SME performance: the role of networking, innovation breadth, and business model design

Abstract

Because small and medium-sized enterprises (SMEs) are pivotal to the health and vibrancy of economies, it is crucial for researchers to understand the factors that significantly underlie SME performance. Two of the most widely identified antecedents to SME performance are innovation and networking. However, despite widespread attention, the theoretical and empirical status of the relationships between innovation, networks and SME performance remain uncertain. Some researchers note that claims regarding a direct positive relationship between innovation and networks with performance fail to adequately account for the variables that mediate this relationship.In contrast, while much research has been undertaken into the performance benefits of innovation and networks, the exponential increase in the number of publications heralding the performance benefits of business model design and business model innovation received very scant empirical support, almost non-existent for SMEs. Business model design is seen as a powerful mechanism for unlocking and enhancing the value of business processes, including innovation.Empirical evidence presented in this thesis tangibly supports this assertion and thus creates a more solid foundation for future development of the business model view of the firm.The purpose of this thesis, comprising four studies, is to theorise and research the nature of the relationship between innovation breadth, networks and business model design with SME performance. The central research question of this thesis asks: How do innovation breadth, networks and business model design relate to SME performance?Study One systematically reviews a large sample of SME growth and performance literature to identify and interpret emergent concepts, themes, trends and gaps. Study One backgrounds the three empirical studies that that follow to argue, using Resource-Based Theory, that the resources required for developing competitive advantage are both physical and intangible; of the two, intangible resources have the greatest strategic potential. In other words, the thesis finds that SMEs lacking physical resources could develop more sustainable competitive advantage by relying more heavily on leveraging path dependent, socially complex, and causally ambiguous intangible resources. Social capital and technological competence, associated with networks and innovation, represent highly desired intangible resources. Business model design organises these resources to create value for the customer. Therefore, innovation across the elements of the business model when designing or reconfiguring the SME's business model acts as dynamic capabilities that enhance SME performance.iii The systematic literature review is followed by three empirical studies that use longitudinal and cross-sectional datasets of Australian SMEs. Study Two introduces the concept of innovation breadth, as the number of distinct types of innovation that firms use, or their innovation diversity, and examines the linearity and temporality of its re...

Does functional diversity in interfirm collaborations lead to innovation diversity? Firm‐level evidence from the Australian food industry*

“…The data presented in Figure 2 show that France takes the lead in terms of business-to-business collaboration as more than 50 per cent of innovative firms have co-created goods or services in the year 2018. Our results are consistent with prior Australian studies and government reports that highlight a low level of collaboration in small and medium-sized firms (Gronum 2015;Australian Government 2017;Innovation and Science Australia 2017).…”

“…It has no effect on growth for the low or average growth firms. Consequently, the relationship between innovation diversity and growth is highly contextual (Gronum 2015). The modest growth effect of innovation in this study can be explained on the grounds that the majority of the firms in our dataset are non‐employing or microfirms (around 50 per cent as in Appendix ), and such firms may lack the capacity to transform their innovation into commercial success.…”

“…2011). In such cases, it is better to concentrate efforts on a few innovations than to dilute efforts into many (Gronum 2015; Roxas et al . 2014).…”

“…These results support claims that particular cases, such as low-growth small firms that suffer resource constraints, cannot muster the minimum resources needed to develop innovation projects (Rosenbusch et al 2011). In such cases, it is better to concentrate efforts on a few innovations than to dilute efforts into many (Gronum 2015;Roxas et al 2014). A related explanation is that larger companies face the uncertainty and risks of innovation with high growth and more resources (Eisenhardt and Martin 2000) or previous experience with innovation projects more common in larger organisations (Majchrzak et al 2004;Danneels 2002).…”

Managerial capabilities and firms' sustainable performance: Evidence from Chinese manufacturing small and medium-sized enterprises

“…Careful and informed choice is made in selecting these particular capabilities. Studies affirm that networking and innovation are two of the most widely identified antecedents to SME performance [6]. Dynamic capabilities literature [7] also attests to the fact that sensing capability is "more significant than ever to SMEs" (p. 3).…”