Small firms choose to innovate even in a challenging environment. Unlike stylised facts, innovation by small and medium firms in South Asia is not just technology-based but is rather human resource oriented. Using microdata from the World Bank Enterprise Surveys, we find that learning, research and development, and formal training impact innovation the most. We use a mix of frequentist statistics and machine learning algorithms. Learning is the core factor valid for all streams of innovation. Combining the learning with the other two causes a discernible increase in the chance to innovate. Any improvement in learning in the firm will make strides in innovation. However, to sustain this, there is a need for policies that combine innovation with research and development and with training. An innovation ecosystem that fosters these combinations through collaborations will be impactful. Learning is the tipping point of innovation to have new products and processes, an adaptive organisation and a new marketing strategy.
AcsZ. J., & AudretschD. B. (1988). Innovation in large and small firms: An empirical analysis. The American Economic Review, 78(4), 678–690.
2.
ArrowK. J. (1971). The economic implications of learning by doing. InReadings in the theory of growth (pp. 131–149). Palgrave Macmillan.
3.
BicenP., & JohnsonW. H. (2015). Radical innovation with limited resources in high-turbulent markets: The role of lean innovation capability. Creativity and Innovation Management, 24(2), 278–299.
4.
BremanJ. (1976). A dualistic labour system? A critique of the informal sector concept: I: The informal sector. Economic and Political Weekly, 11(48), 1870–1876.
5.
ClarkJ., & GuyK. (1998). Innovation and competitiveness: A review: Practitioners’ forum. Technology Analysis & Strategic Management, 10(3), 363–395.
6.
CoaseR. H. (1937). The nature of the firm. Economica, 4(16), 386–405.
7.
CookeP. (2001). Regional innovation systems, clusters, and the knowledge economy. Industrial and Corporate Change, 10(4), 945–974.
8.
EngelJ. S. (2015). Global clusters of innovation: Lessons from Silicon Valley. California Management Review, 57(2), 36–65.
9.
EntrialgoM. (2002). The impact of the alignment of strategy and managerial characteristics on Spanish SMEs. Journal of Small Business Management, 40(3), 260–270.
10.
FischerM. M. (2001). Innovation, knowledge creation and systems of innovation. The Annals of Regional Science, 35, 199–216.
11.
FrenkelA., SheferD., KoschatzkyK., & WalterG. H. (2001). Firm characteristics, location and regional innovation: A comparison between Israeli and German industrial firms. Regional Studies, 35(5), 415–429.
12.
HothornT., HornikK., StroblC., ZeileisA., & HothornM. T. (2015). Package ‘party’: Package reference manual for party version 0.9-998, 16, 37. Retrieved 26September2024, from https://cran.r-project.org/web/packages/party/party.pdf
13.
HuibanJ. P., & BouhsinaZ. (1998). Innovation and the quality of labour factor: An empirical investigation in the French food industry. Small Business Economics, 10, 389–400.
14.
KarlssonC. (1997). Product development, innovation networks, infrastructure and agglomeration economies. The Annals of Regional Science, 31, 235–258.
15.
LallS. (2000). Technological change and industrialization in the Asian NIEs. In KimL. & NelsonR. R. (Eds.), Technological learning and economic development: The experience of the Asian NIEs. Cambridge University Press.
16.
LandryR., AmaraN., & LamariM. (2002). Does social capital determine innovation? To what extent?Technological Forecasting and Social Change, 69(7), 681–701.
17.
LazearE. P., & ShawK. L. (2007). Personnel economics: The economist’s view of human resources. Journal of Economic Perspectives, 21(4), 91–114.
18.
LeeR., LeeJ. H., & GarrettT. C. (2019). Synergy effects of innovation on firm performance. Journal of Business Research, 99, 507–515.
19.
LewisW. A. (1954). Economic development with unlimited supplies of labour. The Manchester School, 22(2), 139–191.
20.
MadisonK., MooreC. B., DaspitJ. J., & NabisaaluJ. K. (2022). The influence of women on SME innovation in emerging markets. Strategic Entrepreneurship Journal, 16(2), 281–313.
21.
MarshallA. (1920). Principles of economics: An introductory volume. Macmillan.
22.
MorganJ. N., & SonquistJ. A. (1963). Problems in the analysis of survey data, and a proposal. Journal of the American Statistical Association, 58(302), 415–434.
23.
MyrdalG. (1972). Asian drama: An inquiry into the poverty of nations (Vol. 1). Pantheon.
24.
NarayananK. (1998). Technology acquisition, de-regulation and competitiveness: A study of Indian automobile industry. Research Policy, 27(2), 215–228.
25.
NelsonR. R., & WinterS. J. (1982). An evolutionary theory of economic change. Harvard University Press.
26.
NonakaI. (1994). A dynamic theory of organizational knowledge creation. Organization Science, 5(1), 14–37.
OECD & Eurostat. (2005). Oslo manual-third edition: Guidelines for collecting and interpreting innovation data. Organisation for Economic Co-operation and Development.
29.
ParmigianiA., & MitchellW. (2009). Complementarity, capabilities, and the boundaries of the firm: The impact of within-firm and interfirm expertise on concurrent sourcing of complementary components. Strategic Management Journal, 30(10), 1065–1091.
30.
PenroseE., & PenroseE. T. (2009). The theory of the growth of the firm. Oxford University Press.
31.
PenroseE. T. (1952). Biological analogies in the theory of the firm. The American Economic Review, 42(5), 804–819.
32.
PutnamR. D. (Ed.). (2004). Democracies in flux: The evolution of social capital in contemporary society. Oxford University Press.
33.
RomerP. M. (1990). Endogenous technological change. Journal of Political Economy, 98(5, Part 2), S71–S102.
34.
RudJ. P. (2012). Infrastructure regulation and reallocations within industry: Theory and evidence from Indian firms. Journal of Development Economics, 99(1), 116–127.
35.
SamuelsonP. A. (1954). The pure theory of public expenditure. The Review of Economics and Statistics, 36(4), 387–389.
36.
SchumpeterJ. A. (1934). The theory of economic development (OpieR., Trans.). Harvard: Economic Studies (Vol. 46). Harvard University Press.
37.
SchumpeterJ. A. (1942). Capitalism, socialism and democracy. Harper Perennial Modern Thought.
38.
SimmonsG., ArmstrongG. A., & DurkinM. G. (2008). A conceptualization of the determinants of small business website adoption: Setting the research agenda. International Small Business Journal, 26(3), 351–389.
39.
SmithA. (1778). An inquiry into the nature and causes of the wealth of nations (2nd ed.). StrahanW. and CadellT..
40.
SmithR. (2017). Work(er)-driven innovation. Journal of Workplace Learning, 29(2), 110–123.
41.
TeeceD. J. (2007). Explicating dynamic capabilities: The nature and microfoundations, of (sustainable) enterprise performance. Strategic Management Journal, 28(13), 1319–1350.
42.
TherneauT., AtkinsonB., RipleyB., & RipleyM. B. (2015). Package ‘rpart’. Retrieved 30November2020, from https://cran.r-project.org/web/packages/rpart/rpart.pdf
43.
TzengC. H. (2009). A review of contemporary innovation literature: A Schumpeterian perspective. Innovation, 11(3), 373–394.
44.
UzziB. (1997). Social structure and competition in interfirm networks: The paradox of embeddedness. Administrative Science Quarterly, 42, 35–67.
45.
WalkerR. M., ChenJ., & AravindD. (2015). Management innovation and firm performance: An integration of research findings. European Management Journal, 33(5), 407–422.
46.
WilliamsonO. E. (2002). The theory of the firm as governance structure: From choice to contract. Journal of Economic Perspectives, 16(3), 171–195.
47.
WooldridgeJ. M. (2002). Econometric analysis of cross section and panel data. MIT Press.
48.
World Bank. (1998). World development report 1998/1999: Knowledge for development. Oxford University Press.
49.
World Bank. (2011–2014). Enterprise surveys. Retrieved 30November2020, from http://www.enterprisesurveys.org
50.
World Bank. (2019, October). Rethinking decentralization. South Asia Economic Focus. https://doi.org/10.1596/978-1-4648-1515-7
51.
World Bank. (2020). Doing business 2020. https://doi.org/10.1596/978-1-4648-1440-2
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
