«Innovation in food sector SMEs»

Anahita Baregheh, Jennifer Rowley, Sally Sambrook, and Daffyd Davies. «Innovation in food sector SMEs », Journal of Small Business and Enterprise Development, vol. 19, n.º 2, 2012.


»The findings of this study are discussed in three sections: degree of innovation; innovation types; and innovation orientation.

»Degree of innovation

»The results of this study confirm the past literature on the incremental innovation focus of SMEs in general (e.g. Oke et al., 2007) and food SMEs, more specifically (Avermaete, 2002). Also, the rate of organisational engagement with radical innovation is relatively high, which bears out Massa and Testa’s (2008) assertions concerning the importance of radical innovation in SMEs. So, although the rate of firms’ engagement with incremental innovation is higher than that with radical innovations, firms also undertake radical innovations.

»Types of innovation

»Food sector SMEs in this study exhibit a similar level of engagement with all of product, process, and position innovation. Levels of engagement with paradigm innovation are lower, but still significant. This is consistent with research that suggests that SMEs engage in a range of different types of innovation (e.g. Avermaete et al., 2010; Menrad, 2004)) and counters research that suggests that one type of innovation is more or less important than another type for SMEs (e.g. Oke et al., 2007; La Foret and Tann, 2006). Most importantly, since these food sector SMEs do not only engage in both product and process innovation, but also engage in paradigm and position innovation, any study that restricts its analysis to one type of innovation can achieve only a very partial insight into innovation in the organisations under study. As for allocation of resources to types of innovation, product innovation seems to receive the majority of attention, closely followed by process and position innovation; responses suggest there is a lower level of resource allocation to paradigm innovation. This is the first study to identify the patterns of resource allocation to among food sector SMEs on the basis of innovation types.

»Moving on to examine types of innovation in more detail, it is important to note that the level of engagement with product and packaging innovation is similar. In the food sector, it is, therefore, important to extend the consideration of types of innovation to include packaging innovation as noted by Earle (1997) and Gellynck and Vermeire (2009). Firms are more engaged with incremental packaging innovation than with radical packaging innovation, arguably because radical packaging innovations require significant investment in machinery, design and material. In addition, firms are moderately engaged with usage of information technology to improve product development processes and, with the application of a standard new product development process. This use of a standard new product development process suggests a level of formalisation that is not always evident in SMEs (Griffin, 1997).

»Moving on to process innovation, the results of this study indicate that food SMEs are committed to the incremental improvement of their processes, and are moderately engaged with all other process related activities, including the exploitation of information technologies. On the other hand they are a little conservative in allocating resources for process innovation, re-enforcing Le Bars et al. (1998) finding that scarcity of financial resources within food SMEs prevent them from exploiting technical/technological related opportunities.

»Overall, there is also a high level of engagement with position innovation, and associated engagement in marketing activities. This is consistent with Lin and Chen’s (2007) findings in respect of marketing innovation for SMEs in quite a different sector.

»On the other hand, although respondents report a high level of engagement with position innovation, they report a relatively low level of commitment to investing signficant resources in marketing. Very few studies have examined marketing or position innovation, so data on engagement with the activities associated with position innovation are useful. Firms reflect a reasonably positive commitment to the development and exploitation of branding, innovation in marketing and promotion, and to identifying the potential of e-marketing. Firms’ lowest level of engagement is with CRM, which may be more relevant to some firms than others.

»Finally, engagement in paradigm innovation is lower than that for other types of innovation; this could be as the result of SME managers’ limited competency in viewing their organisations strategically (Singh et al., 2008). Nevertheless, within paradigm innovation, firms have quite a high level of engagement with incremental innovations, in the form of ongoing improvements to strategy and plans, although they report a rather lower level of engagement with radical paradigm innovations, or radical changes to strategy and business model. This may be associated with the rather low level of engagement with the allocation of signficant resources to strategic development.

»In respect of the other aspects of paradigm innovation, respondents are positively engaged with following a formal business planning process, again counter to the often reported informality of decision-making in SMEs (Gelinas and Bigras, 2004). Although it has been noted that collaboration is important for successful innovations ((Kumi-Ampofo and Brooks, 2009), respondents seemed rather less likely to be engaging in partnering and strategic alliances, or considering outsourcing, mergers or acquistions. Such findings question the belief that “companies almost never innovate in isolation” (Menrad, 2004, p. 845).

»Innovation orientation

»Innovation orientation has mostly been measured on the basis of organisational inputs and outputs (Bigliardi and Dormio, 2009; Capitanio et al., 2009). This study, on the other hand, has identified the level of organisational engagement with a number of activities often viewed as central to effective innovation by using Siguaw et al.’s (2006) innovation orientation framework. Firms indicated some commitment to encouraging new ideas, and to the encouragement and support of innovative employees. As suggested by many commentators (e.g Voss, 1998; Schmidt, 1990) these are central to successful innovation. Grunert et al. (1997) comment on the importance of food firms’ awareness of their markets and, in particular, this group have a reasonably high level of commitment to gathering and using information on customers, consumers, and competitors. Overall, the firms demonstrated a reasonable level of innovation orientation.

»Conclusion and recommendations

»Aiming to profile innovation in food SMEs within the UK, this study sheds light on the level of firms’ engagement with various innovation activities, processes and types on the basis of the responses of the managers of food SMEs.

»In comparison with other studies, where the main focus tends to be, variously, on incremental, radical, product and/or process innovation, this study encompasses all of incremental, radical, product, packaging, process, position and paradigm innovation, and in addition considers engagement with a range of innovation orientation activities.

»Subsequently, it considers food SMEs’ engagement with product, process, position and paradigm innovation. The findings of this study reflect a positive engagement of food SMEs with innovative activities and product, process and position innovation. There is also a reasonable evidence base to suggest that SMEs take a structured and organised approach to innovation; they engage in strategic planning, use standardised to new product development processes, and gather information about customers, consumers and competitors. On the other hand, their engagement with the allocation to significant resources to innovation lags behind their engagement with types of innovation and innovation activities, which might account for their lower level of engagement with radical paradigm innovation, and the development and deployment of new technologies. Furthermore, there is a relatively low level of engagement in partnering or strategic alliances.

»One of the most important contributions of this study is that it demonstrates the importance of exploring organisational commitment to a range of innovation types within the scope of one study. There is increasing recognition that organisations need to manage a portfolio of innovation of different types and scales (Damanpour, 2010), and that one of the characteristics of innovative organisations is their capacity to do just this (Prange and Schlegelmilch, 2010). By taking a holistic perspective across degrees and types of innovation, this study has provided evidence that SMEs in the food sector, at least, are engaged with activities that contribute to the development of a range of different types of innovation, and has also offered insights into their relative levels of engagement with activities associated with the different types of innovation and innovative behaviours. These SMEs are also relatively strategic in their approach to planning their innovation activities. However, their engagement with resource allocation to innovation acts as a constraint. Resource constraints have long been recognised as one of the factors that impact on the business performance and growth of SMEs. Cohen and Klepper (1992) suggest that SMEs’ small size limits innovation, whilst other authors have commented on the impact of limited access to finance for venture capital on innovation (Carson et al., 1995; Freel, 2000; Verhees, 2004).

»On the other hand, the SMEs in this study demonstrated a higher level of engagement with monitoring their marketplace, and other marketing activities, than has been reported in some previous studies of SMEs (e.g. Carson, 1985; Morris et al., 2002; Stokes, 1998).

»These findings could be used by practitioners in food sector SMEs to:

»_ benchmark their innovation activities and innovation orientation; and

»_ further develop their innovation portfolios to better manage the range of types of innovation with which many of them are involved.

»It is also evident that whilst the sector seems quite vibrant in terms of its engagement with innovation, investment can act as a constraint. Therefore policy makers interested in economic development might:

»_ consider strategies that can assist food sector SMEs in accessing and managing resources for innovation;

»_ explore the potential to encourage and support food sector SMEs to engage in more collaborative innovation; and

»_ offer advice and support on innovation processes and activities, with a particular focus on supporting food sector SMEs to evaluate technological developments towards enhancing their business performance. Finally, there is potential for considerably more research into innovation in SMEs in general, and in the food sector, in particular. This is an exploratory research study in this area. It is important that future research:

»_ acknowledges and accommodates the full diversity of types of innovation, and the links between them; and

»_ further develops the notion of an innovation orientation or innovativeness scale, to support businesses in their understanding and management of processes and cultures to support innovation success.»

Innovation Typologies
Thematic Readings

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