Factors influencing the development of radical innovation capabilities in small and medium enterprises

Abstract

Organizations need to innovate in order to gain competitive advantage. Due to the fast-changing conditions of markets, firms maintain their survival through the creation of innovations. More specifically, the development of radical innovations disrupts markets and enables firms to differentiate themselves from competitors. Small and medium enterprises (SMEs) in particular can develop radical innovations in order to compete against their larger counterparts. This thesis focuses on SME radical innovation capability, i.e. the ability of SMEs to develop radical innovations. The thesis examines what internal and external factors influence the development of radical innovation capability in SMEs. Through a systematic literature review, existing research is integrated to identify what those factors are. The findings reveal that SME leadership, organizational culture, human capital, knowledge and technology management, customer and market orientation, entrepreneurial orientation, resources availability, and collaboration with external stakeholders are key factors for radical innovation capabilities to be developed in SMEs. Theoretically, the thesis contributes to the understanding of innovation capabilities in SMEs and what factors influence their development. Practically, it offers insights to SME leaders and managers that help them better position their firms to produce radical innovations. Through participatory leadership, a psychologically safe organizational culture, effective allocation of scarce resources, as well as active collaboration with external stakeholders, SMEs can strengthen their ability to produce radical innovations (radical innovation capability).