Innovation Performance of Pakistani SME’s: Micro Level Evidence

Document Type: Original Research

Author

Department of Economics Hazara University Mansehra, Pakistan

Abstract

This study investigates empirically the determinants of innovation performance of Pakistani SMEs, through micro level evidence.  There is research gap of innovation analysis of Pakistani SMEs at micro level. The data has been drawn from World Bank Enterprise Survey of 1247 Pakistani manufacturing SMEs, by applying Bivariat Probit model. Our findings indicated that Pakistani SMEs are less probability to introduce product and process innovation. Additionally, external R&D, networking, absorptive capacity and exports have positive and significant effect on product and process innovation. This provides a way for policy makers to increase investment in infrastructures (i.e. telecommunications and network) and knowledge based assets (i.e. R&D) and should contribute private and public sectors organizations to increasing the innovation performance of SMEs.

Keywords


Acs, J. Z. Anselin, L. and Varga, A. (2002), ‘Patents and Innovation counts as measure of regional production of new knowledge’, Research Policy 31, 1069-1085
Ahmad, S. Z., N. S. A. Rani and S. K. M. Kassim. 2011. Business Challenges and Strategies for Development of Small and Medium Sized Enterprises (SMEs) in Malaysia. Int. J. Business Competition and Growth, 1(2): 177–197.
Ahmadani, M. M., Shaikh, N., & Shaikh, F. M. (2012). Impact analysis of SMEs sector in economic development of Pakistan: a case of Sindh. Journal of Asian Business Strategy, 2(2), 44.
Akhtar, S., R. Raees and M. R. Salaria. 2011. The Impact of Firm, Location and Ownership Specific Factors on Foreign Market Performance of Pakistani SMEs. International Conference on Technology and Business Management, (March 28-30):5132-521
Alarcón, S., & Sánchez, M. (2013). External and Internal R&D, Capital Investment and Business Performance in the Spanish Agri‐Food Industry. Journal of Agricultural Economics, 64(3), 654-675.
Alvarez, R. (2016). External sources of techonological innovation in Chilean manufacturating industry. Estudios de economía, 28(1), pp-53.
Anuar, H., Zulhumadi, F., & Udin, Z. M. (2012). The role of internal R&D in operational performance as moderated by intellectual property rights: The Malaysian manufacturing perspective. Journal of Innovation and Business Best Practices2012, 1-15.
Audretsch, D. B. (2004). Sustaining innovation and growth: public policy support for entrepreneurship. Industry and innovation, 11(3), 167–191.
Avermaete, T., Viaene, J., Morgan, E. J., & Crawford, N. (2003). Determinants of innovation in small food firms. European Journal of Innovation Management, 6(1), 8-17.
Belderbos, R., Lokshin, B., & Carree, M. (2004, January). R&D cooperation and firm performance. In DRUID Summer Conference on Industrial Dynamics, Innovation and Development.
Bratti, M., & Felice, G. (2009). Are exporters more likely to introduce product innovations?. The World Economy, 35(11), 1559-1598.
Chun, H., & Mun, S. B. (2010). Determinants of R&D cooperation in small and medium-sized       enterprises. Small Business Economics39(2), 419-436.
Cohen, W. M., & Levinthal, D. A. (1989). Innovation and learning: the two faces of R & D. The economic journal, 99(397), 569-596.
Damijan, J. P., Kostevc, Č., & Polanec, S. (2008). From innovation to exporting or vice versa? Causal link between innovation activity and exporting in Slovenian microdata.
Domingo-Serrano, G. and Borras-Cabrer, B. (2007), “Innovation and R&D spillovers effects in Spanish regions: a spatial approach”, Research Policy, Vol. 36 No. 9, pp. 1357-1371.
Dundas-Hewitt, N. (2006). Resources and Capability Constraints to Innovation in Small and Large Plants, Small Business of Economics 26, 3, 257-277.
Escribano, A. Fosfuri and J. A. Tribó, “Managing External Knowledge Flows: The Moderating Role of Absorptive Capacity”, Research Policy, vol. 38, (2009), pp. 96-105.
Escribano, A., Fosfuri, A., & Tribó, J. A. (2009). Managing external knowledge flows: The moderating role of absorptive capacity. Research policy, 38(1), 96-105.
Ford, D., Gadde, L-E. Hakansson, H., & Snehota, I. (2003). Managing Business Relationships. Chichester: Wiley.
Gabsi, F., Mhenni, H., & Koouba, K. (2008). Innovation determinants in emerging countries: an empirical Study at the Tunisian firm level.
Ganotakis, P., & Love, J. H. (2011). R&D, product innovation, and exporting: evidence from UK new technology based firms. Oxford Economic Papers, 63(2), 279-306.
Girma, S., Görg, H., & Hanley, A. (2008). R&D and exporting: A comparison of British and Irish firms. Review of World Economics, 144(4), 750-773.
Greenaway, D., & Kneller, R. (2007). Firm heterogeneity, exporting and foreign direct investment. The Economic Journal, 117(517), F134-F161.
Griffith, R. Redding, St. and Reenen V. J (2004), ‘Mapping the Two Faces of R&D: Productivity growth in a Panel of OECD Industries’, The Review of Economics and Statistics, 86, 4, 883-895
Hansen, J. A. (1992). Innovation, firm size, and firm age. Small Business Economics, 4(1), 3744.
Harhoff, D. (1998), ‘R&D and Productivity in German Manufacturing Firms’, Journal of Economics of Innovation and New Technology, 6, 1, 29-50.
Harris, R., & Trainor, M. (2005). Why do some firms undertake R&D activities whereas other do not? A study of attitudes to R&D using a sample of matched firms’.
Hertog, R. & Thurik, R. (1993). Some new evidence on the determinants of large-and small-firm innovation. Small Business Economics, 9(4), 335-343.
Hoffman, K., Parejo, M., Bessant, J., & Perren, L. (1998). Small firms, R&D, technology, and innovation in the UK: a literature review. Technovation, 18(1), 39-55.
Hottenrott H. and C. Lopes-Bento, 2012, (International) R&D Collaboration and SMEs: The effectiveness of targeted public R&D support schemes, CEPS Working Paper No. 2012- 36, Esch-sur-Alzette, Luxembourg.
Huergo, E., & Jaumandreu, J. (2004). How does probability of innovation change with firm age?. Small Business Economics, 22(3-4), 193-207.
Kheng, K. K., Ramayah, T., & Yeap, J. A. (2014). Knowledge Absorptive Capacity and Process Innovation: The Moderating Effect of Environmental Dynamism. Journal of Technology Management and Business1(1).
Laforet, S., & Tann, J. (2006). Innovative characteristics of small manufacturing firms. Journal of Small Business and Enterprise Development, 13(3), 363-380.
Lumpkin, G. T. & Dess, G. G. (1996). “Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance,” Academy of Management Journal, 21 (1), 13572. 
Mairesse, J., & Mohnen, P. (2004). The importance of R&D for innovation: a reassessment using French survey data (pp. 129-143). Springer US.
Manufacturing firms, International Journal of Industrial Organization, 24, 349-380.
McEvily, S.K., Eisenhardt, K.M.m and Prescott, J.E., (2004), The global acquisition, leverage, and protection of technological competencies, Strategic Management Journal, Vol. 25, pp. 713-722.
Mone, M.A., McKinley, W., Bargar, V.L., (1998), ‘Organizational decline and innovation: a contingency framework’, Academy of Management Review, No. 23, pp. 115-132.
Mukkerjee, Debmalya; Gaur, S. Ajai; Gaur S. Sanjaya (2013). External and Internal Influences on R&D Alliances Formation: Evidence from German SMEs, Journal of Business Research, 66, 1, 2178-2185.
Murovec, N., & Prodan, I. (2009). Absorptive capacity, its determinants, and influence on innovation output: Cross-cultural validation of the structural model. Technovation, 29(12), 859-872.
N. Muroveca, “Absorptive capacity, its determinants, and influence on innovation output: cross-cultural validation of the structural model”, Technovation, vol. 29, no. 12, (2009), pp. 859-872.
Name. Kang, K & Lee, Y. S. (2005). What affects the innovation performance of small and medium-sized enterprises (SMEs) in the biotechnology industry? An empirical study on Korean biotech SMEs. Biotechnology letters, 30(10), 1699.
Neito, Maria; Santamaria, (2010). Technological Collaboration: Bridging the Innovative gap between Small & Large Firms; Journal of Small Business Management, 48, 1, 44-69.
Ornaghi, Carmine (2006). Spillovers in Product and Process Innovation: Evidence from
Prajogo, D. I., & Ahmed, P. K. (2006). Relationships between innovation stimulus, innovation capacity, and innovation performance. R&D Management, 36(5), 499-515.
Radas, S., & Božić, L. (2009). The antecedents of SME innovativeness in an emerging transition economy. Technovation, 29(6), 438-450.
Rogers, M. (2004). Networks, firm size and innovation. Small Business Economics, 22(2), 141-153.
Salomon, R. M., & Shaver, J. M. (2005). Learning by exporting: new insights from examining firm innovation. Journal of Economics & Management Strategy, 14(2), 431-460.
Sandvik, I. L. & Sandvik, K. (2003). “The Impact of Market Orientation on Product Innovativeness and Business Performance,” International Journal of Research in Marketing, 20 (4), 255-376.
Santamaria, L., Nieto, M. J., & Barge-Gil, A. (2009). Beyond formal R&D: Taking advantage of other sources of innovation in low-and medium-technology industries. Research Policy, 38(3), 507-517.
Senge, P.M., and Carstedt, G, (2001), Innovating Our Way to the Next Industrial Revolution, MIT Sloan Management Review, 42 (Winter 2001): 24-38.
Sorensen J.B., & Stuart, T.E. (2000). Aging, Obsolescence, and Organizational Innovation. Administrative Science Quarterly, 45, 81-112
Spithoven, A., Vanhaverbeke, W., & Roijakkers, N. (2013). Open innovation practices in SMEs and large enterprises. Small Business Economics, 41(3), 537-562.
Stock, G. N., Greis, N. P., & Fischer, W. A. (2002). Firm size and dynamic technological   innovation. Technovation, 22(9), 537-549.
Strotman H. (2007) Entrepreneurial Survival, Small Business Economics 28, 87-104.
Sun, B., Xu, X., & Wan, X. (2015). The Effect of Openness and Absorptive Capacity of Leading Firms on Innovation Performance: A Perspective of Innovation Ecosystem. International Journal of u-and e-Service, Science and Technology8(12), 139-150.
Svetina, A. C., & Prodan, I. (2008). How internal and external sources of knowledge contribute         to firms’ innovation performance. Managing Global Transitions6(3), 277-299.
Teirlink, Peter; Spithoven, Andre (2013). Research Collaboration and R&D Outsourcing different R&D Personnel requirements in SMEs, Technovation, 33, 142-153.
Umidjon A., Shuhua H., Jayathilake B., Renyan M. (2014) ‘Characteristics of Small and Medium Enterprise Innovativeness: Cases of Uzbekistan and China’, International Journal of Management Science And Business Administration Vol 1. No 1. pp. 12–27
Unterlass, F. (2013, July). The nexus of innovation, exports and economic performance of firms–revisiting self-selection and learning-by-exporting. In EcoMod conference in Prague.
Vannoorenberghe, G. (2015). Exports and innovation in emerging economies.
Y. Yufen and C. Jin, “The influence of openness to innovation performance”, Studies in Science of Science, vol. 26, (2008), pp. 419-426.