What Are the Barriers of Innovation in Smes

Topics: Innovation, Management, Entrepreneurship Pages: 11 (3797 words) Published: July 16, 2013
Innovation, Creativity and Enterprise Assignment
What are barriers of innovation within SMEs?
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Innovation, Creativity and enterprise Assignement.
1. Introduction.2
2. Literature review.4
2.1. Innovation.4
2.2. SMEs.6
2.3. Barriers of innovation in SMEs.8
3. Findings.9
3.1. Top barriers.10
3.2. Financial constrains.10
3.3. Shortage in skills in innovation management.11
3.4. Bureaucratic obstacle.12
4. Conclusion.13
5. List of reference.13

1. Introduction.
In the present time, while the world is sheltered of the creepy financial crisis, SMEs is one of the main sectors stimulating the economy out of the recession. In the UK economy, they accounted for 99% of all enterprises and provide over 59% of private sector employment (BERR, 2008). Meanwhile, the globalization of the markets requires the revolution of companies to survive, even SMEs have to introduce new products of higher quality and gain competitive advantage of new technology. Innovation is a difficult undertaking, especially for businesses with small experience and limited resources (Herstatt et al. 2008). Tiwari and Buse (2007) recognise that, Innovative ideas and products are playing increasingly important role responding to the price oriented competition from low-cost producers from emerging economies, on home turf and abroad. On this crucial score, however, SMEs often find themselves confronted with a number of barriers to innovation which hinder their capacity to invent and successfully commercialize new products, services or processes, see e.g. Herstatt et al. (2008). This paper aims to examine addressed barriers of innovation for SMEs under scope of reviewing previous researches. The following diagram is explaining how the essay is framed briefly.

2. Literature review.

2.1. Innovation.
Though, there are a lot of research on the connection between SMEs performance and innovation ( Verhees and Meulenberg, 2004), more information is needed (Siqueira and Cosh 2008). The way in which innovation activities are run in smaller firms differs from the way they are conducted in larger firms ( Rothwell 1994, Vossen 1998, Hadjimanolis 2000). The growth potential effect related to innovation in SMEs comes from three input parameters: technology, R&D, and generation of competitive edge (Romano, 1999). Vertically integrated organizational company structures facilitate innovation activities Definition:

In simple terms, innovation engages the utilization of new ideas. Innovation is often confused with invention. There is a difference between innovation and invention. Innovation should not be equated to invention; an invention may not necessarily lead on to innovation. This distinction is made clear by Freeman (1982:7) when he noted that: “an invention is an idea, a sketch or model for a new or improved device, product, processor system” whereas “an innovation in the economic sense is accomplished only with the first commercial transaction involving the new product, process, system or device…” Stage of innovation:

Innovations typically do not take place in a given, static environment. They are rather a result of a dynamic process in an organisation that involves interplay of several internal and external factors. Research and Development (R&D) constitutes a major – though not exclusive – part of the “innovation process”. According to Herstatt et al. (2008), it encompasses several systematic steps such as requirement analysis, idea generation, idea evaluation, project planning, product development, product testing, and product marketing. The individual steps may overlap each other and may be categorized into 3 broad phases, which represent a simplified innovation process.

Three stages of a Simplified Innovation Process (Tiwari, 2007:31). The importance of Innovation to businesses:
To start with the significance of innovation within SME stated by...
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