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How does customer and supplier cooperation in micro-enterprises affect innovation? Evidence from Pakistani handicraft micro-enterprises

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Abstract

Due to resource constraints, short product-life cycle, and increased competition, handicraft micro-enterprises face many difficulties. By investigating the individual effects of customer and supplier cooperations on innovation (and thereby, firm performance), this study reveals how micro-enterprises can overcome such limitations and maintain competitiveness in the market. We find that cooperation with both partners significantly and positively affects product innovation, but only cooperation with suppliers has significant and positive effect on process innovation. In turn, product and process innovations significantly and positively affect a firm’s financial and non-financial performances. Our findings provide useful theoretical and practical implications.

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Notes

  1. For various reasons, we decided to visit each micro-enterprise personally. First, there was distrust among micro-entrepreneurs towards community outsiders. Second, the educational level of most of the micro-entrepreneurs is low, raising concerns over their ability to understand the questions and concepts. Third, generally, questionnaires sent through e-mail or mail are either ignored or get low response rate. Fourth, surveys that are completed in-person have higher response rates and reduce concerns on misunderstanding of the questions and concepts. Moreover, similar studies related to handicraft businesses have also followed such an approach (e.g. Chand et al. 2014; Mendozaramírez and Toledolópez 2014; Sánchezmedina et al. 2011).

  2. Regarding the use of alternative/new materials and quality material, one may argue that the two variables are the same; therefore, it is clarified that the use of quality materials has an impact on the product’s finishing, durability, and long-lasting use. In other words, it has a direct effect on the product’s quality, whereas the use of alternative/new materials may or may not have a direct effect on the quality of the product. Furthermore, alternative/new materials are added to produce new products or different designs. Many micro-entrepreneurs also use new materials (Chand et al. 2014) to create a different look for the products.

  3. Financial performance was evaluated subjectively due to various reasons. In general, the micro-enterprises do not record their daily business transactions. In most cases, they do not have any inventory-management system mainly due to their small size and resource constraints. Moreover, these micro-enterprises are unwilling to share their financial information (Covin and Slevin 1989). Thus, it is difficult to collect such objective data. Other researchers argued that subjective financial performance is also appropriate in such studies (Garg et al. 2003).

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Acknowledgements

The authors would like to thank the Editor-in-Chief and two anonymous reviewers for their constructive comments and suggestions on the earlier version of this paper. We would also like to thank Dr. Ahsan Shafi Memon and Munir Ahmed for assistance in the data collection process. The authors also gratefully acknowledge the research support received from the Key Project of the National Social Science Fund (18AGL024) and Sichuan University new century higher education teaching reform research project (SCU8317).

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    Yongzhong Yang & Mohsin Shafi

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Yang, Y., Shafi, M. How does customer and supplier cooperation in micro-enterprises affect innovation? Evidence from Pakistani handicraft micro-enterprises. Asian Bus Manage 19, 530–559 (2020). https://doi.org/10.1057/s41291-019-00072-4

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