Innovation and Small Business

Innovation and Small businses are making an important contribution to the development of technological innovation within industries at regional and national levels.

In fact, the European Commission (EC, 1993, 1994, 2007) has reported that this sector probably holds the key to the future renewal and growth of Europe. According to the EC small businesses are enterprises employing fewer than fifty people, with an annual turnover/balance sheet total not exceeding ten million euro (EC, 2005).

Innovation can be defined as either the ‘application of a new method or device’ (Collins, 1997) or the ‘successful exploitation’ of a new idea (Thomas and Rhisiart, 2000). According to Baregheh et al. (2009) innovation is ‘the multi-stage process whereby organisations transform ideas into new/improved products, services or processes, in order to advance, compete and differentiate themselves successfully in their marketplace’.

Whereas the advantages of small businesses in innovation are largely associated with flexibility, dynamism and responsiveness (Rothwell, 1994), the disadvantages are often related to a lack of financial and technological resources. This can lead to problems in their capability to absorb and diffuse technology within industrial sectors.

This is a major problem in the development of the small business sector in many UK regions, especially as external inputs are of greater importance for the small firm than for the large firm during the innovation process (Allen et al., 1983). With the different levels of regional industrial development within Europe there will also be variations in the importance of innovation support to the small business (Saxenian, 1991). This inequality can make access to knowledge, technology and human resources more difficult, and will affect not only the development of small businesses within regions, but also the efficiency and effectiveness of the regional innovation system. Regional policy needs to respond to these variations, and develop innovation support networks that are sensitive to the needs of small business.

Uyarra (2005) has investigated theoretical issues and empirical evidence of regional innovation strategies with regard to knowledge, diversity and regional innovation policies.

The development of concepts concerning regional innovation has led to the new regionalist literature (Lovering, 1999) and to models of territorial innovation (Moulaert and Sekia, 1999). Such concepts include regional innovation systems, the triple helix, innovative milieu, technological districts and learning regions (Uyarra, 2005).

Here there are concerns on the use of concepts including regional innovation systems to study declining economies, rural areas and peripheral regions (Doloreux, 2002; Asheim and Isaksen, 2002). It is concluded that it is rare to identify the requisite aspects for a regional system of innovation (Evangelista et al, 2002).

In terms of increasing globalisation it appears sensible for small businesses to use support for their own innovation goals (Cooke, 2001) whether or not the support comes from outside or within a region (Uyarra, 2005). Small Business Innovation Networks It has been shown that networking is a time-consuming and demanding activity with opportunity costs for small businesses with limited resources (Rothwell, 1994).

Accordingly, there is a need to enable small businesses to overcome innovation-related disadvantages associated with networking. Since this has become a key feature of industrial innovation this increases the small businesses innovatory capabilities. Negative and positive aspects of networks need to be noted since, for example, ICT systems carry dangers as well as opportunities for small businesses, especially where industry-wide operating standards lock them into large networks.

In innovation support networks technology equates with knowledge. Within university-industry link systems a multiplicity of technology transfer mechanisms are apparent, which appear to be well integrated (Cheese, 1993). Chambers of commerce who deliver innovative support to small businesses complement the higher education system. Small businesses need to co-operate through network groups to share learning and training resources and good practice.

It is clear that chambers of commerce can provide support by acting as the prime entry point into the local innovation support network, by offering basic consultancy and using knowledge of the network to direct businesses, as necessary, to the agent, such as an independent research centre or a higher education institution (Cheese, 1993).

A non-trivial source of the exchange of information on problems of common i nterest are personal contacts within an informal network (Desforges, 1985). A problem that is particularly acute for small businesses is co-operation since they tend not to be well integrated into academic/government/company networks.

A network of co-operation partners will operate to form a ‘focal point’ of business innovation (Martinussen, 1992). The hub of the process needs good organisation and a network of co-operation partners involving business innovation centres, technology transfer companies, science parks, and venture capital companies. These will be responsible for developing technology from a business idea to establishment of a new firm.