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2.3 Barriers to Innovation for Microenterprises

2.3.5 Managing capabilities and capacities for innovation

The aim of this section on examining the barriers to innovation was to apply understanding of the barriers to innovations literature to the context of innovating microenterprises. Scholars have reached various verdicts and recommendations for overcoming these challenges. The inconsistency in the perceptions of what constitute barriers to innovation is one area that may be explained by the variety of firm size for innovation studies. Barriers may be perceived differently due to the size of the firm—a large firm may not view cost factors in the same regard as a smaller firm that has limited financial resources.

The magnitude of impact is perceived differently for mid-size SMEs as compared to a microenterprise set up using personal funding. Consider also that more established SMEs might view the innovation itself as a barrier, as new products/processes/services may run the risk of cannibalizing the existing profitable product line. A young microenterprise that has started out with just one product will view innovation not as a barrier but as an opportunity to create a new market niche.

Van der Panne et al. (2003) pointed out that grey areas exist due to the innovation process being regarded as a complex phenomenon fraught with obstacles and failed examples. A determinant of innovation for one microenterprise can be turned into an obstacle to innovation for another microenterprise, simply due to a difference in the innovative conditions. It is often not just a single barrier that confronts a firm at any point of time. Such obstacles are often unforeseen and can occur simultaneously at various stages of the innovation process. This can create critical points in the innovation process of microenterprises. D’Este et al. (2012) suggested that when barriers are encountered in the innovation process, firms could view them as obstacles that

prevent innovation from progressing or as an opportunity to successfully overcome barriers. That is, firms can adopt the attitude of viewing barriers as a form of deterrence, and prevent themselves from stepping beyond their comfort zone (deterred barriers). This attitude can prevent them from even starting innovation activities or from adopting a learning attitude from failed innovation attempts. This observation extends the commonly held view of how culture can be an internal barrier to a potential driver of innovation due to risk-adverse personnel, from a strategic point of view for microenterprises.

Madrid‐Guijarro et al. (2009) pointed out that the impact of the barriers to innovation is dependent on different considerations:

…Process and management innovation are affected negatively by internal barriers, such as human resources and weak financial position and positively by barriers originating from the environment. Furthermore the risk factor associated with cost and financing problems is significant for only management innovation. The most significant barriers are associated with cost, whereas the lowest barriers are associated with manager/employee resistance. Additionally, the results demonstrate that the costs associated with innovation have a disproportionate impact on small firms, which are affected more than larger firms.

This is connected to understanding how microenterprises can overcome these barriers through their attitude and their own way of innovating.

Microenterprises, due to their size and organizational structure, often remain composed of passionate founders who can have the flexibility and eagerness to succeed. Studies have also shown that when a firm is actively engaged in innovation, they have had an elevated sense of awareness of the barriers to innovation than those firms that are not active in innovation (revealed barriers) (D’Este et al., 2012, Silva et al., 2007). However, beyond just relying on the characteristics of a firm to explain the innovation process, Larsen and Lewis (2007), like D’Este et al. (2012), suggested that for driving the innovation process along, how these barriers are being viewed should be considered too.

Small firms are often described as having the advantage when innovating due to “less bureaucracy, owner expertise and closeness between owners and customers” (Madrid‐Guijarro et al., 2009). These advantages are related to the characteristics of a firm, seen as aiding the implementation process during innovation. These advantages can also be described as behavioral characteristics such as flexibility and motivated management (Radas and Božić, 2009). The liability of smallness and newness that microenterprises are subjected to can

also imply that they can adapt to changes and quickly adopt new accessible resources (Dennis, 2000). A common innovation activity that complemented these behavioral advantages is networking. Networking has the main aim of being used to overcome barriers relating to external information and linkages.

There are internal constraints that have been noted to occur due to the lack of internal competencies for dealing with externally accessed knowledge and information.

Different motivations drive a firm to innovate. Whether these motivations are proactive (for example, being strategic in nature) or reactive (as a response to change in internal or external conditions), firms motivated by proactive factors are correspondingly more responsive in their marketing and product/process development activities (Bigliardi and Ivo Dormio, 2009). In Silva et al. 's (2007) research, deterring factors that were noted in their study such as lack of financing sources, lack of qualified personnel, and lack of customer responsiveness to new products had a restraining effect on the propensity for innovation. The removal of barriers has been viewed as essential to a successful innovation process.

This section is not positioning these past studies as invalid, but pointing to the difficulty in generalization for such a complex phenomenon as the innovation process, which spans a large range of industries and geographical areas. As such, while the sample size is small, the detailed empirical data of this thesis aims to provide a focused study on microenterprises. To complement the understanding of the innovation process for microenterprises, a review of the elements that can aid the innovation process is also explored in the following section. These factors may manifest in the literature describing characteristics of the firm that assisted in overcoming barriers through adapting organizational structures, culture and innovation process to gain competitive advantages in the new market place (Mosey et al., 2002, McAdam et al., 2004). In relation to this, the efforts made by both private and public sector organizations are aimed at helping the general population of SMEs stimulate innovative efforts and to overcome barriers encountered in the innovation process (Radas and Božić, 2009). The effectiveness of these initiatives at times casts a shadow of skepticism as microenterprises continue to feedback on the challenges they encounter while innovating. A main group of criticism centers on policies that pursue a “one-size-fits-all” type of solution (Tödtling et al., 2009, Tödtling and Trippl, 2005, Sullivan-Taylor and Branicki, 2011) for small firms to overcome innovation challenges. Despite the inconclusive views on the efforts provided to small firms to address the barriers to innovation, the

concept of interaction is one that most scholars have agreed on as key to successful innovation, not just for microenterprises but also for large firms.

2.4 Capabilities Influencing Innovation for