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The role of innovation in small and large businesses

In large businesses innovation is usually based on research and development. However, in small businesses most innovation is found in activities connected to the production line, activities concerning adaptation to technologies acquired from outside, or in small technical improvements implemented through engineering techniques. In comparison to large companies which spend more money on research and development, the ratio of patent development by small companies is significantly higher. This suggests that it is easier for smaller companies to invent than to innovate.Technological innovation of a product or a process can comprise of the following activities:

  • Research and Development (R&D)
  • Adoption of new technology
  • Acquisition of new engineering tools
  • Creation of new design in industry
  • Start of new production
  • Launch of new and improved products
  • Implementation of advanced training

It is a proven fact that small businesses have to take the assistance of various sources for any innovation. These sources can be wide and varied – such as academic organisations, advanced research institutes, R&D wings of large companies, specialized technology providers, or the buyers themselves who require product changes or improvements.

As regards technology development, collaborations between small businesses and large companies can be an advantageous alternatives to venture capital, since, in addition to resources, large companies can also provide know-how, credibility and access to a marketing network, all of which can prove valuable for a new product. For large companies, the advantage of associating with smaller ones is in the inventive efficiency. In addition, with the dynamism and heterogeneity of high-tech markets, it is difficult for large companies to dominate all market segments.

Therefore, we are able to perceive that the advantage small businesses have in adoption of innovations rests in their behavioural aspects of flexibility, speed of decision-making, accelerated learning, and the need to adapt in order to stay in business or search for new markets. Large companies possess the advantage of material assets, i.e., the quality of their research and development, the capability to hire highly qualified technical professionals, and easier access to gaining finance for maintenance of research activities.

It is evident that invention and innovation takes place faster in small businesses and it is the flexible structure of these companies that contributes to the effectiveness of innovation. Small businesses which are financially fragile and they should have the support of venture capital programs to encourage innovation, financing, and patents to protect inventions.

It should be kept in mind that most small companies operate through small capital, and there is a risk of cutting fixed costs by eliminating the spending on innovation. It is important to raise the awareness of small businesses about the importance of investing in innovation, as this forms the roots for the future competitions and business survival.

Entrepreneurial Learning

It is a proven fact that small businesses have to take the assistance of various sources for any innovation. In large businesses innovation is usually based on research and development, while in small businesses it is found in activities connected to the production line, activities concerning adaptation to technologies acquired from outside, or in small technical improvements implemented through engineering techniques.

Image courtesy: FreeDigitalPhotos.net

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