Overcoming barriers to innovation in SMEs in China.docx
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OvercomingbarrierstoinnovationinSMEsinChina
OvercomingbarrierstoinnovationinSMEsinChina:
Aperspectivebasedcooperationnetwork
Publication:
Innovation:
Management,Policy&Practice
Author:
Xie,XM
Datepublished:
December1,2010
(ProQuest:
...denotesformulaeomitted.)
1.INTRODUCTION
Inthefast-changingandincreasinglycompetitiveglobalmarket,smallandmedium-sizedenterprises(SMEs)exertastronginfluenceoneconomicgrowthandtechnologicaldevelopmentofmanycountriesthroughtheirabilitytoinnovatenewproductsandprocesses(Zhuetal.,2006).Nevertheless,innovationisdifficulttorealize,especiallyforSMEswithlittleexperienceandresources(KaufmannandTödtling,2002).ManyfailurestoriesofSMEsintechnologyinnovationrevealthattherearevariousfactorsimpedingtheirinnovationprocess(O'Reganetal.,2006;Zengetal.,2010).
Sincetheimplementationoftheopenpolicyin1978,Chinahasmadegreateffortstochangefromaformerhighly-centralizedplannedstatetothecurrentmarketeconomy(GuandLundvall,2006).TheroleofSMEshasbeenexpandinginthischangingsocio-politicalcontextofChina(Andersonetal.,2003).Theynotonlyplayagreaterroleintheeconomies(accountingformorethan99%ofallfirms),butalsocontributeinalargeextenttotheincreasedlevelsofbusinessactivityandemployment(Siu,2001,2005).
Asthelargestcityandthecenterforeconomy,financeandtrades,ShanghaihasundergonedramaticchangesasreflectedbytherapidgrowthofSMEs,notonlygeneratingalargenumberofSMEsaroundthecityofShanghaithatoverspillintothesurroundingareaoftheYangtzeRiverDelta,butalsoahightotalturnover(Zengetal.,2009a).AccordingtothedatafromShanghaiMunicipalStatistics,thenumberofSMEshadincreasedto363,600bytheendof2006,accountingfor99.70%ofthetotalnumberofenterprises,andthetotalturnoverhadreached3635billionYuan,accountingfor63.10%ofthetotalturnoverofallenterprises.Figure1showsthechangesinnumberandannualturnoverofSMEsinShanghaisincethe10thFive-yearPlan.
FromFigure1,itrevealsthatthenumberoftheSMEshasincreasedfrom201,100in2001to363,600in2006,andtheannualturnoveroftheSMEshasincreasedfrom1432.916billionYuanin2001to3635.341billionYuanin2006.
AlthoughSMEshavethecharacteristicsofrespondingrapidlytochangingenvironmentsandsatisfyingcustomers'emergingrequirements(Ferneley,2006),manySMEshavebeenmorelikelytofaceresourceandcapabilityconstraintsthantheirlargercounterparts(Hewitt-Dundas,2006),andhaveshownconsiderabledifficultiesinfacilitatinginnovation(Hussinger,2010;RolfoandCalabrese,2003).
Toourknowledge,thereisapaucityofresearchoninnovationofChineseSMEs.Usingastructuredquestionnairesurvey,thispaperexaminestheinnovationandnetworkingactivitiesof188manufacturingSMEsinShanghai,thelargestcityinChina.Weexploredtherelativeimportanceofthebarriers,cooperationnetworksandpoliciesininnovationforChineseSMEs.ItishopedthatthestudycanpavethewayforimprovinginnovationcapacityforSMEsinChina.
2.PREVIOUSWORKS
Kimetal.(1993)exploredthefactorsdeterminingtechnologicalinnovationsinsmallfirmsinKorea,andrevealedthatthetwotopmanagerialcharacteristics(risk-takingpropensityandtoleranceforambiguity),environmentalheterogeneity,environmentalscanningstrategy,andprofessionalizationoforganizationalstructurewerethemostsignificantfactorsdiscriminatinginnovativefromnon-innovativesmallfirmsinKorea.Smallboneetal.(2003)arguedthatthelowrateofreturnandthelackoffinancewerethemainconstraintsofinnovationformanufacturingSMEs.UsingsurveydatafromsmallAustralianmanufacturingfirms,Rogers(2004)foundthatinnovationmightbehigherinfirmswithhighermanagementtraining,firmsthatnetworkwitheachotherandfirmsthatcarryoutR&D.O'Reganetal.(2006)addressedthattheinvestmentinR&D,thenumberofnewproductsintroduced,theneedtomeettechnologicalchangesinbothprocessesandproductsandtheimportanceofprototypedevelopmentwerethemostimportantattributesofinnovationinmanufacturingSMEs.Hewitt-Dundas(2006)foundthatinnovationactivitiesofsmallplantswereconstrainedbythelackofexternalinnovationpartners,thelackoffinance,thehighriskofdevelopmentandthelackofinformationaboutnewtechnologies.
TherequirementofSMEstocollaborate,asameansofsupplementingandcomplementinginternalresources,hasdominatedmuchoftheacademicdebate.AsBougrainandHaudeville(2002)indicated,networksreinforcedSMEs'competitivenessbyprovidingthemwithawindowontechnologicalchange,sourcesoftechnicalassistance,marketrequirementsandstrategicchoicesmadebyotherfirms;especiallyinusingeitherformalorinformalnetworks,SMEscouldreducetheirirreversibilitycostsandhadaccesstonewknowledge.Cumbersetal.(2003)notedthattheadvantagestobegainedfromlocalizednetworksandlearningwereclaimedtobeparticularlyimportantforSMEsinhelpingoffsetthesize-relatedadvantagesoflargerfirms.Macpherson(2005)examinedtheprocessoftechnologicalandorganizationalinnovationwithinaSMElocatedinarelativelyremoteareaofnorthwestEngland,andindicatedthatvirtualtechnologiesdependedheavilyonsharedperceptionsofparticipatingones(e.g.,universities,researchinstitutes,suppliers,customers)innetworks.
3.METHODOLOGY
Todeterminetherelativerankingsoftheidentifiedfactorsincludingthebarriers,thecooperationnetworksandpoliciesininnovationforSMEs,therelativeimportanceindex(RII)isemployed(Zengetal.,2005).Therespondentswereaskedtorankthelistedfactorsbasedontheirrelativeimportanceusingscoresrangingfrom1to5,where'1'representstheleastimportantand'5'standsforthemostimportant.Thescoreswerethentransferredtotherelativeimportanceindex(RII)usingEq.
(1).CalculatedRIIvaluesareintherangebetween0and1.
...
(1)
Whereωisthescoregiventoafactorbyarespondent,rangingfrom1to5;Aisthehighestscore(i.e.,5inthestudy);andNisthetotalnumberofrespondents.
3.1DefinitionofSMEs
ItisdifficulttodefineSMEs:
notonlybecausethedefinitionchangeswithtime,butalsobecausethedefinitionvariesfromcountrytocountry,includingorexcludingdifferentsizeranges.Ingeneral,adistinctioncanbemadeaccordingtothequantitativecriteriaforassessingthesize,whichinclude:
numberofemployees,annualturnover,totalpayroll,balancesheettotalandnetproduct.ThemostwidelyuseddefinitionintheentrepreneurshipliteratureisprovidedbytheAmericanSmallBusinessAdministration(SBA),whichdefinesSMEsasstand-aloneenterpriseswithfewerthan500employees(WolffandPett,2000).FollowingtheSBA'sdefinitionofSME,welimitoursampletoChinesefirmsthathavefewerthan500employees.
Rogers(1995:
11)definedinnovationas'anyidea,practiceorobjectthatisperceivedtobenewbyanindividualorotherunitofadoption'.Inthisstudy,innovationnotonlyinvolvestheadoptionofnewproducts,processesand/orideasinSMEs,butalsoinvolvesnewwaysofidentifyingtheneedsofnewandexistingclients.
3.2Survey
Onthebasisofpreviousstudies,aquestionnairewasdesignedtoevaluatetheimportanceofsomefactorsaffectinginnovationactivitiesofChineseSMEs(Doloreux,2004;O'Reganetal.,2006)includingbarriers,innovativecooperationnetworks,andthepolicyenvironmentofinnovationforSMEs.Theitemsofconstructsareevaluatedwithafive-pointLikertratingscale,rangingfromstronglynotimportant'1'tostronglyimportant'5'.Toreduceresponsebias,thequestionnairescatteredthoserelatedquestionsmeasuringeachconstructacrossthesurveyform.Thequestionnairewaspretestedforvaliditybyapanelofexpertsintherelatedfield(includingtheexecutivesofenterprises,consultants,scholarsandgovernmentofficers).
Thedatawerecollectedviaacross-sectionalsurveyapproachbysendingquestionnairestoasampleofmanufacturingSMEslocatedinthenearbyregionsofShanghai,whichhavethemostdevelopedmanufacturingsectorsinChina.ThislistoffirmswasobtainedfromthewebsiteofShanghaiSME,selectedaccordingtotheirsizeandindustrialsectors.Inthisinvestigation,500copiesofquestionnaireweredistributedand295questionnairesreceived,inwhich188werevalid,witharesponserateof37.6%.Thegoodnumberofvalidresponsessuggeststhatlittlesignificantnon-responsebiasisdetected(Hart,1992).Therespondents'profileisshowninTable1.
3.3Thesample
Table1showsthecharacteristicsofthesample.Itindicatesthatthereare,intermsofownership,69.68%WhollyChinese-OwnedEnterprises(WCOEs)whichincludeState-OwnedEnterprises(SOEs,10.11%),PrivatelyOwnedEnterprises(POEs,45.74%)andCollectivelyOwnedEnterprises(COEs,13.83%),and30.32%Foreign-InvestedEnterprises(FIEs),whichincludeJointVentures(JVs),CooperativeEnterprise(CEs)andWhollyForeign-OwnedEnterprises(WFOEs).InlinewiththefindingsofAndersonetal.(2003),privateenterprisesarebecomingincreasinglyimportantintheChineseeconomy.Asfortheemploymentsize,56.91%ofenterpriseshaveemployeesrangingfrom50-300.Inaddition,48.94%ofenterpriseshaveanannualturnoverrangingfrom10-30millionRMBYuan.
Inaddition,thereare23industrialcategories,inwhichtheelectronicandtelecommunicationsequipmentsector(35.64%)isthelargestsectorrepresentedinoursample(seeTable2).ThemainindustrycompositionofWCOEssampleisrepresentedbytheelectronic