "The Innovation Kite Model". From this analysis, and after the identification of the characteristics and needs presented by the Mexican commerce and service MSE, we stablished 12 innovation capabilities to measure innovation levels.

JEL: M10, M16

KEYWORDS: Innovation, Micro and Small Enterprises, Innovation Capabilities

INTRODUCTION

Innovation is an important topic for business. Innovation is a way enterprises manage challenges in developing new products and services, as well as to improve processes and management to offer added value to their customers. Innovation has been widely accepted as a driving force in creating economic value since Schumpeter defined it in 1934. Being effective at innovation is about creating knowledge and generating a competitive advantage.

Enterprises have good opportunities to make improvements. They must pay attention to what they are doing and what customers are telling them about their products and services. Customers know how they want products and services to be better. The enterprises' job is to do research and ask customers their desires. Employees are also an important source of information. Creative ideas can be conceived by anyone in the enterprise. But, these suggestions must be taken seriously and some selected for implementation (Morris, 2013).

To profit from innovation, enterprises make great efforts to build their innovation capability. Measuring innovation capabilities is complex. Multi-dimensional difficulties are shown in the innovation process. Innovation involves a broad and dynamic spectrum of activities related with markets, new products, redesigning, production and others. Successful innovation comes from the integration of a set of capabilities, rather than a single type of capability (Zhang, Garrett-Jones, & Ricky, 2013).

To manage the innovation capabilities the first step is to be able to measure them. Therefore, the creation of metrics or indicators to measure innovation in companies is crucial to determine the current condition of the company and define a strategy for improvement (Galvez, Camargo, Julio, & Morel, 2013).

Usually, the methodology and tools available to evaluate innovation are not sufficient. Most are based on the design and use of science and technology. Descriptive methods focused on processes or innovation resulting in research done at a country level, does not show the perspective from enterprises' point of view. (Moreno Rojas & García Carrillo, 2014)

The innovation level for micro and small enterprises (MSE) of commerce and services sectors is difficult to evaluate. The evaluation criteria can be applied to bigger enterprises which have more resources and activities related with research and development, high levels of technology and other factors that MSE cannot easily obtain. Adams, Bessant, and Phelps 2006 show evidence that the best way to measure innovation capabilities in MSE is using a multi-criteria approach. (Moreno Rojas & García Carrillo, 2014)

Innovation is easy when enterprises have enough resources. But when resources are limited, things get difficult. Micro and small enterprises commonly face resource limitations. …

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