Overcoming barriers to innovation in SMEs in China.docx

1、Overcoming barriers to innovation in SMEs in ChinaOvercoming barriers to innovation in SMEs in China: A perspective based cooperation networkPublication:Innovation : Management, Policy & PracticeAuthor:Xie, X MDate published:December 1, 2010(ProQuest: . denotes formulae omitted.)1. INTRODUCTIONIn th

2、e fast-changing and increasingly competitive global market, small and medium-sized enterprises (SMEs) exert a strong influence on economic growth and technological development of many countries through their ability to innovate new products and processes (Zhu et al., 2006). Nevertheless, innovation

3、is difficult to realize, especially for SMEs with little experience and resources (Kaufmann and Tdtling, 2002). Many failure stories of SMEs in technology innovation reveal that there are various factors impeding their innovation process (ORegan et al., 2006; Zeng et al., 2010).Since the implementat

4、ion of the open policy in 1978, China has made great efforts to change from a former highly-centralized planned state to the current market economy (Gu and Lundvall, 2006). The role of SMEs has been expanding in this changing socio-political context of China (Anderson et al., 2003). They not only pl

5、ay a greater role in the economies (accounting for more than 99% of all firms), but also contribute in a large extent to the increased levels of business activity and employment (Siu, 2001, 2005).As the largest city and the center for economy, finance and trades, Shanghai has undergone dramatic chan

6、ges as reflected by the rapid growth of SMEs, not only generating a large number of SMEs around the city of Shanghai that overspill into the surrounding area of the Yangtze River Delta, but also a high total turnover (Zeng et al., 2009a). According to the data from Shanghai Municipal Statistics, the

7、 number of SMEs had increased to 363,600 by the end of 2006, accounting for 99.70% of the total number of enterprises, and the total turnover had reached 3635 billion Yuan, accounting for 63.10 % of the total turnover of all enterprises. Figure 1 shows the changes in number and annual turnover of SM

8、Es in Shanghai since the 10th Five-year Plan.From Figure 1, it reveals that the number of the SMEs has increased from 201,100 in 2001 to 363,600 in 2006, and the annual turnover of the SMEs has increased from 1432.916 billion Yuan in 2001 to 3635.341 billion Yuan in 2006.Although SMEs have the chara

9、cteristics of responding rapidly to changing environments and satisfying customers emerging requirements (Ferneley, 2006), many SMEs have been more likely to face resource and capability constraints than their larger counterparts (Hewitt-Dundas, 2006), and have shown considerable difficulties in fac

10、ilitating innovation (Hussinger, 2010; Rolfo and Calabrese, 2003).To our knowledge, there is a paucity of research on innovation of Chinese SMEs. Using a structured questionnaire survey, this paper examines the innovation and networking activities of 188 manufacturing SMEs in Shanghai, the largest c

11、ity in China. We explored the relative importance of the barriers, cooperation networks and policies in innovation for Chinese SMEs. It is hoped that the study can pave the way for improving innovation capacity for SMEs in China.2. PREVIOUS WORKSKim et al. (1993) explored the factors determining tec

12、hnological innovations in small firms in Korea, and revealed that the two top managerial characteristics (risk-taking propensity and tolerance for ambiguity), environmental heterogeneity, environmental scanning strategy, and professionalization of organizational structure were the most significant f

13、actors discriminating innovative from non-innovative small firms in Korea. Smallbone et al. (2003) argued that the low rate of return and the lack of finance were the main constraints of innovation for manufacturing SMEs. Using survey data from small Australian manufacturing firms, Rogers (2004) fou

14、nd that innovation might be higher in firms with higher management training, firms that network with each other and firms that carry out R&D. ORegan et al. (2006) addressed that the investment in R&D, the number of new products introduced, the need to meet technological changes in both processes and

15、 products and the importance of prototype development were the most important attributes of innovation in manufacturing SMEs. Hewitt-Dundas (2006) found that innovation activities of small plants were constrained by the lack of external innovation partners, the lack of finance, the high risk of deve

16、lopment and the lack of information about new technologies.The requirement of SMEs to collaborate, as a means of supplementing and complementing internal resources, has dominated much of the academic debate. As Bougrain and Haudeville (2002) indicated, networks reinforced SMEs competitiveness by pro

17、viding them with a window on technological change, sources of technical assistance, market requirements and strategic choices made by other firms; especially in using either formal or informal networks, SMEs could reduce their irreversibility costs and had access to new knowledge. Cumbers et al. (20

18、03) noted that the advantages to be gained from localized networks and learning were claimed to be particularly important for SMEs in helping offset the size-related advantages of larger firms. Macpherson (2005) examined the process of technological and organizational innovation within a SME located

19、 in a relatively remote area of northwest England, and indicated that virtual technologies depended heavily on shared perceptions of participating ones (e.g., universities, research institutes, suppliers, customers) in networks.3. METHODOLOGYTo determine the relative rankings of the identified facto

20、rs including the barriers, the cooperation networks and policies in innovation for SMEs, the relative importance index (RII) is employed (Zeng et al., 2005). The respondents were asked to rank the listed factors based on their relative importance using scores ranging from 1 to 5, where 1 represents

21、the least important and 5 stands for the most important. The scores were then transferred to the relative importance index (RII) using Eq. (1). Calculated RII values are in the range between 0 and 1. (1)Where is the score given to a factor by a respondent, ranging from 1 to 5; A is the highest score

22、 (i.e., 5 in the study); and N is the total number of respondents.3.1 Definition of SMEsIt is difficult to define SMEs: not only because the definition changes with time, but also because the definition varies from country to country, including or excluding different size ranges. In general, a disti

23、nction can be made according to the quantitative criteria for assessing the size, which include: number of employees, annual turnover, total payroll, balance sheet total and net product. The most widely used definition in the entrepreneurship literature is provided by the American Small Business Adm

24、inistration (SBA), which defines SMEs as stand-alone enterprises with fewer than 500 employees (Wolff and Pett, 2000). Following the SBAs definition of SME, we limit our sample to Chinese firms that have fewer than 500 employees.Rogers (1995: 11) defined innovation as any idea, practice or object th

25、at is perceived to be new by an individual or other unit of adoption. In this study, innovation not only involves the adoption of new products, processes and/or ideas in SMEs, but also involves new ways of identifying the needs of new and existing clients.3.2 SurveyOn the basis of previous studies,

26、a questionnaire was designed to evaluate the importance of some factors affecting innovation activities of Chinese SMEs (Doloreux, 2004; ORegan et al., 2006) including barriers, innovative cooperation networks, and the policy environment of innovation for SMEs. The items of constructs are evaluated

27、with a five-point Likert rating scale, ranging from strongly not important 1 to strongly important 5. To reduce response bias, the questionnaire scattered those related questions measuring each construct across the survey form. The questionnaire was pretested for validity by a panel of experts in th

28、e related field (including the executives of enterprises, consultants, scholars and government officers).The data were collected via a cross-sectional survey approach by sending questionnaires to a sample of manufacturing SMEs located in the nearby regions of Shanghai, which have the most developed

29、manufacturing sectors in China. This list of firms was obtained from the website of Shanghai SME, selected according to their size and industrial sectors. In this investigation, 500 copies of questionnaire were distributed and 295 questionnaires received, in which 188 were valid, with a response rat

30、e of 37.6%. The good number of valid responses suggests that little significant non-response bias is detected (Hart, 1992). The respondents profile is shown in Table 1.3.3 The sampleTable 1 shows the characteristics of the sample. It indicates that there are, in terms of ownership, 69.68% Wholly Chi

31、nese-Owned Enterprises (WCOEs) which include State-Owned Enterprises (SOEs, 10.11%), Privately Owned Enterprises (POEs, 45.74%) and Collectively Owned Enterprises (COEs, 13.83%), and 30.32% Foreign- Invested Enterprises (FIEs), which include Joint Ventures (JVs), Cooperative Enterprise (CEs) and Who

32、lly Foreign-Owned Enterprises (WFOEs). In line with the findings of Anderson et al. (2003), private enterprises are becoming increasingly important in the Chinese economy. As for the employment size, 56.91% of enterprises have employees ranging from 50-300. In addition, 48.94% of enterprises have an

33、 annual turnover ranging from 10-30 million RMB Yuan.In addition, there are 23 industrial categories, in which the electronic and telecommunications equipment sector (35.64%) is the largest sector represented in our sample (see Table 2). The main industry composition of WCOEs sample is represented by the electronic