Innovation in Small Medium Enterprises (SMEs): The statement that small to medium sized enterprises (SMEs) are always better at innovating than larger organizations has different interpretations. To a greater extent small medium sized enterprises are better at innovation but to a lesser extent large enterprises are also better at innovation. This paper will discuss majorly on how SME are better at innovating and how they are not better. Besides, the paper will also provide an insight on how large enterprises are better at innovation. Parcel2Go Corporation will be used as example of a small medium sized enterprise. Parcel2Go is a worldwide courier corporation that offers cheap shipping services across the UK as well as internationally.
What are Small Medium Enterprises?
Small medium enterprises are corporations whose personnel numbers are below particular confinements for instance Parcel2Go. The number of small enterprises is more than large enterprises which implies that there are many people employed in small medium enterprises than large enterprises. On the other hand, small enterprises are in control of driving innovation as well as competition in various economic sectors.
SMEs and Innovation
Small medium Enterprises have a benefit over larger enterprises in relation to addressing innovation issues – their size implies they are in a position to react very fast to variations in the business setting. Whereas some small medium enterprises are best in sustainable practices or doings, others do not have the type of strategic outlook which views variations in the business setting as chances – seeing the responsibilities which necessitate more transformation as an added problem, instead of a source of probable benefit.
Small medium enterprises are often not easy to describe considering their diversity as well as size. The range of the small medium enterprise segment also offers a challenge. The division may comprise of businesses which vary from service industry through manufacturing– each of which offer their particular sustainability challenges. However, whereas concerns around sustainability ought to be one of the more significant business attentions facing small medium enterprises today – many directors remain uninformed of the main areas of environmental legislation that affect their enterprises.
Many business directors of small medium enterprises for instance Parcel2Go and are not able to name any ecological legislation which affects their enterprise. Furthermore, many are certain that greater green regulation would raise costs and place extra burdens on them, with some believing that new enterprises will be created. Scholars in the field of business provided evidence which shows that small medium enterprises are capable of demonstrating innovative practices as well as being responsive to rapid revolution because of their flexible workforce and size. Research also shows that although there is a strong trust that small medium enterprises have clear benefits over large enterprises, further researcher does not recognize that the ability to vary quickly means that movement in the external environment of a business might provide opportunities that can be capitalized in strategic approaches as well as innovative (Mompo, & Redoli, 2009).
Small medium enterprises require targeted, clear, brief information which takes the least amount of time as well as effort to access, comprehend and use. Then again, the small number of employees that small medium enterprises have makes it easy for them to adhere to ethical issues that are recommended during innovation. Complying with ethical regulations remains the most essential attention for the corporate board. In 2001 major corporations like Enron collapsed because of poor ethical compliance. This contributed to the enforcement of strict regulations to prevent the same crisis. However, the increased attention on compliance contains its drawbacks. For instance, shareholders are often not interested with returns than compliance. According to previous research, shareholders want to see proof of practical corporate advantages that enhance business performance. The association between performance and corporative governance is therefore a complex subject that always rotates around organization compliance without destructing performance (Booyens, 2011).
On the other hand, most small medium enterprises encounter obstacles when they are joining new markets. Business practices and culture, government needs, product customization and a firm’s structure are the main extents that subject a company to local adaptation. Yueh-shian (2011) points out that, when a company goes international, two factors drive its strategy, the pressure of international integration and the pressure of regional or local responsiveness. The pressure of local responsive arises when a company selects the multi domestic strategy. Local adaptation is mainly driven by the market environment and the strategy of a firm. Therefore, it is hard for a small medium sized enterprise to cope with multi domestic strategy.
Change in Business
To some extent small medium enterprises are better at innovating because they are not faced with the problem of change. It becomes difficulty for a larger enterprise to adapt to innovation because of its long familiarization with its service. Change is a usual aspect that is required in any business its development. Incorporating change in an organization will enable it thrive well in the changing environments as it will not struggle to survive. However, how businesses manage change differs depending on the kind of business and the individuals involved. The most important part of change is how people who are far away from the business understand the change procedure. Large businesses always find it hard in coping with change which is a hindrance to innovativeness.
Another factor that makes small medium companies to be more innovative is the competitive factor. Most small medium enterprises face a lot of competition from large companies that have higher brand recognition and have won customer loyalty because of the advantage of their long existence. Therefore, small medium enterprises use innovation as the only competitive advantage to beat their large competitors.