How to apply disruptive innovation theory in SMEs in China?

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Chapter One

1.0 Introduction

            In general, Small and Medium Enterprises (SMEs) in China depend on the use of technology so that to make certain and enhance the level of accuracy and accountability in the management of business processes. The existence of disruptive innovation in China provides SMEs with an opportunity to confront and alter or make over the existing business operations. According to Zhu, Wittman, and Pung (2012, p.1132), the locus of focus on the enhancement of technology underlines the challenge faced by the management of SMEs due to technology advancement. Business operations and way of life have significantly benefitted from the introduction of technology (Ji & Gunasekaran, 2014, p.893). Today, technology is characterized by substantial change with advanced technological innovations being unveiled almost on a daily basis. The Chinese economic growth is on an upward trajectory with SMEs becoming part and parcel of the national economy. Besides, SMEs represent the most active business entities within the Chinese economy as a result these enterprises possess the highest probable percentage of further developments.

            Currently, 99% of business enterprises in China are SMEs; consequently, this underlines the sectors' rapid expansion and growing popularity. These enterprises provide the Chinese economy with over 55% of the gross output value and over 30% of national taxes and profits. SMEs have also boosted the growth of industrial value to over 70% since the early 1990s (Chen, Zhu & Zhang, 2017, p.140). As the beneficiaries of the implementation of the economic reforms in China, SMEs lead in the incorporation of technological advancements in the running of operations accounting for over 70% of technological innovation with over 60% of patents rights. Nonetheless, according to Bao, Chen, and Zhou (2012, p.1227), SMEs are currently facing an uncertain future due to the financial crisis that began in 2007. China has received criticisms for producing sub-standard goods, and therefore brands products produced in the country have struggled on the global market. SMEs in China have failed to stamp authority in the market due to high competition levels; therefore to enhance survival and development the adoption of innovation is deemed as necessary.

To maintain a competitive advantage, it is the responsibility of SMEs in China to adopt the technological innovation. Reinhardt and Gurtner (2015, p.139) found out that the application of disruptive innovation should support the transformation of SMEs in the economy. Different scholars have defined disruptive innovation with Zhu, Wittman, and Pung (2012, p.1131) arguing that it is the situation of business doing things differently by altering the traditional mode of operations. For example, the roles of conventional mail services were overtaken by the introduction of the internet. In China, SMEs have to apply disruptive innovation so that to adequately utilize the provisions of new technology in gaining competitive advantage in fast-paced business environments. The need for disruptive technology has been brought about by the increasing demand for better and quality products that are delivered inconvenience hence reducing the cost of operation. Within the Chinese economy, the majority of SMEs have realized the benefits and the impacts of incorporating technology in production processes.

            Disruptive innovation is significant to the growth of SMEs as such technology is a substantial element in the achievement of business goals and objectives. In a competitive market frame, the application of disruptive innovation...