How does customer and supplier cooperation in micro-enterprises affect innovation? Evidence from Pakistani handicraft micro-enterprises

Due to resource constraints, short product-life cycle, and increased competition, handicraft micro-enterprises face many difficulties. By investigating the individual effects of customer and supplier cooperations on innovation (and thereby, firm performance), this study reveals how micro-enterprises can overcome such limitations and maintain competitiveness in the market. We find that cooperation with both partners significantly and positively affects product innovation, but only cooperation with suppliers has significant and positive effect on process innovation. In turn, product and process innovations significantly and positively affect a firm’s financial and non-financial performances. Our findings provide useful theoretical and practical implications.