The Impact of Innovative Practices on the Performance of Small and Medium Enterprises

The ability of companies to identify customer requirements, appropriately organize and develop products that satisfy these requirements in the most efficient way, is the key to obtaining competitive advantage. This is highly associated with the ability of the company to monitor the environment and adjust with the environmental changes by developing innovative practices. The Food and Beverage industry in Cyprus is a leading manufacturing sector and is under investigation in our study. Results presented in this study are based on a large project carried out aiming at the investigation of the innovative behaviour of the sector and the development of a model illustrating possible relationship of innovative behaviour and practices with the achievement of a competitive advantage. A nation wide survey has been carried out with an aim to identify and further develop the managerial practices that foster the innovative ability of the companies. The study examines the success or failure of those innovative initiatives in the sense of the achievement or not of a competitive advantage and investigates its relationship with the application of innovative practices. All five prefectures (Nicosia, Famagusta, Limassol, Larnaca and Paphos) were covered and a sample of 5% of the whole sector is surveyed. A closed questionnaire, made of five sections has been used in order to collect relevant information. The results of the factor analysis and the subsequent regression models developed highlight the relationship between strategic planning competencies and the ability of companies to innovate. It is shown that the successful implementation of innovative practices depends highly on the adoption of a successful Human Resource mainframe. Staff development approaches and the degree of customer involvement in the decision making process is found to be a factor that generated also a high impact on both the growth of innovative activities as well as on the organizational performance.