Innovation processes and the small business: a conceptual analysis

Innovation in the small business can be conceived of as a management process and challenge that can fundamentally affect business performance. This process, when mapped, offers a framework that can be used to encourage and enhance successful innovation management. The paper outlines an innovation process based on five case studies of small businesses, and uses qualitative data to analyse and examine the concept of innovation within the small and medium enterprise. The development of an underpinning conceptual framework provides insights into the constituent parts of the innovation process, which can be presented in three main stages. The first stage encompasses the development of the ‘building blocks’ of innovation, namely: a strategy for innovation; awareness of the external environment and opportunities; and the capability to innovate within the small business. The second stage relates to the development of innovative responses to problems and opportunities experienced by the small business or its key stakeholders. The third and final stage commercializes the innovative response, both tactically and strategically, in ways that maximize the benefit of innovation to the small business. Overall, effective innovation is based on managing this process as a whole, and on building up capacity and competency at each stage. The framework has since been used as the template for the development of a management development program for owner-managers of SMEs and as a practical tool for diagnosing small firm support needs. The framework, therefore, provides a mechanism for performance management benchmarking in the small business.