The Effect of Technological Changes on SME Performance in Lagos State: A Case Study of Selected SMEs
Chapter One
Overview of the Research
Economic Outlook (ECLAC, 2013), for firms to generate and accumulate technological capacities to function and trade, SMEs and technological innovation processes must be linked and be associated with knowledge flows to greatly impact the results of innovation activities, which in turn impact the flows. More importantly, training and knowledge accumulation are essential for a firm to develop its skills and innovative abilities. A learning process of a firm or company can be influenced from experiences and its interaction with other companies and other types of agents. Technological innovation processes are attainable from complex and social interactions that neither occur freely nor in isolation, but are the cause and consequence of knowledge flows and interaction between National Innovation System (NIS) agents. Variances in technological innovative behaviour also exist among SMEs. Those aiming international markets have a countless capacity or edge to innovate and diversify, especially if they operate in sectors dominated by dynamic efficiencies. Accessing international markets requires technologies which motivates firms to boost their technology base and improve their organisational and business specifications, paving way for them to innovate. Some SMEs are more likely to innovate often as they have a greater capacity to accumulate knowledge (Cimoli et al., 2011). The study also shows that financial support from Government towards innovation has positive effects on businesses. In Latin American countries such as Chile and Colombia, the enterprises that received financial support from Government usually invest 80% more in technological development than others. Costa Rican firms benefit most, with those receiving such fund investing twice as much as those that do not. In a country like Germany, Finland, Netherlands and Italy, firms that receive government financing invested 40–50% averagely, while in Austria, Belgium, Denmark, France and Norway the difference is up to 70%. This shows the great impact public innovation policies have on companies’ innovative effort, which has a huge positive effect on investment in innovation (Crespi and Zuñiga, 2010). Kirchhoff (1994) distinguished the effects of growth and innovation potential on small enterprises and he identified a set of small firm start-ups that are more prone to technological innovation. Spencer and Kirchhoff (2006) regard these firms as ‘ideal types’ of new technology-based enterprises that are key drivers of innovation and economic growth. These firms are characterised with the fast adopters of new technologies while ‘ambitious’ firms are likely to invest only in new technologies that can boost productivity and operational efficiency. Many SMEs across industries and economies have the unrealised innovation potential (Chaminade and Van-Lauridsen, 2006). This is primarily as a result of their essential characteristics such as flexibility, better adaptability and receptivity, effective internal communication, simple organisational structure, quick decision making, etc. which are not properly harmonised to attain a desirable result or goal (Harrison and Watson, 1998). There is ample empirical evidence that a number of SMEs in a wide variety of sectors do engage in technological innovations and that these innovations are likely to be a crucial determinant of their success (Hoffman et al., 1998). Empirical investigation showed that the relationship between technological innovation and profitability helps to ascertain actions and policies to improve the competitive position of firms. The impact of innovation on firm profitability seems to vary with different types of innovation. Firms that engaged in product and process innovation usually have higher profit than those that do not engage in innovation based on the studies that were carried out among the manufacturing firms in UK (Geroski and Machin, 1993; Geroski et al., 1993). They maintained that product and process innovation strengthened a firm’s competitive advantage and profitability. Kongmanila and Takahashi (2009) examined the relationship between innovation and firm profitability and export performance of industrial cluster of Lao garment industry using resource-based view theory to posit the conceptual model. The findings suggest that innovations (product and production process innovations) are important factors in determining firm profitability and export performance.
Chapter Two
Literature review
Theoretical Framework
Lewin’s Change Management Model
“Lewin (1951, cited in Robbins, et.al., 2008) argued that successful change in organizations should follow three steps:” Unfreezing: change efforts to overcome the pressures of both individual resistance and group conformity”. Movement: “a change process that transforms the organization from the status quo to a desired end state” and the third step is Refreezing: “stabilizing a change intervention by balancing driving and restraining forces”. In this respect, “Harper (2001) proposed that for effective change to take place, management must ensure that all relevant stakeholders are given the opportunity to be engaged in decision-making and problem solving in a collaborative manner. A better understanding of the needs and benefits of change may result in little or no resistance on the part of change recipients. In the final step (refreezing), the emphasis is on the reinforcing of new processes and tasks in the organization by the employer. For this step to be successful, employees must be acknowledged, as reward is an important consideration. Reward is crucial for behaviour modification and employees should receive appropriate recognition for changes in behaviour if they embrace the technological change.
Conceptual Framework
Change Management
“Moran and Brighton (2011: 111 –118) defined change management as the process of continually renewing an organization direction, structure and capabilities to serve the ever-changing needs of external and internal customers”. “When change is announced in an organization, there is a general hope and feeling among the staff that the outcomes will be favorable to them (Kimaku, 2010”). The norm indicates that most employees expect a positive outcome and their management will consider their needs. This also applies to new ideas, technology, products or service. “Therefore, trust becomes a key factor in determining how employees think, feel and act in respect to the current change (Sikasa, 2004)”. “Korir, et. al (2012) defined change management as the effective management of a business change such that executive leaders, managers and frontline employers work in concert to successfully implement the needed process, technology or organizational changes”. Due to its importance, change management is becoming imperative and needs appropriate managerial skills and strategy. For firm to survive, succeed and remain competitive in today’s highly volatile and continuously evolving business environment, it must be able to successfully manage the change which is as a matter of fact a necessity.
References
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