Small Business Economics

, Volume 6, Issue 5, pp 327–347

Innovation and diffusion in small firms: Theory and evidence

  • Bart Nooteboom
Article

Abstract

The article provides an inventory of the strengths and weaknesses of small firms in a dynamic context. To do this it considers verbal accounts of the processes of innovation and diffusion, as well as quantitative studies testing cause-effect relations. It consider both economic and noneconomic factors, concerning issues of motivation, perception and knowledge. First an overall summary is given of the characteristics of small business compared with large business, as a basis for an assessment of strengths and weaknesses. Perhaps the most important characteristic of small business is its diversity, and the article gives the conditions and sources of it. Other core characteristics are small scale, personality and independence of the small firm. From these, derived characteristics, strengths and weaknesses and core strategies can be inferred. From the perspective of the firm, strengths and weaknesses are subsequently analysed for the successive stages of innovation: invention, development, tooling/production, introduction to practice/market. Strengths and weaknesses in diffusion are analysed for the successive stages in the adoption process, as proposed by Rogers. Reference is made to theory and to empirical studies from the literature and from research by the present author.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Abernathy, W. J., 1978,The Productivity Dilemma, London: Johns Hopkins University Press.Google Scholar
  2. Acs, Z. and D. Audretsch, 1990,Innovation and Small Firms, Cambridge, Mass: The MIT Press.Google Scholar
  3. Acs, Z. and D. Audretsch, 1991, ‘R&D, Firm Size and Innovative Activity’, in Z. Acs and D. Audretsch (eds.),Innovation and Technological Change, Ann Arbor: University of Michigan Press.Google Scholar
  4. Amin, A., 1989, ‘Flexible Specialisation and Small Firms in Italy: Myths and Realities’,Antipode 21, 13–34.Google Scholar
  5. Baldwin, L. and J. T. Scott, 1987,Market Structure and Technological Change, Chur: Harwood.Google Scholar
  6. Barber, B., 1983,The Logic and Limits of Trust, New Brunswick: Rutgers University Press.Google Scholar
  7. Biemans, W. G., 1989,Developing Innovations Within Networks, PhD Thesis, Eindhoven, the Netherlands.Google Scholar
  8. Blair, J. M., 1972,Economic Concentration, New York: Harcourt Brace Jovanovich.Google Scholar
  9. Bolwijn, P. T. and T. Kumpe, 1990, ‘Manufacturing in the 1990s — Productivity, Flexibility and Innovation’,Long Range Planning 23, 44–53.Google Scholar
  10. Boog, J. and H. Kuiken, 1985,The Income Position of Independents in SME (in Dutch), Zoetermeer, the Netherlands: EIM.Google Scholar
  11. Bound, J., C. Cummins, Z. Griliches, B. H. Hall and A. Jaffe, 1984, ‘Who Does R&D and Who Patents’, in Z. Griliches (ed.),R&D, Patents and Productivity, Chicago: University Press.Google Scholar
  12. Burt, R. S., 1982,Toward a Structural Theory of Action, Network Models of Social Structure, New York: Academic Press.Google Scholar
  13. Burt, R. S., 1987, ‘Social Contagion and Innovation: Cohesion versus Structural Equivalence’,American Journal of Sociology 92, 1297–1335.Google Scholar
  14. Cannon, T., 1985, ‘Innovation, Creativity and Small Firms Organisation’,International Small Business Journal 4(1), 33–41.Google Scholar
  15. Chell, E., 1985, ‘The Entrepreneurial Personality: A Few Ghosts Laid to Rest?’,International Small Business Journal 3(3), 43–44.Google Scholar
  16. Cooper, R. G., 1983, ‘The New Product Process: An Empirically Based Classification Scheme’,R&D Management 13(1).Google Scholar
  17. Cuff, E. C., W. W. Sharrock and D. W. Francis, 1979,Perspectives in Sociology, London: Unwin.Google Scholar
  18. Davis, C. D., G. E. Hills and W. LaForge, 1985, ‘The Marketing/Small Enterprise Paradox, a Research Agenda’,International Small Business Journal 3(3), 31–42.Google Scholar
  19. David, P. A., 1975,Technical Choice, Innovation and Economic Growth, Cambridge: University Press.Google Scholar
  20. Davies, S., 1979,The Diffusion of Process Innovations, Cambridge: University Press.Google Scholar
  21. Donckels, R. and J. Degadt, 1985, ‘SME's and Public Authorities; on the Information and Communication Gap’,International Small Business Journal 3(3).Google Scholar
  22. Dosi, G., 1984,Technical Change and Industrial Transformation, London: MacMillan.Google Scholar
  23. Dosi, G., 1988, ‘Sources, Procedures and Microeconomic Effects of Innovation’,Journal of Economic Literature 26, 1120–1171.Google Scholar
  24. Freeman, C., J. Clark and L. Soete, 1982,Unemployment and Technical Innovation, London.Google Scholar
  25. Groen, A., 1991,Adoption of Technological Innovation to Solve Pollution Problems in SME: A Network Approach, paper IMP conference, Uppsala.Google Scholar
  26. Habermas, J., 1982,Theorie des kommunikativen Handelns, Teil I&II, Frankfurt: Suhrkamp.Google Scholar
  27. Habermas, J., 1984,Vorstudien und Ergänzungen zur Theorie des kommunikativen Handelns, Frankfurt: Suhrkamp.Google Scholar
  28. Hendrikse, G. W. J., 1988,On the Role of Small Firms, PhD thesis, University of Pittsburgh.Google Scholar
  29. Hippel, E. von, 1988,The Sources of Innovation, Oxford: University Press.Google Scholar
  30. Jewkes, J., D. Sawyers and R. Stillerman, 1958,The Sources of Invention, MacMillan.Google Scholar
  31. Johannisson, B., 1986, ‘Network Strategies, Management Technology for Entrepreneurship and Change’,International Small Business Journal 5(1).Google Scholar
  32. Johnson, J. L. and R. Kuehn, 1987, ‘The Small Business Owner/Manager's Search for External Information’,Journal of Small Business Management, July, 53–60.Google Scholar
  33. Kamien, M. I. and N. L. Schwarz, 1982,Market Structure and Innovation, Cambridge: University Press.Google Scholar
  34. Kazanjian, R. K. and R. Drazin, 1990, ‘A Stage-Contingent Model of Design and Growth for Technology Based New Ventures’,Journal of Business Venturing 5, 137–150.Google Scholar
  35. Kets de Vries, M. F. R., 1977, ‘The Entrepreneurial Personality, A Person at the Crossroads’,Journal of Management Studies, February 1977, 34–57.Google Scholar
  36. Kirchhoff, B. A., 1989, ‘Creative Destruction among Industrial Firms in the United States’,Small Business Economics 1, 161–173.Google Scholar
  37. Kleinknecht, A., 1987a,Industrial Innovation in the Netherlands (in Dutch), Assen/Maastricht: van Gorcum.Google Scholar
  38. Kleinknecht, A., 1987b, ‘Measuring R&D in Small Firms: How Much Are We Missing?’,Journal of Industrial Economics 34, 253–256.Google Scholar
  39. Langlois, R. N. and P. L. Robertson, 1990, ‘Innovation in a Modular System: Lessons from the Microcomputer and Stereo Component Industries’, paper conferenceInternational Joseph A. Schumpeter Society, Airlie House, Virginia.Google Scholar
  40. Lee, T. and L. L. Wilde, 1980, ‘Market Structure and Innovation: A Reformulation’,The Quarterly Journal of Economics 94, 429–436.Google Scholar
  41. Loury, G. C., 1979, ‘Market Structure and Innovation’,Quarterly Journal of Economics 93, 395–410.Google Scholar
  42. MacMillan, I. C., L. Zemann and P. N. Subbanarasimha, 1987, ‘Criteria Distinguishing Successful from Unsuccessful Ventures in the Venture Screening Process’,Journal of Small Business Venturing 2, 123–137.Google Scholar
  43. Mahajan, V., E. Muller and F. Bass, 1990, ‘New Product Diffusion Models in Marketing: A Review and Directions for Research’,Journal of Marketing 54(1), 1–26.Google Scholar
  44. Mansfield, E., 1969,Industrial Research and Technological Innovation, London: Longmans, Green & Co.Google Scholar
  45. Mintzberg, H., 1983,Structures in Fives: Designing Effective Organizations, Englewood Cliffs: Prentice Hall.Google Scholar
  46. MITI, 1984,Small Business in Japan, Tokyo: MITI.Google Scholar
  47. Neave, E. H. and J. C. Wiginton, 1981,Financial Management, Theory and Strategies, Englewood Cliffs: Prentice-Hall.Google Scholar
  48. Nelson, R. R. and S. G. Winter, 1982,An Evolutionary Theory of Economic Change, Harvard: Belknap Press.Google Scholar
  49. NOBIN, 1983,External Information Acquisition of the Small and Medium Sized Manufacturing Firm (in Dutch), the Hague: NOBIN.Google Scholar
  50. Noorderhaven, N. G., 1990,Private Competence and Public Responsibility; Anatomy of a Government-Firm Relationship, PhD Thesis, University of Groningen.Google Scholar
  51. Nooteboom, B., 1984, ‘Innovation, Life Cycle and the Share of Independents: Cases from Retailing’,International Small Business Journal 3(1), 21–33.Google Scholar
  52. Nooteboom, B., 1985, ‘A Mark-up Model of Retail Margins’,Applied Economics 17, 647–667.Google Scholar
  53. Nooteboom, B., 1987, ‘What Small Businesses Do and Omit’ (in Dutch), in:On the Measure of Small Business (in Dutch), report to the government no. 30, Scientific Council for Government Policy (WRR), the Hague.Google Scholar
  54. Nooteboom, B., 1988, ‘The Facts about Small Business and the Real Values of Its Life World’,American Journal of Economics and Sociology 17, 299–314.Google Scholar
  55. Nooteboom, B., 1989a, ‘Diffusion, Uncertainty and Firm Size’,International Journal of Research in Marketing 6, 109–128.Google Scholar
  56. Nooteboom, B., 1989c, ‘Paradox, Identity and Change in Management’,Human Systems Management 8, 291–300.Google Scholar
  57. Nooteboom, B., 1991a, ‘Entry, Spending and Firm Size in a Stochastic R&D Race’,Small Business Economics 3, 103–120.Google Scholar
  58. Nooteboom, B., 1992a, ‘Towards a Dynamic Theory of Transactions’,Evolutionary Economics 2, 281–299.Google Scholar
  59. Nooteboom, B., 1992b,Small Business, Institutions and Economic Systems, paper EACES conference, Groningen, the Netherlands, September, 1992.Google Scholar
  60. Nooteboom, B., 1992c,Schumpeterian and Austrian Entrepreneurship: A Unified Concept of Change, Research Report, School of Management and Organization, P.O. Box, 9700 AV, Groningen, The Netherlands.Google Scholar
  61. Nooteboom, B., 1993a, ‘Adoption, Firm Size and Risk of Implementation’,Economics of Innovation and New Technology 2, 203–216.Google Scholar
  62. Nooteboom, B., 1993b, ‘Firm Size Effects on Transaction Costs’,Small Business Economics 5(4), 283–295.Google Scholar
  63. Nooteboom, B., C. A. Coehoorn and A. H. van der Zwaan, 1992, ‘The Purpose and Effectiveness of Technology Transfer to Small Business’,Technology Analysis and Strategic Management 4(2), 149–166.Google Scholar
  64. Nooteboom, B., P. S. Zwart and T. Bijmolt, 1992, ‘Transaction Costs and Standardization in Professional Services to Small Business’,Small Business Economics 4, 141–151.Google Scholar
  65. Nooteboom, B. and R. W. Vossen, 1993, ‘Firm Size and Efficiency in R&D Spending’, in: A. V. Witteloostuyn (ed.),Market Evolution, Competition and Cooperation across Markets and over Time, forthcoming; Dordrecht, the Netherlands: Kluwer.Google Scholar
  66. North, D. C., 1990,Institutions, Institutional Change and Economic Performance, Cambridge: University Press.Google Scholar
  67. Pavitt, K., 1984, ‘Sectoral Patterns of Technical Change’,Research Policy 13, 343–373.Google Scholar
  68. Piore, M. and C. Sabel, 1983, ‘Italian Small Business Development: Lessons for US Industrial Policy’, in J. Zysman and L. Tyson (eds.),American Industry in International Competition: Government Policies and Corporate Strategies, Ithaca: Cornell University Press.Google Scholar
  69. Polanyi, M., 1962,Personal Knowledge, London: Routledge.Google Scholar
  70. Polanyi, M., 1966,The Tacit Dimension, London: Routledge.Google Scholar
  71. Polanyi, M., 1969,Knowing and Being, London: Routledge.Google Scholar
  72. Pompe, J. H., M. H. Bruyn and J. V. Koek,Entrepreneurship in International Comparative Perspective (in Dutch), University of Groningen.Google Scholar
  73. Porter, M. E., 1980,Competitive Strategy: Techniques for Analysing Industries and Competitors, New York: Free Press.Google Scholar
  74. Porter, M. E., 1985,Competitive Advantage, New York: Free Press.Google Scholar
  75. Reinganum, J. F., 1985, ‘Innovation and Industry Evolution’,The Quarterly Journal of Economics C, 81–99.Google Scholar
  76. Rogers, E. M. 1983,Diffusion of Innovations, New York: MacMillan.Google Scholar
  77. Rosegger, G., 1980,The Economics of Production and Innovation: An Industrial Perspective, Oxford: Pergamom.Google Scholar
  78. Rosenberg, N. (ed.), 1983,The Economics of Technological Change, Penguin.Google Scholar
  79. Rothwell, R., 1985,Innovation and the Smaller Firm, First International Technical Innovation and Entrepreneurship Symposium, Utah Innovation Foundation, Salt Lake City, 11–13 September.Google Scholar
  80. Rothwell, R., 1986, ‘The Role of Small Firms in Technological Innovation’, in J. Curran (ed.),The Survival of the Small Firm, Gower.Google Scholar
  81. Rothwell, R., 1989, ‘Small Firms, Innovation and Industrial Change’,Small Business Economics 1, 51–64.Google Scholar
  82. Rothwell, R. and W. Zegveld, 1985,Innovation and the Small and Medium Sized Firm, London: Francis Pinter.Google Scholar
  83. Sandberg, W. R. and C. W. Hofer, 1987, ‘Improving New Venture Performance: The Role of Strategy, Industry Structure, and the Entrepreneur’,Journal of Business Venturing 2, 5–28.Google Scholar
  84. Scase, R. and R. Goffee, 1980,The Real World of the Small Business Owner, London: Croom Helm.Google Scholar
  85. Scherer, F. M., 1980,Industrial Market Structure and Economic Performance, Chicago: Rand McNally.Google Scholar
  86. Scherer, F. M., 1984,Innovation and Growth: Schumpeterian Perspectives, MIT Press.Google Scholar
  87. Schumpeter, J. A., 1909,Theorie der wirtschaftlichen Entwicklung, Leipzig: Duncker & Humblot.Google Scholar
  88. Schumpeter, J. A., 1939,Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, New York & London: McGraw Hill.Google Scholar
  89. Schumpeter, J. A., 1943,Capitalism, Socialism and Democracy, London: Unwin.Google Scholar
  90. Simon, H. A., 1983,Reason in Human Affairs, Oxford: Basil Blackwell.Google Scholar
  91. Smilor, R. W. and H. R. Feeser, 1991, ‘Chaos and the Entrepreneurial Process: Patterns and Policy Implications for Technology Entrepreneurship’,Journal of Small Business Venturing 6, 165–172.Google Scholar
  92. Soete, L. G., 1979, ‘Firm Size and Inventive Activity: The Evidence Reconsidered’,European Economic Review 12, 319–340.Google Scholar
  93. Stanworth, M. J. K. and J. Curran, 1976, ‘Growth and the Smaller Firm — An Alternative View’,Journal of Management and Studies, May, 95–110.Google Scholar
  94. Stoneman, P., 1983,The Economic Analysis of Technological Change, Oxford: University Press.Google Scholar
  95. Tillaart, H. J. M. van den, H. C. van der Hoeven and F. W. van Uxem, 1981,Independent Entrepreneurship (in Dutch), Nijmegen/Zoetermeer: ITS/EIM.Google Scholar
  96. Venkataraman, S., A. van de Ven, J. Buckeye and R. Hudson, 1990, ‘Starting Up in a Turbulent Environment: A Process Model of Failure Among Firms with a High Customer Dependence’,Journal of Business Venturing 5, 277–295.Google Scholar
  97. Wyatt, S., 1985, ‘The Role of Small Firms in Innovative Activity’,Economia and Politica Industriale.Google Scholar
  98. Weinberg, N. M., 1990,Innovation, Competition and Small Business, PhD Thesis Erasmus University Rotterdam, Alblasserdam, the Netherlands: Haveka.Google Scholar
  99. Wind, Y. and R. J. Thomas, 1980, ‘Conceptual and Methodological Issues in Organizational Buying Behaviour’,European Journal of Marketing 14(5/6), 239–263.Google Scholar
  100. Williamson, O. E., 1975,Markets and Hierarchies: Analysis and Antitrust Implications, New York: The Free Press.Google Scholar
  101. Williamson, O. E., 1985,The Economic Institutions of Capitalism; Firms, Markets, Relational Contracting, New York: The Free Press.Google Scholar

Copyright information

© Kluwer Academic Publishers 1994

Authors and Affiliations

  • Bart Nooteboom
    • 1
  1. 1.School of Management and OrganisationGroningen UniversityGroningenthe Netherlands

Personalised recommendations