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Impact of innovation on the internationalization-performance of SMEs

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Impact of innovation on the internationalization-performance of SMEs


Impact of innovation on the internationalization-performance of SMEs


Internationalization refers to the process of improving the international presence and operations of a given firm (Zucchella & Siano, 2014). In some of the developed countries such as New Zealand, when large firms expand and become multinationals, the small to medium enterprises (SMEs) also benefit from the efforts of internationalization (Chatha & Jajja, 2014). Innovation has acted as the driving force behind the existence and reality of competitive advantage and performance in the international business environment. Economic growth and development rely on the introduction of new technology that can aid the process of production. Zucchella & Siano (2014) determines that the level of innovation controls the international performance of SMEs. The benefits associated with internationalization of operations have resulted in SMEs growing the interest to innovate. As a result of innovative activities, SMEs tend to deliver an increase in economic growth and employment thus becoming an essential aspect in explaining the competitive advantage and international performance of a firm. Innovations bring about new ways of production and service dispensation thus adds benefits to the economic prosperities of SMEs.

In developed economies, SMEs have been recognized for the prominent role they play in adding value to the GDP and creation of employment; however, their full potential remains underexploited (Chatha & Jajja, 2014). This argument is also supported by Alexy et al. (2018) who conclude that developed economies thrive due to the existence of SMEs that constitute a considerable portion of business operations that considerably contribute to the GDP and employment levels. For that reason, developed economies provide support for the startup SMEs, for them to internationalize and become centers of innovation and technological advancement. To improve the performance of SMEs, developed economies ensure that they establish and implement policies that will provide these entities get to utilize the technology available effectively. The incorporation of innovation in the operations of SMEs results in improved general performance concerning the durability and quality of products. The ability to innovate results in cost reduction enabled by the saving of materials, energy conservation or through the use of cheaper and alternative materials instead of conventional materials in the process of production.

SMEs continue to apply the concept of innovation in their business activities. To compete internationally, SMEs are using new technology to produce more products, adopt effective marketing innovation techniques and create business innovation processes (Alexy et al., 2018). This situation paves the way for the SMEs to grow their local and international business activities thus improving performance levels. SMEs continue to adopt the different forms of innovation (organizational, marketing, process or product) to maximize the advantages of new technology entirely. The international performance and competitiveness of SMEs are enhanced by the availability of innovation; therefore the effects of new technology can be accessed in different ways, for example, through evaluating the benefits of innovation to SMEs. The research focuses on examining the effect novelty has on the performance of SMEs in New Zealand. The paper precisely concentrates on the international performance of SMEs is influenced by innovation.

1.1 About SMEs in New Zealand

In the New Zealand economy, more than 97% of the local enterprises is constituted by SMEs. These enterprises are imperative to the economy of New Zealand, as they provide an indispensable source of economic development and employment opportunities. SMEs give employment to more than 30 percent of the total workforce hence providing around 30 percent of the country’s total GDP. Various economic assessment reports indicate that in New Zealand, SMEs are represented in different industries (Peng, 2013). As opposed to larger enterprises that spent less time on the regulation of resources use, SMEs focus more on improving workplace safety and utilization of resources as a way of gaining an edge over close competitors. To enhance the competitiveness of SMEs, New Zealand enhances the access of startup SMEs to finance. This situation is evidenced by a research conducted by the Pew Survey where over 80 percent of the SMEs that requested debt financing had their requests approved with over 70 percent who requested equity finance also receiving approvals (Peng, 2013).

            The New Zealand economy is dominated by the presence of SMEs, and therefore just like any economy, the country relies on the international performance of these entities so that to access enhanced economic fortunes. However, despite the dependence of New Zealand on these enterprises most of them struggle to succeed with around 50 percent of the startups failing within the first five years of being operational (MBIE, 2018). To reverse this trend, the government has invested significantly in ensuring that SMEs improve their profitability and reduce the ‘death' rates of these enterprises. To develop the SMEs sector, the New Zealand government has actively pursued initiatives that will support the existence and success of SMEs most especially through innovation. The international performance of SMEs relies on the utilization of new technology that can support the process of...


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