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2. Innovation: Meaning and Dimensions
Organizational innovation is a vast multi-disciplinary area of research. Many authors have
regarded innovation as a key factor for a company to survive and grow on a long term. While most
researchers agree upon the definition of innovation, the research is fragmented from different
perspectives with efforts being made towards a cumulative body of research and a general theory
(Read, 2000). The concept of innovation is multidimensional. In general, innovation research can be
approached from the perspectives of an individual, an organization, and a nation, focusing on personal
traits, innovation management, and a nation’s source of competitiveness, respectively (Yeh-Yun & Yiching,
2007). According to Rogers (1998), “innovation is an idea, practice or object that is perceived
as new by an individual or other unit of adoption”. According to Cooper (2003), “innovation refers to
alteration of what is established by the introduction of new elements or forms”. In the context of
SMEs, innovation can be treated as any change that adds value to the organization. This value need not
be only financial, but may also represent product quality, employee satisfaction, customer satisfaction
or other less tangible measures (O'Leary, 2005).
Existing literature classifies organizational innovation into different classes. Innovations can
be either technological (product, service, process) or administrative (organizational structure,
administrative process or programmes) (Damanpour & Gopalakrishnan, 2001). OSLO manual suggests
that innovations adopted in an organization can be classified as Technological (product, process),
marketing or organizational (OECD, 2010). Technological innovations are those that occur in the
operating component and affect the technical system of an organization. It can be the adoption of a
new idea pertaining to a new product or service, or the introduction of new elements in an
organization’s production process or service operations. These innovations may be radical or
incremental in nature. While marketing innovations involve new marketing methodologies to attract
potential and existing customers, organizational or administrative innovations refer to new or
improved working systems and methods in the organization to improve overall operational efficiency.
3. Barriers to Innovations
Though it has been proven by experience and through research, that innovation adoption can
lead to better firm performance and competitive advantage, not all firms undertake innovations. A
number of studies show that firm differences in barriers to innovation were related to cost, institutional
constraints, human resources, organizational culture, flow of information and Government policy
(Baldwin & Lin, 2002). In most of the studies relating to barriers of innovation, cost involved had been
identified as the major barrier. High innovation costs have a negative and significant influence on the
innovation propensity (Shiang & Nagaraj, 2009).
According to the Canadian Survey of Innovation and Advanced Technology (SIAT), apart from the
cost related problems, impediments that arise from government policy, labour market imperfections,
internal organization problems and imperfections in the market for information were identified to be
barriers for advanced technology adoption (Baldwin & Rafiquzzaman, 1996). Regulatory
environments impose unwarranted burdens on SMEs through high and regressive compliance costs,
lack of transparency in the application of rules and legislation, inefficient bankruptcy laws and
procedures, lack of clarity and lucidity in product standards in world markets, unfair or non-transparent
competition policy and ineffective anti-corruption measures (OECD, 2010). SMEs, even in
industrialized countries, are expected to face relatively more barriers to innovation than large firms due
to inadequate internal resources and expertise (Hadjimanolis, 1999).
The decision to innovate often takes place under great uncertainty (Rosenberg, 2004). The
barriers internal to an SME, that may hamper its internationalization can be limited information on
foreign markets, supply chain and technology partners; lack of time and resources for international
engagement; lack of qualified personnel and knowledge to access markets; shortage of capital to
www.theinternationaljournal.org > RJEBS: Volume: 02, Number: 06, April-2013 Page 118