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Are ICTs needed for innovative firms to succeed? A survey of French SMEs
Abstract
Firms' performance can be explained by many factors, including their innovativeness. Investment in ICTs is also seen as a source of competitiveness. Our research tests these two sources of performance and examines possible synergies with ICT supporting innovation. Based on the few existing academic studies raising the issue of synergies between ICTs and innovation, three hypotheses are formulated: the positive influences of (1) innovativeness and of (2) ICT resources on firm performance and (3) the influence of ICTs on innovation performance. The model is complemented with two control variables: market dynamism and firms' sectors. An empirical survey is conducted among 1.992 small-and-medium enterprises (SMEs) in France, complemented with an investigation of their financial performance. With a final sample of 1.088 firms, we test the direct effects of innovativeness and ICT resources (software diffusion and level of ICT skills) and the combined effect of innovativeness and dedicated ICTs. Dedicated ICTs variable captures how innovation depends on specific investments in ICTs or more intensive use of existing ICTs in the firm. This variable constitutes the major conceptual originality of our research. Our econometric results show that innovativeness has a positive effect on performance only if it is accompanied with dedicated ICTs. On the other side, econometric regression emphasizes an unexpected direct negative effect of innovativeness and of the level of ICT skills on SMEs' financial performance. We discuss these results taking place in the specific organizational context of SMEs: innovative SMEs might not always be the most financially efficient firms; the return on investment of ICTs has also to be questioned. However our results confirm that synergies between innovativeness and ICTs are a factor of SMEs' performance.
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Several studies support the positive link between information technology capability and firm performance, including Bharadwaj (2000) and Santhanam and Hartono (2003), which appeared in MIS Quarterly. We conducted a study to see if this link is still statistically significant. It is now over a decade since the first study was published, during which several significant developments in the IT industry have taken place. Unlike the 1990s, when proprietary information systems prevailed, the 2000s are characterized by more standardized and homogeneous information systems and with the rapid adoption of ERP and web technologies. Thus, we attempted to reexamine the link between IT capability and firm performance with data from the 2000s. Surprisingly, the results of our current analysis showed no significant link between IT capability and firm performance. Contrary to earlier studies, IT leader firms in our study didn't show better financial performance than control firms. We discuss several possible causes for the change in findings and present an in-depth comparison in business performance between the two groups--IT leader and control--over a period extending from 1991 to 2007.
Innovativeness is the capability for innovation or the ability to innovate, and has been acknowledged as a key organizational capability. Process innovativeness is considered as an organization's capability to marshal, integrate, and leverage organizational resources to improve or create new processes. Researchers have noted that though growth in the service sector has been strong in recent years, research on innovation in service processes is sparse. Further, as information and communication technologies become an important component of many service firms' offerings, there is a growing need for research on service firms offering technology intensive services, i.e., technology service firms (TSFs). TSFs may be defined as firms that sell or provide technology in the form of management consultations, evaluations, tests, analyses, maintenance, purchasing advice, studies, designs, plans, and other artifacts. Our research, therefore, examines the relationship between process innovativeness and firm performance in TSFs. Using contingency theory arguments, our model proposes that environmental hostility (external contingency) and aggressive posture (internal contingency) moderate the relationship between process innovativeness and performance in TSFs. Based on data from 108 firms, our results show that firm performance in TSFs is positively related to process innovativeness. Further, we find that while environmental hostility has a moderating effect on the relationship of process innovativeness with TSF performance, no such relationship is found with aggressive posture.
In theory, IT integration through applications such as enterprise resource planning, manufacturing resource planning, and electronic data interchange provides an organization with the ability to exploit innovation capabilities. Based on survey data obtained from 309 Canadian manufacturing small and medium-sized enterprises (SMEs), this study aims to identify the enabling effect of IT integration on the innovation capability of manufacturing SMEs—in terms of growth and productivity outcomes—and to verify if this effect is subject to industry influences. While the firm's innovation capability was found, as expected, to be positively related to the growth and productivity of manufacturing SMEs, the results underline paradoxical effects of IT integration in this regard. While IT integration was not seen to enable the innovation capability of manufacturing SMEs in terms of growth, it was seen to have a disabling effect on this same capability with regard to productivity.
Large organizational projects must integrate the specific and dispersed knowledge of many individuals and groups to succeed. Thus, frequent exchanges between the project team and the organization's members are required. In this context, understanding of the knowledge integration process during cross-functional projects can be enhanced through the conceptual framework of social capital. A qualitative investigation of a French small firm conceptualizes knowledge integration as a three-phase model: collection, interpretation, and assimilation. The case shows that the integration process is cyclical with overlaps and inter-dependencies among the phases. This study leads to refinement of the social capital role in knowledge integration and reveals the dynamics of internal and external facets of social capital. That is, internal and external social capital play differentiated roles depending on the three phases of the knowledge integration process. Finally, the study reveals the co-evolution of social capital and knowledge integration as a resulting long-term effect.
Purpose
The purpose of this paper is to explore two basic research questions: what are the effects of information technology (IT) capability and employee empowerment on the innovativeness of small to medium‐sized enterprises (SMEs), and what are the effects of innovativeness and IT capability on firm performance in SMEs?
Design/methodology/approach
Data from 109 Polish SMEs were collected. In order to identify empirical dimensions of innovativeness, empowerment and IT capability, a factor analysis was carried out. Multiple regression analysis was employed to examine the effects of IT capability and employee empowerment on innovativeness, and the effects of IT capability and innovativeness on firm performance.
Findings
The following results are offered: innovation activity of SMEs is positively related to technological turbulence, climate for innovation, investments in innovation and use of IT in internal communications; innovation activity and IT knowledge have a positive effect on subjective measures of firm performance; and subjective measures of firm performance are significantly correlated with objective ones. The results of this study do not confirm that IT capability has a significant moderating effect on the relationship between innovativeness and firm performance.
Practical implications
The findings identify the factors that are significantly related to innovation activity and the dimensions of the constructs under study that contribute to firm performance in SMEs.
Originality/value
To the knowledge of the authors, no previous studies conducted with regards to SMEs have examined the relationships between innovativeness, empowerment, IT capability and firm performance in an integrated way. The findings suggest some direct and indirect relationships between different dimensions of these constructs.
The resource-based view is presented here as the theoretical framework for empirical research on the determinants of technological innovativeness in small firms. These determinants include the characteristics of the owner/manager (O/M) and the firm and some technological assets (resources and capabilities). Evidence based on case studies is used for the evaluation of their effect on innovativeness and their interaction. The study highlights the key role of the O/M and the importance of some of his/her characteristics. It also shows the impact of certain resources and capabilities. The O/M emerges as the orchestrator of resource accumulation and capability development in the innovative firms.
The main objective of this research is to highlight the need to reconceptualize the theoretical construct of innovativeness. There is a large body of research on the adoption of innovations. Although research studies in this area are motivated by fundamentally different objectives, there is a common thread that runs through all of them—the identification of innovative firms.In order to identify innovative firms, a variety of unidimensional measures of innovativeness have been employed in past research. Thus, innovation diffusion research studies have used the time of innovation adoption as a measure of a firm's innovativeness. Other studies have assessed innovativeness on the basis of the number of innovation adoptions. This research contends that the conceptualization of innovativeness as a unidimensional construct is incomplete. Innovativeness, we believe, is an enduring trait that is consistently exhibited by innovative firms over a period of time. In other words, a valid measure of innovativeness must represent this temporal dimension. This study proposes and tests the validity of a multidimensional measure of innovativeness.