To what extent do you agree with the claim that small to medium sized Essay

To what extent do you agree with the claim that small to medium sized enterprises (SMEs) are always better at innovating than la - Essay Example The drivers of innovation include competitive pressures, and the need to gain competitive advantage. Competitive advantage can also be achieved from firm size or possession of assets (Tidd and Besant, 2009, Ch 2, p1). Mobbs (2010) cites from a book by Baumal who noted that â€Å"virtually all the economic growth that has occurred since the 18th century is ultimately attributable to innovation†. Drivers of Innovation Internationalization, deregulation and globalization have compelled companies to find newer ways to enhance performance, productivity and growth. Innovation has become a strategic priority as it helps to survive adverse changes, to protect market share, to open new horizons and to become market leaders (Mobbs, 2010). As markets have become customer-driven, firms also need to innovate to cater to customer needs, preferences and wants. In addition, advanced communications and transportation technology have fuelled growth thereby increasing competitive pressures on fi rms to innovate (The Economic Intelligence Unit, 2007). Other drivers of innovation include education and technical skills of the workforce and investments in research and development as a percentage of the GDP. Innovation is the application of knowledge in some innovative way and it definitely boosts performance. Business leaders in both small and large companies have started focusing on top- and bottom-line growth and one of the best ways to achieve this is through innovation. They have started evaluating their products, services, processes and even their corporate culture to gain competitive advantage (Mobbs, 2010). This paper evaluates to what extent small and medium-sized companies are better at innovating than larger companies. Types of Innovation Various theories have been put forth by researchers and scholars as they evaluate the potential of SMEs and large firms to innovate. Firm size and age influence survival, but the direction of growth matters more than the firm size (C efis and Marsili, 2005). According to the product life cycle (PLC) theory, both product and process innovation influence market competition in different stages of industry evolution. Process innovation gains prominence as the industry matures. However, product innovation has to be ongoing as in the case of cardiac pacemakers. Firms that could introduce intermittent incremental innovations could support themselves better. Smaller firms would focus on product innovation but there are other ways in which firms can obtain strategic advantage such as change in the process, position (changing identities) and paradigm (new ways of seeing the world). Schumpeter, the founder of innovative studies, believed that entrepreneurs have the propensity to innovate and also receive rewards as long as they enjoy monopoly (Tidd and Besant, 2008). However, they can soon be overtaken by competitors who copy and imitate. Therefore constant innovation keeps the capitalist engine in motion. Sources of Innov ation However, this ability to innovate is more important than any other factor. Innovation transcends all functional areas such as marketing, planning, human resource management and finance. In SMEs most of these functions are carried out by owner-managers who may lack the realization of the process needed for implementing innovation. Moreover, SMEs consider innovation as a one-dimensional function and hence consider innovation only through a major technological breakthrough (Tunney, 2007). However, there is