Academy of Entrepreneurship Journal (Print ISSN: 1087-9595; Online ISSN: 1528-2686)

Abstract

Can SME Benefit From Innovation in an Emerging Market Economy?

Author(s): Donard Games

Despite  the  abundance  of  literature  on  SME  innovation,  this  interlinked  and  complex concept requires further investigation. The present study examines Small and Medium Enterprise (SME)  innovation  outcomes  in  order  to  see  whether  SME  innovation,  which  is  represented  by innovation capability and risk taking, has contributed positively (or negatively) to SME which in turn  enhance  SME  financial  performance  in  the  context  of  Indonesia  as  an  emerging  market.More  often  than  not,  innovation  is  seen  as  an  effective  way  to  enhance  performance  especially financial performance as it is highly beneficial for SMEs in an emerging market. However, it is possible  that  innovations  might  be  regarded  as  a  burden  rather  than  a  benefit  for  SMEs. The present   study   uses   the   conceptualization   of   innovation   outcomes   as   these   reflect   the organization's  ability  to  benefit  from  the  implementation  of  innovation.  It  is  important  to understand  this  theme  in  the  context  of  an  emerging  market  which  may  offer  both  golden opportunity to innovate and unprecedented challenges to innovate. There  is  little  research  regarding  the  impact  of  SME  innovation  outcomes  on  SME performance  in an  emerging  market.  The  present  study  useda  quantitative  approach,  a  partial least  square,  WarpPLS  6.0.  Data  were  collected  from  120  SME  owners  in  creative  industries residing in three Indonesian cities in West Sumatra. It was found that innovation capability had a significant positive relationship with positive outcomes which in turn lead to a better financial performance. This  means  that  innovation  outcomes  play  a  greater  role  in  identifying  whether innovations  benefit  SMEs  or  not.  SME  innovation  in  an  emerging  market  economy  such  as Indonesia may be costly, but it is worth doing as innovation can give monetary benefit as well as better organizational performance.