Sustained product innovation in small companies through the lens of absorptive capacity
Creators: name: Petley, Anthony
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350605
subject: Marketing management (incl. strategy and customer relations)

description: Innovation is universally accepted as critical to economic growth, and small companies are recognised as key sources of innovation. Despite the plethora of government programmes to encourage innovation, Australia chronically ranks at the bottom of OECD countries with respect to commercialising innovation, particularly by small companies. Small companies provide the livelihood of many families, and are at the core of many communities and industries, so it is critical to understand how small companies function, and how they can improve performance. They are characteristically resource deficient, so how do some overcome this shortcoming to sustain product innovation and grow? This study conducts qualitative and quantitative research into the ability of small companies to acquire and exploit new knowledge (absorptive capacity) and how this capability together with organisational processes, resources, capabilities and characteristics influence the front-end of the product innovation process; and how this in turn impacts on successful and sustained product innovation, in the context of small food manufacturing companies in Australia. The food industry currently adds value of A$26 billion to the Australian economy each year, and together with agriculture the food sector has been selected for strategic national development in Australia.  The findings suggest that absorptive capacity (ACAP) plays a central role in influencing activities at the front end of innovation (FEI), and both directly and indirectly in successfully achieving sustained product innovation (SPI). The research also finds that the individual ACAP, entrepreneurial passion and innovation leadership of the owner-manager of a small company play major roles in the success of FEI, together with the organisation's culture. The results indicate that small companies, while being active seekers of new knowledge typically utilise a limited scope of sources and use primarily 'closed' approaches, particularly bricolage, in product innovation. Similarly, the research indicated that small companies have a limited scope of engagement with external stakeholders, and they rarely participate in collaborative innovation. This lack of engagement and collaboration is most evident between small companies and technical institutions and potentially contributes to lower levels of novelty of product innovations by these companies. It is argued that building understanding, confidence and trust between small companies and technical institutions will require structural and attitude changes to enable higher levels of success through collaborative innovation. The findings of this research have  implications for academics. These include further research into the role of ACAP in small companies within other sectors, into how ACAP can influence FEI over time as the size of a company grows, into how to improve the scope and depth of external engagement by small companies, and into how the issues impeding small company-university collaboration on product innovation can be overcome. From a practitioner's perspective, the findings provide insight into the importance of developing ACAP within a small company; into the complex inter-relationships of the organisation's characteristics and capabilities particularly in the front-end of the innovation process, and the need for owner-managers to develop and manage these as a necessary part of growing the company successfully and sustainably. For policy makers the findings can provide guidance on appropriate platforms and programmes to encourage and support greater product innovation in small companies in Australia.