Product Innovation in Small and Medium-Sized Enterprises

To compete internationally, SMEs must have the capability to design and produce innovative products that not only satisfy market requirements in respect to quality and performance, but also capture customers' imagination. Products involving significant technology or engineering development are particularly challenging in this respect, because product designers and engineers must be able to cover relevant engineering fundamentals as well as the creative and managerial skills required to drive product development. This paper argues that a firm's new product development performance increases with the extent of its innovation capability. The sources and configuration of innovation capability are internal organizational learning capability and control of external network resources. Based on empirical observations of innovation processes in SMEs, this paper suggests that a powerful way for SMEs to do this is to offer customers new products and services that allow more efficient and effective use of the products that they currently sell.