Innovation in Australian regional small businesses: does its adoption and adaption promote the evolution of innovative capabilities?
Cummins, David John (2014) Innovation in Australian regional small businesses: does its adoption and adaption promote the evolution of innovative capabilities? PhD thesis, James Cook University.
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Abstract
The small business sector is a significant contributor to Australia's economic prosperity, and is often described as an incubator for building the nation's innovation capabilities. The routine adoption and implementation of innovations such as new ideas, processes and products are espoused as a key driver of business success and survival of all sizes. However, while substantial volumes of research and business text focus on innovation within the small-to-medium business sector, debate remains about whether a paucity of empirical evidence exists to assist small business operators effectively plan, manage, and effectively measure the outputs of innovation activities. Hence, the overarching objective of this thesis is encapsulated by three primary aims: (1) to identify the enablers of innovation activities; (2) explore the potential development of innovative capability metrics and/or indicators; and, (3) examine how the identified enablers can be integrated into a conceptual model and innovation planning framework specifically for small businesses of less than 20 employees. This thesis is exploratory in nature, therefore, the proposed metrics and/or indicators, the conceptual model and planning framework all require further testing to ascertain their veracity and efficacy levels when applied in small business operating environments.
The paucity debate about the availability of empirical, evidence-based research specifically focused on small businesses remains for two reasons. The first concerns an observation from the research literature that the majority of innovation research is centred on large organisations. The second concerns innovation processes involving highly complex, interconnected, and multifaceted relationships comprised of both tangible and intangible inputs. As a consequence innovation outcomes and outputs can be hard to quantify, while the dynamic nature of innovation processes are difficult to measure accurately. Indeed, the innovation process can range along a continuum from radical to incremental and can encompass a multitude of typologies; whereby, the resulting outcome may be unquantifiable tacit knowledge creation. This thesis was undertaken to help us better understand the complexities small business operators are faced with in trying to implement and manage innovation, and to build on their innovative capabilities.
An initial review of the wider innovation literature identified two conjoint research problems in the context of small business innovation research. Discussed in chapter 1, the first problem is disparate consensus of a unilaterally accepted definition and theory of innovation generally in the context of regional small businesses. Because of its inherent complexity and the fact it occurs across all industry sectors, it is accepted that no one singular definition could adequately encompass what defines the innovation process. Nonetheless, there is widespread acknowledgement the innovation construct is defined as the adoption of something new in a process that creates or adds value to the adopting entity, and indirectly creates value for the adopting business's customer. The second problem, even though innovation metrics are available for large organisations, is a limited number of contextually appropriate innovation metrics and/or composite indicators capable of effectively quantifying regional small business innovative capabilities and outputs; particularly in micro-businesses with between 1-4 employees. The currently available innovation proxy measures, R&D expenditure and patent counts, do not account for the differences between small and large businesses such as resource limitations and operational structures.
A two-stage literature review process was undertaken for the thesis using two complimentary approaches; a traditional narrative and systematic literature review. The first stage involved a traditional narrative review of the wider literature; while the second stage involved a systematic literature review with the overall results detailed in chapter 2. Synthesis of these findings led to the development of the research aims and questions; in addition to providing the fundamental justification for the research design. Furthermore, the findings from the systematic literature review, covering 25 years of innovation research and focused only on research journals, provided strong evidencebased support in three major areas. These areas included: (1) the primary data findings; (2) answers to the research questions; and, (3) the foundations for development of the thesis outputs; while also supporting the use of a multi-methods research design.
The research design utilised a multi-methods approach; whereby, quantitative and qualitative methodologies are combined with multivariate analysis techniques. Discussed in chapter 3, the development of the research design was guided by adopting two complimentary paradigms; innovative constructivism and pragmatic pluralism. As with the multi-methods approach, these paradigms were deemed to accurately reflect the complexity of innovation research. Two separate datasets are analysed, the first being a secondary dataset from a national innovation survey undertaken by the Australian Bureau of Statistics. The second dataset is primary data, with a sample of 100 North Queensland small businesses collected using semi-structured, face-to-face, interviews. A precoded questionnaire was used as the survey instrument; with a range multivariate analysis techniques applied to ascertain the strength of relationships between activities deemed to be enablers of innovation processes.
With over 100 variables within the primary dataset, the application of multivariate analysis techniques identified a range of activities identified as enablers of innovation processes. The results and findings of the analysis process are discussed in chapter 4. Using the SPSS 22.0 statistics package, the analysis techniques applied identified innovation process enablers with strong measures of association between a range of activities, procedures, and personal attitudes. A summary of the findings are then combined with the evidence from the literature review to provide the foundations for development of three contextually specific outputs pertinent to the small business sector. These outputs include: (a) a propositional inventory; (b) a conceptual innovation model; and, (c) an innovation planning framework.
To examine small business innovative capabilities more intimately, particularly the influence of personal attitudes and attributes, three innovation rich case studies are presented. Covered in chapter 5, and identified during the sample interviews, each business was invited to discuss their innovation enabling activities and personal approaches in further detail. The three businesses represented a diversification across industry sectors; accommodation/tourism, manufacturing/services and wholesale/retail. Congruent with the literature findings, all three businesses engaged in a wide range of activities which enabled innovation process to take place including customer engagement and proactive problem solving. Interestingly, none used any formalised planning procedures, preferring to use informal planning and gut instinct to build on their innovative capabilities and to inform their decision making procedures.
By synthesising the thesis findings, it is postulated that innovation adoption allows a small business to build innovative capabilities through an evolutionary process of natural selection. Having identified the enablers of small business innovation, the final chapter addresses the three primary aims previously the four research questions. It then draws a definitive conclusion on the contextual inappropriateness of widely used innovation proxy measures developed for large businesses - yet still applied to small business operations, and proposes alternative measures focused on identifying innovative capability levels. A discussion on the contribution towards future policy development is posited, as is future research requirements. The final substantive conclusion is an assertion that innovation adoption in small businesses is akin to the natural selection process. Thus, adoption of new ideas, knowledge, processes, products or services allow businesses to continually adapt to changing markets and operating environments. If these adopted adaptations continue to create added value and increase the levels of the business's competencies in specific activities, they become embedded in the business's operating systems and knowledge banks. The result is an increase the business's ability to survive and prosper by providing a competitive advantage that allows for a better fit to meet changing operating environments. To invoke an evolution analogy, if a business's core DNA is based around customer service, then innovation is equivalent to a mutating gene that allows the business to continually adopt, adapt and evolve to better fit with the changing environments of dynamic market demands. Hence, so long as the core DNA remains relatively unchanged, small businesses succeed through a natural selection process; whereby, building innovative capabilities through evolutionary adaptation allows them to cater for changing market conditions and dynamic customer demands.
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