of networking mechanisms in the promotion and enhancement of SME performance. They do not directly incorporate the impact of an enterprise†s innovation activities.
The work adds to the theory of the firm, as it presents a new way
ie Number of employees of the firm xe Maximum number of employees (according to SME definition
if Sales (or Turnover ic3 Total costs of production ip Profit margin ic1 Initial investment capital
Firstly, my special gratitude goes to my supervisor Magnus Klofsten. He has been of great help
investigation, which I am sure will be helpful in my future research work Thomas Hedner, my dear friend and colleague at Innovation and
enlightening me as the work progressed. His input into the thesis and our general discussions
Technology, for his deep insight into and criticism of my work, which helped me to develop it
interest in my work On a personal level, I have no words that can describe my love and respect to
I present this work in her memory Adli Abouzeedan Gothenburg June 15, 2011 11 Table of contents 1. Introduction 13
They are a major source of job creation (Storey et al. 1987, Castrogiovanni 1996, Clark III and Moutray 2004) and they represent the seeds for future large companies and corporations
1 SMES are defined as firms with less than 250 employees (NUTEK 2004, p. 15 14 performance of SMES with a central focus on innovation capacity are limited (Siqueira and
and employee turnover, which are expressed differently in the intended model than the existing ones The existing models are complex tools
however, it is used also in this work in order to align the research text with existing practices. Furthermore, the models do not present performance in a dynamic way
the number of employees, the maximum number of employees distinguishing the different categories of enterprises, firm age,
interest to this work are: sales, turn over, intake, and absorption of new technologies indicated by investments in these technologies and total costs of production.
number of employees or the amount of turnover. It is a misleading term, however, due to the
The focus of this work is to discuss SME performance evaluation while accounting for the impact of innovation on firm efficiency in relation to both the firm†s
This work attempts to alert scholars working with firm performance research that a better approach is needed.
An objective of the work is to correlate organization theory (Scott 2003) to the theory of the
It is important to emphasize that this work aims to communicate its message to two types of individuals.
consultants, and individual researchers. The second group consists of individuals who hold key-positions and deal with SME performance issues in relation to the firms†external
evidence shows that countries with higher R&d activities per employee have higher levels of total factor productivity growth (Coe and Helpman 1995.
how this work has developed, because the journey was far from conventional. This thesis started a long time ago, back in the early 1990s, after I finished a study at Chalmers
Based on that work the university awarded me, in accordance with its standards, a Phd degree.
done a lot of work in relation to performance within the finance discipline, but their work is not related directly to the way
I tried to build the SIV model Modern finance theory assumes a perfect market (Simkowitz 1972.
SMES often work as suppliers to larger corporations, and as thus transaction costs are highly relevant to their situation.
The initial work to build the desired model (Abouzeedan 2001) applied a textual/statistical analysis method to existing basic information from a Swedish database
Developing this work made it clear to me that there is already a lot of gained experience in the area of building performance models of SMES,
This discussion should also clarify why the reader will see works in this thesis that are focused more on the firm-perspective (paper 1, 2,
I also reflect on some possible future research extensions to this work 28 As a closing note to this introductory chapter, it is worth mentioning that the three
numbers of employees have a higher survival probability (Mansfield 1962 According to Caves (1998), firm failure rates decline with size, given age.
In that work, Klofsten (1992b) described a couple of models that he thought would give the widest possible understanding of the firm performance concept
to my work •The issue of innovation must be considered when constructing performance models for SMES
their ability to provide the locus for employment creation in periods of economic shifts, and their innovative contribution to structural and
Klofsten†s (1992b) work focuses on the earlier stages of firm life. He distinguished between two groups of firm models:
â€oesystems and work process that leverage competitiveness. †According to him, it is â€oethe competencies delivered as codified knowledge in the internal environment of the firm and that
significance of the human relationship in the organization and how the employees are related 44 to the functions of the firm.
According to Taylor†s (1911) approach, each worker is specially trained to perform a single movement or subtask in the manufacturing process.
theory is limited actually a contribution to a much more encompassing work of analysis of the
works on analyzed data collected by Roethlisberger and Dickson (1939. Social psychologists such as Likert (1961) and Katz et al.
clear in James D. Thompson†s (1967) work. Thompson was among the first to recognize the
Earlier works on the competitive advantage of organization emphasized tangible resources, such financial capital and location (Scott 2003.
thinking is based to a great extent on the work of scholars at the Tavistock Institute of Human Relations, in England.
Early work in this field recognized the extent to which organizations were shaped by political and legal frameworks, the rules governing market
One new work in this area is the Actor-Networks Theory (ANT. The theory advises us to look at events, actions, and
that future work should broaden the scope of small firm performance predictors to include additional nonfinancial variables (Peel and Peel 1987.
) In the manufacturing sectors, SMES tend to have greater numbers of employees, while in consultancy and other service sectors;
SMES tend to have fewer employees. An alternative approach is to talk about smaller firms and larger firms in a relative sense;
the number of employees, to the average size of firms in the sector at that point in time.
The first two of these parameters are the number of employees and the firm†s age.
maximum number of employees distinguishing the different categories of enterprises (for the firm size parameter) and the
The first three quantitative parameters of interest to this work are the turnover (or sales), production costs, and profit margins.
It leaves the statistical refining work to be performed when analyzing variations of the model in specific contexts of sector and locality
250 employees; the data was taken directly from the accounting reports of the firm and the analysis
250 employees; the data was delivered from the firm management for the period of the analysis;
as it had less than 250 employees 60 and the data was taken directly from the accounting reports of the firm for the period of the
as it had less than 250 employees; the data was delivered from the firm†s management for the period of the analysis;
more empirical work If one considers a 45 degree slope to be the lower limit for an SPI indicator
and a lot of empirical work is required to determine a more accurate location for these borders. Furthermore, the borders of the transitional area depend on the
difference between the two companies is that one of them works in a classical economic activity (fishery),
while the other works in healthcare technology. It is possible to generalize these two case studies to assess the ability of the SIV model to address the stated challenges
The existing work handled the issue from various other aspects, such as business strategy and management practices.
The paper originated as a single-authored work, wherein I tried to establish a strategic approach for the usage of SME performance models.
The first is a short work published in 2001, in which we presented the concept of the
This paper presents the first published empirical work, excepting the working paper of 2001 (Abouzeedan 2001), in which the SIV model was used to analyze SME performance
The original work upon which paper 3 was based proposed a new parameter of the SIV model (Abouzeedan 2001, Abouzeedan and Busler 2002) †the Survival Index (SI
The case study presented in this work indicated the analytical power of the new model, as it succeeded in giving a reasonable indication of the worsening situation of the
employees. The analysis covered two fiscal years, 1999†2000 and 2000†2001. In comparison to the existing models,
We used a maximum limit of 50 employees to define a â€oesmall firm†in the case
That led me to write the first version of this work. The first draft of
This work introduced a new type of capital†innovation capital. In the paper, we argued that innovation capital can be used as an indicator for the degree of richness of the
policy-oriented work, and was published in a special volume entitled â€oescience, Technology and Sustainability in the middle East and North africa. †The volume included works from
various scholars who are interested in issues of economic development in that region Summary of paper 5
The company had a work force range of 49†90 employees through the years Summary of paper 7
This paper is a case study wherein the model is implemented, with the innovation aspects playing a major role in the evaluation of the firm†s performance
The firm works to adapt personal cars for the usage of handicapped people, both as drivers and as passengers.
employees. The analysis covered two years, 1999†2000 and 2000†2001. Compared to the existing models,
profiling profits from empirical work. The last paper (paper 7) returns the discussion to the
6 gave a good example of how policy profiling profits from empirical work. The last paper, paper
The work achieved in this thesis contributes to firm theory (Cyert and Hedrick 1972, Moss 1984, Amess 2002, Jacobides and Winter 2007, Ricketts 2003), and more
the work contributes to the literature†s correlation of organization theory (Scott 2003) to the
the number of employees, the maximum number of employees distinguishing the different categories of enterprise, firm age,
for costs of material and other accessories as well as costs of manpower involved in developing new products and services at the firm.
The published works tend to avoid such discussion by focusing on alternative topics, such as business strategy models (Rasheed
future work using the IBAM tool The Arab countries presented a unique case, where each country has an
that promote SMES can use the tools of analysis developed in this work, such as the SIV
The functions of the executive. Cambridge, Massachusetts: Harvard University Press Baum, J. A c. 1998. Disciplinary roots of strategic management.
Technology, growth and employment International Review of Applied Economics 16 (3), 265†276 Covin, J. G. and Slevin, D. P. 1989.
prepared for the OECD Directorate for Social affairs, Manpower and Education†GERI. (IUI w. p. 350b, Stockholm
empirical work. The Review of Economic Studies 62 (1), 53†82 Ettlie, J. E.,Bridges, W. and O†Keefe, R. D. 1984.
worker than others? Quarterly Journal of Economics 114 (1), 83†116 Hannan, M. T. and Freeman, J. 1977.
morale among railroad workers. Ann arbor, Michigan: Institute for Social Research University of Michigan Katz, J. A.,Safranski, S. R. and Khan, O. 2003.
How open source software works: â€oefree†user-to -user assistance. Research Policy 32 (6), 923†943
work organizations. Administrative Science Quarterly 14 (1), 115†126 Qian, G. and Li, L. 2003.
Management and the worker. Cambridge Massachusetts: Harvard university Press Romano, C a. 1999. Identifying factors which influence product innovation:
defenses of a work group in relation to the social structure and technological context of the work system.
Human Relations 4 (1), 3†38 Trott, P. 2008. Innovation management and new product development. 4th edition.
Sociology of Work of the International Sociological Association, the Executive council of the Society for the Advancement of Socioeconomics,
and working times"committee of the Association internationale des sociologues de langue franã§aise. She is also president of the Association d†à conomie politique and editor of the
Chair on Technology and work organization, professeur associã with Ecole nationale d†administration publique and UQAM, she has published many articles and books on
employment and types of employment, job training, innovation in the workplace and work organization, as well as the articulation between work and family life.
See websites for details www. teluq. uquebec. ca/chaireecosavoir www. teluq. uquebec. ca/chairebell www. teluq. uquebec. ca/interventionseconomiques
It must first be specified that the works by classical analysts of society and its evolution
Although Schumpeter†s works have made it possible to isolate the role of the entrepreneur as a key agent of change in economic organizations, he did not broaden the
Schumpeter and Veblen†s works Veblen and the role of technology Veblen makes an important contribution to the economic analysis of innovation, but
Schumpeter and Veblen†s works constitute important background for the development of an analysis which embeds innovation in society.
â€oeevolutionary†economists who completed their work by proposing a global vision of innovation. For this movement, innovation is a process (Freeman et al.
Vernon†s works show that there are five phases to a product initiated through innovation: novelty, growth, maturity, standardization
labour market (Le Bas, 1995. This process is therefore uncertain, although not entirely so The firm acts as an interface between these elements, mediating
evolutionary economists and authors who have drawn on their work. Thus, writings by Chambon, David and Deverey (1982) on social innovation, by Flichy (1995) on technical
The renewal of the concept of innovation is also related to the rediscovery of the works
In the tradition of Mead†s interactionalist perspective of sociology (1934), the works by Lazarsfeld et al.
action pertains to the field of strategy since it works on the action system of an organization
Experts for thematic capitalisation on the innovation capacity of SMES Year 1 Eurico Neves †inova-Portugal
He is one of the most experienced European experts in research exploitation and innovation policy, both at the regional and national level
SÃ verine Ouvry is an expert in innovation. Her background as a researcher in the United states, where
She joined inno as a consultant in economic development and policy evaluation http://www. inno-group. com
/â€oethe contents of this work reflect the views of the author (s) and do not necessarily represent the position
almost 6 000 staff involved in regional policy to acquire new skills and capabilities, and it has led directly to the improvement of more than 400 policies.
The programme therefore asked 12 teams of experts covering 12 different fields of policy to analyse the
Innovation capacity of SMES, is the fruit of their work. It showcases a selection of tried-and-tested
more established companies and commercialise them, thereby contributing to growth and employment As a result, SME innovation †capacity†is naturally at the top of the European, national and regional
Incorporation of new staff ï¿Activities addressing creativity thinking and product conception ï¿The acquisition of specific technological competences
o The promotion of lead markets in a bid to restore European union (EU) competitiveness o The creation of new market opportunities related to the search for technological and
The hiring of qualified staff ï¿How to overcome weaknesses in networking and cooperation with external partners
or a new organisational method in business practices, workplace organisation or external relations. Innovation, thus defined, is clearly a much broader notion than R&d and is
of only 1 employee) to large companies employing several hundred people and with a turnover of millions of Euros †basically only excluding multinational companies or large
employees and an annual turnover below â 10 Million, and medium-sized companies as those with fewer than 250 employees and an annual turnover below 50 million.
The same recommendation defines micro-companies as those with fewer than 10 employees and a turnover below â 2 million
In this report, and as the assessment is on behalf of and for regional policymakers (the programme partners) and for the final beneficiaries (SMES), we have followed the
inventions, literary and artistic works, and symbols, names images, and designs used in commerce. IP is divided into two categories:
which includes literary and artistic works and is not relevant for the present report 1
and job creation Procurement of Innovation Platform The Procurement of Innovation Platform19 is an online hub developed by ICLEI (an association of over
the Knowledge for Growth Expert Group advising the then Commissioner for Research, Janez Potoä nik
Innovation and Promotion of RTD Enforcing SMES role in the transition from traditional industry regions to knowledge
Innovation Hubs Promotion of innovation in edge cities Innomot http://innomot. net /Improving Regional Policies
Promotion of innovation for SMES DISTRICT +http://districtplus. it /Disseminating Innovative Strategies for Capitalisation of
•Improve the capacities of employees in SMES for RTD and innovation management through training and the support of experts
•Weaknesses in networking •Lack of internal research capabilities •Insufficient marketing of innovation
than 250 employees in which †access to finance†was ranked the second most pressing problem
providers or private consultants), in a small-scale approach targeted to the needs of individual companies.
INNOSUP-4-2014 within the †Innovation in small and medium-sized enterprises†Work Programme
is sent directly to NORT with a short report on the work done. NORT pays the bill directly to
o Business Accelerator, for the promotion of private VC o Business Angel Network to connect private investors to entrepreneurs
Staff recruitment Another approach is supporting SMES to recruit new staff, thereby bringing new skills into the company in non
-technological areas such as design or marketing. This approach has been addressed by •MINI-EUROPE40 o Summer Design Office
Examples of GPS in staff recruitment •The Summer Design Office (Sweden) in the MINI-EUROPE project:
Supervisor, and eight students for seven weeks This GP has a lot in common with †Summer Entrepreneur†(also a GP from MINI
members†relationships in distributed work environments The VE/VO was tested particularly in the field of technological innovation and technology
o I-CREO, brings an expert within each SMES€ network to seek new business opportunities
through the hiring of innovation experts in order to seek, propose and bring new business opportunities to fruition, including in export markets.
experts for each of the main industrial sectors of the Valencia Region. The function of the
the promotion of Corporate Social Responsibility in a local or regional territory in order to improve local SMES€
provided via the network of IVEX delegations abroad and in Spain and experts in international
to achieve this are for SMES to hire technically qualified staff and to strengthen their own in-house
institutions to industry as well as on GPS addressing the recruitment of research staff There were also four INTERREG IVC sub-projects addressing technology parks (one from SMART
Fabrica Ethica hinges on the respect for workers, consumer rights and the environment. It encourages an approach based on continuous improvements which anchor
Technology transfer promotion Three projects identified GPS related to the promotion of technology transfer and support to spin
-off and start-up companies •ERIK ACTION45 o Campus: Technological Transferability and Business Support o TT Andalusia:
economic development and business promotion for the Andalusian Regional Government) to promote technology transfer from the knowledge system to industry by consolidating
Human resources solutions The other popular GPS concerned human resources and how to introduce technological competences within SMES
•ERIK ACTION45 o Innovation assistant, to support newly graduated employment •INNOMOT48 o Bioenergy for the region, to build cooperation between Phd students and companies
o Innovation assistant, to support newly graduated employment •PERIA49 o Creation of R&d departments, to support the hiring of research staff
Innovation assistant is an excellent example of a GP transferred multiple times. The initial GP was
assistant, it aims at promoting the employment of recently graduated staff in SMES with no or little
experience with graduate employees. It is limited not to technological fields but also includes marketing website and e-commerce development and product design
staff in R&d. A similar GP was found in the Cross Innovation51 project Technological Promoters for Innovation
and support for new staff identification 48 GPS described in the INNOMOT Good Practices Report:
from a lack of highly qualified staff, caused due to the long distances from educational organisations, fear of contacting R&d institutions and the perceived less attractive location of
Innovation Assistant stimulates SMES to employ recently graduated staff in order to overcome these barriers. Innovation Assistants are employed for a definite project and funded
o Grant for the labour costs of the innovation assistant o Mandatory training of the innovation assistant by a specially designed post
o Accompanied monitoring/evaluation of project by an external consultant Innovation Assistant is now a key tool in the regional innovation system and has been
on a pool of one hundred advisers technological or generalist) to visit SMES, identify needs and support them
assisted with the development of new products and/or methods in their work o Development of the above-mentioned pilot projects in the selected SMES
Lectures were given by the expert staff of the Department of Wood and Furniture Design and Technology.
Promotion of cooperation between design students and SMES §3. 2. 2 Very high ICT ERIK-ACTION PRAI/VINCI Support for the setting up of Virtual Enterprises based on ICT
Incorporation of new staff PERIA ERIK-ACTION & INNOMOT Creation of R&d units Innovation Assistant
Promotion of innovation within a traditional sector (§3. 2. 5 Very High Medium *In terms of replication potential towards other regions
H2020 call in the Innovation in small and medium-sized enterprises work programme: INNOSUP-5-2014
H2020 call in the Innovation in small and medium-sized enterprises work programme: INNOSUP-4-2014
defining their work programme, identifying GPS and analysing their conditions of transferability ï¿INTERACT66: This programme provides assistance to stakeholders that are implementing
technology†in the Horizon 2020 work programme †Innovation in SMES€. The label will help with the
and Parenthood (ERIK ACTION), coaching activities through external experts, such as in Innovation Stockholm (INNOHUBS) and Tameside Business Family (MINI-EUROPE) or
through the incorporation of new staff in SMES, such as in Innovation Assistant, from DISTRICT +•Support activities addressing Creativity Thinking and Product conception, such as in the
tools, dedicated staff and training. Today, most national tax incentive schemes encourage strictly R&d investments and activities and rarely cover aspects of non-technological innovation.
and work together securely. This trend towards †virtual†support through web-based platforms seems
INNOHUBS Innovation Hubs Promotion of innovation in edge cities Innomot Improving Regional Policies promoting and
SME development in Europe Promotion of innovation for SMES PERIA Partnership on European Innovation Agencies
SMART+Mini-Programme for SME Innovation and Promotion of RTD Enforcing SME role in transition from traditional
No. of staff members with increased capacity awareness /knowledge /skills) resulting from the exchange of
research output from universities directly to SMES, through the support to the employment of young
Employment of young graduates in innovation projects within SMES Innovation Systems awareness raising, tutoring and consultancy for SMES;
new staff PRAI Vinci (virtual organisations Parenthood Trainings 68 the PRAI/VINCI is given particularly relevant its focus on Virtual Enterprises which stands-out from the
sectors and are relatively easy to implement in other regions, such as Campus, for the promotion of
maintain and sustain member relationships in distributed work environments The VE/VO was experimented particularly in the field of technological innovation and technology transfer
workers, consumer rights and the environment. It encourages an approach that is based on continuous improvements which anchor CSR in SME strategies and management systems.
both staff from the planning and management of funding programmes and operational staff linked with implementation processes.
support and promotion of local entrepreneurship and innovative SMES among the partner Edge Cities This goal would be achieved through the creation of an †innohub†in each city, drawing and building
counselling, advising and mentoring resource staffed by local experts from the academia and business environment, available for private individuals as well as businessmen and other entrepreneurs
different regions across Europe with different innovation contexts, for the promotion of knowledge transfer from more experienced regions (in terms of innovation systems) to learning
region (New Staff /Phd students INGENIUM II public VC Technical Commercial Service (coaching Managers School
can be provided via the network of IVEX delegations abroad and in Spain and experts in international
including salaries for Project manager, Supervisor, and 8 students for 7 weeks This GP, which has a lot in common with †Summer Entrepreneurâ€,
Office (new staff Financial Eng Public-Private VC FLIIN Public-Private VC Innovoucher Vouchers Pole programme
through the hiring of innovation experts in order to seek, propose and bring new business opportunities to fruition, including in export markets
start-ups, and micro and small companies with a staff of fewer than 50, in developing their innovation
New staff Cluster Mgmt Services Cluster mgmt Innovation vouchers Young Innovative Enterprise contract (loans New products by
design (new staff Incubation coaching 82 good potential for transfer, due to their simplicity of implementation and universal applicability.
SME innovation and promotion of RTD: SMART +PARTNERSHIP Lead partner Aragonese Federation of Municipalities Regions and Provinces
recommendations were evaluated then by regional experts for their •Financial burden •Organizational efforts •Expected effects in increasing regional innovativeness
by local entrepreneurs and their application in promotion of clusters •Development of programmes that will enable universities,
consultants). ) This reduces the distance between regional players and final beneficiaries (SMES and produces tangible results quickly
Call in the Innovation in Small and Medium-sized Enterprises work programme 2014. Link •INNOSUP-5†2014:
Medium-sized Enterprises work programme. 2014. Link •Innovation and business strategy: why Canada falls short.
Growth Expert Group advising the then Commissioner for Research, Janez Potoä nik. 2009 Link •SME opportunities for EU-US collaboration in Horizon 2020.
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