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Innovation success of non-R&D-performers: substituting technology by management in SMEs

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Abstract

This paper investigates the impact of in-house R&D and innovation management practices on innovation success in small and medium-sized firms (SMEs). While there is little doubt about the significance of technology competence for generating successful innovations, in-house R&D activities may be a particular challenge for SMEs due to high risk exposure, high fixed costs, high minimum investment and severe financial constraints. SMEs may thus opt for refraining from R&D and relying more on innovation management tools in order to achieve innovation success. We analyse whether such a strategy can pay off. Based on data from the German CIS, we find that R&D activities are a main driver for innovation success if combined with external R&D, using external innovation sources or by entering into co-operation agreements. SMEs without in-house R&D can yield a similar innovation success if they effectively apply human resource management tools or team work to facilitate innovation processes.

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Notes

  1. Definition and measurement of the four areas of management practice are described in Sect. 4.

  2. In Sect. 2, we argued that conducting in-house R&D occasionally is another type of R&D input which may be preferred by SMEs since it involves less investment, less financial resources and bears less risk. As this paper is about whether SMEs need to invest into R&D as a permanent activity in order to achieve high innovation success or whether they can substitute R&D by some type of innovation management, we refrain from considering occasional R&D in the remainder of the paper. Estimation results of extended models that also included a term for occasional R&D and an interaction term for occasional and external R&D showed that neither of the both terms was statistically significant, indicating that occasional R&D does not support innovation success in SMEs in our empirical set-up.

  3. The authors would like to thank Norbert Janz and Hans-Georg Gemünden for their conceptual contribution in the design of this question as well as the one on team work and cross-functional co-operation.

  4. This also holds true when using the log of the number of employees instead of size class dummies, and there are also no non-linear effects of size.

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Acknowledgements

The authors would like to thank Marco Vivarelli, Roy Thurik, Jacques Mairesse and the other participants of the workshop „Drivers and Impacts of Corporate R&D in SMEs”, held at the JRC-IPTS in Seville, September 19th, 2008 as well as Bettina Peters for helpful comments. The usual disclaimer applies.

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Authors and Affiliations

  1. Department of Industrial Economics and International Management, Centre for European Economic Research (ZEW), L 7, 1, 68161, Mannheim, Germany

    Christian Rammer, Dirk Czarnitzki & Alfred Spielkamp

  2. Department of Managerial Economics, Strategy and Innovation, K. U. Leuven, Naamsestraat 69, 3000, Leuven, Belgium

    Dirk Czarnitzki

  3. Department of Entrepreneurship and Innovation, University of Applied Sciences Gelsenkirchen, Neidenburger Str. 43, 45877, Gelsenkirchen, Germany

    Alfred Spielkamp

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  1. Christian Rammer
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Correspondence to Christian Rammer.

Appendix

Appendix

See Tables 8, 9, 10.

Table 8 Dependent variable: Number of observations by type of innovation
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Table 9 Ordered Probit models with sample selection and reduced number of categories (four instead of five categories)
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Table 10 Wald tests on effectiveness of management tools: R&D vs. Non-R&D performers (regressions with reduced number of categories as shown in Table 9)
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Rammer, C., Czarnitzki, D. & Spielkamp, A. Innovation success of non-R&D-performers: substituting technology by management in SMEs. Small Bus Econ 33, 35–58 (2009). https://doi.org/10.1007/s11187-009-9185-7

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