CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction

The capacity of SMEs to perform viably relies upon their capability to put resources into rebuilding and development. SMEs require capital and access to funding to rebuild and enhance their development. This chapter specifically focusses on the advancement rubrics which could be utilised towards the development and foundation of SMEs and to discover the idea of market condition on a hypothetical point of view. This chapter will further highlight the concise meaning of SMEs and how innovative strategies impact their progression and establishment.

2.2 Definition of SMEs

According to Adeyele & Osemene (2018) the term SME is a wide term with varied definitions and measures which varies among various nations and research findings. The commonly used criteria the number of workers, complete nets resources, deals and the venture level. In the determination of the size, there are various methods used in characterising the upper and the lower sizes of an SME. Equitable and experimental research on Small to Medium Enterprises has since quite a while ago showed the complexities of investigating this segment (Al-Tit, Omri & Euchi, 2019). Amadhila (2019) argued that there is no generally accepted meaning of the term SME, some of the meanings used may have implications in other nations due to the variations in the definitions.

Astuti, Afiff and Balqiah (2017) argued that the most reasonable maximum breaking point in terms of employees’ capacity should be 250 workers based on the European standards. Other nations however, use a lower standard of about 200 employees while the United States considers SMEs to incorporate firms with less than 500 representatives. Smaller firms on the other hand are defined as firms with less than 50 representatives down to 10 and 5 workers (Barkhatov, Pletnev & Campa, 2016). In Namibia, SME are determined based on the definitions from the Ministry of Trade and Industry (Amwele, 2013). The Ministry of Trade and Industry defined an SME as an association with an annual turnover under N$1 million with less than 10 individuals working in the firm.

2.2.1 The context of SMEs in Namibia

One of the key concerns of governments all over the world is to advance their monetary capability by supporting the small and medium range businesses. Studies indicate that SMEs form the backbone of most economies and are key wellspring of monetary development in any country (Amadhila, 2019). SMEs add to the improvement of an economy in different ways including producing work and offering various types of assistance. Over the past two decades, Namibia has seen a rapid increase in SMEs following the freedom of Namibia and the support from the government.

The small and medium-sized enterprises (SME) division has a significant task to carry out in creating economies in financial improvement and also through creation of employment (Amwele, 2013). This segment faces various challenges particularly in funding the markets and accommodating innovation. Access to business data administrations has been distinguished as one territory that needs consideration from governments and business administrations suppliers if the SME division in creating nations is to accomplish reasonable degrees of development and improvement (Astuti, Afiff and Balqiah, 2017). Numerous organisations in Africa work in poor data conditions due to the lack of bolster administrations that can support innovative frameworks based on the data (Barkhatov, Pletnev & Campa, 2016). The access to data and information has not been prioritized due to the limited development of SMEs in terms of access to business innovative ideas and wider markets.

Cai, Chen, Chen and Bruton (2017) attributes the significant improvement in data and correspondence innovation to better business data administration over the years. More especially in the developed nations, SMEs are granted access to data and information through ICT frameworks such as simple access to PC equipment and programming. This information has come handy towards the improvement of the running of these businesses since innovative ideas can readily be accommodated. In creating economies there are numerous difficulties concerning ICT frameworks and the expense of IT equipment and programming. This in itself has made numerous issues in the region of business data administrations for the SME division. As governments and business specialist organizations attempt to address the numerous difficulties affecting SMEs, it is likewise significant that the present utilization of ICT in business data administrations be recognized to give room for greater improvement (Direction, 2019).

Data obtained from the Bank of Namibia Symposium (2010), SMEs in Namibia have contributed roughly 12% to the Gross Domestic Product (GDP), while employing about 20% have utilised about 20% of the workforce somewhere in the range of 2004 and 2009, and are helping towards the acknowledgement of the Namibian government’s 2030 vision (Fernandes, Ferreira, Veiga, and Marques, 2019). Despite how SMEs assume an undeniably significant job in giving solutions and business openings. SMEs in Namibia have been experiencing various challenges particularly financing. SMEs as often as possible need access to institutional credit, which causes SMEs to experience high financing costs and imminent disappointment. Freel, and Robson (2017) found that the monetary and money related misfortunes was the cause for the failure of several businesses which has slowed down the rate of growth among most SMEs. Researchers recommended the need by the government to focus on the issues that could be affecting the performance and progression of businesses as an incentive towards SME development.

2.3 Inhibiting growth of SMEs

The problems affecting growth of SMEs have been closely associated with the failure to oversee development in the sector. SME proprietors argue that one of the problems affecting SMEs is the absence of financial support making it difficult for them to progress. As indicated by Gancarczy & Gancarczy (2016) development in any business is dependent on the investment on assets. Businesses with limited assets tend to plunge to financial problems which end up bringing about disappointments.

Garba & Aliyu (2017) contends that the last disallows SMEs from developing to maximum capacity, as they can’t get the essential assets and prompts SME indebtedness. Gassmann, Frankenberger and Csik (2016) additionally expresses that the absence of SME proprietors and boards to address the issues raised by the SME owners. Absence of organising is regularly a genuine test for SMEs visionary, as there are consistent changes in needs, gives that need consideration and different issues that require correction (Irungu & Arasa, 2017). SME ought to make clear plans on their future goals and plans as a way to encourage them towards achievement of their targets. SMEs ought to assess different open doors dependent on the degree to which they draw assets from their capacity to accomplish their long haul objectives. As indicated by Jahanshahi & Brem (2017) despite their growth and significant contribution to the nation, SMEs confronted with various difficulties that undermine their development.

2.4 Overview of Innovative strategies

Advancement in SMEs alludes to the demonstration of making new items or procedures. There are two principal kinds of advancement: item development and procedure development. Item advancement is the improvement of items that are new to the world or have better qualities than the existing items. Process innovation is the improvement of another procedure for creating and conveying them to client (Jajja, Kannan, Brah and Hassan, 2017). A few scholars Kamati (2017) comprehend development procedures as key standards or rules for advancements are a piece of the organisation technique. They express the normal commitments of developments to the general vital objectives.

Kim and Kim (2018) have contemplated the connections among open approach, advancement and execution in 23 segments of Taiwan fabricating industry. They have discovered that all in all Taiwan firms that spend on advancement will in general perform less well, showing negative connections. Klovienė & Speziale (2015) in contrary found that monetary execution had impacted on the UK modern segment. In any case, there are additionally concentrates in the writing that discovered negative connections among advancement and execution. As outlined by Krajňáková, Navikaitė & Navickas (2015) there was no significance connection between innovative advancement and efficiency for Finland yet the relationship was huge for Norway and Sweden. In this way the accompanying pointers were considered as estimating the power of development: (I) item advancement; (ii) process development; and (iii) use advancement.

Innovative new companies are the new drivers of the economy with ideas in items, administrations and thoughts in existing ventures (Kyungu, 2019; Schumpeter, 1934). The quest for advancement is regularly described as exceptionally unsure actualising the recently created capabilities or putting resources into known innovation (Liao and Tsai, 2019). While developments beginning from interior markets relate emphatically to long haul execution, an association’s advancement technique may debilitate because of administration changes that happen during the development phases of a firm (Mukata, Ladzani, & Visser, 2018). When looking for help from outside corporate finance specialists, enterprising firms face a trade-off between fulfilling the requirement for capital and unveiling private data about their development abilities. Small firms might have the opportunity to enhance their growth when they advance their innovative ideas (Murimi, Ombaka & Muchiri, 2019). Administrative changes can also affect the firm level system as it identifies with advancement in its item development and procedures (Mwatange, 2017).

Most researchers on advancement have been centred on seeing how interior authoritative components including top administration, HR, mechanical capacities, and hierarchical culture, influence development in SMEs (Rialp-Criado and Komochkova, 2017). This is because advancement is viewed as a movement that is inside the control of a firm which the executives can execute control. There is less focus on other factors critical to the organization such as innovation. Innovative moves’ including imaginative exercises are driven by other outer components including the activities of the contenders, advertisements and efforts from the government (Restrepo-Morales, Loaiza and Vanegas, 2019).

In a related report, these creators examined and discovered the presence of a high level of tenacious conduct in advancement procedures in organizations (Tavassoli and Karlsson, 2016). SMEs development is dependent on the conduct from the management more especially on the ideas they implement and approaches used by trailblazers (Tavassoli and Karlsson, 2016).

2.5 Types of innovative strategies

2.5.1 Product innovation

Item development can be characterised as the making of another item from new materials or the change of existing items to meet consumer loyalty by incorporating new names (Langley et al., 2005). It additionally alludes to the presentation of new items or administrations to make new markets or clients, or fulfil current markets or clients (Wang and Ahmed, 2004; Wan et al., 2005). The other form of process innovation gives an assortment of the decisions involved in enhancing efficiency of service delivery (Craig and Hart, 1992). Item development is one of the fruits of innovation since this can give a business an upper hand to compete (Camison and Lopez, 2010). With the advancement in innovation the nature of items could be upgraded, which gives the firm an upper hand (Garvin, 1987; Forker et al. 1996).

As indicated by Hult et al. (2004), item advancement offers a potential assurance to a firm from showcase dangers and contenders. Bayus et al. (2003) demonstrated that item development had positive and huge connection with hierarchical execution. Utilising an all-out-number of 744 Spanish-firm examples, Espallardo and Ballester (2009) affirmed a positive effect of advancement on firm execution. Thus, Alegre et al. (2006) found that both item development measurements (adequacy and productivity) were unequivocally and emphatically identified with firm execution. The presentation of the novel item is emphatically connected with firm execution was additionally affirmed by (Varis and Littunen, 2010).

Technological upgrades are some of the benefits SMEs benefit from innovative strategies. The upgrades can be in the form of mechanical details, parts and materials, joined delicate product, ease of use or other useful qualities (Ramanathan et al., 2010). It can use new information or advancements, or it tends to be founded on new uses or blends of existing information or innovations. Item development is the after effect of a troublesome procedure driven by propelling advancements, changing client request, shortening item cycles and expanding national and between national rivalries. It is ordinarily accepted that effective item development requests vary dependent on cooperation between the firm and its clients and providers.

2.5.2 Process innovation

Process innovation refers to the adoption of improved procedures or conveyance techniques to ensure higher quality output. It incorporates several changes to its strategies, gear and/or programming. They can be intended to diminish unit expenses of creation or conveyance, to in-wrinkle/improve item and conveyance quality (Cabagnols and Le Bas, 2002). When all is said in done, process development is the procedure of re-engineering and improving interior activity of the business process (Cumming, 1998). This process includes numerous parts of a company’s capacities, including specialised structure, R&D, assembling, the executives and business exercises (Freeman, 1982). To Oke et al. (2007), process advancement worries with the making of or improvement in methods and the improvement in procedure or framework. For example, development in innovation, expertise, strategies, framework and strategy, which is utilised during the time spent changing contribution to yield (Zhuang et al., 1999). In a creation movement, process development can be alluded to like new or improved procedures, devices, gadgets, and information in making an item (Gopalakrishnan and Damanpour, 1997; Langley et al., 2005; Wan et al., 2005; Oke et al., 2007).

Essential to the assembling business, process advancement ought to be accentuated by a firm as its essential particular ability for upper hand (Nemetz and Fry, 1988). All the more explicitly, such development is emphatically connected with firm development (Morone and Testa, 2008). Reliable with this contention, Varis and Littunen’s (2010) concentrate on SMEs in Finland found that procedure advancement is decidedly related to firm execution. Utilising innovative strategies as a process for development. Anderson (2009) found a huge connection between new innovation and firm execution. Late proof by Ar and Baki (2011) reconfirmed the positive and huge impact of item and procedure development on firm execution.

Process innovation incorporates the utilisation of another or altogether improved help conveyance strategy. It plans to either diminish the unit expenses of conveyance or to build the nature of the administration (Mortensen and Bloch, 2005). Process innovations are acquainted with the achievement of explicit objectives, for instance the improvement of rehashed exercises related with the conveyance of a specific help (Tether, 2005). Rather than the presentation of new administrations, which are considered to have a reasonable positive monetary return, Fagerberg, Mowery, and Nelson (2004) recommend that the impact of procedure development on execution is uncertain. Regularly, organisations tend to develop their procedure in which they believe this will get an upper advantage against their competitors. They mostly focus on assistance developments and authoritative developments to be considered (Hertog et al., 2011; Nieves, Quintana, and Osorio, 2014; Orfila-Sintes and Mattsson, 2009).

2.5.3 Market innovation

As indicated by Johne (1999), advertise advancement manages the market blend and market choice to meet a client’s purchasing inclination. Ceaseless market innovative strategies should be implemented by SMEs for instance through the Internet to make it feasible for different contenders to capture more clients over the globe. Rodriguez-Cano et al. (2004) noticed that showcase development is associated with the usage of other promotional techniques, item arrangement or valuing system. Its objective is to ensure all the time client needs are met and also to open up the market to reach out to many customers (Du, Love and Roper, 2007). They are firmly identified with valuing procedures, item offers, structure properties, item positions or potentially advancement exercises.

A developing group of researchers has started to inspect the effect of market direction on advancement (Athuahene-Gima, 1995; 1996; Beck et al., 2011; Sandvik and Sandvik, 2003; Nasution et al., 2011). The existing examinations has ordinarily failed to recognise client and contender direction when exploring such issues, and utilised general proportions of market advancement or concentrated absolutely on client direction (Nasution et al., 2011). Also, there has been little separation among exploitative and exploratory types of development while looking at the effect of market direction (Beck et al., 2011). Following past writing (Smith and Tushman, 2005; Jansen et al., 2006; Bierly et al., 2009) we look at the utilisation of exploratory and exploitative advancement procedures by associations (Jansen et al., 2006). Exploitative developments are steady advancements that emphasis on the requirements of existing clients and markets (Benner and Tushman, 2003).

Advertisements tend to offer a reasonable direction though sometimes this brings about misuse and investigation of the methodologies with unmistakable hypothetical ideas in businesses (Narver and Slater, 1990). Though showcase direction is a firm-level attribute, misuse and investigation procedures are created and utilised by firms to develop (Slater and Narver, 1995). As such, advertising direction makes the standards by which firms can gain from their clients and rivals, which thus empower firms to participate in exploitative and exploratory advancement.

Right now, showcase development must be aimed at satisfying clients’ need and fulfilment (Appiah-Adu and Satyendra, 1998). The significance of market development to firm execution, but constrained, is examined in the writing, as well. Sandvik (2003) found that advertise development positively affects deals development of a firm. To Johne and Davies (2000), showcase development would enlarge deals through the expanding interest for items, which returns an extra benefit to creative firms. So also, Otero-Neira et al. (2009) discovered solid proof that showcase development decidedly affected business execution.

Adding to these findings Varis and Littunen (2010) utilised an expected model to identify the connection between a market-related inventive movement and firm execution. Showcasing advancements are the execution of another advertising technique not once in the past utilised by the firm, including “noteworthy changes in advancement or estimating, item situation, item plan or bundling” (Mortensen and Bloch, 2005, p. 49). These new development emphasize client needs hence opening new markets and repositioning the organization’s item to build deals. Research further shows that effective advertising advancement encourages administration firms to fortify their serious methodology (Line and Runyan, 2012; Scaglione et al., 2009).

2.5.4 Organisational innovation

The usage of innovative strategies in the association’s strategic policies, work environment association or outer relations is significant (Povolná, 2019). Such advancements tend to build the presentation of firms by diminishing managerial and exchange costs, improving working environment and enhancement of workplace efficiency. For example, they may incorporate new practices for classifying information by setting up databases for storage and analysis of data. This data can be used for decision making process assessment as well as analusis of the performance of the innovative ideas incorporated by the organisation. For instance, new programs designed to enhance the efficiency of service delivery should be reviewed to ensure the objective is met (Du, Love and Roper, 2007).

Hierarchical advancement is conceptualised as the execution of another authoritative strategy in the association’s strategic approaches, working environment association or outer relations” that expects to improve the adequacy or execution of the embracing firm (Mortensen and Bloch, 2005). It is the less discrete, progressively elusive and association explicit piece of administration developments (Armbruster et al., 2008; Birkinshaw et al., 2008). This is a significant wellspring of advancement with a potential effect on the versatility of the firm to changing economic situations (Martin-Rios and Parga-Dans, 2016b, 2016a). Among these precursors, adjustment of the board style will be a deciding component in encouraging development activities, given that supervisors have the best skills to deal with such circumstances (Martínez-Ros and Orfila-Sintes, 2012; Nieves and Segarra-Ciprés, 2015).

2.6 Innovation Strategies and Firm Performance

Scientists have investigated the relationship between innovative strategies and firm performance. One of the observed effects is the positive impact it has on the monetary performance of firms which contributed to their development and their progressive endeavours (Evangelista and Vezzani, 2010; Tavassoli, 2014). In any case, the biggest challenge is the expanded disappointment on some firms especially when they fail to achieve their expectations after investing on a certain innovative idea (Dosi et al, 2012).

Innovative ideas development is one of the key elements for the achievement, feasible upper hand and endurance of firms (Jimenez and Sanz-Valle, 2011) and comprises on a basic level of specific information about how to show improvement in a firm (Povolná, 2019). The significance of overseeing various sorts of assets and system interfaces in development forms has been focused on both in transformative financial hypothesis and in the asset-based perspective on the firm (Raza Bilal, Naveed & Anwar, 2017). It is a primary supposition in the assets based perspective on the firm that solitary firms with specific assets arrange connections, and attributes will accomplish upper hands through the advancement and, subsequently accomplish unrivalled execution (Camisón and Villar-Lopéz, 2014).

The expanding of dynamic for advancement forms in the administration division has gotten show over the previous decade (Lin, 2013). Research has started to test whether designs of advancement rehearses differentiated affect firm outcomes (Restrepo-Morales, Loaiza, and Vanegas,2019). Firms frequently settle on vital choices to develop, bringing about advancement designs of at least one development activities. The presentation of new administrations frequently expects firms to embrace new assistance forms, hierarchical practices, administration structures, advancement and position (Sachitra & Chong, 2016). In that sense, a firm can decide to execute none or any of the four kinds of development—for example item, process, hierarchical and showcasing, or a mix of these four sorts. Along these lines, a firm can have one of the sixteen potential development systems at a given point in time (Karlsson and Tavassoli, 2016).

In their investigation of Swedish assembling firms, Karlsson and Tavassoli (2016) saw that organisations browsed each of the sixteen procedures. The greater part of the organisations in the investigation picked an intricate development system. However, their cross-sectional investigation doesn’t distinguish which administration advancement technique or methodologies were actualised (Shangadi, 2017). Normally, management in firms requires the attention of everyone particularly in ensuring the idea is implemented as a whole.

2.7 Procedures in the innovation procedure

A correct innovative procedure can help firms to gain an advantage over the other firms (Soetanto and Jack, 2016). As indicated by Schumpeter, a firm has a choice to pick a development technique including item, procedure, advertising or hierarchical innovation. These can be named as “straightforward” development approaches since firms choose to take part in just one kind of advancement. On-going proof, in any case, shows that a decent part of imaginative firms decides to take part in different kinds of development simultaneously, for example “complex” development methodology (Taneja, Pryor & Hayek, 2016). On-going proof likewise shows that those organisations seeking after complex advancement methodologies are progressively tenacious in doing development contrasted with the individuals who seek after basic development systems (Le Bas and Poussing, 2014). There is however, limited information on the impact of such decisions on the progress of rthe business into the future.Hypothetical and exact investigations have committed minor regard for other development procedures than those identified with mechanical advancement (Haned, Mothe and Nguyen-Thi, 2014; Oh, Cho and Kim, 2014).

Along these lines, growing the extent of investigation of advancement techniques past the field of mechanical development is vital. This will give a lot more extravagant comprehension of firms’ decisions of development procedures just as of the impacts of various basic and complex advancement systems on firm execution (Le Bas, Mothe and Nguyen-Thi, 2015). Albeit all the more requesting as far as firm abilities, we contend that increasingly unpredictable advancement procedures can give “complementarities” between different sorts of development, subsequently prompting enhanced profitability gain for firms (van Scheers, 2018).

Given the data on the firms’ decisions of advancement technique influence firm execution obviously significant from an administration and proprietor point of view. Not least would we be able to expect that in times with expanded degrees of rivalry and abbreviated item cycles the capacity of firms to create advancements might be progressively significant for firms’ upper hand and execution than at any other time (Artz, et al, 2010). Along these lines, advancement can be viewed as an essential target for all organisations that need to improve firm achievement and execution (Varis and Littunen, 2010).

2.8 Theoretical review

The idea of development and foundation just as creative systems is comprehended through the SWOT investigation where the firm is having attention to its quality, shortcoming, openings and dangers. The SWOT examination is the best strategy to comprehend creative techniques that are connected to the development and foundation of firms (van Scheers & Makhitha, 2016). A basic issue is that creative associations should pick how to allot their rare assets on an item, process, hierarchical and advertise advancements, together with different mixes of these crucial development structures, just as how to oblige this assignment after some time as inside and outside conditions change(Verbano and Crema, 2016). Goals that are made rely upon within traits of organisations just as the attributes of the outer setting in which they work. While firms can mostly change their inner qualities after some time, they should concede that factors that they can’t impact shape the outside setting. The general conclusion that can be drawn is that the determinants of organisations’ development conduct, there is a requirement for a standard hypothetical system equipped for getting a handle on the unpredictability, multidimensionality and interface of elements controlling advancement or non-development choices together with the decision of advancement technique (Wijethilake, Munir and Appuhami,2018).

Moreover, different illustrative factors effectively affect the various procedures for advancement and can collaborate from multiple points of view. Unfortunately, to the extent known, there is no such hypothetical system (Yu, Ramanathan and Nath, 2017). Then again, organisations must depend on logical factors saw as significant for item and procedure, advertise and hierarchical development in past research, for example organisation’s size, organisation techniques, mechanical chances, innovative learning, innovation sources, suitable conditions and market structures, and supplement them with factors that can be attempted to affect the market.

SWOT Analysis Framework

Figure 2: SWOT Analysis Framework

Source: Stonehouse & Pemberton (2002).

2.9 Chapter summary

The above chapter was based on the conceptual literature on innovative strategies, growth of SMEs, the context of SMEs in Namibia, the SWOT analysis as an adopted framework to understand the impact of innovative strategies on the growth of firms. The following chapter will be on the methodology employed in the study.

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APPENDIX A: INTERVIEW SCHEDULE

My name is Jacobina Marta Kamati (Endjala) a student from Cumbria University studying towards the attainment of a master’s in business administration.

You are free to answer the questions and your contribution will be presented anonymously and will only be used for academic purposes only.

Questions

1. How long have you been in business?

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1. What are the challenges you are facing in the growth and establishment of your business?

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1. What do you think needs to be done to facilitate the progression and establishment of your business?

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1. In your sense do you think lack of innovation strategies is the cause of poor performance of your business?

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1. Of what importance is innovation strategies are important for the betterment of your business progression and establishment?

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1. How often do you consider innovative strategies to improve the performance of your business?

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1. How effective are the strategies you are using to improve your business growth and establishment?

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Thank you for the best time I had with you