Innovation Approaches, Practices and Firm Performance among Select Software Product SMES: A Case of Bangalore Firms

Abstract

Innovation is considered as a topic of interest among both academicians and practitioners. Right from Schumpeter till current day researchers have worked extensively in the area of innovation, yet the topic appears to be fresh and new. Henry Chesbrough coined the terms ‘open innovation’ and ‘closed innovation’ in his pioneering work. Small and Medium Enterprises are a major part of an economy and essential for its growth. In India, SMEs play a very important role in generating employment and growth of the economy. At present, Indian SMEs adopt innovation for sustaining their growth rather than radical transformation. A rigorous review of literature points to research gaps to study the innovation approach adoption and its influence on firm performance among SMEs. The present work adopts a case-study approach to study the SMEs of Bangalore region. A structured online survey was administered to 213 survey participants identified through criterion based snowball sampling method. Firm-level factors such as age, size, experience, and culture have been perceived to have a significant influence to adopt innovation approach. However, investment in Research and Development does not influence SMEs to adopt Innovation. As for External factors, ecosystem and competition have a significant influence on the adoption of innovation approach. Other factors such as technological advancement, government policy, and customer have a relatively lesser role in the adoption of innovation approach. Further, open innovation practices such as collaboration, Spin-offs, and alliances positively influence firm performance. IPR trading is still not encouraged in the Indian context. Closed Innovation approach also influences the firm performance. Hence, the decision makers of SMEs should cautiously reflect on the innovation approach suitable to their firm at that point in time. Adoption of innovation approach should be considered by the SMEs as a strategic choice for their growth and sustainability.