Barriers to innovation for SMEs in a small less developed country (Cyprus)

doi:10.1016/S0166-4972(99)00034-6

Technovation

Volume 19, Issue 9, September 1999, Pages 561-570

https://doi.org/10.1016/S0166-4972(99)00034-6 Get rights and content

Abstract

The present research, conducted in Cyprus, a small less developed country, concentrates on the barriers approach to innovation. The importance of barriers, as perceived by the firms' owners/managers was, rather surprisingly, not statistically correlated either to innovativeness, economic performance or the extent of the horizontal networking. The study of barriers offers, nevertheless, some interesting clues to the innovation practice in small less developed countries. Some similarities with barriers in industrialized countries (e.g. in supply of finance and skilled labour) were found, but many differences as well, as expected from the peculiar environment of a less technologically developed country. The role of Government policies is of particular importance.

Introduction

While firms in less developed countries, in the recent past, were operating within a relatively protected environment, they must now face the global forces of competition. The globalization of the markets requires the adaptation of firms in order to survive. Even small firms have to introduce new products of higher quality and take advantage of new technology. Innovation is a difficult undertaking, especially for firms with little experience and limited resources.

Small firms in less developed countries have to face in addition to the liability of their size, the limitations of an inadequate infrastructure. The study of innovation, including the obstacles to its successful implementation, while relatively well researched in the industrialized countries is rather neglected in less developed countries (Bell and Pavitt, 1992).

The present research was conducted in Cyprus, a small less developed country. It is located in the eastern end of the Mediterranean Sea and has an open and relatively well-developed economy with a high per capita income (US$13 000 in 1997). It is classified as a "high income economy" in the World Development Report of 1997.

The next section introduces the barriers approach to innovation. The methodology is then presented, followed by the results of the study. The findings are compared with those of the literature and the last section presents some conclusions and recommendations for policy makers and managers.

Section snippets

The barriers approach to innovation

One of the several different approaches to innovation concentrates on the main barriers, i.e. obstacles, to innovation usually as perceived by the top managers of the firms. This approach is sometimes extended to include factors motivating innovation, i.e. facilitators. The aim of the research on barriers is initially to find out about their nature, origin, and importance. It attempts then to identify their point of impact in the innovation process and to measure their effects or consequences.

Methodology

In the small island economy of Cyprus small firms, strictly speaking, are those under 10 employees. Since the aim of the survey was to study firms with important innovation efforts the concentration on micro-businesses would not serve this purpose. For our purposes small are those with 10-50 employees and medium between 51 and 100. Even medium firms in Cyprus are small by European standards. According to the definition adopted by the European Union (as of January 1995) small firms are those

Hypothesis testing

The hypothesis that the higher the importance of the external barriers as perceived by the owner/manager, the lower is the innovativeness, is tested by calculating the correlation of variables: Innovativeness (NPDIN) and Importance of Barriers (EXBARSUM) (r=0.12, p=0.085). The coefficient r is low and not statistically significant, therefore H1 is rejected.

The reason may be that innovative firms although facing important barriers tend to find ways to overcome them, while non-innovative firms

Conclusions and recommendations

The importance of barriers, as perceived by the owners/managers of manufacturing firms, is not statistically correlated to innovativeness. This is a rather counter-intuitive finding, but a possible explanation was offered and other researchers have found something similar. No correlation was also found to economic performance. Perhaps the high performing firms find ways, sometimes innovative, round the barriers.

The importance of barriers is also not correlated to horizontal networking. This is

Athanasios Hadjimanolis has recently obtained his Ph.D. from Brunel University. The topic of his thesis was the management of innovation in small and medium size firms in Cyprus. He also holds an MBA from the same university, while his first degree was in chemistry. He has a 20 years' career in the manufacturing industry in a managerial position.

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Barriers to innovation for SMEs in a small less developed country (Cyprus)

Abstract

Introduction

Section snippets

The barriers approach to innovation

Methodology

Hypothesis testing

Conclusions and recommendations

Technovation

Research Policy

Corporate culture, customer orientation, and innovativeness in Japanese firms: a quadrad analysis

Journal of Marketing

Economic action and social structure

American Journal of Sociology