Innovation and market orientation in SMEs : antecedent factors and inter-relationships

In pursuing sustainable competitive advantage, firms undertake a range of strategic initiatives such as innovation, customer relationship management, entering new markets overseas, and competitive actions within current marketplaces. Studies that examine these initiatives generally study the firm?s strategy by either: (i) focusing on one strategy only, and examining its impact on firm performance and the role of employees in the implementation of this strategy; or (ii) studying the interaction of two or more strategies. This study explores the interaction between two strategies, innovation and market orientation, and identifies key components of the market orientation construct as antecedent factors of the innovation performance of the firm. This paper builds on our previous study of the relationship between the two strategies of Innovation and Market Orientation within Australian manufacturing SMEs, in which we found a link between the constructs of Innovation and Market Orientation and produced a model of the relationship between market orientation of a firm and the innovativeness of a firm. We then proposed that further research was needed to investigate this linkage and identify what components of these constructs were involved in the relationship. Research findings from an empirical study of 73 Australian manufacturing SME?s are reported here as part of this ongoing study. We extend our previous work by identifying and modelling factors external and internal to the firm that impact firm innovativeness. Of the internal factors, we have identified the key components of the market orientation construct that impact either positively or negatively upon a firm?s innovativeness. The paper also discusses the implications of these findings in terms of current literature concerning sustainable competitive advantage and relevance to managers and employees within SMEs. The paper concludes by detailing a future research agenda and stressing the importance of further qualitative research to better understand the effect of the antecedent factors identified, and to discover what role, if any, employee participation plays.