Innovation and the Small Business
11 important questions on Innovation and the Small Business
Innovation, in industry context
- Advantage of LE is promoted in capital-intensive industry
- In highly innovative industry, SE is better
Degree of innovation depends on 2 dimensions:
- Technology dimension: incremental vs. radical
- Market dimension: imitation (new to firm), vs. innovation (new to market)
3 factors for innovative advantage of LE
- Innovation requires higher FC
- R&D is risky, SE must invest large proportion of resources in single product
- Scale economies in promotion, greater potential for LE
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The greatest source of generating new knowledgde is R&D. Measures of technological change involve on three major aspects of the innovative process
- measure of inputs in innovative process (such as R&D expenditurs)
- intermediate output (as the number of patent)
- direct measure of innovative output (Objective: innovation count; subjective: firm-based survey)
Since 80s, government has active policies in supporting companies
- Small Business Administration (SBA): loan programme to businesses that may have great impact on economy
- Angel capital: informal private equity
- Small Business Innovation Research (SBIR): helps ideas developing to become commercial
Innovation, in geographical context
Factors for innovative advantage SE
- Less bureaucracy
- Benefit from researcher who felt thwarted by managerial restraints in LE
- SE places innovative action at centre of competitive strategy
Simplyfied innovation process, 3 steps
- Conception: idea analysis and idea evaluation
- Implementation: development and testing of idea
- Marketing: production and market launch of idea
Innovation intermediat output measure:
- adv: publicly available and comparable across countries & times
- disadv: measures inventions ipv innovations, and not all innovations are pattented
Innovation input measure:
- Adv: available from statistics & comparable across countries/times
- Disadv: not all innovation comes from R&D, tendency to favour LE above SE
Innovation ouput measures:
- adv: historical perspective available
- disadv: favor product over process innovation, favor radical above incremental innovation, and it excludes unsuccesful innovation
- adv: differentiates among different kinds of innovation
- disadv: subjective, representativeness of results depends on answer rates
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