Most businesses in the 21st century are developing partnerships which are creating a
favorable climate for innovation. There is a lot of literature that supports non-collaborative form
of relationship in stimulation of creativity and innovation in business (Summaries of research
projects from around the world, 2006). Non-collaborative relationships are relationships suitable
for most of business transaction (Robbins & Coulter, 2007). Non-collaborative form of
relationship is essential in a business transaction because what is sold or bought is strictly
defined by set specifications (Allen, Buchanan, Edelsky and Norton, 1992). These are relation of
convenience (Tomlinson and Fai, 2013), and are only replaced when one party decides to offer
superior value to another party. According to Kessler et al (2007), this form of collaboration acts
as external factors that behave the same as the competition. There is substantial literature
supporting that most of the innovations from Medium sized enterprises are propelled by external
networks alliances (Lee, Park, Yoon and Park, 2010; Ritter and Gemünden, 2003), and joint
venture (Zeng, Xie, and Tam, 2010). Additionally, the government also recognizes this
phenomenon through enacting policies encouraging development of innovation schemes (Van de
Vrande, De Jong, Vanhaverbeke and De Rochemont, 2009).
On the other hand, there is enough literature that supports the notion that a noncollaborative or informal relationship enhances innovation (Rothwell and Dodgson, 1991; Freel,
2000; Lasagni, 2012). These informal relationships enhance innovation through provisions of
insight that help to upgrade innovation and create favorable avenues for commercialization of the
innovations. This open innovation (innovations steered from non-collaborative relationships)
allows examiners to shift their focus from within the organization and look at other external
factors (Lasagni, 2012, p. 310; Robson, 2002). External factors that steer innovation include end
use customers, competitors and suppliers (Zhou and Li, 2010; Frost, 2003). However, due to
limited research done on the importance of non-collaborative relationship, little is known about
the overall impact of this relationship on innovativeness. Additionally, more research is needed
to understand the impact of different relationships on the speed and quality of innovation in
organizations. Therefore, this research is dedicated to understanding how the non-collaborative
relationship enhances innovation within SMEs in north of England (Lichtenthaler, 2011).
Additionally, commercialization of innovations also constitute to the muscle of discussion in this
study. Assumption made in this study is that organizations with a good reputation are in a better
position to commercialize their innovations. These organizations earn profit from
commercialization. Therefore, they have a greater access to the market. This study explores
genuineness of this claim.
Why choose SMEs?
According to Chesbrough (2006b), SMEs are start-ups. These are companies that harbor
technologies and are also experimenters of new technologies (Chesbrough, 2003; Chesbrough,
Vanhaverbeke and West, 2008; Chesbrough, 2006). They are flexible, experiment different
business models and very sensitive change of the business environment (Gutterman, 2004).
Chesbrough, Vanhaverbeke and West (2006) claimed that SMEs operations are centralized, and
thus they do not have hierarchal chain of command (Hollenstein, 2001). This makes them able
to meet the needs of modern business. SMEs quickly analyze the market condition and develop
strategies concerning business relationships with other organization (Hollenstein, 2005; Ussman,
Franco, Mendes, and Almeida, 1999).
The business external environment comprises of many factors that influence the output of the
organization. However, this research limited to a number of factors, which relate business
cooperates and commercialization of innovations; they include:
What are the characteristics that enhance the likelihood of non-collaborative relationships
which could lead to open innovation for SMEs?
Can these characteristics be created in SME clusters in England?
What are the impacts of non-collaboration relationship on SMEs in the North of England
How can SMEs present in the North of England utilize these relationships to enhance
Do all the relationships in business have the same effect on the speed and quality of
innovation experienced in SMEs
How does relationships hinder or enhance commercialization of innovation in relation to
market access and reputation
How do price competition enhances creativity in SMEs
In business literature, there is great knowledge about how the external environment
affects organization. Example of external environmental analysis is PESTLE (Markham, 2013;
Roberts, 2004). This business analysis models analyse the political, social, economic, legal and
environmental factors that influence businesses (Simonin 1997; Smith et al., 2010). However,
little consideration is given to other external factor that forces the organization to change their
products and product development processes. These factors include customer preference and
organization interrelations. According to (Schein, 2010), when organizations collaborate, they
provide opportunities in which they can collect strength from each organization and use practices
of one organization to the other’s processes. In addition, Rowley and Sambrook (2009) imply
that large social forces in the work place have shown to have a larger influence on individual
abilities. In other words, work environment has bigger effects than person traits such as skills
and capability. In this respect, SMEs are much shaped by the outer environment in terms of
Innovation refers bringing change that is previously unknown to the world (Schroeder,
Scudder and Elm, 1989; Evangelista and Sirilli, 1995; Rogers, 1998; Covey, 2004; Baregheh,
Rowley and Sambrook, 2009). Innovations are encouraged in businesses in order to attract
customer, as well as retaining customers (Watkins, Mohr, and Kelly, 2011; Gitman, and
McDaniel, 2008). A number of studies indicate that consumer preference in the 21st century is
continuously changing, and only flexible organizations with the ability to respond to these needs
will survive (Rammer and Schmiele, 2008; Rammer and Schmiele, 2008). Additionally, Zadek
(2006) argues that innovation is a unique way to commercialization. Therefore, it is an area that
requires a lot of research.
The roles of formal relationships impact on innovation are greatly studied with many
scholars establishing the relations. For instance, Lasagni (2012) shows that, innovation is high in
SMEs that focuses on strengthening their relationships with innovative suppliers, customers, and
users. Additionally, innovation is also high in SMEs that collaborate with research institutes. On
the other hand, Tomlinson and Fai (2013) indicate that cooperation between rivals does not
enhance innovation. The study findings provide and evidence that informal relation can promote
innovation in SMEs. However, the study findings do not provide any mechanism in which
innovation can be achieved. In addition, Love and Roper (2013) indicate that there are purposive
links developed SMEs and their partner. These partnerships are contributors of innovation and
export in SMEs. Additionally, factors such as targeted supply and demand side have proven to be
the promoter of innovation and exporting. However, there is little known about environmental
characteristics that play the greatest role in influencing innovation in SMEs (Love and Roper,
Apart from non-collaborative relations, there are also other associations that promote
innovation and creativity in SMEs. According to (Matthews and Sawang, 2010; Fritz, Rickert
and Schiefer, 2009; Sousa Filho, Wanderley, Góme and Farache, 2010), these associations are
brought about by competition within the market. However, these associations are regarded as
unethical (Gugler and Shi, 2009; Caldwell, Hayes & Long, 2010), but they are there in the
market and play major roles in promoting creativity (Werther and Chandler, 2010). Many SMEs
face the problem of commoditization burden in their market. In the same way, technologies have
a lifecycle the same way price competition and commoditization emerge and start to take control
of the market. However, SMEs are not effective in price competition and thus opt on innovation
for a fight for market share (Macbeth, and Purchase 2004)
Therefore, because these associations have their roles in promoting creativity, research is
necessary to understand in which mechanisms they promote creativity. Jennings de
LurdesVeludo, Macbeth, and Purchase (2004) suggest that critical research is necessary to
promote this body of literature. However, at the initial level, studies on these associations may be
criticized because scholars may assume that these relationships are being promoted.
However, Jennings (2012) claims that, despite the absence of literature, these practices
are not combated. In this respect, these associations are promoting creativity which is creating
avenues for commercialization and increase of revenue for the organization (Perkmann and
Walsh, 2007; Henkel, 2006). Additionally, the impact of open innovation is not unilaterally
supported in the literature (McLean, 2005). Most of the case studies of open innovation are for
large enterprises and only few for SMEs (Kraus, 1993; Idrissia et al., 2012; Wincent, Anokhin
and Ortqvist, 2010). This phenomenon leads argument that all open innovation activities will not
favor SMEs Innovation performance (Mazaria, Gonzalez, and Avendano, 2003; Powell and
Grodal, 2005). Thron, Nagy, and Wassan (2007) suggest that, only degree of openness of SMEs
to innovation can mediate the relationship between open innovation and SMEs. This degree of
openness can be classified as closed, open, user-driven, or interactive. These factors do not only
influence relationship, but they are also mediated by other factors. According Brandon (1998),
factors that mediate these relationships are further mediated by factors such as national and
regional proximity, as well as external obstacle to innovation and the age of SMEs (Treister,
Batra, Chen and Eliezer, 2001; Cox, 2004; Kim and Park, 2010).
There are studies on the same subject which has developed models that try to explain
innovation performance, and find the factors that enhance performance. For instance, Bondy,
Moon and Matten (2012) indicate that, SMEs will only harness power of external open
innovation. This is through the development of a high level of innovation ambidexterity Thron,
Nagy and Wassan, 2007). Innovation ambidexterity refers to the ability of the organization to
innovate from external and internal perspective simultaneously (Hughes, Martin, Morgan and
Robson, 2010). However, Caniels and Romijn (2003) suggest that, SMEs require appropriate
organization structure and balance to innovation to achieve innovation ambidexterity. In
addition, the complexity of the development process and complex innovation are also
highlighted. Pullen et al. (2012) opines that complex innovations make the smallness of SMEs a
problem. However, complex innovation make SMEs rely to open innovation such as suppliers to
aid them develop complex products to be feasible (Keilbach, Tam and Audretsch. 2009).
The above literature implies that the drivers of open innovation have previously been
examined. However, up to date there is no single study dedicated to knowing impacts of open
innovation drivers on innovation have been done (Perkmann and Walsh, 2007; Gassmann, Enkel
and Chesbrough, 2010; Gassmann, 2006). In this respect, this study is dedicated in feeling this
gap by considering these factors in the same study in order to come up with a model for north
Although these relationships are good for innovation, commercialization of innovation is
crucial for organization health (Rafinejad, 2007; Landstrom, 2008; Nelson, 1982).
Commercialization of innovation can be promoted by inter-organization relationships, which
have a synergistic effect which can change their product as well as process. However,
collaborations create avenues for revenue cannibalism, which can harm the aim of all
collaborating party. Therefore, this creates confusion on the stand of commercialization of
innovations, and impact of various relationship because the can promote or discourage
commercialization (Henkel, 2006; Jansson, 2008; O'Mahony and Robinson, 2007). Therefore,
the research will also explore the best relationships that can promote commercialization of
innovation and those that discourage it. However, the literature is still incomplete because it does
not demonstrate the impact of collaborations on innovation and does not specify the relationships
that can be favorable for one or more organization.
Literature analysis shows that this study will provide an understanding of this area by
filling the gap that already prevails. The analysis also presents open innovation strategies which
can be identified and aids the understanding of non-collaborative relationships. The next step in
the study is to identify high quality innovations from SMEs in the North of England in order to
capture the best case study to answer the research question.
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