Zimbabwe, as an emerging economy, has witnessed a sharp increase in rural to urban migration, providing much labour to the growing Small and Medium Enterprises (SMEs) sector. With the country’s economic meltdown experienced since the year 2000, major companies have closed doors leaving opportunities for growth of the SMEs in various sectors. Though the SMEs have failed to satisfy the market-demands fully, they have played a crucial role in contributing towards the general growth of the economy, providing employment opportunities, and improving livelihoods of many. On the other hand, innovation has been a topical subject for a long time in the manufacturing sector irrespective of the company's size. Mahemba & De Bruijn (2003), states that innovative SMEs contribute immensely to the Gross Domestic Product (GDP) of any nation as they create employment improving livelihoods. In most emerging economies where trade has been liberalised, SMEs have become the critical engines of growth as they have necessitated technological development. Through innovation, companies can launch new products onto the market, and this is a cycle that can be repetitive given that there is global competition. In Zimbabwe, SMEs are estimated to contribute approximately 50% of the nation’s GDP and control about 70% business activities (Research Council of Zimbabwe, 2019). This therefore implies that the SMEs are contributing massively towards the nation's development.
As cited by Tohidi & Jabbari (2012), Schumpeter opines that innovation can happen in many forms. This encompasses introducing a new product, new service, or process, establishing new supply chains, improvement of an existing product, and notable changes to organisational structure. Rogers (2003) says, "An innovation is an idea, practice, or project perceived as new by an individual or other unit of adoption." According to the latter view, the individual's perception of the invention determines innovation irrespective of the time the invention might have been made. Forsman (2011), defines innovation as the creation and implementation of new or improved processes, products or services, and manufacturing methods in order to improve an organisation's competitiveness. In short, the critical aspects of innovation, therefore, are how ‘new’ the output is and the commercialisation aspect of the product or processes. Creativity is the generation of ideas whilst innovation is the process carried out to realise these ideas into a functional product or service. There is scant literature on creativity and innovation in SMEs operating in emerging economies (Abdul-Halim et al., 2019; Castillo-Vergara & García-Pérez-de-Lema, 2021; Haase et al., 2018). SMEs in emerging economies do face a lot of challenges in trying to convert creative ideas into innovations that can be meaningful, key among them is the lack of resources (Games, 2019).The ability of a business to stay afloat in a competitive market hinges on its capacity to continuously innovate. This is crucial for emerging economies as they seek to grow their economies. In all, this study discusses innovation from the perspective of manufacturing SMEs and how they design their products for the various markets. The paper also looks at the determinants of innovation from the emerging market context and how these affect the success or failure of product design in SMEs. According to Temel, Mention & Torkkeli (2013), the period before the 1980’s did not provide an incentive for manufacturing companies in emerging economies to invest into research and development (R&D) and innovation as they enjoyed protection from their governments from outside competition. But this started to change gradually as various trade agreements and economic groupings between nations started to collaborate in an effort to promote the competitiveness of their nations (Kabiraj & Yang, 2001). Zimbabwe was not an exception as this shift was evidenced by the various polices enacted to promote regional and international growth.
The Objective Of The Study
Economic issues that have affected Zimbabwe as a nation have provided a fertile ground for the small players to create thriving startups. As such, requiring more support to survive the global competition. To achieve this, the SMEs in the manufacturing sector have to provide innovative products to the worldwide market to expand their businesses. Games (2019) & Indarti (2010) argue that the SMEs in emerging markets lack proper structuring that can make it easy for them to implement radical innovation unlike those found in developed markets. This study seeks to advance literature on innovation in manufacturing SMEs in emerging economies by examining in depth the determinants of product innovation from an emerging market perspective. The study aims to measure the innovation capability in the context of SMEs found in emerging economies as these face a dilemma of trying to be profitable and at the same time keep their operations running. If innovation cannot be measured, it then becomes an uphill task for the organisation to improve its ability to innovate.
Theoretical Framework
According to Desa & Basu (2013), there is limited information as to how SMEs in emerging economies mobilise resources especially in cases where the economy at large is not providing fertile grounds for development. This study adopts the Resource Based View (RBV) theory formulated by Wernerfelt (1984) and later enhanced after Barney’s (1991) studies. Authors like Barney et al., (2001) have made considerable contributions to the theory. The principle of the RBV theory is hangs on two key parameters which are resources and capabilities. These parameters are viewed as key in achieving a sustainable economic advantage. Saeedi et al., (2012) used the RBV framework to explain the internationalisation behaviour of successful SMEs in Iran and highlighted the effective blending of capabilities and resources leading to fast internationalisation of the SMEs. Rapid internationalisation of the SMEs from the new emerging markets means that firms can now compete on the global market, thus expanding their horizons. Entrepreneurship makes up the core element of the RBV framework (Barney et al., 2001) and SMEs with better Entrepreneurial Orientation (EO) detect quickly prospects of new business ventures in the markets and thus achieve rapid internationalisation (Ruokonen & Saarenketo, 2009). In SMEs, the manager is at the center of the operations and his or her managerial skills are put to the test in a number of ways. By nature in SMEs, it is the manager’s or owner’s vision that is developed into reality (Romijn & Albaladejo, 2000). The decision making process in SMEs becomes more individualistic as the owner-manager actions are limited to the closest business environment they are exposed to. According to Gay & Szostak (2019), SMEs make choices of where to set-up depending on a number of factors such as cultural activities, legislation, business activities, language and educational background of the market. Proximity to resources is a key decision in SMEs’ management as it capacitates an SME to effectively compete with others. Nonetheless, the major problem is the capability of the SME to successfully disrupt the business environment especially where large companies exist. Through the RBV framework, the SME has to seek control of the resources it does not own for it to succeed. For new product development to be a success, resources have to be mobilised (Knizkov & Arlinghaus 2020) and this has a positive effect on the growth of the business especially SMEs targeting to grow their market share (Villanueva et al., 2012). The success or growth of any SME is directly related to its specific capacity to access the resources and according to Clough et al. (2019) these can be classified into human, social and financial resources.
Innovation In Smes
Due to limited resources, SMEs lack the formal process of new product development. SMEs with research and development departments usually allocate fewer funds for new product development as compared to big companies due to limited financial resources (Games, 2019). Vrgovic et al. (2012) reported that SMEs from emerging economies lack internal technical support thus forcing them to sub-contract certain aspects of their innovation endeavours. Liu et al., (2014), argues that it is not only the collection of ideas that are key to be able to innovate. The innovation process calls for a systematic process where one has to identify, collect and retain the best idea out of a pool of available ideas for them to innovate better (Cohendet & Simon, 2015; Liu et al., 2014). As SMEs face financial constraints, they end up ignoring or not affording to set up research and development departments or fully employ personnel responsible for R&D (Woy & Qing 2007), even though they show great efforts in involving their customers in their specific innovation processes (Vrgovic et al., 2012). Traditionally, studies to understand innovation were more focused on the large companies in the areas of R&D and technology management. As the area has been developing and the emergence of SMEs worldwide, the scope of innovation has also widened.
Innovation has four categories namely: product, process, market, and organisational (OECD, 2005) and this can vary from company to company. It is also determined by the size of the company and the sector in which it operates and overall by the country's economic environment in which the company is using (Silva et al., 2011). Seo & Cho (2020) reported that the R&D process needs skilled professionals for planning, irrespective of the company's size, and this expertise is lacking in SMEs as they face resource challenges. Similarly, in their study on the SMEs in Tanzania, another emerging economy, Kiveu, Namusonge & Muathe (2019) state that, SMEs fail to translate R&D into innovation as they lack the human capital with the know-how to do it correctly. Investing in R&D in an SME shows the seriousness of the management to propel the company to greater heights as investment in R&D and innovation has a positive correlation. However, it is challenging to measure innovation using a single indicator or variable (Boonen, 2007). Indicators like the level of R&D investment and outputs like products, new services and or patents registered by the company can be the best measures of the company's innovation drive. Though SMEs are often at an advantage when it comes to radical innovation as they are more flexible, Liu et al. (2014), indicates that the majority of these innovations and new products developed by SMEs are cumulative as they are based on incremental changes in ideas. But if they adopt an open innovation strategy, SMEs can improve their innovation capability and thus engage in more radical and disruptive innovations. McAdam et al. (2007), cites that many SMEs are set up after just one technological innovation by the owner. This becomes the firm's essential product as it goes straight to the manufacturing process. Cohendet & Simon (2015) reported that if the SMEs invest in Research and Development (R&D), their knowledge will increase, thus improving their innovative capability and resulting in better productivity. But due to the risks associated with investing financial resources, many of the SMEs are not keen to invest in R&D, especially those in emerging economies, as they lack financial muscle. Several authors allude to a positive relationship between SME performance and innovation level (Indarti, 2010: Kiveu et al. 2019: Silva et al. 2011). According to Love & Roper (2015), the export capability of an SME is determined by its level of innovation, with those with the knowledge to innovate being more successful in their endeavours to export. Through export, SMEs can tap into the global market, which can be a springboard for success as they enter new markets that give them more business returns. The drive to innovate is determined by the manager or owner and the nature of the size of the SME. The agility in the decision-making process by these leaders in the particular SME also determines the innovation activities to be implemented. What they have learnt from other competitors and their passion for excelling better than their counterparts becomes a critical success factor as that gives a general platform for innovation stimulation. In their study on SMEs in Tanzania an emerging economy, Mahemba & De Bruijn (2003), argue that for innovation to succeed, SMEs must establish business relationships in their particular manufacturing sectors.
Determinants Of Innovation In Smes
Romijn & Albaladejo (2000) highlighted that the technical expertise of the personnel employed by the SME, the innovation drive of the manager or owner of the SME and the level of investment in R&D by SME are the primary internal factors that drive the agenda on innovation in SMEs. A number of studies have also tried to unpack the determinants of innovation. Bougrain & Haudeville (2002) cite technical partnerships, R&D efforts, and a design office as the critical determinants of innovation while Rahmouni (2013) argues that SMEs must maximise their internal and external knowledge capabilities. SMEs have to try to match up to copy what other successful enterprises would have done in terms of technology adoption. Chudnovsky et al., (2006) & Gonçalves et al., (2007) both indicate the direct beneficial association between R&D activities and innovation in emerging economies. They did their studies in Argentina and Brazil economies, respectively. In his research on SMEs in Tanzania, Goedhuys (2007) confirmed that R&D strongly supports innovation in emerging economies. Other studies as indicated by Rahmouni (2013) show that the partnerships between the SMEs and institutions of higher learning and other research organisations can improve the level of innovation in SMEs. In her study on Polish SMEs, Szczepańska-Woszczyna (2014) reports that SMEs need support from the government by setting up of innovation policy that will motivate SMEs to improve their operations. She argues that such a policy framework reduces the level of risk to the entrepreneurs as it encourages them to implement innovation. The innovation policy framework also offers advisory services to SMEs, given that they lack skilled personnel in their operations to help implement innovative ideas either for product or product or process improvement.
SMEs face several barriers in their operations, and one of them is uncertainty in demand as fear of investing in developing a product that will not perform well on the market is common. They will have invested heavily in its development (Lesakova, 2009). Prominent companies are however at an advantage as they can absorb such losses whenever a product fails on the market as they have a better financial capacity. The former operate with a very tight budget. Szłapka, Stachowiak, Batz, & Fertsch (2017), report that drivers of innovation in an SME include the size of the company, management skills, organisational culture, market segment, technology investment, financial capacity or performance, consumer preferences and competitiveness of the SME.
Innovation Capabilities Of Manufacturing Smes
The innovation capacity of an SME is determined by its financial potential, material potential, human potential, and knowledge or technological potential. Innovation capability helps SMEs attain high levels of competitiveness in their local and export markets but it is rarely measured in these SMEs (Saunila, 2016). Therefore, managers in these SMEs should prioritise promoting and supporting the SMEs' innovation capability (Çakar & Ertürk, 2010). According to Sen & Egelhoff (2000), there are two types of innovation capability: radical innovation and incremental innovation. Neely et al. (2001), states that innovation capability is the potential ability of the organisation to come up with innovative products. Lawson & Samson (2001) defines innovation capability as a theoretical framework that outlines the numerous activities or actions that may be taken to improve the success of inventions. SMEs have different behavioural traits in operations, and how they innovate among those in the same sector. Large companies' policies, theories, and models that can be suitable for use do not translate to successful outcomes when implemented in SMEs. Human capital is significant as it also affects the innovation adoption in the SME. The educational background of the personnel employed in the SMEs determines how they view innovation as an essential facet of the organisation's success. Sulistyo (2016) states that external factors such as the level of financial support given by the government and collaborations with external players like customers, suppliers and banks are also critical determinants in measuring the innovation capability of the SME.
Innovation And Performance Of Smes
Konsti-Laakso, Pihkala & Kraus (2012), state that most 20th century innovations are attributed to SMEs, which have been instrumental in bringing about competition in various market segments. A study by SMEs furniture manufacturer Hajar (2015), revealed the vital link between innovation and performance of the SME. Hajar states that a strategy adopted by the business entity and the innovation culture of the small business are crucial determinants to the success or performance of the SME. In a similar study undertaken in Kenya, scholars Ndesaulwa & Kikula (2016) discovered that SMEs owned by entrepreneurs who are keen to explore new methods and ideas resulting in new inventions had better performance ratings. Ndesaulwa & Kikula (2016) further argued that there has been very few studies in Africa that tackle issues of SME performance and innovation. One of the biggest challenges SMEs face is competition from large companies. Large companies have better financial resources to invest in technology.
Small Medium Enterprises In Zimbabwe
In Zimbabwe, small enterprises are entities which employs maximum of 50 people, and have a maximum of up to $500 000 USD in annual turnover. Medium enterprises include those who employ not more than 100 people with an annual turnover of not more than $830 000 USD. SMEs have smaller structures that allow a quick decision-making process by their size. They are willing to take risks, thus making their innovation process faster, unlike the more prominent, more established companies (Love & Roper, 2015). Though SMEs the world over face synonymous challenges, their size makes them early innovators in various sectors of their economies. Their major hindrance comes in the availability of raw materials and finances in contrast to large companies. The relative strengths of SMEs are more of a behavioural character as they exhibit entrepreneurial dynamism, flexibility, and motivation in the way they operate. From the SME standpoint, innovation is frequently considered as introducing new items that will answer to clients’ wants more competitively than existing products on the market (Adam & Alarifi, 2021). SMEs compete with large companies already established in the market; therefore, they should offer more than what prominent players do. In other words, their products should be designed expertly so that they attract customers and at the same time be priced competitively. Despite the rising global competition, SMEs in the industrial sector play an important part in the Zimbabwean economy. Ncube (2017), reports that the competitiveness of Zimbabwean SMEs is low, and these SMEs need to appreciate the crucial role of innovation. He further suggests the need to create awareness through an "innovate and succeed" campaign. He proposes using models of regional and global SMEs that have achieved growth through innovation adoption. For such firms to remain operational there is need to revamp productivity performance continuously. Though it can be risky and resource-consuming, adopting innovative pathways can lead to SMEs opening new growth paths.
SMEs in Zimbabwe face similar challenges parallel to any other SMEs in emerging economies, and these include limited access to finance, a volatile economic environment, poor infrastructure, poor management skills and lack of entrepreneurial skills (Zindiye, Chiliya & Masocha, 2012). Wadesango (2015) argues that while the government of Zimbabwe has enacted various policies to enable development of the SMEs, this support has not been enough, given the turbulent nature of the economy, as the SMEs are not achieving meaningful growth. Several studies (Wadesango 2015; Zindiye et al., 2012) have shown that SMEs fail to survive in their early years of operation, especially in emerging economies, as they face stiff competition from those already established in the particular sector. According to a study by Adam & Alarifi (2021), when personal engagement efforts achieve innovation, it is referred to as user-driven innovation. This involves the users from the early stages of design development up to production. Given that SMEs in furniture manufacturing for instance take the innovation ideas from the customers, it means the customers are key informants to the innovation process in SMEs. The creative potential of staff employed by SMEs makes them attain competitive advantage as they can create differentiated products for the niche markets. The need for having creative minds within the design stage of the development is significant as innovation and creativity go hand in hand. One cannot innovate without being creative and vice versa. Most SMEs found in emerging markets cannot afford to fail even though they have limited resources available for innovation. However, the recent drive globally towards sustainable design and cleaner production systems has increased the importance of collaborations at the beginning of new product development. SMEs from emerging markets are no longer safe in their local markets. They are exposed to stiff competition globally and continuously have to innovate to outpace their competitors. Therefore, this pushes innovative SMEs in the manufacturing sector to be more inclined to network with other SMEs or other establishments linked to the line of products they also produce.
Challenges Facing Smes In Zimbabwe
Makanyeza & Dzvuke (2015), conducted a study on SMEs in Zimbabwe, and concluded that there is some innovativeness in SMEs even if this was only evident in the manufacturing and service sectors. Nyoni & Bonga (2018) also studied SMEs in Zimbabwe and found that most SMEs were formed due to the economy's collapse as more prominent companies laid off many workers. Tinarwo (2016) focused on challenges in the operations of SMEs in an industrial area in Harare, Zimbabwe and his results showed that they lack access to capital, access to markets, stiff competition, and lack of technology and lack of skilled workforce. Gombarume & Mavhundutse (2014) also studied SMEs in Chitungwiza, Zimbabwe and found that SMEs lack access to financial support lending institutions and recommended that SMEs be assisted financially through schemes managed by the government so that they can also be formalised. Studies on SMEs in Zimbabwe, an emerging economy, show a similar trend to all other SMEs in emerging economies and yet take a silent approach to SMEs' capabilities that are related to innovation. This study assumes that for manufacturing SMEs, design innovation is a key success factor in achieving growth in developing economies.