Innovation in small and micro-enterprises in Donegal; nice idea or commercial reality?

Abstract

Context and Purpose: This dissertation was based on the authors own practical experience of working with small and micro-enterprises (SaMEs) over eighteen years. In his experience, many business development models, originally developed around large firms, do not take account of the needs and characteristics of SaMEs, including innovation theories and models which base their research on large multinational organisations with apparently little consideration for how innovation is developed, managed or measured in SaMEs. Therefore, the author decided to undertake research into innovation in SaMEs in Donegal. The three overall objectives of this research study were to:  Identify what SaMEs in Donegal understand by the term ‘innovation’  Investigate innovation practice(s) in SaMEs in Donegal  Identify how innovation can be effectively measured within SaMEs. Design / Methodology / Approach In a process similar to Andrews et al. (2008), a detailed literature review was undertaken which guided subsequent research activities where data was collected using in-depth interviews. The two stages of data collection were: 1. Literature review supported by in-depth interviews with key informants (government bodies, agencies) who provided an insight to innovation practices within the county 2. In-depth interviews which provided a comprehensive view of the understanding, practice, motivations, behaviours and attitudes towards innovation and its measurement amongst SaMEs in Donegal 4 Findings: While very few SaMEs are aware of innovation theories, processes and procedures, practically all of them engage in some form of innovative activity. They possess a broad understanding of the ‘concept’ of innovation and are aware of its benefits. Enterprises engage in a wide range of innovations across products, processes, people, marketing, etc. and innovation is very important to them. However, innovation is not a managed or systematic process and while this is often due to lack of resources, the small size and flexible nature of SaMEs also means that innovative proposals with merit can be assessed and acted upon quickly. Many enterprises in Donegal do not engage with existing innovation networks/clusters as they feel that they are not suited to their needs. The main innovation barriers include lack of time and management support for innovation, the financial risk associated with innovations, poor ICT infrastructure, complacency amongst SaMEs and high costs of innovation including prototyping, IP, etc. Few SaMEs measure innovation activities and some only measure innovation because management accounts provide them with the information to facilitate this. A significant point to emerge from the study was the benefits of management accounts to SaMEs. Research Limitations: Very little information exists on innovation in micro enterprises. Furthermore, innovation is a very broad subject and while a number of significant themes emerged from the literature review, it was not feasible, as part of a Masters dissertation, to investigate these issues by means of an extensive quantitative survey with SaMEs. Originality / Value This paper seeks to provide an insight into the understanding which regionally-based, SaMEs have of innovation and whether, given their unique characteristics, they can practically use accepted innovation management theories, tools, etc. It also seeks to inform support organisations and other enterprises as to the challenges faced by regionally-based SaMEs in trying to implement innovation activities and whether current 5 support structures adequately address their needs. Finally, it seeks to establish whether innovation in SaMEs is effectively measured and whether innovation metrics have benefits for such organisations. Suggestions for Further Research: Further consideration should be given to whether recognised innovation management systems, models and structures as opposed to flatter, more organic innovation models are best suited to SaMEs. Also, can current support structures, networks, clusters, etc., be effectively tailored so that they are responsive to the real needs of SaMEs, and can current support organisations and policy makers present innovation more simply to SaMEs in a way which is easy to understand and practical to manage and which can demonstrate clear growth benefits. The benefits of effective management accounting systems which accrue to SaMEs in terms of knowledge management, innovation management and marketing activities should also be considered. Finally, as little research exists in relation to innovation in micro enterprises further studies should be undertaken in this area.