title: What determines and deters innovation in the British and Omani small and medium-sized enterprises
Creators: name: Al Sheibani, Shamsa Masoud Nasser
Publisher: name: University of Reading
Year: 2020

description: This research employs both quantitative and qualitative approaches in investigating the drivers and barriers of different types of innovations in the British and Omani small and medium-sized enterprises (SMEs). It follows the existing British Surveys on SMEs and develops a new dataset for the Omani SMEs. Although the Omani data sample is currently small, the framework can be used for future studies to establish larger data samples. An important contribution of this study is the design of the research that allows the findings relating to innovation among British SMES to be used to draw implications for innovation among Omani SMEs. This research also contributes to the literature as it fills the gap of limited empirical studies that compare both the drivers and barriers of different types of innovation in SMEs, in a developed and a developing economy, in a single thesis. Investigating both the determinants and deterrents of innovation in SMEs is important to have a full understanding and insights on how to enhance SMEs’ ability to innovate and respond to disruptions and challenges. Unlike all the previous studies, this study separates services innovation from product innovation, to make it clear that product innovation means goods innovation, and investigates the effect of different variables on product and service innovations separately. This thesis asks the following four questions. What are the key specific firm characteristics that impact innovation outcomes in the British and the Omani SMEs? What are the key firm behavioural elements that matter for the British and the Omani SMEs in deciding on whether to innovate or not? What are the key specific business environment factors that influence the choice of innovation in the British and the Omani SMEs? What are the barriers that may prevent the British and the Omani SMEs from innovating and how to overcome them? The first three questions are raised to understand the relationship of the firm characteristics, firm behaviour and the business environment with the innovation of products, services, processes and marketing methods at SMEs level in the UK and Oman. The fourth question is raised to identify the barriers to innovation in the British and Omani SMEs and propose suggestions to overcome them. This research analyses three datasets, the Cambridge Centre for Business Research (CBR) SME Dataset 1997, the Department for Business Innovation &amp; Skills (BIS) Dataset 2015 and the online Omani SMEs Survey 2018. These are used to test the products, services, operational processes, organisational or managerial processes, and marketing methods models at the firm level. It also uses the datasets to find out the barriers to innovation in the British and Omani SMEs. It employs three estimators: the probit, the logit, and the multi-variate probit to have a clear view of the effect of firm characteristics, firm behaviour and business environment factors on different types of innovation in the British and the Omani SMEs. For the Omani sample, the investigated direct relationship between the explanatory variables and the innovation outcomes showed quite sizable variables are insignificant. These are exports, family-owned businesses, firm age, executive founders, access to new exports markets, access to external finance, access to ICT, access to skilled labour and unskilled labour markets out of twenty-five tested explanatory variables. However, when additional tests were carried out, it is found that an indirect relationship between the explanatory variables and the innovation outcomes exist through the firm behaviour and business environment factors. The British SMEs in the 1990s primarily innovated their products, followed by their processes and services. The marketing methods innovation was the least practised type of innovation by the British SMEs during that period. This finding reflects the British economy in the 1990s, as it was highly industrialised and starting to move towards a knowledge-based economy. Later, the British SMEs in the 2010s shifted their focus as they became more processes and services innovation-oriented, followed by marketing methods innovation. Product innovation is the least practised kind of innovation in the meantime. This finding also reflects the transfer of the British economy to the crypto- economy that requires innovative process solutions to protect privacy, sensitive information and wealth. The situation with the Omani SMEs now is somewhere between the British SMEs in the 1990s and the British SMEs in the 2010s. This finding reflects the Omani economy’s diversification initiatives aiming to leapfrog from a natural resources-based economy to a knowledge-based economy. The Omani SMEs are mostly service-oriented, followed by marketing methods and incremental product innovations. The processes innovations are the least practised among the different types of innovations at the firm level. The results show that two common and key firm characteristics drive innovation in the British and the Omani SMEs: the ‘firm size’ and the ‘updated equipment &amp; high technology.’ The ‘firm age’ matters for innovation with the British SMEs in and after the 1990s. There are also two common and key firm behaviour elements: the ‘R&amp;D’ and the ‘capacity for expansion.’ The 3 presence of competition, access to local business networks, access to external R&amp;D and government support are the four common and key business environment factors that drive innovation at the firm level. The results also show that the common and key barriers to innovation in the British and the Omani SMEs are the bureaucratic hurdles of laws and regulations, the rigidities in organisational culture, the financial constraints and lack of proper finance vehicles devoted for innovation purposes. They may be prevented internally by adopting the culture of innovation, starting with the executive founders or both female and male entrepreneurs who may play a significant role in inspiring the team to innovate. The external barriers may be reduced by activating the wellharmonised entrepreneurship ecosystem that aims for economic transformation through innovative solutions. This research uses cross-sectional datasets; hence there is an issue of causality and endogeneity which is difficult to be treated given that 5 innovation models are investigated with 25 explanatory variables. It would be useful to investigate the innovation model using panel data in future research. The panel dataset will enable the researcher to perform binary choice models for panel data such as the pooled estimation, the random effect, and the fixed effects. Also, it will enable the researcher to see the changes that happened in the SMEs over multiple years. Besides, this research did not cover the sectoral analysis as the models were already exhausted enough with explanatory variables. Therefore, it will be interesting to do an in-depth sectoral analysis with fewer explanatory variables in the model. Moreover, it will be interesting to perform clusters analysis to evaluate the behaviour and performance of the SMEs in each cluster.