A reflective academic piece of work on Innovation as a growth strategy for small business and entrepreneurs.

1. ‘Innovate or die’
Cooper, 2005
Innovation: A Growth Strategy for Small Business

2. Individual Reflective Essay
Module Code : ENT705SU
Module Name : Entrepreneurship and Small Business Growth
Student Number : 10480824
Word Count : 1650
I declare that this assignment is my own work and that I have correctly
acknowledged the work of others. This assignment is in accordance with University
and School guidance on good academic conduct

3. The following essay is a reflective review on literature of related theories, frameworks and
real life case studies on innovation as a growth strategy for small firms. The key areas of
innovation, entrepreneurship and small business growth have been broadly defined in order
to go in depth to the implications and relationships between each while keeping to the world
limit. Therefore starting with a few contemporary and broad definitions of innovation, this
essay then reflects on the types, process and models of innovation in order to build a case to
discuss the relationship between entrepreneurship and innovation. The main part of the
essay focuses on innovation as growth strategy for small firms followed by a reflective
conclusion.
1.0 What is Innovation?
While an enormous number of definitions have been developed over the course of a few
decades, among some of the more contemporary academics, David O’Sullivan (2008)
definition of innovation, I feel, provides a broad yet comprehensive view on innovation;
‘Innovation is the process of making changes, large and small, radical and incremental, to
products, processes, and services that results in the introduction of something new for the
organization that adds value to customers and contributes to the knowledge store of the
organization.’
However it is important to acknowledge the reason for the wide coverage of the topic area in
management and scientific literature over the past few decades. A large number of
academics cover firms need to compete for market share or profit as a reason for innovation
(Cooper, 2005; Hamel & Prahalad, 1998; Kaplan and Norton,1992) and innovation as a tool
for value creation for customers (Hartley, 2005; Mulgan & Albury, 2003). Therefore it is clear
that among academics, scholars, business and researches alike, the importance of
innovation for survival of an organisation is heavily acknowledged regardless of size (Tidd &
Bessant, 2005; Cooper, 2005).
1.1Types, Processes and Models of Innovation
I feel that in order to better define and understand innovation, instead of listing the vast
number of academic definitions, a closer look at the types of innovation will provide a more
in-depth view on innovation and build a solid ground for the context of innovation as a growth
strategy by not only highlighting the areas covered by innovation but also its scope.
The mainstream areas of types of innovation fall under product, process and service
innovation (Luecke & Katz, 2003; Albury, 2005) as well as newness to market vs company
classification (Cooper, 1993). Which are quite broad, compared to the more contemporary
‘degree of innovation’ (incremental to radical) identified by authors such as Jacobs &
Snjiders (2008) and Bessant & Tidd (2007). Bessant & Tidd (2007) additionally hypothesised
Innovation from two perspectives, plotting the ‘novelty’ (incremental to radical) of the
innovation against the systematic (component to system level) changes to the innovation.
It is equally important to note the models of innovation and innovation as a process, defined
as the active and conscious organisation, control and execution of business functions
leading to innovation through developing, selecting and transforming ideas into innovations
(Hansen & Birkinshaw, 2007; Jacobs and Snijders, 2008). Chronologically models of
innovation as a process has been a simple linear sequential process, emphasising on
research and development (R&D) known as the technology push, which was followed by a

4. market-pull model of similar nature but with emphasis on marketing (Trott, 2005 cited; Myers
& Marquis). Design dominated models came into play in the later 70s illustrating three
stages proceeding a dominant design (Abbernathy & Utterback, 1978). The early 80s and
90s saw multiple revolutionary models, highlights being the coupling model, interactive
model and networked model of innovation, each emphasising integrating R&D to marketing,
combining push & pull strategies and knowledge accumulation of external linkages
respectively (Rothwell, 1992; Wheelwright & Clark, 1992).
Contemporary models of innovation are the open innovation model (Chesebroguh, 2003)
and the Cyclic Innovation Model, which is quite intriguing as it places ‘entrepreneurship’ at
the centre of innovation which will be examined in detail later (Berkhout et al, 2010).
2.0 Relationship between Entrepreneurship and Innovation
Misleadingly, innovation and entrepreneurship are often used interchangeably (O’Sulliva,
2008). However it is simply the specific tool that entrepreneurs use to exploit change as an
opportunity to grow a business or a service (Drucker, 1985). The relationship between
entrepreneurship and innovation are primarily based on strategy, structure and process by
many researchers (Casson, 1982; Cornwall and Perlman, 1990; Caird, 1988 and Littunen,
2000). Alternatively other academics explored the conceptual relationship between
innovation and entrepreneurship (Schumpeter, 1934, Drucker, 1994, Legge and Hindle,
1997, Kanungo 1999, Sundbo, 1998). With a few touching on the synergy of the
aforementioned two (Zhao, 2005).
From Thomas Edison (light bulb) to Steve Jobs (Apple) the relationship between
entrepreneurship and innovation is quite evident. The aforementioned and the likes of Bill
Gates (Microsoft), Richard Reed (Innocent) and Brain Chesky (Airbnb) have brought to the
world many forms of innovations however they have one thing in common, entrepreneurship
and growing a small business in to multi-billion dollar companies (Shandrow, 2015; Nguyen,
2015; BBC News, 2010) .
Therefore there is a considerable overlap of innovation and entrepreneurship ((Kanungo,
1999, Sundbo, 1998, Drucker, 1994, Schumpeter, 1934). More importantly entrepreneurship
is need to achieve commercial success of innovation by addressing market needs(Zhao,
2005).
3.0 Innovation as a Growth Strategy for Small firms
Due to the increasing role of small firms in technological, social and economic development,
innovation in terms of small business growth has gained interest in both academic and
practice oriented literature (Rosenbusch, et al., 2011; Acs & Auderstch, 1988).
While there are many number of conceptual frameworks to capture the various approaches
to small business growth, it is mainly divided in to six wide groups; descriptive, stochastic,
evolutionary, resource-based and deterministic (Hamilton, 2007), but as aforementioned
innovation is an essential part of entrepreneurship as identified by many established authors
of various backgrounds and thus present in most approaches (Hamilton, 2007; Cooper,
1981).

5. Rosenbusch et al. (2011) identified a ‘deeply engrained belief’ in entrepreneurs and small
business managers, that in order for their business be successful, they need an ‘innovative
edge’ to compete against bigger firms. This is further supported by strategic literature that
identified small business profit and competitive gains through innovative adaptation to
external changes faster than bigger firms, attributed to their quick decision making,
innovation and lack of hierarchy (Nooteboom, 1994; Vossen, 1998). Long term
entrepreneurial success of small firms has also been attributed to establishing temporary
monopolistic advantages by continuous innovation (Schumpeter,1934). Porter (1980)
contributes by claiming that small firms can differentiate from competition by offering tailored
innovative products, service, process and business models to attractive niches. Additionally
he claims that innovative products create demand, facilitating growth and loyalty setting high
barriers to entry thus leading to exponential growth in terms of size and market type (Nice to
mass). For example, contemporary high growth start-ups such as Airbnb, Innocent and Uber
began with offering a disruptively innovative product, service and business model to
attractive niche markets and then developing them (Alton, 2016, Brown, 2016; Shead, 2013).
Roper (1997) further supports Schumpeter’s (1934) claims of advantages to small firms due
to closeness to market, thus the first to react to market opportunities (supported by
nimbleness of small firms) and develop suitable innovative products, service etc., going
further, due to the flexibility of small firms, he adds that small firms can effectively adopt new
technological innovations developed elsewhere.
Another key argument in favour of innovation as a growth strategy for small business growth
is the new product development process which I have studied in detail under my
postgraduate studies (Msc. Marketing and Innovation). Considered to be a value creation
strategy due to the enhancement, recombination and creation of resources that improves the
firms performance (Branzei and Vertinsky, 2006; Rosenbusch, et al., 2011; Grant, 1996;)
additionally the knowledge acquired during the product development process greatly
contributes to economies of scope and scale, learning economies and absorptive capacity of
knowledge all leading to long term competitive advantages (Rosenbusch, et al., 2011;
Shepherd and Shanley, 1998; Van De Ven and Polley, 1992; Zahra and George, 2002).
However, it is equally important to acknowledge the drawbacks, limitations and
disadvantages of innovation as a growth strategy in small firms, which too has been noted
by many bodies of literature (Birley & Westhead, 1990; Heunks, 1998; McGee et al., 1995;
Vermeulen et al., 2005). Main points being; Innovation requires a significant number of
resources, thus overstraining the capabilities of resource-lacking small firms ((Acs and
Audretsch, 1988; Nooteboom, 1994; Vossen, 1998). Secondly there is a considerable risk
and uncertainty in innovation, thus failure can potentially lead to extinction specially
compared to larger firms capable of absorbing failure (Eisenhardt and Martin, 2000; Knight,
1921; Nohria and Gulati, 1996). Third common point being that contrary to public opinion,
bigger firms have the resources, capabilities and more importantly the management
experience in managing innovation thus drastically reducing the risk associated with
innovation, which constitutes high failure rates (Majchrzak et al., 2004; Danneels, 2002;).
3.1 Reflective Conclusion
The primary objective of this essay was to examine, outline and evaluate innovation as a
growth strategy for small business. It is clear that most literature may it be contemporary or

6. past, academic or practice-oriented show that both innovation as a strategic orientation as
well as an activity which creates immense value to new and growing small business. While
on one hand innovation means risk, uncertainty and high-investments, it can be argued that
the potential benefits such as sustainable competitive advantages, differentiation, customer
loyalty and high growth can outweigh the drawbacks if innovation it is managed strategically
and continuously by the entrepreneur. The positive relationship between entrepreneurship
and innovation are clear, thus the organisational culture, management style and the way the
two interact with each other play a key role in the successful partnership of the two. Thus
innovation must be treated as a dynamic and holistic process instead of just confining it to
the initial stages of a new or growing entrepreneurial venture.
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