Innovation and New Product Development in smes: An Investigation of the Scottish Food Industry




НазваниеInnovation and New Product Development in smes: An Investigation of the Scottish Food Industry
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1Introduction



This dissertation reports a doctoral research on innovation and new product development in Scotland involving case studies of eight Scottish food SMEs and a triangulation survey of 85 innovative Scottish companies.

1.1Background and motivation


The history of study and analysis of innovation goes back to three quarters of a century. Much of the early work on innovation, however, concerned the large corporation and analysed innovation from a technological perspective. Like much of SMEs research, innovation studies of small enterprises commenced later and were less numerous. The focus of such studies, however, remained high-technology enterprises. Small high-tech start-ups were considered the quintessential unit of small business innovation. The breakthrough nature of their innovations, the scorching pace of their growth and demolition of some of the most revered names in the world business by them, romanticised many of the more successful of these ventures and made them a part of the folklore of business history. Businesses of this kind were thus looked at with great interest and enthusiasm and continue to be a focus of academic and journalist interest. Innovative endeavours of people in traditional low-tech industries did not evoke similar response. Their innovations were less breathtaking. They grew rather slowly and did not confront large corporations head-on, knowing full well, the disastrous consequence of such a contest. Academics and media ignored these ‘lacklustre’ enterprises. This doctoral effort, to address the imbalance, attempts a comprehensive analysis of innovation in this, hitherto largely neglected, area of inquiry.


This research, however, is prompted not only by a relative scarcity of work on small low-tech enterprises. It springs from the belief that innovation studies of such enterprises are equally, if not more, essential. Though, it is now well accepted that SMEs are quite influential in determining the processes of income generation and employment creation in a region (Birch, 1981), it is less understood that in economies such as that of Scotland, the competitiveness and rates of growth are influenced substantially by the functioning of low-tech and traditional industries. In the year 2005, these industries constituted 93% of businesses, 89% of employment and 70% of turnover in the Scottish economy (Scottish Business Statistics, 2007). The future of Scottish economy and the well-being of Scottish people, at least in the medium term, thus, depend significantly on the performance of these industries. Given the contribution of innovation in the competitiveness and growth of businesses, the significance of innovation studies in traditional low-tech industries in Scotland is too obvious to be stressed.


Within the low-tech traditional sectors of Scotland, food and drinks is the most important. It is one of the biggest employers of people in Scotland, its top exporter and its second fastest growing export sector. Food and drinks also constitute the single largest item of household expenditure in Scotland. Study of innovation in the Scottish food industry, thus, provides us with a good understanding of the process of innovation in Scotland in general.

1.2Objective



The objective of this research is to identify and analyse the main drivers of product innovation in the Scottish food industry and the underlying process through which innovative Scottish food companies develop new products. It further aims to triangulate the findings of this work through a larger survey of innovative Scottish companies.

1.3Organisation of thesis


Chapter 2 of this thesis provides the details of a review of literature on business innovation. It describes, analyses and evaluates previous major works on definition, taxonomy, determinants, process and effects of innovation.


The chapter begins by presenting a selection of evidence on the effects of innovation on the performance of an enterprise from over half a century of work in the field to highlight the beneficiary effects of innovation on an enterprise. Next, it examines major contributions on the definition of innovation. The definitional writing on innovation comprises of an array of diverse articulations. In this chapter, an attempt is made to unify many well-known definitions of innovation by conceptualising and diagrammatically presenting a new idea, the innovation-span. In the section on taxonomy of innovation, major innovation taxonomies are described and assessed. Next, the voluminous literature on the determinants of innovation is considered. In order to organise and put this considerable work in proper perspective, the determinants of innovation are classified into two broad strands, one relating to the internal characteristics of enterprises and the other to their external characteristics. This allows a separation of the industrial and regional analysis of innovation from its microanalysis where innovation is explored at the firm level. The internal determinants of innovation are further subdivided into strategic and non-strategic factors. The rationale for such a division is that some internal strategic influences on the innovation process can be altered by the firm’s policy initiatives, but some others, non-strategic ones are not so amenable. The study of strategic determinants is obviously more important than that of non-strategic ones. Strategic variables are of interest to firms that want to change the direction, pace or outcome of their innovative efforts. Non-strategic variables are ‘given’ at a point in time and though, over a period, the enterprises may be able to alter them or their influence, such manoeuvring has limited scope.


In the penultimate section of this chapter, the process perspective to innovation is discussed. Here the relative merit of analysis of the process of innovation is discussed vis-à-vis the exploration of its determinants and it is explained as to why process perspective provides a better vantage point to visualise innovation than analysis of its determinants particularly in the context of the small business. This section also details Cooper’s (1990) contribution in analysing the process of innovation through his seminal Stage-Gate® work.


The last section in the literature review is on management or implementation of innovation. Here the issues of normative evaluation, legitimisation and conflict in management of innovation are highlighted and how they have a bearing on the conflict between the entrepreneur and the leader is discussed. Finally, other kinds of conflict that the entrepreneurs and the business leaders face while managing innovation is analysed. These include the conflict between need of a structured organisation and the flexibility required for innovation and the need to strike a balance between change and persistence and novelty and repetition.


Chapter 3 discusses the methodological issues. This chapter, on lines of other major qualitative research efforts in the field, gives a very detailed narrative of the research process used. It explains the procedure used to choose the case study companies and describes them in some detail. It discusses the meaning, rationale and limitations of case study research, the epistemological foundation of this work and explains how the research questions for this study are derived from identification of literature gap and how the case studies were conducted, including the issues of case study design and the use of multiple-case studies. Next is a discussion on how the extraneous factors are controlled and how the analysis of innovation potential indicator questionnaire data is carried out. Finally, it shows why this research fulfils various criteria of good qualitative research recommended by Miles and Huberman (1994).


Chapter 4 provides a context to this thesis by presenting an overview of the Scottish food and drinks industry. It highlights the premier role of this industry in the Scottish economy as an employer and as an exporter. It looks at the current trends affecting it and brings out a less discussed aspect of its changing nature. It shows that following a shake up, the number of businesses and employment in this industry has declined considerably whereas the turnover per unit and gross value added per employee has risen in the 7-year period from 1998 to 2005. This makes it obvious that competitiveness is crucial for survival and growth in this industry in the present times, underscoring the importance of innovation for the existing companies and highlighting the timeliness and significance of the present study.


Chapter 5 examines another context of this study, the status of business innovation in Scotland. It charts the innovation performance of businesses in Scotland vis-à-vis other regions in the UK. It analyses a number of documents and statistics including those published by the Scottish Government on the theme. It brings to the fore the fact that in Scotland, UK and EU, innovation is perceived to be synonymous with Research and Development (R&D). Here, evidence from a variety of sources is examined to show that innovation performance of enterprises in the UK regions is independent of their R&D investments and argued that a policy dictated by a R&D driven vision of innovation cannot make any noticeable impact on the economic performance of Scotland as a country. This chapter also draws from the insights gained from the research outlined in this thesis to support the above argument. It can be said that this chapter, though only contextually related to the main theme of inquiry of this research, makes a major contribution by discovering and highlighting a major flaw in current government thinking on innovation in Scotland.


Chapter 6 reports the findings of the case studies. As there are two perspectives to the analysis of innovation, the determinants perspective and the process perspective, the results of this research are, thus, presented and analysed from these two perspectives. In section, 7.1 of this chapter, evidence on presence or otherwise of indicators of various determinants of innovation in the case study companies is detailed. The chapter provides within-case and cross-case analysis of the several internal determinants of innovation. These are, market orientation, learning processes, technology policy, participation in cooperative networks, managerial efficiency, age, size, human resources, innovative people and financial resources. In section 7.2, the evidence on the nature of the process of innovation in these companies is discussed. It begins by giving a summary of the underlying process of innovation that this research has identified and then goes on to analyse in detail each significant component of that process and shows how they are linked with one another. This chapter presents detailed evidence in support of the assertions made in the findings of this research. This is achieved by interspersing the text with quotes from interview transcriptions and parts from the interview summaries. This allows the reader a basis to judge that the conclusions drawn are in consonance with the evidence.


Chapter 7 presents a report on validation of major case study findings by a panel of six experts from the Scottish food industry. It discusses salient case study results and the panel’s views on each of them.


Chapter 8, reports on a survey of Scottish companies that have successfully developed new products, undertaken to triangulate the case study results. It explains survey methodology and presents survey findings both at a rudimentary graphical level as well as in terms of advanced statistical tests. It charts a list of propositions deemed suitable for testing along with rationale for their choice as well as a list of questions that were crafted to elicit response on each proposition. It also explains choice of survey companies, the sectors from where they are chosen and rationale for the sector choice as well as the company choice. It then reports the survey results in two parts, analysis of general information on companies and analysis of information on product innovation. The first part describes the segment, age and size distribution of respondent companies. In the second part, the results are first presented graphically as propositions supported and refuted by the survey, as well as the propositions with a mixed response. It then analyses the survey data in terms of response rate, missing values, data validity, anomaly, reliability of scales and tests for self-selection bias. After presenting results of these initial checks on the data, it reports the result of statistical testing of 18 hypothesised propositions for all 85 companies as well as comparisons of statistical testing of hypothesised propositions between high-tech and low-tech companies, food and non-food companies, new and old companies and small and large companies. In the end, it gives a summary the survey process and its results.

Chapter 9 presents conclusions of this research. It discusses case study findings, and triangulates them by survey results. An attempt is first made to compare the types of innovation found in this sector with the standard taxonomy of innovation and to show what innovation variants are prevalent and prominent here and what others are absent or marginal. Then it shows what indicators of various determinants of innovation reported in literature are observed in the case study companies and what others do not have much influence here and why. Each case study result on determinants of innovation is further analysed and reconsidered in the light of the survey findings. The implications of the observed underlying process, through which the case study companies develop new products most often, are then discussed and reconsidered in the light of the findings of the triangulation survey.


In Chapter 10, three sets of recommendations are spelt out. First, it is explained how the underlying process of innovation in the case study companies identified in this research can be replicated by other non-innovative food companies. Second, in view of the flaws identified in the innovation policy of Scottish Government, prescriptions for a more realistic and effective policy are presented. Third, suggestions for further research in this field are made.


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