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Diffusion of Organizational Innovation and the Growth of
SMEs: Case Study Evidence from Small and Medium
Enterprises of Khyber-Pakhtunkhwa Pakistan
Mohammad Daud Ali
A PhD thesis submitted to the Department of Business Administration Iqra National
University Peshawar.
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I declare that this thesis is entirely my own work and I have referenced other’s Ideas or
concepts in the text and in Bibliography.
Mohammad Daud Ali
2
To my parents and my siblings specially my sisters
3
Acknowledgment
This work would not have taken shape without the support of my supervisor Dr. Syed
Imad Shah. His unwavering support and patience immensely helped me to complete my
thesis. He supported me how to be an independent writer and academic. Dr. Syed Imad
Shah always spared time and whenever I emailed him, he responded in detail and well in
time.
I am also highly indebted to Professor Dr. Shahjehan who motivated me during the entire
process. His motivation enlightened me and broadened my vision not only in this PhD
work but for my career at large.
I also acknowledge the support of Malik Taimur Ali khan who as the Registrar supported
us in the administrative process. He always tried to process the student’s work on priority
basis.
Good friends and peers are the must-haves for a PhD student. It is there support which
encourages getting over the agonizing feeling of solitude during the tiresome process of a
PhD. I specially acknowledge the support and help of (late) Farman Ali kaka who always
spent time with me during most of the traveling I did for data collection and even during
the course work. It indeed is a very sad feeling for me not to have him around when I
have done the work.
My friends Syed Arshad Ali shah, Dr. Muhammad Shakeel, Muhammad Nisar khan
Yousafzai , Muhammad Abdul Haseeb Khan, Dr. Mian Ahmad Jan and Ali Raza also
supported me at each step during my PhD. Without their support and motivation, it
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would not have been possible.
My sisters also supported me and their motivation meant a world to me during the
completion of this research work.
Finally, I extend my gratitude to my late father whose motivation throughout my life
made it a guiding principle for me that “I can if I think I can”.
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Table of Contents
Chapter 1: Introduction to this Research.......................................................................................
1.1 Background..............................................................................................................111.2 Small and Medium Enterprises in Pakistani Perspective........................................141.3 Problem Statement...................................................................................................181.4 Objectives of the Study............................................................................................201.5 Significance of the study.........................................................................................211.6 Scope of this Study..................................................................................................221.7 Nature of the Study..................................................................................................221.8 Structure of the Thesis.............................................................................................24
Chapter 2: Literature review..........................................................................................................
2.1. Introduction.............................................................................................................262.2 The Growth of SMEs: Paths to walk.......................................................................272.3. SMEs and Entrepreneurial Orientation...................................................................282.3.1. The role of E-Commerce in SMEs of Developing Economies............................292.3.2. SMEs innovation through government intermediaries........................................302.4 SME and the Challenges..........................................................................................30
2.4.1. SMEs Competence and its side effects............................................................312.5. An Evolutionary note on Innovation.......................................................................33
2.5.1 Different types of Innovation............................................................................372.6. A review of novelty and innovation in established SMEs......................................392.7. Innovation or Imitation Strategies: Pros and Cons.................................................422.8. Invention, Innovation, and Discovery....................................................................442.9. Innovation and firm performance...........................................................................492.10. Effect of SMEs size and Characteristics on Nature and type of Innovation.........512.11 Not just Innovation but Persistent Innovation!......................................................532.12 Theories of organizational Innovations.................................................................54
2.12.1 Organizational Design theories.......................................................................552.12.2 Organizational Cognition and learning theories.............................................552.12.3 The organizational Change and Adaptation theories......................................562.12.4. Cultural theory at work in Innovations and Inventions.................................56
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2.13. Organizational Innovation....................................................................................592.13.1. Operational definition of organizational innovation for the current study....65
2.14 The Technological, Organizational, and Environmental Factors Effecting SMEs 662.15. Determinants of successful organizational Innovation: A review of current Research.........................................................................................................................672.16 Idea Generation in Small Companies....................................................................702.17 The external network and collaborations for innovation.......................................72
Chapter 3: Conceptual Framework, Research Methods and Design, Analysis Techniques
.......................................................................................................................................................
3.1. Introduction.............................................................................................................743.2. The Conceptual Framework....................................................................................763.3. The Study, the Methodology, and the Methodological Considerations..................78Construct Validity:.........................................................................................................82Internal Validity:............................................................................................................83External Validity:...........................................................................................................83Reliability......................................................................................................................843.4. Case Selection and Design......................................................................................84
3.4.1. Sources of Information....................................................................................853.4.2. Interview Data Triangulation...............................................................................88
3.4.3. Selection of Case Study SMEs........................................................................893.4.4. Identification of Respondents..........................................................................903.4.5. Interview Protocol...........................................................................................91
3.5. Data Analysis Methods...........................................................................................923.6. The 8 Case Study SMEs.........................................................................................943.7. Data Coding: Developing Categories and Themes.................................................95
3.7.1. Themes.............................................................................................................963.7.2. Additional emergent themes during data collection........................................98
3.8. Condensing the Data...............................................................................................99
Chapter 4 Case presentation and within case analysis.................................................................
Case 1: Hizat Pharmaceuticals.....................................................................................101
Case 2: Wisdom Pharmaceuticals Industrial Estate Hayatabad Peshawar..................................
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Case 3: Zinta Pharmaceuticals.....................................................................................................
Case 4: Aries Pharmaceuticals.....................................................................................................
Case 5: Stanley Pharmaceuticals.................................................................................................
Case 6: Delta Pharmaceuticals Risalpur......................................................................................
Case 7: Iceberg Pharmaceuticals.................................................................................................
Case 8: Rock Pharmaceuticals.....................................................................................................
Chapter 5 Cross Case Analysis....................................................................................................
5.1 Introduction............................................................................................................2615.1.1 The structure and Culture of SMEs................................................................2615.1.2 The role of Size in Adoption and Diffusion of Innovation.............................264
5.1.3 Organizational processes making the firm innovative........................................2675.1.4 What makes the SMEs innovative..................................................................271
5.2 Diffusion and adoption of Innovation....................................................................2745.2.1. How Innovations are developed from Infancy?.............................................2755.2.2. The rate of adoption of innovation................................................................2795.2.3 Sharing Knowledge Sources...........................................................................2825.2.4 Collaborations and level of mutual trust.........................................................2855.2.5 Value addition through collaborations............................................................2885.3.1 Drivers and sources of Innovation..................................................................2895.3.2 Idea Sources for new products and services...................................................2915.3.3 Knowledge and training level of Staff of the SME........................................294
5.3.4 Challenge of idea stealing/ copyright.................................................................2965.3.5 Inspiration from Competitors Products..........................................................2985.3.6 Customers Input as driver of Innovation........................................................2995.3.6 Role of Suppliers in innovation diffusion and Adoption................................3005.3.7 Screening and evaluating Ideas......................................................................302
5.4 Role of Marketing Research in finding the Environmental Conditions................3045.4.1. Market Research: Formal or Ad hoc..............................................................305
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5.4.2 Risk calculation and test marketing................................................................3075.5 Barriers to the Spread of Innovation......................................................................310
5.5.1 Lack of expertise.............................................................................................3125.5.2 Financial Barriers and role of banks...............................................................314
5. 6 Role of Government authorities like SMEDA......................................................3165.7. Impact of adoption of innovation on SME Growth..............................................3195.8 Conclusion.............................................................................................................321
Chapter 6: Discussion and Conclusion........................................................................................
6.1 Conclusions about research propositions and themes...........................................3246.1.1. The nature of organization and type/s of innovation related to the adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan......................3246.1.2 The role of technological organizational and environmental conditions for the diffusion of innovation in SMEs of Khyber-Pakhtunkhwa, Pakistan......................3256.1.3. The adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan has a positive relationship with the availability of internal and external sources of innovation...............................................................................................330
6.2. Implications for Theory........................................................................................3316.3. Implication for Policy and Practice of Future Trends...........................................3356.4 Limitations of the study.........................................................................................3376.5 Implication for Methodology.................................................................................3386.6. Directions for Future Studies................................................................................340
Bibliography................................................................................................................................
Appendix A: The interview protocol...........................................................................................
Appendix B: Master Table...........................................................................................................
Appendix C: Letter to the participant..........................................................................................
Appendix D: Release form/ information sheet............................................................................
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Abstract
This research is conducted to examine the diffusion of organizational innovation and its impact
on the growth of Small and medium enterprises of Khyberpakhtunkhwa, Pakistan. The study was
conducted in the pharmaceutical sector in two clusters i.e. Peshawar and Nowshera of
Khyberpakhtunkhwa. A case study research design was adopted for the study and data was
collected from through semi-structure interviews. The interview protocol was developed by
identifying the themes from the literature review. The protocol was modified slightly after the
pilot study of two enterprises and some emergent themes were added to it. The interviews were
administered with the different top level managers of each SME. The semi-structure interviews
were conducted for primary data whereas the official websites/facebook pages of the firms and
non-participant observations were used for secondary data. The research was successful as it
established the relationship of diffusion of innovation and SMEs growth as well as put forth
some suggestions for making the enterprises innovation friendly. This study also unearthed some
barriers and environmental conditions which hinder the diffusion of innovation in SMEs. The
study made some methodological contributions as it is the first of this kind in Pakistani
perspective. This study offered implications for theory, policy and practice as well as offered
some directions for future research.
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Chapter 1: Introduction to this Research
This Chapter introduces the current research. The researcher has tried to shed light on the
background of the study in the first section. This section has presented the case with the
view to ascertain that small and medium enterprises play an utterly important role in
economic growth. In the next section of this chapter the researcher presented the problem
statement. This section elaborated that although SMEs are important for economic
growth, they face many limitations which hinder their development however they seek
way outs to survive the adverse business conditions. For this purpose, SMEs rely on
innovation to increase their life span. This is followed by the section where the
perspective of Pakistan Small and Medium Enterprises is presented. The next section
enlisted the objectives why this research is carried; the significance of the study and its
scope as well as the nature of the study is explained in last sections of this chapter.
1.1 Background
In developing economies, the importance of Small and medium enterprises is
acknowledged for years now (Kayanula and Quartey, 2000). The economic growth and
the employability needs of the developing countries can be accomplished through SMEs.
Small and medium-sized enterprises (SMEs) are often referred to as the backbone of the
economy as they provide the source for jobs and social cohesion(Wee & Chua, 2013).
However, many of these enterprises have failed to grow further than their micro
enterprise nature, sometimes progressing at best to a small or medium size (Kaya Nula &
Quartey, 2000). SMEs face a variety of limitations owing to the difficulty of absorbing
large fixed costs, the absence of economies of scale and scope in key factors of
production, high unit costs, and poor cash flow (Rothwell, 1991; Parker et al, 1995 &
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Rammer and Schmiele, 2008). Due to a meager credit worth , SMEs are discredited for
gaining finances and thus do not survive in crunch times leading to eventual failure(De
Maeseneire & Claeys, 2012).
During the late 70s through early 80s SMEs started to become more innovative and
flexible. The effort was intended to reduce costs and work more efficiently than the large
firms. On a lower note, however, SMEs are labeled for being a fragile financial entity
which can go broke frequently. Besides sometimes these enterprises are stereotyped for
producing lesser quality and short living products. In the developed world, SMEs depend
on the business life cycles and a booming economy means booming number of firms
which do not dye .On the contrary, the SMEs growth in a developing economy depend on
Crisis cycles (Farinha and Félix (2015). An SME has the risk of being bankrupted at the
very early stage as they often do not survive their second year .It is often felt essential
that the SMEs lacking sufficient funds of their own need to get enough funds from
banks. The entrepreneurs who want to invest their financial and human resources to
SMEs do so only when they feel that there is a substantial political stability.
Furthermore, security and safety is also an integral part for SMEs establishment in a
country. An increase in crime rates results in a decrease in SME establishment.
Historically speaking businesses operated successfully in proximal and favorable
geographic locations. In fertile land, favorable environment and demographics have
determined effect on SMEs growth and it reassures that the mortality rates of the SMEs
are lower.
SMEs can grow to become corporate units only and only if they are innovative
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(Cannarella & Piccioni, 2003). Innovation refer to as the use of advance products,
processes, services, technologies or ideas accepted by markets, governments, and society
(Christensen, 2002). Innovation and invention differs from each other. Whereas
innovations mean the use of new ideas, invention refers only to the idea creation (Davila
et al, 2006). An innovation is a useful exercise having practical applicability, a
distinguishing feature of innovation from invention. Practically, innovation contributes to
the performance of the enterprise (Gronhung and Kaufman 1988; Padmore, Schetze and
Gibson, 1997; Cooper, 1998).
Innovation is not always the creation of new ideas but the accepting of an idea to modify
the operations. Innovation has been recognized as an important tool for a country’s
economic prosperity (Schumpeter, 1911) as it leads to entrepreneurship. Since the
characteristics of SMEs change from case to case, it does not have a clearly agreed upon
definition as yet (Lopez and Aybar, 2000).Using the capitalization, sales, employment and
profitability measures, the definitions of SMEs always become unreliable(Kayanula and
Quartey, 2000). As per the EU directions, SME is a firm employing less than 250 people,
have less than 50 million Euros(De Maeseneire and Claeys, 2012). The commonly
accepted definition however is given by Osei et al; (1993).He categorized an enterprise
on the basis of its number of employees. He considered a micro enterprise as one with
less than 5 employees; the number of employees in a small enterprise is 5 to 29 while the
number of employees in a medium enterprise is from 30 to 99. Buckler, (1997) describes
innovation as something like a spiritual force, culture or environment which guides
organizations towards value creation.
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1.2 Small and Medium Enterprises in Pakistani Perspective
As per the state bank of Pakistan prudential regulation document, Small and Medium
Enterprise Financing, A small Enterprise is any business entity which has up to 20
employees, be they are contractual and an annual sales turnover of up to Rs.75 million. A
medium enterprise is any entity which is ideally not a public limited firm and has from 21
to 250 employees if it is a manufacturing and services enterprise and from 21 to 50
employees if it is a trading enterprise in both case the per annum sales turn-over is above
75 million and up to 400 million PKRs(Sme Sbp, 2011). According to the FBS, in
Pakistan there are around 3.2 million economic establishments. There is 90 % of that
enterprise which has an employment base of 99 employees. The GDP contribution of the
SMEs is 30% beside their 25% earning in exports and 35% in manufacturing value
additions.
The realization of importance of SMEs in the growth of economy motivated the
Government of Pakistan to declare SMEs as one of the four important pillars for the
revival of economy in 1999-2000.At the beginning of the new millennium Pakistan
reached to an extent of macroeconomic stability and the focus was then to trigger the
growth of economy so that to reduce poverty, create jobs, and induce rural development.
The strictly developed financial policies enabled the government for a fiscal space to
work out on the equal geographic distribution of the policy to accomplish the targets.
Also, according to the poverty reduction strategy paper and Medium Term Development
Framework document the SME has been identified by Pakistan government as one of the
important tool for economic growth and developing private sector (Poverty, 2007).
Although the government devised policies for the development of private sector but there
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is a strong need for the government to focus on the SME policy whilst the sustainable
private sector growth is targeted. Adopting an SME centered policy will not only help in
improved growth rates but will also ensure to get rid of the wealth in equal accumulation
and income generation.
As there is a huge proportion of poverty in rural settings mounting for 34.7% as
compared to 20.9% in the urban areas, the rural areas must be considered for investments
and for job creation while an SME policy is devised(Poverty, 2007). Learning from the
growth and industrialization of 60s wherein the GDP was 6+ but even then the poverty
was on the rise as well, due to the fact that focus was laid on large scale organizations
only. The SME policy document of the first five years of the new millennium
documented the recommendation of SME policy task force to support idea that the
economic growth and prosperity must be necessarily based on SME development.
Although the government of Pakistan initiated the policies to promote the small industries
in the past as well but it faced problems like overly emphasizing on manufacturing than
service industries, giving more attention to hardware than software, lack of a policy
framework which could indicate the role of all the stakeholders who can play role in the
uplift of small industries and finally, lack of actions carried out to develop the
complementary skills.
Following the 60s and 70s policies of employment promotion and growth, in the 80s and
90s, initiatives like the yellow cabs and youth investment were taken, but these policies
focused only on individual employability opportunities rather than focusing on enterprise
development. On top of this, due to the low loan portfolios, the SME financing
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henceforth is least favored by banks.
As an outcome of the government of Pakistan efforts to strengthen SMEs, a private sector
structure, SMEDA has been established for playing a vibrant role. As an institution,
SMEDA has worked appreciably to develop SMEs but a coherent SME policy can be
more effective in implementing the aggressive SME development initiative. The efficacy
of SMEDA is however curtailed mainly due to the fact that SME development falls under
the umbrella of many ministries and both federal and provincial government levels which
do not come under any of control of SMEDA. Also SMEDA lacks both human and
financial capitals to cover the initiate an outreach program. Although an SME bank is
created as an effort to develop SMEs. In its early time, the bank focused on a single point
agenda of providing financing to the SMEs, although on a small scale.
In Pakistan, there is no single definition of SME and all the concerned departments such
as the state Bank, provincial labor departments and Federal labor of statistics define SME
in their own way. This lack of unanimity makes it difficult to target firms, carrying on
with the development programs and collect data. According to SME policy, the
government should devise one definition which is approved by all public and private
enterprises and should subsequently give a time frame of two years for the firms to align
themselves with the policy recommended SME definition. Any enterprise will be
considered as an SME which has paid up capital of Rs.25 million, an annual sales
amounting for up to 250 million rupees and has an employee strength of up to 250
employees(Poverty, 2007).
From Pakistani perspective, SME is traditionally an enterprise which is engaged in
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business activities, whatever legal form it may have. The SMEs are differently described
even from one province to another. In the province of Punjab any enterprise which has a
fixed investment worth of at least Rupees 20 million, excluding its building and plot cost.
However, in Sindh province SMEs are fixed investment amounts for around 10 million
rupees. Although most of the Pakistani villages are self-reliant on the basic necessities
and have their own specialist technical workers for their activates, many families depend
on the cottage industry for making money, the industry is considered to be one big
contributor to the overall GDP of the country. As the small business face severe financial
constraints, they do not produce the desired output and hence can only contribute about 5
to the entire GDP. The SMEs in Pakistan accommodate around 25% of the labors; there is
a necessity for the improvement of the SME sector to cope with the unemployment
situation. The areas of Punjab like Sialkot, Faisal Abad and Gujranwala and that of Sind
like. Hyderabad and Karachi are hubs of SMEs. There are also some areas of Kashmir
where there are small and medium size enterprises. In the face of some serious financial
constraints, the SME industry in Pakistan seems not to function properly.
At times the revenue generated by these firms have nothing more worth than to bear the
operational expenditures and no extra money is left to expand the business. Due to its
inability to create economy of scales, the products produced in SMEs are no way near
those which can be produced on large scale in the open market. Due to the lack of quality
control check and the coordination among these SMEs, the products normally cannot
match the export standards and there is difference in prices of due to the lack in mutual
coordination. The lack of technical knowledge of the owner, the operations carried out in
the firms are through the out dated methods and technologies. Sometimes the wholesalers
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take the goods from the producers at the cost price and leave them with profits to make,
which discourages the producers who then drop down the quality. The energy crisis in
rural and sub urban areas discourage the installation of small enterprises .Besides, the
high electricity tariffs and the frequent fluctuations also add to the problems of small
enterprises. The free trade and the dumping policies make it further difficult for the small
enterprises to grow as these firms cannot compete with their internationally developed
export quality competitors. The SMEs face problems to channel their products as there is
a lack of proper communication channels and the weak networking on the part of these
SMEs. Following the networks and proper communication channels will enable them for
gaining more competitive advantage. In order to minimize the trade deficit that Pakistan
is facing these days, SMEs need to produce goods and products which are high quality
and which can be used as an alternative of the imported products. The SMEs must be
helped by the public agencies in this regard as to participate in global trade expos in the
outside world. The SMEs in Pakistan do not only give economic growth a chance and
contribute to GDP, but is believed to maintain the cultural identity as well.
1.3 Problem Statement
SMEs are vital to the development of any economy as they usually form the bulk of
economic activity (Kaya Nula & Quartey, 2000) especially in the developing world. Most
of these SMEs do not live their second “birthday” because of certain limitations. These
limitations include lack of capital, human resource challenges, market-based challenges,
unfavorable legal, regulatory conditions and weak institutional rules (Abor and Quartey,
2010; Kayanula and Quartey, 2000; Mensah, 2004). Also, due to the lack of relationship,
enhanced repute and collateralization, the SMEs do not get as good amount of funds as
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larger firms do (De Maeseneire & Claeys, 2012). An SME bank borrowing demands for
credit has a direct bearing on its interest along with its internal financial volume. Credit
supply , however depends on the fact that whether an SME can initiate cash-flows and
can repay its debts in time (Farinha & Félix, 2015).Innovation is one of the key means by
which SMEs can overcome these severe business conditions to survive and grow into
large corporate units (Subrahmanya et al, 2010). Academics have studied the various
innovations (Sundbo, 2003; Van der Aa and Elfring, 2002) that can be adopted by SMEs.
These studies on innovation have concentrated on process and technological innovation
(Hoffman et al, 1998; Julien et al, 2004; Kalantaridis, 2010). Few studies have looked at
organizational innovation among SMEs with the exception of Salavou et al (2004) who
looked at organizational innovation in SMEs from the context of strategic orientation and
competitive structure in Greek SMEs. Although the importance of Internationalization
and strategy in SMES is of immense imsportance yet very little work has been done
academic research wise on this area. Due to its very opportunistic, unplanned and
reactive nature strategies for SMEs may not be developed. Although literature sheds light
on some SMEs as proactive, innovative and risk taking to enter into foreign markets. A
differentiated strategic orientation is missing in literature(Giovanni, 2012).
This study will reflect the diffusion and adoption of organizational innovation among
pharmaceutical SMEs of Khyberpakhtunkhwa, Pakistan. This sector is chosen for the
understanding that since pharmaceutical industry is a science oriented area and these
enterprises follow latest research. The knowledge based nature of these pharmaceuticals
can be associated to the adoption of innovations. There have also been studies on the
spread and adoption of innovation (Hinson, 2007; Klaas et al, 2010). Several models have
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been developed regarding the spread and adoption of innovative methods (Wade, 2009).
Theoretically, the question still remains: what conditions are necessary to spread of
innovation among enterprises? Do these innovations lead to enterprise success? Also, few
studies have focused on a qualitative approach (O’Dwyer et al, 2009) with most studies
focusing on quantitative approaches (Udry and Goldstein, 1999; Nordman and Tolstoy,
2011; Salavou et al, 2004; Subramanyah et al, 2010) in studying the phenomenon. SMEs
tend to have flexible organizational structures therefore conducting qualitative research
will afford the opportunity to observe their innovation processes in real life situations
using case studies. This study will therefore adopt a qualitative approach using multiple
case studies that present the real situations within which innovations have to be adopted
and their impact on SMEs overall success or failure.
1.4 Objectives of the Study
The objectives of the study are:
i. To identify the sources of organizational innovation in small and medium scale
enterprises (SMEs) of Khyber-Pakhtunkhwa, Pakistan.
ii. To determine how organizational innovation diffuses/spreads among SMEs of Khyber-
Pakhtunkhwa, Pakistan.
iii. To explain the conditions necessary for the diffusion of organizational innovation
among SMEs of Khyber-Pakhtunkhwa, Pakistan.
iv. To identify the barriers to the spread of organizational innovations of SME’s of
Khyber-Pakhtunkhwa, Pakistan.
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v. To explore the impact of type of enterprise on the nature of organizational innovation
adopted.
vi. To understand whether adopting Innovation can help the enterprise grow.
1.5 Significance of the study
This study can be significant for many reasons but apparently it can be important for at
least the four reasons. Firstly and most importantly, when the effect of nature of SME on
adoption behavior is identified, it will help in making specific innovations to specific
SMEs, for example an entrepreneurial pharmaceutical SME of Khyberpakhtunkhwa can
be assumed to adopt new and research based molecules or utilize the latest instrument.
Secondly, it emphasizes to spot out the sources of innovation among SMEs. Once these
sources are identified they can then be used to influence any future innovative methods
that can have a positive inclination on enterprises. Thirdly, recognition of the conditions
necessary for spread of innovation will help organizations to work as to focus on
achieving the favorable conditions and desired effects. Finally, understanding the positive
relationship between SMEs performance and adoption of innovation will build
confidence for these enterprises to easily adopt any future innovations that enhance their
Organizational Effectiveness. This also will help identify the barriers which could then be
addressed properly and resultantly, the performance of the firm will lead it to growth. It
will bring in the perspective on this phenomenon from KPK and Pakistan, hence
contributing to the extant literature.
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1.6 Scope of this Study
This research has a focus on the Diffusion and Adoption of innovation in the
pharmaceutical SMEs of Khyberpakhtunkhwa, Pakistan. The study aimed at studying
those SMEs which are operating in Khyberpakhtunkhwa. This research aims at studying
the Characteristics of the firm which are bearing an impact on the diffusion and adoption
of Organizational innovation in these case study SMEs. The study also attempts to find
out the various sources of organizational innovation in the selected SMEs. Another aim of
this study is to find out those conditions which trigger the diffusion process and those
barriers which hinder the same. This study however is focused only on only eight case
study SMEs from both the Peshawar and Nowshera clusters which operate in
Pharmaceutical sector and does not focus on any other Sectors. These are those firms
which are listed on the website of Small and Medium Enterprises Development Authority
website and the study does not reach to any big national or multi-national firms in this
sector.
1.7 Nature of the Study
A qualitative approach helps understanding and analyzing of change situation in case
study organizations. Through qualitative research the social realities, experiences and
meaning they attribute to words are understood and properly perceived(Taipale-Erävala,
Lampela, & Heilmann, 2015). This study uses semi- structured interviews and case study
methods help to obtain deep rich data on organizational innovations among SMEs of
Khyber Pakhtunkhwa, Pakistan. The strengths of constructing understanding through
case studies comprises the possibility of producing new thorough insights through the
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varied nature of data collected from several sources (Creswell, 2007). A multiple case
study method is followed for the current study. Hakim (1987) believes that data and
evidences taken from multiple sources make case study analysis more complete and
rounded. As a research strategy, the focus of case studies is unraveling the nature of
dynamics present within situations. They are especially valuable when the laboratory type
of controls are not feasible and/or ethically unjustified (Miles and Huberman, 1984; Yin,
1994; Remenyi et al., 1998). Case Study research is way too important and helpful in
those areas where there is an aim or tendency towards building an incremental theory and
develop new theoretical relations(Dwyer, Gilmore, & Carson, 2015).
Simon et al. (1996) argued the same way, examining many cases concurrently, the
analysis is enriched as issues are compared, contrasted and elaborated. Case studies
usually deploy a combination of data collection methods like library data sources,
interviews, questionnaires and at the best observation too which all go beyond all
historic, behavioral and attitudinal lines of inquiry (Eisenhardt, 1989; Yin, 1994).
While quantitative data do sometimes form part of case studies, they are largely
qualitative. Case studies usually depict an authentic, though summarized record of events,
the main players concerned, and other influencing variables, and generally have an
institutional focus (Rosselle, 1996). The current research method is in perception with the
philosophy of inducting theory and case studies (Eisenhardt, 1989). There are some
researchers who already conducted exploratory research and have used generally used
statistical survey techniques to improve the key subjects in the broad area of SMEs
innovation (Nordman and Tolstoy, 2011; Subramanyah et al, 2010).
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The SMEs for this study will be those which are adopting Modern Management practices
especially Organizational Innovation. This research will select 08 registered SMEs; the
number of employees in these enterprises must not be more than 99 employees. There are
no exact norms on optimum number of cases in multiple case studies (Perry, 1998) and it
is not easy to ensure whether the number of cases analyzed is enough as a basis for
generalization (Swartz and Boaden, 1997).
Eisenhardt (1989) in this context advises analyzing between four to ten cases that it is
generally quite demanding to build a theory of adequate complexity from less than four
cases. The SMEs will be selected using SMEDA data base.
1.8 Structure of the Thesis
This section of the chapter tried to present the structure of the thesis so that a glance can
acquaint to the summary of all the six chapters of the thesis.
Chapter 1 provides a brief overview and introduction to this research. It explains
the background, the SMEs in Pakistani perspective, the problem statement, research
objectives, and significance of the study, scope and nature of the study.
Chapter 2 reviews the academic and professional literature. This has two distinct
parts; first it reviews the Small and medium Enterprises literature from different aspects.
Second; it reviews the various aspects of innovation and the theories related to it. Then
there is an attempt to augment the two parts i.e. the SMEs and Innovation for the specific
requirement of this research.
Chapter 3 explains the research framework, methodology and methodological
considerations, case selection and design, data collection and analysis methods, a brief
24
introduction to case study SMEs, the data coding and development of themes and finally
the data condensation criteria and methods.
Chapter 4 draws the within case analysis of all the 8 case study pharmaceuticals.
A brief profile of each case SME is presented followed by an in-depth discussion about
the themes analyzed on the basis of how each participant from the same case resembled
or differed while responding about the same theme.
Chapter 5 presents a cross case analysis by comparing the aggregate answers
about each theme of all the case study SMEs. The findings of each case in-line with
relevant literature are discussed in detail.
Chapter 6 finally discusses the findings in relation with the research propositions,
implication for the theory, implications for the policy and practice, implications for
methodology, limitations of the study and directions for future research.
25
Chapter 2: Literature review
2.1. Introduction
This chapter discusses the pertinent extant literature. In the first section of this chapter,
the work of different authors related to the SMEs growth paths is discussed. The
researcher tried to describe the various strategies mentioned by various authors which can
lead to the growth of SMEs. In the next section, an effort is made to describe the
literature related to the SMEs internationalization and its significance for the economic
well being of the developing countries. Afterwards, the researcher has reviewed the
SMEs entrepreneurial orientation and the role that Ecommerce plays for SMEs
innovation, as per the specific relevance of both these to the current study. In the next
section, the researcher reviewed literature related to the role of SME innovation through
the government intermediaries as well as the challenges to the SMEs. The SMEs
competence and the threats this can pose to the growth of SMEs is reviewed as well. The
next section of the thesis is devoted to an evolutionary note on innovation as innovation
one very important variable in the current study. The various types of innovations is also
reviewed in this section while in the following section the novelty and innovations in
established SMEs is described from the extant literature. The pros and cons of the
innovation and imitation strategies are discussed as reviewed from the relevant extant
literature. The next section described the role of innovation in SMEs performance and the
role that size and characteristics play on type and nature of innovations. This chapter also
has reviewed the literature relevant to the importance of persistent innovation and not just
innovation. Before devising an operational definition of Organizational Innovation from
the extant literature for the current study, the relevant theories of organizational
26
innovation are reviewed briefly in the penultimate section. Whereas in the ultimate
sections, the literature related to the different technological, organizational and
environmental conditions, the idea generation sources in SMEs and the determinants of
successful organizational innovation is reviewed.
2.2 The Growth of SMEs: Paths to walk
The growth of firms follows different paths. Market penetration and increasing efficiency
does not add too much to growth but rather some infrequent ways that are used for firm’s
growth such as opening up new ventures and entering into export markets may help firms
grow more. Since it is important for an economy to have new SMEs as well as long
survived SMEs, growth of SMEs is essential for countries. External factors such as
business cycle, economic dynamism and level of competition play a role. Internal factors
like, firm capabilities, type of activities and extent of planning for growth are important
factors. Cooperation mode of innovation means that the SMEs seek cooperation from
external world vertically by setting up relations with educational and research
organizations and laterally through linking up other SMEs(Yao, 2008).As compared to
establish SMEs, the new launched SMEs grow at a faster rate. Growing SMEs plan more
suitably for growth than the stable ones which have experienced the decline before. The
ambition of firms to grow leads the way to growth as well (Wakkee et al., 2015).
2.3. SMEs and Entrepreneurial Orientation
Generally it is believed that Entrepreneurship is related to growth, innovation and
flexibility (Drucker, 1985; Backman, 1983; Birch, 1987), which lays the foundation of
entrepreneurship. Due to the speedy globalization of businesses it has become imperative
27
for SMEs to internationalize. SMEs need to have entrepreneurial behavior in order to
globalize. The significance of SMEs in the economic growth and job creation in the
developing countries is widely recognized, through which national development can be
achieved.
Entrepreneurial Orientation is an important element for the sustainable performance of
firms as it shapes up the purpose and vision for gaining competitive advantage. Firms are
entrepreneurial if they innovate, take risks and are proactive. Since its proposition by
Miller (1983), EO has been regarded as pro activeness, risk taking, innovation,
rejuvenation, opportunity seeking ability of firms. Innovativeness is the basic function by
which the SMEs leave the current technology or processes and switch to initiate new
technology and processes, or exploit new marketplaces. A SMEs that is entrepreneurial in
nature enters into unknown markets, dedicates a large portion of the firm financial
resources to go for outcomes not well known and borrow heavily .i.e. the SMEs take
risks. According to the researcher, SMEs in developing countries adopt
internationalization primarily through exporting and hence internationalize. In order to
make the most of the new opportunity in the marketplace firms need to be proactive than
to be reactive. This entrepreneurial method puts the SME ahead of its competitors in
exploiting new opportunities. The proactive first mover can make huge profits as opposed
to the late adopters. Due to numerous constraints to domestic SMEs in skills, resources
and experience, the need of learning innovation and producing novel services and goods
for export becomes more important(Taylor, 2013).
28
2.3.1. The role of E-Commerce in SMEs of Developing Economies
In the study of (Hussain and Centre, 2014) ecommerce has been one of the best tool to
create innovation for SMEs. A substantial rise of 120% due to the online trade in china
and the capital increase counted from 1.6 billion to 43 billion US$ in a decade is an
example of substance. Sometimes ,the case may be like that Ecommerce draws around
business for SMEs but these firms cannot benefit from it due to lack of facilities of
storage or of Exports restrictions.
Many developing countries have tried their luck at E-Commerce but due to very high
costs for introducing ICTs a very little realization of this dream have been possible as yet;
only 1.6% of global E-Commerce comes from Middle East and Africa. Ecommerce is a
source of SME development as it enables the firms to showcase its talent globally. The
technical support in form of ICT/ITC can help SMEs in three broad areas such as spotting
out opportunities, marketing intelligence and to develop specific solutions. Lack of
internet infrastructure and online mode of payments are the problem of E-commerce in
SMEs .The kinds of banks that operate in the developing countries are still conventional
and they do not have online systems. Adoption of new technologies is the needs of the
hour for economies to bring up diversification to services, so that the least develop
countries lessen their dependence on commodities. Connectivity is the way forward for
bringing up transparency, a knowhow of E-government and E-Education so as to affect
the rural areas positively. As oppose to bureaucratic norms, E-commerce helps in
bringing a cost effective way of governance into play(Hussain & Centre, 2014).
29
2.3.2. SMEs innovation through government intermediaries
A very little has been done to explore the utility of applying the open innovation in SMEs
in developing countries. Whereas the SMEs of developed world seem to have learnt the
art of innovating, the SMEs of developing world still find it difficult due to many
obstacles to find a way through innovation. The National Innovation initiatives offer
chances for economies to grow and prosper as innovation is one big mean of achieving
economic prosperity. While incorporating innovation hubs as being important for
national and local growth, developing countries will find many hurdles while doing so.
A model which can involve experienced inventors and research teams and government
agencies as intermediaries may connect with SMEs to produce innovatively. Government
also plays a vital role in promoting innovation as it provides roadmaps through its
programs ,promote innovation through introduction of innovation friendly policies and
protect innovation through regulations(Yao, 2008). Due to the recognized fact that SMEs
resulted substantial economic growth, this spurs innovation in a country as well.
2.4 SME and the Challenges
SMEs, especially those operating in the developing world face challenges of fewer
resources, less inventive, creative employees ,lack of understanding of idea generation,
owners technical education, previous work experience and technical skills of workers.
Very little and rare use of internet only limited to email is seen even in some SMEs of
developed countries. Far little of the benefits are perceived by the firms, and
organizations are hardly ready to adopt them, while competitors may put pressure
alongside. Lack of judicial systems that are efficient enough to make good solutions to
30
address the issues adds to the problem even further. Paradoxically, developing countries
either have very strong or very weak intellectual rights regime. Lack of financial and
managerial resources to utilize the external network is one other problem.
Social interactions based on trust developed from the repeatedly successful transactions
between firms, long term loyal customers and suppliers can get over the legal obligations.
Also the government agent can firstly recommend to partner or not some firms, 2ndly
provide better legal services for SMEs and keep record of the agreements in detail.
Lack of enforcement and improper, insufficient legislation is highly ranked barrier in the
way of SMEs making(Vrgovic, Vidicki, Glassman, & Walton, 2012). SMEs face many
hurdles internally such as the lack of resources and deficiency in meeting up the many
challenges of the new business environment. This is more common in developing
countries where the entrepreneurs lag behind in specialized education as well as
international exposure (Antoldi et al., 2011).
2.4.1. SMEs Competence and its side effects
The entrepreneurial competence of SME is geographic based and this varies from country
to country. The SMEs must try and invest heavily in competence renewal so that they are
redundant in competence situation. The environmental changes affect the mode in which
an SME operate. The structural changes occurring in the industry take a serious test of the
SMEs survival potential where some may shape up and some may shape out. The affects
of environmental changes plays an important part in the survival of SMEs. SMEs greatly
add to the job creation as in the EU, It has been the best example wherein SMEs have
contributed 66% in the job market. Competence is an overall performance effectiveness
31
starting from basic level of proficiency to excellence level expertise. Competence can be
termed as skilled base and competency as behavior based.
Over the recent decades, many models and theories have come forth regarding the
classification of competence into individual as well as organizational level. But in case of
SMEs this classification is hard. On the contrary a new concept of Entrepreneurial
competence can forecast the fate of SMEs categorically. Firms need to penetrate through
new marketplaces, develop new goods and services and have lesser costs consumed in
creating value. For Entrepreneurial SMEs to be termed as a successful one, it should have
the ability, intention as well as opportunities. With this it can continue to grow and gain
competitive advantage. Individual competence links with the prowess and knowhow to
effectively perform a specific assignment. Job competence is a set of motives, traits,
skills and knowledge individuals need to smoothly perform their jobs. Professional
competence is shaped by workplace environment, personality of workers and their level
of motivation. As strength of SME, the functionality in operation gives a unique kind of
customer orientation to SMEs. Sometimes, though the customization is so much so that it
can cause a serious inconvenience in the processes of the firm as per every customer you
cannot change the processes. Strong entrepreneurial abilities are needed to bring about
product innovation and capturing new market share(Taipale-Erävala et al., 2015).
SMEs are best known for its flexibility and acceptance to the external changes and any
SME which do not competence trap is when in the wake of new technologies the existing
professionals become redundant, firing old ones is not feasible due to regulations/law and
hiring new one is not available because of the newness of the skills being respond to such
32
change positively may end up as unable to exploit future opportunities. In SMEs,
common traps are those of the familiarity trap wherein the firm favors and prefers the
known over the unknown and propinquity trap where the firm sees to the nearest
solutions as oppose to exploring the novel solutions(Taipale-Erävala et al., 2015).
2.5. An Evolutionary note on Innovation
Derived from a Latin word Innovare meaning to make a new thing, innovation is a very
complicated topic. Due to an increasing importance of Innovation, a variety of definitions
have been put forth in the academic literature representing various aspects of innovations
but mainly the two stand out that is the newness which includes the use of new
knowledge and its relativity to some organizations(Jaskyte, 2002).
In the 20th century, innovation has become one of the most important and popular topics
but still very little heed has been paid to dig out its roots and origin from the categories
and critical review of the available studies on innovation. According to the economic
historian, A. P. Usher and W. Rupert Maclaurin, the technological innovation was a
tradition historically known as technological change. This according to Godin (2010a) is
concerned with industrial manufacturing as the technological invention. On the other
hand, another tradition which developed in 1970s, treated technological innovation as the
commercialization of Inventions done through technologies. Freeman (1974), defined
technological innovation as a vital condition and important element of competition for
firms and countries. The Chris Freeman approach regarding the technological innovation
is multifaceted as compared to the American approach and hence it draws a conceptual
framework of its own kind. Contradicting to the American approach mainly in four ways,
firstly, it is descriptive and not econometric; secondly, its focus is both on product and
process innovation. Thirdly, it guides in strategic policy making and fourthly, it should
aim at developing a technological innovation theory. Invention is an idea, model or a new
or an improved product, process, system or devices whereas Innovation is the commercial
transaction of the new ideas and models (Freeman , 1974).
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Freeman made a note on Research-intensive-industries, following his efforts to
rationalize the importance of technological innovation for poor state of knowledge and
improvement of society, as a vital trend of technical change (Freeman, 1974). According
to the conclusions of Freeman which he drew after using the OECD and US national
Science Foundation database, Small enterprises have advantages over the large firms in
the early stages of inventions whereas the larger firms tend to dominate in the later
stages. Since technological innovation is mainly product innovation, it is in other ways a
gateway for commercialization as it takes the route of product launching for customers or
processes introduction for firms. Freeman on the basis of previous literature on
technological innovation placed together a National Innovation framework as before that,
innovation usually was discussed as an academic discipline. He further added that
Innovation is not only useful for firms and individuals but it is also a source of national
growth as a whole(Godin, 2012). To a certain extent, innovation is hegemonic but not
monopolistic. This hegemony is due to two factors, firstly, researchers use the
appropriated innovation while others do not use it markedly though they invariably use
innovation too. Secondly, government through rules and regulations, make the Innovation
studies an important area and legitimize its understanding(Godin, 2012). An important
debate has spurred on how innovation should be managed because Innovation has
become a reason for survival of firms. However, on the other hand, innovation has the
facet of risk attached to it which may be to the extent that the organization is completely
devastated. As a continuous process, innovation management has changed for the past
four decades as hopes are continued for the best possible practice, which is a time relative
process. The best practice does not automatically come out rather every context favors
34
different models. Every approach, as such has its merits and demerits (Drucker, 1999;
Golder, 1996; Rothwell, 1994).
A general notion is that most high technology companies adjust and manage their
innovation strategies to their business context, which is referred to as contextual
innovation. Focusing on different activities of innovation refers to as innovation process.
Governing and organizing the different innovation processes means innovation
management. The R&D activities of an organization not only include the innovation
processes but also the invention processes that is why an assumption can be made that
R&D management is considered broader than innovation management. There has been
disagreement as to the number of innovation management generations and also the
contexts where they exist. However, the most dominant view suggest about four
generations of innovation management. These innovations work in different conditions
and require different type of innovation processes.
The corporate R&D laboratory made a hallmark of first generation of innovation
management. The second generation largely relied on project management techniques in
R&D. The third generation of innovation management showed signs of the intra-firms
functional collaborations whereas the fourth made knowledge gained from customers and
competitors as base for designing the normal and routine R&D activities more flexible
(Niosi, 1999). However, the current trends show that the firms are more prone to follow a
particular context rather than following the existing generation of Innovation. This
approach is called Contextual innovation.
A weak link in the Generations concept is its formality. Because of the fact that not all the
35
firms take formal routes to incorporate innovation as most of the enterprises rely on
informal ways and intuitions which have done successful innovations following informal
intuitions. Even in areas similarly matched, many firms adopt different approaches to
innovate (Griffin, 1997; Nessim et al., 1995, Brown and Eisenhardt, 1997). Also, there
are studies which show that even in the same firm different innovation approaches are
used. The logic behind this phenomenon is that different contexts need different
processes, which is better as context based innovation yields good results. Selecting the
best innovation for the specific situation is the best ploy (Griffin, 1997).This reflects on
the phenomenon that a single innovation management approach is not applicable
presently. The innovation management of an organization has a relationship with its
environment; both internal and external. The internal environment of an organization has
two aspects which are important, the structure and strategy of organization. The strategy
of an enterprise writes the script for organizations whether the firm has an imitation
policy, a follower policy or an innovation leader in the industry. This in turn determines
the significance of innovation to the organization. Furthermore, the structure of firms
determines how the innovation activities and practices of organizations are organized
functionally or divisionally. The external environment effects the organization of
innovation in the country, for instance, regulatory principles and rules prevalent in the
country (Teece, 1997; Chiesa, 2001).
There is every possibility that there are more contextual innovation factors belonging to
the internal and external environments. The four main types of the contextual factors
among which the first two belong to internal whereas the latter two belong to external
environment are, Type of innovations including incremental, radical and transformational
36
etc. Another is types of organizations such as functional, organic, decentralized or
centralized. Third are types of industries such as SME, high-tech, supplier-driven and
FMCG. Last are the types of culture or country such as authoritative, egalitarian or
democratic. The relationship between the manager’s decisions and the contextual factors
depend on two vital aspects, Firstly, the contextual factors often need the operational and
strategic decision making from managers. A new to the firm innovation can be carried
within house or externally, which is a strategic decision. Similarly, the managing of new
products for as asked by the existing customers is different as compared to the new
products development for unknown and unfamiliar customers of the incumbent
companies, as they are less prepared (Moore, 2002). On the other hand, the new to the
firm innovations will need flexibility in innovation processes as it will be like a trial and
error method, reiterating the processes and altering the decisions accordingly so that the
there are calculated risks involved. One gets a general feeling from the literature that the
contextual factors limit each other’s effect. For example, it cannot be hoped that an
enterprise that has developed the follower strategy will never go for radical type of
innovation. Another example is that a high-tech industry will rely mainly on the
technology while innovating.
2.5.1 Different types of Innovation
Product innovation means the emergence of a new product or an addition of a variety to
an existing product for the satisfaction of customer’s needs. This type of innovation helps
to set up at least a monopolistic position for the newly introduced product or product
feature. The vital role of product innovation means that in many industries and markets a
high degree of innovation is persistent for products and ensures product competitiveness.
37
The innovative behavior of product innovators can be addressed through three pertinent
theories at least. The first argument is that of R&D Sunk Cost, which means that the
amount of money that is used in setting up R&D infrastructures is irrecoverable to the
extent that the firm generates income through these R&D endeavors, though such profit
generation can be guaranteed only and only when the continuum of such activates are
ensured.
(Phillips, 1971) put forward the success breeds success argument. This means that
successfully innovative firms may have an impact on the firms to create conducive
environment for further persistent product innovation.
The appropriation theory put forward by Teece (1986) means that through protecting the
intellectual property rights, new products tend to deliver the persistent rewards.
Comparably, it is something relative as to protect the patents is much harder where
imitation is simple and frugal.
Process innovation relates to the firm efforts in the R&D operations to lessen their unit
cost of production and to produce top quality, customers centered products. It is pertinent
to note that the manufacturing of new products makes parts of the process innovation .As
it is difficult to separate process innovation from organizational innovation, a thin line
however can be drawn in that process innovation encompasses the installment of new
equipment that renders technical change in the firm. The firm’s process persistency can
be seen in its associated sunk costs in introducing heavy production method.
Marketing innovations include the market segmentation and opening new markets and
38
decisions of method to serve these markets Johne (1999).As the point of ambiguity is
between the different innovation types, here again a problem remains unanswered. If the
marketing innovation does include the four marketing Ps, then Product is one of the
major P. which then makes the product "P" common to both the product innovation and
market innovation. The empirical evidences show that marketing innovations are vital to
develop and maintain a competitive advantage through lowering costs and differentiation
(Naidu, 2010).
The marketing innovation persistency is not all that higher for mainly three reasons,
firstly, the firms consider their customers while innovating and too often too much
innovation will leave the customers confused. Secondly, the disruptive technologies
argument holds that some of the leading firms failed due to the changes in markets. Since
firms do not have the luxury to enjoy old technologies for ever, technologies may be
updated but their markets should not be changed often, lastly.
2.6. A review of novelty and innovation in established SMEs
The increase in novelty in the innovation process helps firms to improve their
competitive advantage and also find other opportunities (Lynn et al., 1996; McDermott
and Hadfield, 2000; McDermott and O’Connor, 2002). The increase in the novelty and
uniqueness is correlated to risk (O’Connor and Veryzer, 2001) .It also requires more
resources in terms of human capital, knowledge basis as well financial back up(Stringer,
2000). Despite the fact that a long time has been spent in reaching to any conclusion
about to what exactly is the novelty and radical innovation, there is still no consensus as
some call it breakthrough innovation, some term it as disruptive innovation, some relate it
39
to significant innovation and some other call it major innovation (McDermott and
O’Connor 2002).
Those practitioners and researchers who see innovation from the customer angle term
those products as innovative which offer features and advantages like never before
(O’Connor, 1998; Leifer et al., 2000; Danneels and Kleinschmidt, 2001). From the firm
point of view, two things that make the products and production novel and new are
technologies and markets the production and product innovations are normally not
incremental and radical in nature rather have a lower or higher level of novelty (Green et
al., 1995; Daniels and Kleinschmidt, 2001). According to (Danneels and Kleinschmidt
(2001) and McDermott and O’Connor(2002), the degree of novelty in any product or
production can be linked to four knowledge basis i.e. Creation of new knowledge base to
tackle technological inexperience, skill and technique base knowledge coping with
technical experience lacking, Knowledge base for the development of new business
practices to address the business inexperience and investment in acquisition of
knowledge to tackle the technology costs. For many SMEs working in manufacturing
sector the increase in the degree of novelty is more important than the state whereby they
need to decide whether to innovate or not to innovate. The non-innovative SMEs quickly
loose the competitive advantage they have over other and thus end up losing the
customers too. All innovative firms do not have the same performance as per as the level
of novelty is concerned. Some manufacturing SMEs may bring minor while other bring
major changes to the products so it’s important to judge the difference in the
performances of the SMEs in terms of their degree of novelty.
40
SMEs can assimilate and utilize the knowledge they accumulate from the external
environment to improve the learning abilities to add to their novelty and through learning
SMEs improve their product and process innovations. The higher the firm’s learning
ability, the more the innovation and novelty. Learning helps in improving innovation and
adds to the degree of its novelty and for this particular reason managers increase their
investment through learning by training, learning by doing and learning by searching.
The importance of innovation is attributed more often to the firm performance
improvement but the overwhelming failures of new product neutralize the tendency to
innovate. The results of America alone suggest a 85% failure in the 17000 new products
that were launched in the early 90s.Firms introducing new products to market face many
challenges first and foremost being what type of innovation to be carried out where. The
success of incremental or radical innovation in advanced countries cannot be generalized
in developing economies. The monetary success from Innovation is related closely to the
adequate market size and the investments in supply chain.
Several features effect the innovations. These are either uncontrollable like contextual
factors of infrastructure, economic development path, business culture and market size.
As well as controllable factors like types of innovation, new product development
strategies, new commercialization strategies like promotion, distribution, supply chain
development and strategic control. Incremental innovation is favorable for emerging
countries as compared developed countries(Iyer, LaPlaca, & Sharma, 2006). Irrespective
the type and nature of technology, importantly, the technology should be the one which
suits the market SME caters and the environment, skills of innovation practitioners and
41
infrastructure. Continuing to improve the traditional technologies and introduce new
technologies is the succession mode of innovation. The chase mode technological
innovation concept means that the firms sees and follows the innovators and try to
develop new products before others do so(Yao, 2008).
2.7. Innovation or Imitation Strategies: Pros and Cons
Firms sometimes face the risk of its research and development work being copied
through imitations. The copyrights regulations in this regard help firms to certain extent.
The copyrights vary from region to region. In the weaker propriety rights observing states
the theft is much greater. Imitation is much cheaper than the innovation itself. The growth
and investment of firms, which are protected through copyrights is better(Fan, Gillan, &
Yu, 2013).
The intellectual property rights level has a bearing on innovation. The economic
development also has a relationship with the Innovation. The intellectual property right
has a far more complex effect on the Innovation. However a single globally recognized
Intellectual Property Rights model is sub-optimal (Hudson & Minea, 2013).
The developing countries contribute about 2/5th to the world’s research and spend around
one quarter on R&D yet their inventions are claimed to be imitative (Lorenczik &
Newiak, 2012). However some researchers noticed a 47% failure of innovators as
compared to only 8% failure rate for late entrants. How an economy progress focuses to
imitate technological advances to those who carry internal innovation. As formerly
believed, only as little as 13% of economic progress is associated with capital intensity
whereas now it is believed that technical progress or total technical productivity (TTP)
42
holds a key in economic growth.
Also, the technological advancement is an endogenous factor which is a response to the
stimulus of profit maximization. Innovation is the creation of novel products and
processes internally whereas imitation is the adaptation of technologies of the advanced
countries through the utilization of global trade channels. The major contribution is made
by developed countries as a huge percentage of R&D activities for development are
based in developed countries and the developing countries make very little contributions.
Entrepreneurs hold central roles in economy for their talent to make decisions to innovate
.They are required to have certain skills which are central to make innovation and not
imitations. The more a country develops, the better its innovation ability becomes. Thus
these countries limit their dependence on other countries for their technology and the
paradigm is shifted from imitation to innovation(Yong & Ho, 2006).
An innovation strategy yields new product performance better than an imitation strategy.
Due to the intense competition, demand uncertainty and variations in technology use
innovation is preferred over imitation. The introduction of new innovative products
before the competitors helps firms in economic and other important factors like
behavioral factors.
The effectiveness of innovation can be compared with imitation by focusing on the
performances of pioneers and followers but the external players like market trends and
internal factors like organizational resources must be considered too. A firm however
superior maybe, lags behind the one which enters market innovatively. Thus investing in
R&D is vitally important for sustainable success. However some researchers noticed a
43
47% failure of innovators as compared to only 8% failure rate for late entrants. The
performance of pioneers and followers firms depends on the cultural aspects and may
differ from continent to continent.
Overall, there is hardly an innovator in the market and imitation sweeps the market often.
The degree of imitation varies from cloning to be creative in adding features to the
existing products. So product development can vary from being truly innovative to pure
imitation.
The innovative firms which introduce prior to its competitors can have many advantages
such as economy of scale and experience, can have advantage like occupying the most
attractive space and utilizing scarce resources. Due the risk involved with innovation,
firms sometimes avoid pioneering although they may know about the potential benefits
about innovating(Zheng , 2006). Imitation is bringing the intellectual secrets of leading
innovators. Imitation of innovation is owned by those firms which have little skilled
people, shortage of finances and low experimental equipment’s. These however have the
advantage to face low risks and low investments(Yao, 2008).
2.8. Invention, Innovation, and Discovery
An invention is a new device or process initiated for the first time by humans. Any new
physical product, novel software and biological life form may be categorized as an
invention however it should meet the standards for being able to testify its originality and
then be patentable. The patenting of such innovations does not necessarily qualify to
assure in any way as to be profitable as well. Of the many inventions that have been
introduced each year, very little very few have met the status for being profitable and that
44
is why most firms focus on to improve their processes and products incrementally.
Innovation can simply be defined as the better ways of doing something for achieving the
individual or institutional goals to meet a standard criterion set forth to measure
performances either subjectively or objectively (States, n.d.).
There are four major factors/sources which can be attributed to the promotion of
innovation other than the intellectual property rights. First and foremost is socially
sufficient amount of funding for innovation-related research work. Appropriate financing
facilities can help improve the discoveries by covering two grounds, one, they can help
decision makers to try out the untried alternatives in the wake of their selection and
forecasting of consequences. Two, Following these line of discoveries, innovation in
incentives, organization, decision-making and production can be introduced.
Secondly, concrete and proper conflict resolution mechanism for observing secrecy,
privacy and property rights. Although not enough if focused alone, the scientific
information innovation policy can be helpful to balance the needs for property rights,
secrecy and privacy. As in almost all empirical researches of these kinds, the practitioners
do not perform outright experiment rather follow the alternatives based on the political
and economic agents.
Thirdly, the goal orientations and goal directed attitude of firms is essential so that they
can find out the alternative course of actions. Diversity in policy making on individual,
firm level and government levels is necessary in the sense that if each of these
organizations follow the same policies, the workability of all other alternatives and their
45
performance cannot be ensured.
Fourth and finally, the strategic planning for executing innovation; unless and until the
risk of improvisation is taken; theory alone cannot lead to a good innovation
performance. A plant installation cannot be predicted as to how much it will profit unless
it is planted and the production process of this frequently checked for long time. The
Spatial location of invention can diffuse in a substantial way in a short span of time and
the spatial locality can become innovation hubs and clusters in no time(Kerr, 2010).The
drivers , speed and adjustments for such movements are hard to spot out. The increased
patenting of some of the big cities of the world can be attributed to work done by the
Scientists and Engineers (SEs), who have recently migrated to these cities. Some
empirical studies represent that the high tech industries relocate more than the low tech
industries and that these movements and relocations need much higher R&D budget and
for the development of Scientists and Engineers then those consumed by the low
tech(Kerr, 2010).
The scientific inventions of breakthrough nature are created by and embodied in response
to addressing the incentives and special needs of organization in particular localities by
particular inventors. To understand the diffusion and commercialization of these
inventions, the work of these elite scientists has to be kept in focus which is primarily
done in universities and are moved to the firms through the collaborations of these
scientists on demand.
The capacity of different inventors and scientists is not the same and it cannot be
generalized that their inventions will benefit always more than the costs incurred during
46
the generations of these inventions. This could be as simply put as the difference of
guiding and making high level productive students by some scientists/professors than
others. The potential of such leading inventor is best known by the number of citation
their research work gets.
Those scientists who have successfully related discoveries and patents to industry are
believed to have been cited as frequently as nine times more than their peers who do not
have industry affiliations and do not discover inventions. In most cases the discoveries
and inventions vanish quickly, especially if there is no intellectual property rights
incorporated because the information of such inventions diffuses quickly. However it
depends on the nature of the invention as well. for instance if the nature of the invention
is such that there is some tacit knowledge and techniques used, then the replication of
such inventions is not simple rather anybody who wants to do so would first acquaint
himself with a hands on experience . The knowledge which is required for invention and
discoveries embody only in particular scientists yielding an extensive income for these
intellectual human capitals. So the science based industry can only be achieved and
distributed in all geographies if the scientists who initiate these inventions with their
specialized knowledge is equally distributed. The diffusion of invention is limited
through the boundary spanning between the producing organizations (inventors) and
those collaborators who may need to transfer these to their organizations(Zucker &
Darby, 1996).
Recent literature show that there is no single innovation system, contrary to this, it is the
exchange of actors between different sectors as innovation projects are diversity based,
47
interlinking different social systems. Innovation is an evolutionary, interactive and no-
linear process. It is neither as was put by Schumpeter, the process which relied hugely on
internal R&D, nor it is a process following the linear route from research to production
(Kline and Rosenberg, 1986; Dosi et al., 1988; Malecki, 1997). Non-linearity means that
the innovation follows stimuli of internal and external sources and actors of information.
Interactivity means that the firms must interact between different wings internally as well
externally to factors like customers, suppliers, educational institutions. This will help firm
innovate. The concept of innovation systems has been introduced to remove the doubts
on "innovation". These innovation systems were applied to the national level wherein the
fact can be seen that each country has a different innovation system. However, later on
different regional innovation systems were also spotlighted(Lundvall, 1992a; Edquist ,
1997).The innovation system is comprised of factors and relationship networks such as
production, diffusion, utilizing new and useful knowledge .The innovative system is also
termed as the combined set of institutions whose interactions guide the innovation
performance of firms (Nelson and Rosenberg, 1993, p. 4) .The national innovation
system can better be conceptualized on the dichotomy of system/environment than
element/relation dichotomy. A self-referential social theory can be quoted, the theme of
which says that social systems are autonomous. The social system theory restricts the
response to the internal players and not to external factors. An important query is that
how the system maintain its individuality and how it link up with the environment.
Luhmann (1991,1996) , introduced the auto poetic model of social system, in which he
held that how the social systems separate from environment by establishing boundary
between the surrounding world and its own entity. These social systems maintain
48
elements which work for this type of social system only, the communication standards of
such social systems. Through a system medium, the relevant information is separated
from irrelevant information.
The lack of a single Innovation System which has common sets of interpretations,
common decision rules and identical kind of communication systems to meet the need of
common objectives make the work more difficult for Innovation researchers and
practitioners alike. Over doing Border- crossing, a phenomenon whereby Systems
interact with each other so much so that they influence each other, has a consequence of
costing novelty and gets the process more routines. Routine interactions do not guarantee
to innovate(Kaufmann & Tödtling, 2001).
2.9. Innovation and firm performance
Innovation can be said to have substantial amount of impact on firm effectiveness but
empirical effect on performance is always hard to represent. However investing more in
R&D can guarantee competitive advantage over firms having lesser competencies in
R&D. Innovation and internationalization are two vital factors for firm growth. The
investment in R&D for new idea generation and exploitation are considered important for
success in modern economies.
Although difficult phenomenon to establish, but the innovation performance link can be
checked through two methods, firstly, looking for indicators available in the public
domain such as R&D investments, number of patents and new products launched.
Secondly, designing survey which looks for a variety of indicators like skilled personnel
and the amount of sales profit over the last three to five years(Vollenhoven & Buys,
49
2010). In a changing business environment, Innovation is believed to have a far reaching,
surviving effect on the firm through many attributes like, drawing competitive advantage,
bringing product and process betterments and continuously fast growing, efficient and
more profit orienting firms.
The research conducted through a survey on an innovative supplier industry in Turkey
suggests that there is a positive relationship between the firm performance and
technological innovations such as the product and process innovation whereas the there is
no evidence found f as to whether the non-technological innovation such as
organizational or marketing innovation has a positive relationship with firm performance
as well (Atalay, Anafarta, & Sarvan, 2013) .So it is not a mere coincidences that countries
like USA , Japan and some other countries of Europe are good carrying out R&D
activities and capturing patent rights.
The firms which introduce innovative products cash on the lesser number of competitors
and generate more profits but with the passage of time these profit margins decrease as
other competitors also enter in the same industry and imitate (Sharma and Lacey, 2004).
The innovation capacity of any firm is associated to the human capital and the utilization
of their knowledge resources. The product and process innovation encompasses
knowledge (Stewart, 1997). According to strategic management theories of the current
time, the competitive advantages of firms can help them in monetary terms by raising
funds through rents. The resources and capabilities of firms do add to the sustainable
development and competitiveness, though these resources and qualities are not easily
transferable and replicable. The management of the firms utilize the resources that are
50
available and help enhance the chances to develop more capacities for future venturing
(Grant, 1996a ;Argote et al.,2003; Eisenhardt and Martin 2000)
As the top most important tool for creating competitive advantage, Innovation capacity of
the enterprise is identification of the intrinsic opportunities to make new products,
provide services and/ or carry management practices. The innovation rates of the firms
define their destiny for future performance (Banbury and Mitchell, 1995; Damanpour,
1991).The more the efficiency of the firms in products, processes and services, the more
it meet demands of the firms and can even create the opportunity for firms to enter new
markets (Brown and Eisenhardt, 1995; Burgelman, 1991). The simultaneous and co-
occurring product and process innovation has far reaching effect on the firm
performance(Damanpour and Gopalakrishnan,2001).However, the small firms should
involve separate and simultaneous efforts to engage the selected group of employees in
product or process innovation so that they draw more efficient performance(Andries &
Czarnitzki, n.d.).
2.10. Effect of SMEs size and Characteristics on Nature and type of Innovation
Some existing theories show that small firms carry R&D activates in product
development while larger firms do so in process. Similarly small firms enter into new
markets and may ultimately dominate. If the standard Carnot theory is taken in
consideration in this regard, the firm will grow only if it is efficient. So in such a case the
efficiency can either be its product or process R&D. Large firms invest more in process
R&D while small invest more in product R&D. However it is flawed if checked
empirically. The process and product innovation can be mistaken as in case of product
51
innovation, there are two types, improvement over an existing product or developing a
brand new product, which can be categorized as "process".
Another problem is that of generalizability. When the study of Scherer (1991) which does
not include any small firms, is replicated by (Fritsch and Meschede, 2001) in large firms,
no significant difference is realized. Another important but seemingly abstract issue
might be the fact that the small SMEs under-state its R&D expenses. The large firms
however cannot do it conveniently for the fact that they employee scientists and
professionals with more precise job descriptions ,their salaries can count for R&D
expenditures(Plehn-Dujowich, 2009).
According to Schmutzler (1995), a monopolistic firm can reduce the cost of production
by investing in monopoly and increase future opportunities. This study suggests that
product and process innovation is complementary. Mantovanis (2006) suggests that in
monopoly, firms do invest in product and process simultaneously so that the high
profitability is achieved.
Eswaraan and Gallini (1996) held the view that since product innovation is the
manufacturing of an entirely new product which serve different customers, the process
innovation becomes complimentary and substitute each other(Plehn-Dujowich, 2009). In
essence, large firms have greater opportunities to invest in product and process R&D.
Practically, there is lesser return to R&D irrespective of the use or not innovation counts
to measure the innovation output. So if small firms use more product R&D, larger
enterprises gain more product innovation per dollar of R&D , however this is
insignificant practically(Plehn-Dujowich, 2009).
52
2.11 Not just Innovation but Persistent Innovation!
The empirical outcomes of research carried out has emphasized on the fact that if an
organization remains innovative for a longer period of time, there are likely chances that
it persist with its competitive advantage for longer (Le Bas and Scellato, 2014). Being
persistently innovative means that a firm can have a far reaching impact on the
innovation fields incorporating in economics, can leave its mark on the firm long term
strategic management and above all the public policy concentrated innovation(Peters,
2009). If the firm persistence is substantiated, it would second the Endogenous Growth
theory which relates the persistent and long run economic growth to be a function of the
firm attainment of technological knowledge. Romer’s model in this regard suggests that
innovation persistency is checked at the firm level and that overall knowledge outburst
are the fundamental sources for innovation leading to economic growth (Romer, 1990).
The strategic management point of view of innovation unveils the fact that if the
innovation is maintained consistently , it suggests a persistent loop of innovation and this
will make the firm standout and will give the firm a competitive advantage beside an
inter firm performance sustainability(Ganter and Hecker, 2013).
When innovation is such that it leads to further innovation, it has more far reaching effect
on the firm performance, ultimately taking innovation to other horizons. True innovation
persistency relates to the presence of inter-generational and inter-temporal spillovers
which can help in the assessment of programs which are worked out for the stimulation
of innovation. The persistence of innovation, if it is a result of other underlying
characteristics, these characteristics is rather triggered by innovation policy makers.
Innovation persistence is a complex topic and cannot be placed simply .However the
53
combination of learning that comes from innovation process and a feedback mechanism
between knowledge accumulation and innovation process will generate dynamic scale
economies (Geroski et al, 1997). Knowledge can be an input as well as an output of the
knowledge production process. This has an implication on either type of innovation
persistence (David, 1993). The firms that are generally good enough to create new
knowledge sources do so by utilizing their existing knowledge reservoirs. The better side
of this practice is that those firms which use their own data sources can innovate at lower
costs as opposed its competing firms. This type of knowledge creation and knowledge
generation is important for all types of innovation, technological or non-technological as
any of such innovation needs knowledge to be novel in some degrees. The innovating
firms find new ideas while operating in innovative passion. Those firms which have done
innovation to any level in the past finds it convenient to recombine their past innovation
experience and create new knowledge sources be it in bits and pieces (Weitzman, 1998).
Furthermore, the capacity of firms to absorb knowledge is correlated with the capacity of
the human capital of the firms. If the employees have accumulated good enough
knowledge in one particular time, they can capitalize on that in future time as well
(Cohen and Levinthal, 1990).
2.12 Theories of organizational Innovations
Schumtper (1950) saw that organizational and technological innovations are interlinked
as organizational changes occur with new product and processes and new markets
emerge. The diverse literature on organizational innovation can be categorized broadly
into three categories and streams.
54
2.12.1 Organizational Design theories
These theories largely focus on the relationship of structure and innovation. The aim is to
see what the main structural properties of the innovative organizations are and to find the
influence that the structural variables have on the process and product innovations. There
are more than one possible way of structuring organization innovation diffusion and
adoption if the socio-technical make up and structure of the organization is organic than
mechanical, the rate of innovation is higher(Burns and Stalker, 1961. The more the
organic is the nature, the better it fits for small scale organizations. The mechanical
structure of organization renders to the simpler work of large-scale organizations(Hull &
Hage, 2017). The change in the structures of organization is due to their transactions with
environment and the coordination of their activities for the same purpose (Lawrence and
Lorsch, 1969). The organizations can be reengineered by the managers by bringing
improvement into processes (Liker, 2004).
2.12.2 Organizational Cognition and learning theories
These theories relate the organizational innovation of firms to the knowledge and
learning creation of the firms. A narrow and more specific focus is on how the new
knowledge creation and learning processes are exploited to carry on innovative activities
in organization. Adapting the framework of Riessman(1993), Bartel,(2011)attributes the
prevailing unusual and unexpected experiences of organizations to their learning.
However the learning through narratives development can be through the scientific
approach where the generalizations produce further learning or through the experiential
approach wherein the learning is generated from a stimulus response mechanism. Glynn,
(1996) and Bartel and Garud, (2009) work signifies the importance of new knowledge
55
creation and learning process towards the organizational innovation.
2.12.3 The organizational Change and Adaptation theories
These theorists focus on how the organizations are compatible to the radical
environmental shifts and technological changes. Hence this school of thought sees
organizational innovation to as the capacity of these organizations to the changes that
happen in the external environment which influence and shape the firms. The firms
change due to the adaptations and utilizing the dynamic capabilities to make use of its
external and internal resources (Burgleman, 1991; 2002; Teece, 2007). The smaller firms
have somehow the inability in terms of technology and organizational capacities to
explore and exploit opportunities on regular basis(Teece, 2012).
2.12.4. Cultural theory at work in Innovations and Inventions
According to Schumpeter, innovation is the successful implementation of a new sign and
creation, and innovation is the broader social acceptance of the components of a sign. In
a cultural context innovation is the well suited utterance signifying a pairing of a
signified and signifier which pervade through the social fabric and itself becomes a
believable concept(Mast, 2013). According to Mast, (2006) an innovation is an event that
indicates a change or rupture in the routine exercises of things which is then configured
accordingly. Innovation does not represent itself and are likely to be interpreted. Since
interpretation is a part of a symbolic process in a complicated cultural outfit, the
associated elements are the constituents of the sense making and sense giving processes.
The literature available on Innovation studies show that innovation is a burning issue for
56
academics and practitioners for the fact that innovation holds a central place in the
development and competitiveness of corporations as well as nations at large. The very
frequently used term "Innovation" has made it looks like a routine exercise and a rather
mundane phenomenon. Inventions and Innovations are as much cultural phenomenon as
much they are economic and technical ones and taking it as such will help the researchers
to put meaningful theories to explanations. As from high to low tech, from food to
clothing’s and costumes and the artifacts like computers, all such things are derived from
cultures and hence any innovation in such areas be treated as pertinent to culture as
well(Mast, 2013).The organizations of today face a serious challenge as compared to the
last two decades; that is organizations need to find ways and means of creativity and
innovation. Organization has to pay attention to its environment and culture in such a way
that it becomes innovation friendly. For organizations to not only survive but retaining a
future oriented and long lasting success, it needs to develop a sustainable innovative
culture. Such innovative culture will help these enterprises in developing capacities
which will enable the firms for present as well as for future too. Because when innovation
becomes the integral part of the firm, it enables them to gain and maintain competitive
advantage (Voelpel et al, 2005).
There has been an increase in the rate at which the society moves and hence organizations
also undergo a transformation which is both stressing as well as uncertain forcing
changes in organization. Due to the dynamism in organizations there occur rapid
technological changes, internationalization and the shrinkage in the product life spans. In
such a fast changing globalized economy, there has been an urge creativity and
innovation than ever before, for competing , growing as well as successfully
57
leading(Gunusluoglu,2009 ; Vazifeh ,2011).
Innovation is a way forward for maintaining a better performance promise of an
enterprise and for more future related successes. Although innovation is an overriding
responsibility, it is mainly a duty of top and middles level managers to think of ways to
motivate the employees to take risks and try innovation (Krause, 2004). It has been
suggested by many researchers that organizational culture is a vital player in affecting the
organizational innovation through creating an innovative environment in the
organizations. Organizational culture is a collective set of values, norms and beliefs that
the employees of the organization share and is exhibited in the overall processes and
goals (Khazanchi, 2007).
There are certain managerial practices which can influence the organizational cultures
these are recruitment and selection of competent employees, planning strategically,
deploying employees, compensation and reward, idea generating and screening support
and teams building for multiple tasks which suit innovative behavior. For some
organizations such as those working in information a computer sectors, innovation
culture is not a feature but a necessity. The availability of innovation cultures work as a
significant factor in high-tech organizations and without innovation they will simply
perish (McGourty, 1996; Angel, 2006). Due to its uncertain and unpredictable nature,
innovation can flourish and be monitored by formal settings in organizations rather it
requires creative problem solving from the employees of the organization, especially in
its initializing and implementing phases (Russell, 1988). Many researchers show that the
innovation is infused by the firms in their cultures especially by the highly technical
58
firms. Not only the creative ideas make the innovation culture but also the successful
implementation of those ideas make the firms culture as one of the most innovative one.
However, the adaptive cultures help in nourishing creativity in ideas generation and
implementation (Dennison, 1996; Lee and Yu, 2004; Flynn and Chatman, 2001). These
organizations need to stimulate the employees through the provision of different kind of
incentives such as providing the employees the requisite resources, support and rewards
besides accepting their feedback. Sensing these encouragements in the creativity projects,
employees offer themselves well to contribute to the innovation. The creativity of these
employees will be enhanced with such support as they start believing in themselves as the
risk aversion related to innovation is minimized (Ramus, 2001; Zhou and Jennier, 2001).
The ready availability of resources will motivate the employees of the organizations to
undertake innovation. Those organizations which lag behind in resources do not normally
do well to provoke the thought processes of the employees and hence do not innovate in
its product developments and processes. There is a feeling that the organization where
open-mindedness prevails and where there is a more terrain working environment, the
employees tend to have great performance in terms of their creativity and innovation. The
characteristics of the organizational environment affect the organizational innovation
capability as the OE is correlated positively to OI (Amabile, 1997; Mumford and
Simonton, 1997).
2.13. Organizational Innovation
It is a difficult task to define Innovation. The newness and novelty aspect is common to
literally all definitions of innovation. Innovation definitions vary across disciplines and
applications. The difficulty remain in drawing a definition of innovation because specific
59
researchers use specific applicability contexts while implementing innovation
(Burgelman and Sayles, 1986).There are various authors who define organizational
innovation variably. A table of these definitions based on how these authors have defined
from various angels is given below;
Authors Theme Contextual Definitions
(Mintzberg,1979;Teece ,1999) Organizational structure Some researchers attribute
the organizational
structure of organizations
and its effect on the
product and technical
process innovation to
ORGANIZATIONAL
INNOVATION
( Hannan and Freeman,1984 ;
Levy and Merry,1986)
Organizational change
from inertia
This school of thought
associates the
organizational innovation
to the organizational
change and development.
The model of how
organizational change
occurs and the level of
organizational changes
60
from evolutionary to
revolutionary type.
The underpinning concept
is to know the resistance of
organizations to change
how organizational comes
out of an inertial frame of
mind to adapt the
changing environments
and technologies.
(Duncan and Weiss,1979 ;
Amabile,1988)
Organizational Innovation
starts from within small
portions of Organization.
Organizational creativity
There are other
researchers who have
attributed the emergence
of organizational
innovation at the micro
level within organization
and to organizational
creativity.
Damanpour,1987 Newness in managerial
Practices
Organizational Innovation
is the utilization of new
managerial practices and
61
working concepts.
Whenorganizational
innovation is seen to be the
implementation of
concepts new to the
organizations, it also
indicates how the
organizational practices
diffuse intra-firm.
(Coriat,2001 ; Wengel et
al.,2000)
Organizational Innovation
can be a change in the
Structure or Procedures of
organization.
The structural
organizational innovation
encompasses the change
from organizational
functional structures to
customer orientation,
product orientation,
segmentation and
separating business
portfolios.
Procedural
organizational innovation
means the implementation
62
of new ideas and
operations in the daily
routine procedures and
processes of the
organization. This will
help speed up the
production and/or improve
the quality of the products.
Pleschak and Sabich,1996 Structural and procedural
redesign and
improvement
The redesign of the
structure and procedures
of the firm to bring
improvement to the firm is
called organizational
innovation
Mikl-Horke,2004 New practices as well
new philosophies diffused
to Organizations.
Organizational innovation
can signify to new
practices, new principles,
new managerial
philosophies, changed
organization designs and
63
advanced theories of
leadership. However,
diffusion of managerial
philosophy is perfectly
different from
organizational design or
practice.
Oslo Manual, OCDE,2005 Applying new methods
and designing new
networks
Organizational Innovation
is the incorporation of new
methods in the procedures
and routines of the firm,
the delegation of authority
and decision making and
establishing new networks
with the outside
organization.
Tigre,2006 Structural changes in
overall departments of
organizations in order to
take advantage of
technological
innovations.
Organizational Innovation
is that type of innovation
which happens when there
occurs a change in the
managerial structure of the
firm between different
wings of the firms in line
64
with the employee’s
specialties, the firm’s
relationship with its
customers and suppliers
and the different stratifies
that they own while
organizing various
business processes. In a
nutshell, it’s the type of
innovation which is to fit
in the context of the
organization in order to
exploit for technological
innovations.
Pettigrew,2003 Changing processes,
structures and boundaries.
The changes in the process
of organizations like inter
firm interactions, an
integrated information
technology, the structural
change like
decentralization and
delegation of authority, as
well as the boundary
65
changing strategies
adoption like alliances and
outsourcing are the key
hallmarks of innovative
organizations.
Utterback,1994;Dougherty
and Hardy,1996
New competition, adapt
technology, Expansion in
Market.
Organizational innovation
is referred to as the
application of mechanism
to adapt to the ever
changing competition,
advancement in technology
and expansion in market
shares by introducing new
products, techniques as
well as system.
2.13.1. Operational definition of organizational innovation for the current study
For this study in light of the above mentioned literature, organizational innovation is
defined as “Organizational innovation is the change in the structure from an inertial
66
state through Creativity within small portions of organization, bringing newness in the
managerial practices and procedures based on new philosophies diffused, while new
methods are applied to design new networks, adopting new technologies to meet
competition and market expansion for growth and competitive advantage.”
2.14 The Technological, Organizational, and Environmental Factors Effecting SMEs
An enterprise can only survive if it adopts the capability of technological innovation.
Technological (factor) transfer or sharing, comparing the compatibility of existing and
new technologies, the paradigm of technology and cumulative nature of technology will
have a strong impact on the technological innovation. Beside, those firms which have
historical background in the applying or adopting technologies have higher potential in
technological innovation. Hence explicitness and accumulation of technology has an
impact on firm innovation(Lin, 2006).
Some researchers of organizational innovation have found that there are certain intra-
organizational factors which are responsible for the adoption of innovation in the
enterprises. Among these factors are structure, climate, culture and encouragement to
innovation, Managerial practices and skills, informal interaction of employees, the
leadership behavior, educated and skilled human capital and availability of resources are
the key organizational players for innovation (Ambile, 1988, Kimberly &Evanisko, 1981;
Tornatzky& Fleischer, 1990).
The external environment where the enterprise operates has also an important impact on
the Innovation capacity of the firm. The higher the instabilities in the environment, the
67
more will be the innovation appeal. Similarly, more uncertain environments will
positively affect the organizational structure and innovation. The government role, be that
is regulatory or supporting, can either encourage or discourage the firm innovation policy.
By providing financial support and relaxation through breaking tax, the governments can
make the environment conducive for innovation adoption whereas it can derail the
innovation strategy of firms by strictly regulating them(Damanpour,1991 ;King and
Anderson,1995 ;Toranatzky and Fleischer , 1990 ; Scupola,2003).
2.15. Determinants of successful organizational Innovation: A review of current Research
The globalized business firms facing sever competitions needs some competitive
advantage for income generation and survival. Organizations find it useful to be dynamic
and iterate the creation and modification of products, processes, services, structures and
policies in the organizations, called organizational innovation. The organization which
adopts the organizational innovation policies fit in itself in competitive advantage
(Zhuang 1995: Nohria and Gulati 1996). An innovation is a useful exercise having
practical applicability, a distinguishing feature of innovation from invention. Innovation
practically contributes to the performance of the enterprise (Gronhung and Kaufman
1988; Padmore, Schetze and Gibson, 1997; Cooper, 1998).When innovation is studied; it
becomes an issue as to decide whether innovation is a process or an outcome. Logically,
the monitoring of innovation progress and stages as organizational process, it signifies a
process. On the other hand, studying the time frame within which a firm is considered to
be innovative makes it more like an end result and outcome. Similarly, the definition of
innovation becomes difficult due to the fact that in an industry what is the timing of the
68
introduction of innovation by an enterprise? To some researchers, enterprise need to be
first mover whereas other say that they must be x% of the adopters enterprises (Rodgers,
1983; Midgley and Dowling, 1993).
The innovation can be classified into three types, the product vs. process innovations, the
incremental vs radical innovation and the technical or technological vs. administrative
innovation (Gopala Krishnan and Damanpour, 1997; Cooper, 1998). Innovation can
complete in two distinct stages; Innovation Generation which includes the idea creation
for finding solutions to problem solving in process and product solution, and Innovation
adoption which includes the acquisition and practical implementation of innovation
(Gopala Krishnan and Damanpour, 1997).
Currently there does not exist a generally agreed upon theory of innovation. As
innovation researchers belong from different academic disciplines, study few dimensions
of innovation and there is inconsistency in the results of these researches, it is practically
impossible to rely on a single innovation theory presently (Wolfe, 1994; Abramson, 1991;
Eve land 1991). An innovation is a useful exercise having practical applicability, a
distinguishing feature of innovation from invention. Innovations practically contribute to
the performance of the enterprise (Gronning and Kaufman 1988; Padmore, Schetze and
Gibson, 1997; Cooper, 1998).
A number of innovation process models have been developed ranging from a very simple
linear one to a process or stage model (Tang, 1998, Cooper, 1998; Padmore et al, 1997).
A stage model as an extended version of linear models which include the feedback loops.
Feedback loop means the information regarding an already completed stage so that
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corrections and modifications are made for future control (Cummings and Worley 1997;
Millett, 1998; Padmore et al 1998; Tang, 1998).The open system model depicts an
organization as a system that affects the external environment and is also affected by
external environment. This model consists of inputs in the form of raw resources and
knowledge databases, processing/transformations and the outputs such as the products,
services and the ideas. However this system model also includes a feedback loop as an
important component as well. This feedback loop add sustainability to the model as
compare to the previous models as it receives a consistent feedback from external
environment which can be used in future ventures(Briggs,1992).
Damanpour,(1991) found that the effect of organizational innovation are not stable and
are generalizable as supported by other researchers and that the development of a theory
is not far from a possibility. He also found that organization type and the scope of
innovation are primary variables whereas the type of innovation and the stage of adoption
are secondary variables.
An organization is like a sponge in as much as the absorption of knowledge sources and
its further processing towards the output yield is concerned. Like a sponge, organizations
release outputs in accordance to the accumulated knowledge inputs (Fiol, 1996). The
managers running the organization and innovation must know about the different aspects
and contexts of the organizational variables so that the required awareness of the
complexity of innovation properly reached at (Tang, 1998). Innovation is a multi-
dimensional concept and sometimes it is one-dimensional or may be a bi-dimensional.
There are possibly many types and dimensions of innovations if thoroughly studied as in
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the case of multi-dimensional approach (Cooper, 1998). Most of the innovation study
researchers put their weight behind management support to create an innovative culture
and consider this as a determinant which occurs most frequently (Yamin et al, 1999).The
determinants are classified into two main sets as, the management and resource factors
(Spivey et al, 1997).
The performance improvement link with innovation has been discovered only by a
handful number of researchers. This is mainly due to three apparent reasons, 1)
Measuring is difficult ;2)it is difficult to separate those determinants of innovation which
has an effect on performance from other variables ;3)Innovation may not always
necessarily lead to improved performance.
Also, there is the reason that innovation is comparatively new discipline of research.
However some research studies have shown that there is a marked improvement in the
performance of firms and the innovation efforts carried out by that firm. The
measurement of innovation is difficult, however research continues to make the concept
of innovation clear .Therefore, researchers must direct more organizational resources and
attention to make innovation more fruitful(Read,2007).
2.16 Idea Generation in Small Companies
The idea generation for a service development phase is an unstructured and informal
activities(Schulze and Hoegl,2008).Despite the fact that some studies like that of
Iwamura and Jog(1999), backing up the service development innovation as the end result
of some planned processes, there are other people who put their weight behind the
philosophy that idea generation especially in service development is mainly due to the
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random organizational activates carried out by different
stakeholders(Easinwood,1986;Bowers 1988,1989; Sundbo 1997; Dofsma ,2004).
As a matter of fact, in today’s world it is highly unlikely for firms to develop new
products or innovate through a single individual, rather a huge number of people and
stakeholders are interactively involved and often it’s a network end result (Sorensen et
al.2010). The SMEs also do not follow a structured form while generating new product
ideas and innovating. Since almost all SMEs and small firms are led by one individual,
the firms exhibit the personal characteristics of those individual as the outcome of their
personal decisions rather than a structured decision process for innovation and idea
generation. It may also because of the fact that the small firms have an informal and
flexible interactive behavior among its stakeholders than those of the larger
firms(Hoffman,Sweeney,1987; Burns ,1996;Storey and Sykes ,1996; Rothwell,1983).
While it is largely believed that new idea comes from intuitions and suddenness, a deep
insight into the issue reveals that ideas do not come up spontaneously rather are the result
of a complex and a variety of overt and covert processes(Schulz and Hoegl, 2008).Many
new ideas exist because of a dialogue carried out by individuals through their social
interaction in quest of developing new products , rendering new services and carrying on
new organizational processes(Leonard and Sensiper,1998 ;Brown and Duguid,1998 ).
Though the vitality of networking for idea generations is an accepted fact, the importance
of motivated individuals for finding answers to some disparate questions cannot be
ignored. In this context customers and firm own personnel are identified to be important.
However there are researchers who claim that seldom are ideas generated by the
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networking of Customers and Personnel rather innovative ideas are yielded by the overall
internal complex processes of the firms and the activities of the competitors (Edvardson
et al .2000; Sundbo 1997; Easingwood,1986).
As per as the sources of innovative ideas are concerned they may come from many
sources like: Demanding and competent customers, with whom the dialogue brings ideas
as they have the vision to share their experience competently. Meeting the customers
demand can always help the firm’s managers to brainstorm and produce innovative ideas
(Kristensson et al. 2004). Some competent employees of organization can also produce
innovative ideas although their proportion is not considered to be huge because of two
main reasons, their preoccupation with daily operations and their context bounded
information in a rather fragmentary and sketchy manner (Nonaka and Takeuchi,
1995).Sometimes the lack of processes which are idea generating friendly in the firms,
create obstacle in the ways of employees to put forward their suggestions for innovative
services and ideas (Evardsson et al., 2000).
2.17 The external network and collaborations for innovation
Since 1940s as Schumpeter put forward, innovation is one of the core consideration
whenever competitiveness, rent generation and technological and novel organizational
processes are studied. The phenomenon of open innovation leads the window towards the
external business partnering. The ideas of new products and processes come from
business partners, clients and suppliers. The impact of external network size and its
diversity on innovation can also not be ignored. Large firm sizes mean more human
capital which can be used to bring concrete information and unique knowledge base for
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innovation whereas the diversity can bring diversity in the knowledge base, information
and resources.
The impact of network starts playing its role in innovation when the firm gains
knowledge from the partner when it cannot create such knowledge itself. The firm then
translates such theoretical knowledge into practical application, using the practices of
learning frequently assures an increase in the firm innovation output. The Institutional
network partners such as universities provide more technological knowledge base to
partners. The technological knowledge is often tangible as it can be provided as in the
shape of product prototype or computer software. Market knowledge on the contrary
relates to the non-technical market knowledge of customers desirability and current
production processes. The market knowledge base cannot be codified as such. Business
group network operate in a multiple industry, the knowledge base of Business Group
roots itself in diversified knowledge.
The knowledge relatedness also varies across networks .Knowledge relatedness refers to
the overlap or similarity of existing and newly acquired knowledge. Market Partners
possess similar knowledge because of its industry similarity. Due to their common culture
and control system in the same business group, the firms have the gained more pertinent
knowledge across the same business group.
The extent to which the partners will act opportunistically to exploit the opportunities of
the partnering firms is called appropriation. So the firms in the same group may not share
all the information as the information is bone of contention in such case. Having said this,
the firms that are opportunistic, will risk it for not getting all the required information.
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However, Institutional partners are less opportunistic than the market partners as the later
compete for profit maximization in the same industry(Kim & Lui, 2015).
Chapter 3: Conceptual Framework, Research Methods and Design, Analysis Techniques
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3.1. Introduction
The researcher first discusses the conceptual framework followed by the methodology
and the research design for the current research. The researcher intends to justify the
research methodology. The methodology is associated with the research problems,
research questions, research objectives and the review of literature. A multiple case study
was adopted to meet the objectives of this research as it aims theoretical replication
across the case study enterprises and literal replication within pharmaceutical sectors
(Yin, 2006). For this research the researcher selected eight local pharmaceuticals firms.
The construct validity, internal validity, external validity, and reliability issues related
with qualitative methodology are tackled in the data collection process. Two sources of
information were used: Semi-structured interviews and researcher observation. Also in
this chapter the criteria for selecting the pharmaceutical companies are recognized. To
add to this, the criterion for identifying the respondents and their departments is
established based on the literature review and realism of the situation. Furthermore the
criterion of selecting the respondents is also established here; i.e., non-probability
sampling is justified based on this study’s objective, resources available, and the
complexity involved and from the literature review on methodology. A total of eight (8)
pharmaceutical companies from the local origins were selected. The details of some of
these firms were obtained from SMEDA website while some other were selected based
on references from some friends who already work in this field. Among these
pharmaceuticals, some had official websites and official Facebook pages. An effort was
made to conduct three interviews with different managers of these factories. However, in
some of the Pharmaceuticals only two managers were available and willing to participate.
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In doing so, a total of 20 interviews were conducted. The interviews were conducted
following a carefully designed Interview protocol. The chapter provides specific
elaboration of the data collection process; offer a detail note of how the interviews were
transcribed and also how the data was coded.
The last part of this chapter presents a note about emergent themes and which themes
were dropped from the list of the descriptive themes identified from the literature review.
3.2. The Conceptual Framework
As discussed in the literature review, there are special characteristics that either make the
adoption and diffusion of innovation convenient or become barrier in the process. The
entrepreneurial and innovative culture and structure of organizations coupled with the
adequacy of size both in terms of the suitable number of employees and the production
units also help in the process. Beside the structure and culture there are other internal
sources like the vision of the CEO/Director, the internal processes, employees, R&D,
marketing research and external sources like customers, competitors, suppliers,
knowledge sharing, collaborations and networking which play vital role as sources of
innovation for organizations. Another important factor reviewed in the literature which is
important for the diffusion and adoption of organization innovation is the internal and
external conditions. These conditions include the Technological factors like internet
revolution, automated machines, the laboratories, some organizational factors like the
processes, managerial practices, marketing practices and R&D process. However, there
are also some environmental conditions which also play a role either positively or
negatively. These include government regulations, role of agencies like SMEDA and role
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of banks for financing. This leads to the growth of SMEs. The conceptual framework
based on the literature review and keeping the specific needs for the current research
study is given in Figure 3.2 below;
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Figure: Conceptual Framework
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3.3. The Study, the Methodology, and the Methodological Considerations
The research was carried in the local pharmaceutical companies in two clusters of
Khyberpakhtunkhwa, the Hayatabad cluster in Peshawar and the Risalpur cluster in
Nowshera ; shown on maps below.
Industrial Estate Hayatabad: courtesy Google maps
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Risalpur Industrial State, Nowshera: Courtesy Google maps
There were two factors behind selecting these SMEs in the two listed cities; Firstly, the
researcher has access to both these cities alike. Secondly, since all the areas are not the
same as per as the cultures and economic conditions are concerned in Pakistan, the focus
was on these two clusters of these areas which are almost the same as compare to other
industrial clusters in different provinces of Pakistan. Peshawar is one of those cities
which had a drug company at the time of Independence ,Frontier Chemical Works
Peshawar ,only one other in Lahore at that time; the B-1 Drug Company Lahore (Cluster
& Godavari, 2011).
A multiple case study research design was utilized where eight pharmaceuticals were
picked from these two clusters. The qualitative approach for data collection and analysis
is adopted which reflects the Constructionist position on the ontological considerations
and the interpretivist stand on the broader epistemological paradigm (Bryman and Bell,
2009). However, on the practical front the choice of case studies is reasonable as there are
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a total of 62 pharmaceutical firms in this sector as per the available information on the
Pakistan Pharmacist Association (PPA) and SMEDA websites. Most of these
Pharmaceuticals are clustered in the Industrial estate and Small industrial estate Jamrud
Road ,Hayatabad Peshawar(Cluster & Godavari, 2011). The Risalpur cluster is in the
industrial area Risalpur in Nowshera. The units cannot all be visited physically due to the
lack of time and resources. In addition, conducting surveys is not a feasible option. The
reason for this is that the postal service is not that much reliable and delivery of survey
questionnaires cannot be guaranteed. In addition to this, the workload of the employees is
extensive so even if the questionnaire reached them too, they will not be prompted to fill
it out and return it in due course on priority basis. Therefore conducting in person
interviews will ensure the desired response and hence carrying out case studies is the
doable option. In addition to the above, the research problem of this study is such that it
warrants a qualitative case study approach. The current study proposes to study the
Diffusion of organizational Innovation in Small and Medium Enterprises of KPK by
adopting the qualitative research strategy to its investigation. One of the reasons for this
is that most of the studies in this discipline have been carried out in developed countries
like US of America, United Kingdom, and Australia and thus far no such research has
been conducted in Pakistan. Therefore it is the first of its kind in the context of Pakistan
as is shown in the literature review, hence will be significantly influenced by the
Pakistani country context as well as the unique and contrasting contexts of local
Pharmaceuticals as opposed to Multi-National pharmaceuticals. In fact, studying the
diffusion and adoption of innovation in local small and medium enterprises in Pakistan’s
context is one of the main contributions of this research to this field. Hence, Context is of
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vital importance to this study.
As a contrast to a quantitative research, Qualitative study design according to its nature
and assumptions fits well in context based study (Creswell, 2009; Bryman and Bell,
2009; Bryman, 1988). On top of that, the phenomenon of the innovation diffusion and its
relevance with growth of SMEs is to be studied by knowing how the CEOs and the
Management of the SMEs view about it; i.e., the event will be viewed through the eyes of
the people who practice it in their daily routine, which fundamentally leads towards a
qualitative stance in terms of research design (Bryman and Bell, 2009).Furthermore, the
researcher aims to explore the phenomenon from the viewpoint of the individuals and
how they interpret it based on their experiences bounded by the contexts of these local
pharmaceuticals. In addition, the main research question is a How type rather than What,
Where, Who type, where the investigator does not have control over the actual behavioral
events and nor is such a control required, and it focuses on contemporary events.
According to Yin (2009) if the above three points are characteristics of a study then the
case study research design should be applied. A case study is defined as “an empirical
inquiry that investigates a contemporary phenomenon in-depth and with its real-life
context when the boundaries between the context and the phenomenon are not clearly
evident” (Yin, 2003, p.13).
Therefore, taking the above into consideration the research design applied here is to be a
multiple case study design. This methodology has however some problems linked to it.
The qualitative research paradigm generally but more so the case study design are
criticized by some academics; mainly those who advocate a quantitative research
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paradigm over the qualitative paradigm. The qualitative research strategy has been
criticized on the basis of its lack of rigorous systematic procedures which leads to
predisposition of interpreting the data on the part of the investigator, so contaminating the
course of the findings and ultimately the conclusion (Yin, 2009) for which at least some
alternate conclusion maybe available but has been overlooked due to the researchers
preconception (Bryman,1988).Contrary to this, Quantitative research specifies rigorous
statistical procedures to counter such biases. Another problem is that of generalization of
findings to a greater population (Bryman, 1988). Quantitative research through statistical
techniques of sampling from a population where the sample is an unbiased representation
of the greater population allows for the generalization of the findings from the sample to
the population, but qualitative research is criticized for its lack of such techniques. These
problems (others as well) and solutions are discussed as broad categories of problems like
construct validity, internal validity, external validity, and reliability from the perspective
of case studies.
Construct Validity:
Case studies have been criticized as lacking an operational set of procedures for the event
under observation because of this; they are viewed as using prejudiced judgments to
collect data (Yin, 2009). A number of tactics can be used to counter these concerns and to
categorize the correct operational tools and procedures for the contextual study (construct
validity) (Yin, 2009). First this study will establish a sequence of proofs in data collection
process to illustrate the logical flow of the evidence. Secondly, the draft of the responses
transcribed verbatim will be presented to the key respondents for cross checking and
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verification to assess whether it reflects what the intended to convey during their
responses.
Internal Validity:
The significance of internal validity increases many folds when the case study is of
Causal nature, i.e. an explanatory one, in which some events lead to some other events.
In such particular case, instead of observing the event in a direct manner, an inference is
drawn. Internal validity aims at making it sure that causal relationships and inferences
drawn are correct as well as accurate (Yin, 2009). For the current study to keep the
internal validity intact, the researcher will apply: pattern matching and explanation
building.
External Validity:
It is concerned with the generalization of the case study findings and results elsewhere
(Yin, 2009). This issue of generalization arises out of the quantitative measures (such as
surveys) to generalize from a statistical sample to a larger population which the sample
represents. This is the issue that is seemingly an outcome of some confusion as between
the statistical and analytical generalizations. The generalization in quantitative research
is based on the generalization from sample to population but in analytical generalizations
in qualitative studies, the findings of the case studies are generalized in wake of a broader
study which leads the foundation (Yin, 2009). But the issue is that one case study is
seldom enough even to draw analytical generalization. To cope with this situation, the
researcher applied the replication logic, applying the findings to other cases as the current
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study is mainly a multiple case study.
Replication can be of two types in terms of case studies (which forms the basis of
selecting the multiple case studies). Literal replication is where the multiple cases are
chosen on the basis that they predict to show similar results (Yin, 2009). The other is
theoretical replication where the cases (comparative) are chosen on the basis that they are
predicted to show contrasting results but for anticipatable reasons (Yin, 2009). This study
followed the theoretical replication logic where the case study pharmaceuticals are
predicted to provide contrasting results due to the differences in their structures, cultures
and other contextual factors and literal replication logic predicting the similarities within
the case responses.
Reliability
This signifies towards the fact whether the specific procedures and measures are taken
into account for data collection which could be used by any other researcher in similar
cases in future (Yin, 2009). Hence to ensure the reliability, the researcher developed a
case study database as well as following specific case study protocol.
3.4. Case Selection and Design
The cases were selected on the basis of a non-probability sampling called purposive
sampling. This is based on the assumption that one wants to discover, understand, gain
in-sight, therefore one needs to select a sample from which one can learn more(Merriam,
1988) or else, case which have rich information which are of immense importance to the
researcher(Patton,1990). For the current study, the Pharmaceutical sector was selected as
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this is a science based industry and it is presumed that these firms adopt innovations
frequently. The human resources of the pharmaceutical firms are mostly professionally
qualified and possess knowledge and expertise of latest research and technology. A
multiple benefit of the case study research is that it gives results and proofs of more
compelling nature and leads to a more vigorous study (Herriott and Firestone, 1983).
Yin (2009) is also of the opinion that if possible a multiple-case design is preferred over a
single case design and having at least two case studies should be the goal of a researcher
wishing to conduct a case study research. Therefore, this study tends to adopt an eight-
case design; five from the Peshawar cluster and the other three from the Risalpur,
Nowshera clusters of Khyberpakhtunkhwa, Pakistan. The case selection is made on the
theoretical and literal replication logic whereby the aim is to see dissimilarity in
responses regarding the factors for adoption and diffusion of innovation across different
case and similar within the same case. A multiple-case study requires somewhat more
structure to the research design in terms of instruments to be used for data collection
(Yin, 2009). This is because similar procedures have to be followed for the purposes of
investigation in all the cases otherwise there will be little room for comparison of the
multiple cases.
3.4.1. Sources of Information
Mainly two sources of information were utilized for data collection purposes: interviews
and non-participant observation beside the secondary data available on either the official
website or the facebook pages. Interviews were used to explore a phenomenon that we
cannot directly observe and it allows us to enter into the participant’s perspective
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assuming that people can explicitly demonstrate their understanding of the phenomenon
(Patton, 1990). There are three types of interview strategies: structured, semi-structured,
and unstructured. The sequence and exact wording of the structured interviews are
prepared in advance with specific categories for the respondents to choose from. This
allows for easy data analysis and comparison amongst respondents. However, a major
drawback of this type of interview is that it does not allow the respondents viewpoint to
emerge and hence prevents new and valuable information from surfacing. Structured
interviews are mostly used in quantitative studies for testing theories and generalizing
findings from a sample to a population. Unstructured interviews, also known as informal
interviews, are used when the inquirer has an implicit agenda and not a specific explicit
agenda (Yin, 2009). These types of interviews take the form of casual conversations
where the interviewer initiates the conversation by asking a broad question designed to
elicit the respondent’s viewpoint on the subject at hand. The conversation may then take
any direction where further probing is done by the interviewer based on the responses of
the respondent with the aim to extract as much information as possible. Such type of an
interview technique is mainly used in ethnographic or grounded theory studies where the
researcher does not have many preconceived ideas and is used for theory building rather
than theory testing. It is hard to compare across cases with this type of technique due to
its lack of structure.
Semi-structured interviews on the other hand are similar to structured interviews to the
extent that they have explicit agendas and that their questions are prepared and ordered in
advance but with the added benefit that these types of interviews also allow for the
respondents viewpoint to emerge during the interview. The interview is phrased with
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questions asked in open-ended method so that the perspective of the respondents may
come up but there are closed ended questions which gave the interview a formal structure
as so that comparison across cases can be made which will serve the researcher agenda.
To ensure similar procedures are followed for data collection in all the cases, semi-
structured interview technique is to be employed in this study. Semi-structured interviews
lie in the realms of qualitative research designs and still have sufficient structure as
compared to unstructured interviews so that to ensure that consistent instrumentation be
used in both cases (Creswell, 2009). Therefore using semi-structured interviews, the
study tends to exploit the benefits of both realms so as not to reduce the flexibility
associated with qualitative research, which is its main advantage, as well as give structure
to multiple case designs so that consistency of the questionnaire across cases can be
maintained. Hence, the benefit of semi-structured interviews is that it offers flexibility as
well as consistency to data that is to be collected. The interview guide was designed after
the initial themes were identified from the review of literature which led to the initial
conceptual framework. Since an important part of this research study is the type of
Enterprise whether the structure is entrepreneurial or not, and the nature of innovation,
therefore the first part of the interview guide is related to the questions about the history
and time towards evolution, current market place and the organizational processes of the
enterprises. The next section of the interview guide is about the questions related to the
diffusion of Innovation, developing innovations, the rate at which innovations are
diffused as compare to competing firms, the role of collaborations and networking in
Innovation diffusions, knowledge sharing and the values that collaboration can add to
these SMEs. A more interrelated and interconnected section to the previous one, in this
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part of the guide is focused at finding out the factors and sources that are required to the
diffusion and adoption of innovation. In this section emphasis is laid down on the sources
of innovation like the sources of idea generations, the impact of the staff expertise and
education for Innovation, role of customer’s feedback and supplier input in innovation
adoption and diffusion. This Section is followed by the section where the researcher has
tried to find the impact of the conditions on the diffusion of innovation, specifically the
technological, organizational and the environmental conditions, the marketing research
before making an innovative product or the test marketing of innovative products before
its commercialization, the role of government authorities in diffusion of Innovation and
the supportive or consultative role of agencies like SMEDA.
Furthermore, the next section is about the technical as well as the financial barriers that
may counter the SMEs in their effort to innovate. The penultimate section in the guide is
about questions which try to get information from the respondents as to how these
organizations may grow and gain competitive advantage by adopting Innovation. In the
ultimate part of the protocol there is an open section where the respondents are asked to
contribute to the interview guide in any way they felt is missing in the guide.
3.4.2. Interview Data Triangulation
As mentioned previously, interviews are the primary source of information gathering and
data collection. But interview data is not always relied upon and it should be preferably
verified through other sources, if available. This is known as data triangulation, which
serves as a crosscheck for validity of the results and conclusions. Triangulating primary
data through further sources of data gives more insight into a topic beside its function as a
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means of assessing the researcher’s interpretations and conclusions. For this reason the
researcher tried to gather secondary data about the organizations in this study and in this
connection the data was obtained from the firm’s official websites available online like
that of Stanley and Rock pharmaceuticals and about some other organizations from their
official facebook pages like the Hizat Pharmaceuticals. The interviews carried with
managers of different departments in the SMEs themselves triangulate the responses of
other participants. For example if a particular manager of a Pharmaceutical in an SME
holds specific views about a topic and talks about it in his interview and then another
manager of another department also says the same in their interview, then the second
interview serves to support the first interview. Similarly, if the rest of the respondents
hold similar views then they all support the first respondent’s views. On the other hand, if
the other respondent’s views do not support first respondent’s views then it casts a doubt
on the data collected. In addition to this, the non-participant observation is also used for
triangulating the data collected during interviews. If any of the respondents talked about
the process innovation and the technology use, the researcher visited the units where
productions were carried and observed the process. For example the researcher visited the
offices of Rock pharmaceutical and observed that there are computers in each office and
the mode of communication is the internet. Such kinds of observations were made for all
the SMEs and this eventually made part of the analysis.
3.4.3. Selection of Case Study SMEs
While the design stage of the case study research is reached, a decision is made by the
researcher whether to use a single or a multiple cases. The data instruments and the data
collection approaches are finalized. In case where a multiple case approach is decided,
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each case is treated individually. In this case the conclusion of the individual case can be
a part of the sum of the entire study but its individuality remains as it is. Those cases are
more authentic which are carefully selected and have been chosen with care from among
the available tools. This ensures the validity and can differentiate the case in such a way
that a boundary is created around the case.
An important note is to be made that the researcher in case study researches needs to
decide whether uniqueness or routines is to be favored. Also the selections of cases are
meant for the some specific geographic region or any other criterion is to be
followed .However it is important to note that the a repeated look at the research
questions is important as it maintains the focus on the purpose of the study find answers
to the questions put forth. The researcher for the current study followed the selection of
the case study SMEs on the basis of the rationale of studying specific geographic area
and interestingly the uniqueness in routines of these SMEs was a target to identify. So the
cases are selected on basis of specific geographic contexts and those which would offer
rich data about the phenomenon understudy for this research.
3.4.4. Identification of Respondents
There is a trend in the literature on diffusion of Innovation in SMEs that indicates various
internal and external sources of diffusion of innovation. The researcher of this study
focused more on the internal sources and even when the external sources were important
to be studied, they were studied through the lenses of the internal sources. As reviewed in
the literature, the employees of SMEs play a vital role in the adoption and diffusion of
Innovation in their organization. These employees include the top CEOs and Directors,
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the Management including Marketing Managers, technical people like product managers
and manager Research and development (R&D). During the pilot study, it was
experienced that the managers of these SMEs are more professionally qualified than the
business owners. The research observed that in the first two pilot study SMEs, the
Marketing Manager, Product Manager and the General Manager/Director responded
more appropriately in the context and knew the process of adoption and diffusion of
organizational innovation delicately. The researcher identified these professional
managers as the target respondents in next case study organizations.
3.4.5. Interview Protocol
Participants were invited to participate in the research through a preliminary meeting
requesting interviews, phone calls, and emails. The time duration for the interview to be
scheduled with each participant was approximately 60 minutes and prior to the interview,
the participants were provided a letter outlining the purpose of the study (Appendix C)
and a consent form known as a Study participant Release Agreement/information sheet
(Appendix D). In Appendix D, the participants were asked to grant permission to use
their name and company name in the thesis and subsequent publications. The participants
were presented with the following two options: 1. Permission is granted to use my full
name and that of the organization in the thesis and subsequent publications 2. Permission
is granted to use an alias only so as to disguise my name and that of the university in the
thesis and subsequent publication contains the interview guide. The same interview guide
for all the respondents/managers of different departments was served.
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3.5. Data Analysis Methods
Data analysis in qualitative research asks for some creativity from the researchers and
then categorizing the same in some meaningful sequence(Arnaout, 2015). At first all the
interviews were transcribed. The transcription was done according to how the interviews
were recorded and the order of the questions and answers were transcribed as they were
in the individual interviews. No rearrangement was done in this regard. Then I wrote up
each of the interviews for the individual cases using tables called the tabular summary
technique by Creswell (2009) and word tables by Yin (2008) whereas Eiesinhardt and
Graebner (2007) call it a construct table, while all the time allowing the flexibility for
uniqueness as it emerges (Miles and Huberman, 1994). The tables were ordered
according to the themes which emerged during data collection, then during transcription
and then during data analysis. This was an iterative process, going back and forth from
the transcriptions to the tables to the notes taken during data collection, all the time
keeping it open and allowing for the possibility of new themes to emerge during this
process. The themes, both the descriptive and the emerging themes were distinctively
presented in the tables by making the fonts bold and italic. As it is very important that
data is displayed and presented properly and carefully, it is a main avenue towards
qualitative data analysis (Miles and Huberman, 1994). Also during this time if any new
themes emerged in the progressive transcripts then the previously processed interview
transcripts would be reviewed in light of the new themes to see if they existed or not.
This was done for interviews individually as well as for the cases as a whole. The next
step was to do the actual coding. Indeed this is a very important stage for any research.
This was done by identifying repeated ideas and themes by closely reading and rereading
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the interview transcripts. In vivo, descriptive, and grounded coding techniques were
employed to identify different themes, code them and then categorize them by bringing
together similar themes and putting them into similar categories. This step is elaborated
upon in detail later on in the section dedicated to coding. After this, following the
procedure advocated by Miles and Huberman(1994), the researcher created a master
chart; where descriptive data from all the cases are brought together and put in one place
in standard format, based on the themes that emerged during the previous process. This
allows for all the data to be brought together in one place, giving it a broad overview, and
providing a very initial basis for comparison of the data both within and across cases. It
should be noted here that at this stage the partially ordered meta-matrix carries all the
information from all the cases in one place. It provides a huge amount of un-summarized
information making it virtually impossible to draw any meaningful cross-case
conclusions. Therefore all the descriptive data in the master chart had to be condensed to
a form which would allow for drawing cross-thematic and cross-case conclusions. The
procedure for this is discussed in detail in a section dedicated to it later on in the chapter.
From there the researcher started to conduct cross-case analysis where the researcher did
partitioning and clustering of similar data putting these themes into tables. Hence slowly
and gradually the huge descriptive data in the master chart is refined, summarized, and
reduced through partitioning and clustering accompanied with text clarification.
Following this I employed the mixed strategy approach advocated by Miles and
Huberman (1994) which employs both variable-oriented and case-oriented strategies.
Furthermore I symbolized the data in the tables for easy comparison but used the relative
quotes from the respondents during the explanation building. Then I compared the
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individual constructs with each other in non-summarized form as well as summarized
form and began drawing conclusions.
3.6. The 8 Case Study SMEs
The eight case study pharmaceuticals and their geographic location is shown in table 3.1
for their introduction to the readers only as the detail of these are given in next chapter
which is dedicated to within case analysis.
S.No Company Name Address and Geographic
Location
1 Hizat Pharmaceutical Industrial Estate Hayatabad
Peshawar Khyberpakhtunkhwa,
Pakistan
2 Wisdom Pharmaceutical Industrial Estate Hayatabad
Peshawar Khyberpakhtunkhwa,
Pakistan
3 Zinta Pharmaceutical Industrial Estate Hayatabad
Peshawar Khyberpakhtunkhwa,
Pakistan
4 Aries Pharmaceutical Industrial Estate Hayatabad
Peshawar Khyberpakhtunkhwa,
Pakistan
5 Stanley Pharmaceutical Industrial Estate Hayatabad
Peshawar Khyberpakhtunkhwa,
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Pakistan
6 Delta Pharmaceutical Risalpur Industrial Estate,
Nowshera, Khyberpakhtunkhwa,
Pakistan
7 Iceberg Pharmaceutical Risalpur Industrial Estate,
Nowshera, Khyberpakhtunkhwa,
Pakistan
8 Rock pharmaceutical Risalpur Industrial Estate,
Nowshera, Khyberpakhtunkhwa,
Pakistan
Table 3.1 Introduction of the case study SMEs
3.7. Data Coding: Developing Categories and Themes
For any research coding entails a vital stage of data analysis. It is the stage where ideas or
repeated, patterns are identified across the large corpus of unrefined data, which is then
interlinked with the other data and the literature to facilitate the phase of transition
between the raw data and the conceptual analysis on which further conclusions are based.
In general, the data analysis is determined by both the research objectives outlined by the
researcher. This is known as the deductive approach. Furthermore, the iterative readings
and interpretations arise from the raw data directly is known as the inductive approach
(Thomas, 2003). As mentioned before, this is a multiple case study research; therefore
semi-structured interviews were employed as the main data collection tool specifically
for the purpose of establishing a minimal structure across the different cases while at the
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same time for providing a leeway for new themes and ideas to emerge from the raw data
collected in the field. Hence it provides structure and flexibility to the data collection and
analysis of this study. There are two types of themes involved in this study, the
descriptive themes which the researcher identified form the review of the relevant
literature and the interview guide was formed from those themes and the emergent or
grounded themes, which were identified from the thorough and iterative reading and re-
reading of the data and looking for recurring ideas and patterns (Thomas, 2003). It should
however be noted that the descriptive themes from the literature review were in a broader
subject or topic and the content of it as codes came only after the iterative study of the
raw data similar to the case of the grounded themes. The process began, after the data is
gathered and transcribed into a common design and format, by closely reading the raw
data. Following this, specific codes were identified during multiple readings of the raw
data. This is known as in-vivo coding where the actual words and phrases of the
respondents are used to create coding categories (Glaser, 1978). This is also known as
lower level categorizing of codes which are then in turn further categorized into more
summarized codes called the upper level categories or themes (Thomas,2003).
3.7.1. Themes
The researcher went to the field by addressing some broad descriptive categories related
to the structure and culture of organization and the nature of innovation, the
technological, organizational and environmental conditions. It is viewed from both
aspects as whether their role is encouraging in diffusion and adoption of organization
innovation or it bears any potential barriers. These broad areas were included in an
interview protocol with follow up relevant probe sub themes and sub categories. The
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interview protocol was tested during the pilot study and the researcher did not find many
advisable changes after the respondent’s assessment. The pilot study was carried in Hizat
and Wisdom Pharmaceutical of Peshawar cluster where three managers from different
departments were served from each of the two SMEs. The aim of this initial study was to
check the suitability of the themes included in the interview guide to the real context of
the target cases. This interview protocol is attached as Appendix A.
The list of these descriptive themes is represented in table 3.2 below:
S. No Broad Areas/main
Themes
Specific Area/ sub themes
1. Characteristics of Firm Entrepreneurial in culture
Entrepreneurial in structure
Impact of Size
2. Sources/Drivers of
Innovation
Activities and processes of SMEs
Role of Staff and employees
Role of Customers
Role of Competitors Product
Role of Suppliers
Role of R&D research
3 Sources of Idea
generation
Internal Sources
Employees
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Research and Development department
Technical Staff
External sources
Market
Competitors Products
Suppliers input
4. Role of Collaborations in
Innovation Diffusion
Knowledge sharing
Value addition through collaboration and
networking.
5. Role of government Public Agencies role(SMEDA)
Funding and support
Technical and skill support
3.7.2. Additional emergent themes during data collection
In addition to the above descriptive categories, during the data collection and pilot study,
some other themes also emerged from the raw data. These themes which are called the
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emergent themes were then merged in the initial list of descriptive themes for the
collection of data from rest of the respondents in the other case SMEs. The list of these
emergent themes is given below as table 3.3:
S.
No
Emergent Theme Brief Description
1. CEO/ Director Vision The role of CEO or the Director as a key tool in
adoption and diffusion of Innovation in their
respective SMEs.
2. Consultants Hiring of consultants or experts for implementing
modern technology.
3. Niches Serving specific markets or Niches, Specific
Innovations are carried out.
4. Cyclic Nature of
Diffusion of Innovation
Process
The Process of Diffusion and adoption of
Innovation emerged as to be a cyclic process.
5. Collaborations, limited
trust on collaborators
Do collaborators trust fully is important emergent
theme as some knowledge related to sales may not
be shared.
6. Supplier as strategic
partner
The supplier can have as long lasting impact as
that of becoming the strategic partners and with
whom imports can be made.
7. Technological Revolution Technological revolution is reported as an
emergent theme for the adoption and diffusion of
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Innovation in SMEs.
8. Hierarchy; a barrier The structure of SME can be barrier if it has a
strict formal hierarchy.
9. Role of Government Role of Government as a barrier if its concern
ministries follow strict and long bureaucratic
norms.
3.8. Condensing the Data
During the first step, the data collected mainly through the semi structure interviews after
its description offered a huge amount and as such was hard to give some meaningful
directions for analysis. All individual interviews were transcribed and kept in the same
head for the same SME and in separate heads for other SME. The next step was to make
it easy so that the researcher could easily identify the responses about the main themes as
well as that of the emergent grounded themes. For this purpose, the interviews for each
firm which included different number of respondents were tabulated in a standard table.
The database/file used for these was titled tabulated data. It also provides a huge amount
of un-summarized information making it virtually impossible for making the analysis
easy. So after studying repetitively, the researcher changed the font size of the themes to
bold in these tables, which made it easy for next step. During, this step, the researcher
took all the bold themes to another standard table and titled it as condensed data, in
which the themes appeared in summarized form, themes were condensed to fewer case
typifying sentences, making sure all the while that the essence of the descriptions were
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preserved in these fewer case typified words and sentences (Miles and Huberman, 1994).
After this, researcher followed the first stage of analysis, the within case analysis. During
this process, the similarities and differences among the responses of all the respondents
were carefully marked and an aggregate of response was created based on how a
particular theme was viewed by how many respondents within the same organization.
The detail of this stage is presented in chapter 4. To do this the descriptive response of
each of the respondents for each of the themes were primarily dichotomized into positive
and negative responses for the purpose of illustrating whether the specific theme is
present or absent, or whether the respondents hold favorable or unfavorable views about
it and whether the response show a strong or weak agreement or disagreement. For the
cross case analysis, the data from the summarized or condensed form was further
condensed into only responses showing whether a specific theme is present strongly,
present, absent or strongly absent or whether the respondents had remained neutral to that
particular theme. This data when brought to the same table, presented a master table
which had the responses of all the participants coded in it. This is attached as Appendix
B.
Chapter 4 Case presentation and within case analysis
In this chapter the researcher introduced and presented all the case study pharmaceuticals.
The profiles pharmaceutical companies were discussed and then followed by a within
case analysis of the descriptive themes that the researcher had conceptualized from the
review of literature. In this Chapter the cases are presented with basic information and
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initial analysis for the subsequent cross case analysis in next chapter. The researcher
analyzed the responses of each respondent against the response of another respondent
from the same case study pharmaceutical. In this way all the descriptive themes were
analyzed. The triangulation of within case data was done on the basis of comparing the
responses of respondents as well as the researcher observation and the secondary data
sources like the official websites, the official facebook pages and other pamphlets
available from the case study pharmaceutical. During the interview process the researcher
also came up with some emergent themes which were also noted and discussed in the
next interviews in the same case or the other cases which were interviewed later. There
were mainly two themes which most of the respondents felt are either repetitive or
irrelevant. At the end of each case, the researcher has drawn a conclusion about the
agreement or disagreement of the respondents in the same case and also has shared the
observation made during this process.
Case 1: Hizat Pharmaceuticals
I. Profile of the case
Hizat Pharmaceutical is a private funded local pharmaceutical which was formed in
1992 and there were not many pharmaceuticals companies in Hayatabad, Peshawar. So it
is one of the pioneer enterprises in this sector. At that time there were hardly 3 or 4
pharmaceuticals so the infrastructure was not quite a sophisticated one. Hizat
pharmaceuticals started its operation at low scale but gradually increased production as
their infrastructure developed. Currently, there are different divisions operating in Hizat.
At the time of Hizat establishment, there were few pharmaceuticals in the Peshawar
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cluster of Khyberpakhtunkhwa. A marketer himself, the founding father was inspired by
the manufacturing units in Karachi to come to the practical production and hence set this
pharmaceutical here. Hizat started with 10 different syrups initially but with the passage
of time, the number of products increased to 140. This included a dry syrup section,
ointment and cream section as well as a capsule section. Recently the Nutraceuticals
division is added as well. The building of Hizat is developed and now it looked as a
sophisticated infrastructure. Now there are different parts like the production area, the
laboratories which test the products after production. This SME has added different
departments and divisions gradually.
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
The researcher asked questions to find out the type of Enterprise and the Nature of
Innovation in the first section so that a foundation for the other important variables is
established. The semi-structured questions were asked from the respondents and their
responses were heard without interruptions until it became inevitable. The themes are as
follow:
a. Entrepreneurship and Innovation in Culture and Structure
The attributes like Entrepreneurship and Innovation in culture and structure are important
for adoption and diffusion of organizational innovation of firms. The Hizat
pharmaceutical is structurally and culturally Entrepreneurial and Innovative. When asked
by the researcher whether your SME structurally Innovative and has an Entrepreneurial
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culture, one Manager responded like this;
Yes it is. If you are asking about the
organizational structure and culture, it is
very Innovative and Entrepreneurial in
nature. Risk taking is always associated
with our business as there is no certainty of
whether the steps taken will be successful or
not. As I said we have worked on around
140 products in our SME. Some of them
click but not all of them are active now.
Some of them have become obsolete and are
no more functional, so it is a risk taking
business in itself.
Since it’s a science based industry,
Innovation in medicines, new developments,
new are inevitable so we have to update
our system and ourselves. We have to
respond to the demand of the time. In this
connection we also keep an eye on other big
multinational companies how they launch
their products. As they are the ones who
head in production of new products,
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research based products and we also update
ourselves from that angle. We then apply for
those products in the concern ministry in
Islamabad, Pakistan for getting the
innovative products registered.
As I said there is always progress and
development in this sector like generations
of new antibiotics , new generation of
analgesic and pain killers always come and
doctors demand those products which have
less side effects and more good affects. So
we have to be more innovative if we don’t
want to have fewer shares the market.
When asked the same question the manager of another department responded with more
conviction and enthusiasm as follows;
Yes why not. Our SME is working in
pharmaceutical sector. There you need to be
innovative as there comes new molecules
and you have to adopt them. However, it’s
not that whatever comes in our heart and
mind, we would do that. The thing is that
when new molecules come, we apply for
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their registration, when we get permission
from the ministry, then we incorporate the
production. But we do carry on innovations
and new product launching. Sometimes, we
launch drugs which get outdated early but
we have to take these risks and be proactive
to keep pace with the market.
This SME is entrepreneurial and it developed gradually as it added various new
departments and product lines with the passage of time. One of a senior manager of Hizat
puts the progress in structure in this way;
During its early time it was a small firm but
gradually it evolved to this one. The
cosmetic side is now replaced by
nutraceuticals and we can say that this SME
has developed sufficiently since 1990s.
So the response to the question about the entrepreneurship and Innovation in Structure
and Culture, all the three Managers help positive and affirmative views. They
unanimously agreed that there is a striving for development and that their History shows
their Entrepreneurial and Innovative culture as how it evolved from being a single Unit to
multi-department SME.
The researcher also observed that there was an old and small unit in the middle of the
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organization where they had started this SME and now they have evolved into several
departments and sections.
b. Size of the SME and Innovation
Size of SME is another important theme studied in the literature. The size of SME and its
linkage with the diffusion and adoption of innovation has different results in different
studies. Some studies show that size of SME both with respect to the number of
employees as well as number unit for manufacturing and production is very important.
Still other studies suggest that there is not a very huge impact of the size on innovation.
To a question as how the size of your firm matters in Innovation, one Manager of Hizat
Pharma responded like this;
Size of the SME does not really matter. The
building and the number of employees does
not make difference. It is about the facilities
and the equipment availability. We have four
five managers and they always come with
new ideas, the marketing manager can
always come up with ideas and there are
employees inside the SME who can bring
new ideas. So the number does not really
matter, as it is more about the quality and
not the quantity.
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However, contrary to the low level of importance that this manager and the general
manager gave to the Size of SME because of the fact that they believe that facilities,
equipment and quality of the employees are important than their number, another Manger
has some other views and he thinks that Size is important;
If we talk about infrastructure, we can say
that the building was not built with some
plan. As I said that first there was only one
block. Then with earning and investing more
capital we did build some other blocks. So
we can say that the flow of the building is
not that much and hence can be a barrier to
the innovative processes in organization. If
we talk about number of employees, we can
say that since there is more market demand,
we can increase the number of employees
and as such it is required too. However, I
may say that the employees that we already
have are well equipped and make the
process of this organization more
innovative.
The response of this manager outlines an important theme which we did not study in
literature and as such can be termed as Grounded theme. This manager said that the
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organization needs to make the building with proper planning as it has a positive
relationship with the smooth running of organizational processes in an innovative
manner.
c. Organization Processes and Innovation
The processes of organization in all its departments and sections make it either innovation
friendly or inertial. The responding managers of Hizat pharmaceutical agreed strongly
and unanimously that the processes make the SME innovative. One manager responded
to the question, do you believe that the processes of your organization make it innovative
in this way;
Yes it depends upon the processes of the
organizations to make it innovative or
otherwise. Largely depends upon the
management as to how they utilize the
potential of the employees. Like for example
there are various divisions, there can be
account section, there is marketing section,
there is HR section and there is technical
staff. SO it depends on the overall structure
of the organization and its Management as
how they take ideas from the employees and
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from the market. How they utilize and
channelize it then to be more innovative as
per as the processes are concerned.
Similarly the Quality Control Manager also responded in agreement like this;
Yes, we do have automatic machinery and
state of the art laboratories. This makes it
convenient for the trained staff to carry out
the activities as burden is lessened on them.
So we can say that our processes which are
carried out through the latest technology
are innovative.
While the General Manager also associated the processes of the organization more to the
latest technology and the adaptability to it for carrying the processes in more innovative
ways. His response was like this;
We use new technology for making our
products. We make all the possible
adaptations so that our employees process
the activities in an innovative way.
d. What Makes the SME Innovative?
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In an effort to know the opinion of the Managers as to what they think makes this SME
Innovative, the researcher got response from Marketing Manger in these words;
Our SME is among the very few pioneers
SMEs established in Hayatabad, Peshawar.
Furthermore, currently we are producing
the ointments and creams which no other
pharmaceutical SME does. SO our product
innovation is more robust and frequent as
compare to the other competitors in this
sector. Especially in few products like the
ointments and the creams.
Adding to this, we have pro-technology
organization. We have state of the art
laboratories and equipment/tools that we
utilize. We have quality control department,
we have automatic machines. So in my
opinion this SME is overall an innovative
one.
While the Marketing manager related the Innovative nature more to the historical
entrepreneurial steps of the founding fathers of this SME, the Quality Control Manager
Strongly Agreed that the latest technology and educated staff make the SME innovative.
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The General Manager however made a more elaborate answer enumerating more factors
like the utilization of eBooks and manuals. He responded in this way;
Our processes are new, our technology is
up-to-date and we also take risks as per the
market requirement. We do use internet
technology and we have had our own
website too (although not maintained for
few months now, laughingly!). Also, the
products that we intend to launch are
registered with the ministry and we make
sure that the requirements are at par with
the manuals and e-books available.
As the General Manager also accepted, not maintaining an official Website is a little bit
of question mark as to how the SME will share the information with the target audience
in the market; the researcher was shown the official facebook page for the said purpose.
2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
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The marketing manager of Hizat pharmaceutical to the question, How are innovations
developed from infancy to marketing stage, told about the strong impact of the research
of Multinational companies as well as the internal processes like production as efficient
and effective factors for developing innovations from infancy to marketing stage. He
replied like this;
We follow multinational companies as they
first launch the products because they are
good in Research. It is more about the
processes inside the firms regarding the
development of new products. How efficient
your processes are in production of new
products, as to how to produce cost effective
products.
Our focus is on the Ps, how to get a good
quality raw material for our product, how to
set a reasonable price, how to make the
Packaging more attractive. So we look to
the market in this regard too. So these are
the things that we keep in mind while
developing innovative products and
marketing them.
While the marketing manager explained the process of developing of innovation from
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infancy in much detail, the Quality Control Manager strongly related the innovation
developing from infancy to Market , Methods applied to ensure timely production as
this ;
The ideas of new product mainly come from
the market but we do take care to follow the
proper methods and ensure timely
production.
The general Manager also told that the main factor in developing innovation from infancy
is Market, putting it this way;
Based on the marketing research, we try to
know about those products which are
demanded in the market. We then seek
registration for those products.
So all the three respondents in this SME collectively attributed Market itself as the
important factor.
b. Rate of Adoption of Innovation
The rate of adoption of innovation is one important theme that the researcher studied in
the literature which can be related to the diffusion of innovation to the firm. The
responses of the Mangers to the question, how do you rate your SME as one adopting
Innovation comparing to others though affirmed that the SME is fast adopter of any new
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innovation, the level of conviction of their claim varied from each other.
For example the marketing Manger sounded like he is agreed for the rate of adoption is
good but to him it is steady and gradual process as he said;
If we talk about the same industry, we need
to have a gradual shift towards innovation,
if not so, we would not be able to survive.
We have improved our products and
processes gradually but constantly. We have
worked on the promotions of product,
because if you do not do that survival
becomes difficult.
So Alhamd u Lillah, we have added more
sections and thus we have edge over other
SMEs. In this way we launch products and
other SMEs looking at our products and
they then adopt our strategies. As for
example we have added another division,
the Nutraceuticals division and the Herbal
division too. Now the other SMEs around us
are adopting our innovations and are now
adding these strengths to their SMEs as
well.
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The quality control Manager noticing the mandatory regulations of the concerned
ministry as a hindrance, he reiterated the internal system is much cooperative and open to
the adoption of innovation. He answered in these words;
In most cases we do follow the checks and
regulations of the ministry. However, when
we feel the need of brining the change to
our processes, we do change it. As per as
comparing with other SMEs, we certainly
have a culture which is more innovation
friendly and we accept change with open
hands.
However the general manager does not looked fully agreed to the statement of the other
managers in as much as their statement of internal openness, he reiterated that yes, the
firm is adopting innovations but the structure of the firm could be more of a barrier.
According to his statement the structure should be made more decentralized in order to
improve the rate of adoption of innovation. His answer to the question in this regard is
like this;
Yes our SME is the one which adopts the
Innovations more rapidly and quickly. But
there is something that is important as well,
like it depends more on the culture. In a
centralized culture, it’s more to the centre
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that people look for innovation adoption. In
our SME, we also have a centralized system.
So the innovative ideas come to the
Chairman, who adopts it or drops as he
deems appropriate. So for individuals it is
difficult to adopt innovations.
So the overall responses of the managers can be summed up as to agree to the faster rate
of adoption but adding that the rate of adoption can be improved and more individuals
can be involved in to this process.
c. Sharing Knowledge Sources
The researcher while studying the literature found that those firms which share both inter
and intra-organization knowledge sources, they adopt innovation well. The answers to
this theme showed that all the managers unanimously agree to the significance of Sharing
of knowledge sources. The Marketing manager response is transcribed in these words;
Yes, we share ideas like there can be various
issues during the processes and problems
during the processes. Our system is more
developed, we are sound in knowledge and
then if there are new SMEs which go
through any issues like we have already
gone through, we share our knowledge with
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them. So that kind of knowledge is always
shared with each other in the same industry.
Whereas the Marketing Manager related more the sharing of knowledge more to the
nature and knowledge soundness of the Hizat pharmaceutical, the Quality control
Manager associates it to the nature of the overall sector. The crux of his answer is that
due to the nature of the industry not many information can be kept as secret and that is
why it is good to collaborate for knowledge sharing. He reported that;
To be honest in our sector, we cannot
conceal any information and knowledge is
very porous in this way. If we speak about
production, all our production processes are
documented and there are even books
available. We do share with other SMEs
whenever there is some technical guidance
and knowledge sharing required. Similarly,
we also get knowledge from our
collaborators and networks.
The General Manager also strongly agreed by saying;
Yes we do share knowledge sources with
each other. For instance if we visit another
SME, we get ideas from there by getting
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information regarding their processes and
technologies. Also provide similar kind
information and knowledge whenever we
are asked. This helps in mutual innovation
diffusion and adoption.
Overall management seemed to have convinced with the fact that knowledge sharing is
an important factor in benefitting with adoption and diffusion of Innovation.
d. Collaborations and level of mutual trust
Collaboration for adoption and diffusion of innovation was found to be an important
theme from the answers of Managers of Hizat Pharmaceutical but the level of trust on the
collaborators is not fully agreed upon.
To the question, do you have collaboration with any other firm to carry out innovation
and what level do you trust your collaborators, the Marketing Manager said;
Well, we can trust on our sisters companies
fully but not in general, not always fully. We
do seek information from other companies
too, we have kind of brotherly environment
and we share information, collaborating
with each other. Sometimes their whole
processes can face hindrances and they are
in need of our technical staff, we do share
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our technical knowledge, we do share our
knowledge regarding the products. Since
medicine is a very sensitive area, you need
to be concerned about the health. So
sometimes products are developed but the
Quality Control do not pass it. Then we
apply different processes for the production
of the same product, an iterative approach.
So it could be presumed that the marketing Manager views as that the collaborations with
certain SMEs can be fully trusted and not generally all collaborator, however the
importance of collaborating is acknowledged as especially in this sector, medicine since it
is very sensitive field, you cannot experiment without knowing properly what you do.
The quality control manager looks to it this way;
Yes we have collaboration with two other
SMEs working in the same sector. Oh, yes
we do because there is no such harm us that
(after a long breath and huge pause).
General Manager’s response about the collaboration and level of trust was more or less
the same as the quality control manager as he said;
Yes we do collaborate. We trust our
collaborators but not entirely as after all we
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do have commercial purposes to meet too.
For that reason we decide on how much we
can share and how much we need to hold
back.
These responses can substantiate the response of Marketing Manager in a way as all are
agreed about the importance of collaboration and all think that there is certain limit
beyond which one cannot trust collaborators.
e. Value addition through collaboration
When asked, what values do these collaborations add to your innovation, the Marketing
was recorded saying that?
If you have knowledge and if you don’t share
it will not grow. When you share it, it grows
with the passage of time. When I help others
now, maybe they help me in future too. So in
long run it is helpful. So overall the
innovation process is growing in this
industry. I should say that with
collaborations, our SMEs also grow.
Particularly, the knowledge of the
processes, that kind of knowledge is shared.
So it can help improve the processes. In
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terms of sales, the collaborators normally
do not share knowledge.
So he termed it as something invested for future as well and it gives growth to the SME
too. The quality control manager concisely but objectively put it very simple and referred
to collaboration as something which helps both stakeholders, he said in this way;
It does help both sides, in a way its
mutualism.
The general manager attributes collaboration to more of a solution to the technical issues.
He said that;
Collaboration brings some positive
outcomes. For instance if we feel some
problem in our equipment, we seek the help
of our collaborators and this add to our
innovativeness.
So overall the management seemed convinced that Collaboration can help for future
ventures, can benefit all the collaborators as well as can be helpful especially in solving
problems of technical nature.
3. Drivers and sources of Innovation In organization
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
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a. Drivers and Sources of Innovation in SME
The marketing manager response to the question, what are the sources of innovation in
this SME was;
There are various sources of Innovations
from which we get idea, the market trend for
example. There are internal sources like the
employees, the technical staff. What issues
they see and how can they solve them.
When the same question was served to the Quality Control Manager, he was found
saying;
Market, R&D, other SMEs, the employees
are drivers of innovation.
The General Manager responded in this way;
We follow a formal way. We get ideas from
our employees, who are working in the
market. Also the R&D is a main source and
driver of innovation.
So in general there seemed agreement from all three managers that there are internal as
well as external Sources, however all three recorded that the Market itself, R&D
employees and other competitors are the drivers of innovation in this SME.
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b. Idea Sources for new products and services in SME
Where do the new product and service ideas come from is a great point of interest for the
researcher. The researcher tried to reiterate whether the drivers and the idea sources for
new products and services are the same. The researcher probed the managers and the
marketing manager response was this;
The ideas largely come from the Market.
Then there are employees and technical staff
who can always come up with new product
ideas. But mainly the market is the main
driver of innovation.
The quality control Manager replied;
The new product ideas mainly come from
market through our marketing staff.
And the General Manager replied with more conviction about the Market itself as the
source of new product and service ideas in this one line answer;
Market is the major driver of innovations.
So regarding this theme all the three Managers strongly agreed for Market, Marketing
Staff and the employees as major idea sources for new product and services.
c. Knowledge and training level of Staff of the SME
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The researcher tried to know whether the staff has the required knowledge and training
for innovations. The response of the Marketing Manager recorded as;
We have two kinds of employees, the
technical staff and the labors. For instance
if a new employee joins the firm, someone
senior to him/her in the Quality control
department will help in training them. So
they get training from the senior members
and after sometimes, when they reach at a
certain level, they start operating on their
own. So it’s kind of on the job training for
those who have the knowledge but not the
experience and requisite training.
Here it can be inferred that the seniors train on job whenever a new employee is hired to
reach to the required level.
The quality control Manager answer sounded like they are more strongly satisfied for the
education of the technical people and not the labor, however the level of training is
achieved on job, he said;
Yes some of the staff is highly educated and
expert. Some, like the laborers are not as
well educated but they get on job training.
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General Manager responded that;
Most of the times the people do have the
formal educational background like
Pharmacy and Chemistry degree, as these
people sitting with us(Signaling to the young
professional pharmacists). They however do
not have the required experience. When they
join us, we train them in our innovative
organizational culture and then they do get
the required experience as well.
So all the manager strongly agreed that the professional staff has the required level of
education to carry out the processes in innovative way and the little bit of lack in
experience is fulfilled by getting training from the seniors in the department.
d. Customers Input
The researcher tried to know whether the SME takes the input of customers for
innovations in organization. The first response that came from the Marketing Manager
stated;
Actually we are working with channels. We
work with franchises and we do not directly
get in touch with customers, rather the
customers purchase our products from the
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franchises. So these distributors and
franchises tell us about the results of the
products and whether they need any
improvement.
The Quality Control Manager responded;
Yes we do consider our system to be the one
taking feedback and input but we get it
through the doctors and distributors.
And the reply of the General Manager was also not different from the two other
respondents as he said;
Directly, no but indirectly they do give us
ideas through the doctors which our
marketing people take and then share with
us. So those are the ideas of the customers
which we then serve.
They all agreed that the customer input is important but they customers do not give them
input directly rather the franchises, distributors and the doctors provide the reviews of
customers to the SME.
e. Role of Suppliers in innovation diffusion and Adoption
The role of Supplier in the innovation of any organization is a vital factor. The provision
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of quality raw material in time is important in this regard. The responses of the managers
also agreed about the positive role of suppliers. The Marketing manager in his response
told;
Yes, they give ideas. If the processes go on
well, that’s fine, but they do give
suggestions. They tell us if we adopt that
kind of strategy, if we take that type of raw
or product. Our relationship is a long
lasting one with our suppliers and has
prevailed for many years so we do trust
each others. So we work for long terms and
not just for few days. So we work on their
suggestions at times and they work well.
The response of the Marketing Manager can be seen as of some immense vitality as it
gives a grounded theme to the research by identifying that Suppliers can be strategic
partners too.
When asked the same question, the Quality Control Manager also seconded the
marketing manager in this way;
Yes quite frequently we involve them in our
innovation processes.
The general Manager also appreciated the role of suppliers in saying that there are
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concerned more about the provision of good quality raw material; he put it this way;
They do have a substantial say in the
innovation process as they are more
concerned about providing the best raw
material.
f. Screening and evaluating Ideas
When probed about how the ideas are screened an evaluated the marketing manager
said;
There can be many ideas, right. But we do,
we discuss those ideas. From that we reach
to a conclusion. So in light of those
discussions we take some ideas and drop
other. We have to be very selective as there
can be too many ideas.
The Quality control Manger said;
We call our meetings of departments and
screen our ideas in that.
Whereas the general manager responded in more detail saying that;
Ideas are seen with the organizational
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perspective. We see which ideas match our
requirements and our resources. We try to
work on those only. We carry out technical
sessions and meeting of all the relevant
managers.
So all of them unanimously agreed that there are meetings in which all the relevant
departments participate and discuss the feasibilities and technicalities.
g. Central point for new ideas or focal person
The response of the Marketing Manager to this point was;
We have got the executive body as well the
chairman. It is normally in the hands of the
General Manager. So in this regard ideas
can come from many sources but Chairman
is the person to whom they all head and
then they decide what to do with which idea.
The response of the quality control manager and general manager both was that the
chairman or the Chief Executive General Manager was also the same as they said that
Chairman holds the key.
From this substantiates the earlier statement of General Manager about the more
centralized structure of the firm.
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4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
In the literature researcher studied that the marketing research is important for making
adoption and diffusion of innovation more swift. The respondents to the question of
whether the research this SME follow a formal Marketing research all agreed strong. The
Marketing Manager puts it this way;
Yes, we operate in a formal way. There is an
organizational structure. The marketing
people, do marketing research and part of
their job is to research in the market, finding
the gaps if any. They find out the market
requirements/gaps and coordinate as to how
it could be filled.
The quality control manager also agreed that they carry formal marketing research and
the role of marketing people is important in this regard. He said;
There is a formal structure of our SME and
hence a formal marketing research system
as well. The marketing people bring the
ideas from the market and forward it o their
concern managers. They then work it out
with the chairman.
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However the General Manager mentioned the role of the R&D people as well, he was
quoted saying;
Yes, we follow a formal research involving
R&D and marketing people.
All three managers strongly agreed that there is formal marketing research involving the
R&D and the marketing employees who try to figure out the opportunities in the market
and the organization makes the necessary adoptions.
b. Risk Calculation and test marketing
All the three respondents in Hizat Pharmaceutical agree that without proper risk
calculation and test marketing, the innovations of organization cannot be commercialized.
The marketing manager said;
We do calculate risk as we conduct market
research and after it conceptualization, we
just test market our products through
doctors mainly, before making it
commercial.
The quality control manager and the General Manager also agreed that they test market
their innovations before commercializing it.
General Manager said;
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Without proper risk calculation and test
marketing, the chances of innovations to be
successful remain very low.
In this way all the three managers of Hizat Pharmaceuticals agreed that they have proper
test marketing and risk calculations system.
5. Barriers to the Diffusion of Innovation
From the study of the literature, the researcher understood that there are barriers which
affect adoption and diffusion of innovation in the organization. This section will try to
find out whether themes are testified by the respondents in the case of their SME or they
point some additional themes.
a. Lack of expertise
The managers were asked whether they find it difficult to have sufficient expertise while
carrying out specific innovation type. The Marketing Manager asserted in positive as this;
Sometimes we do face it difficult. As I said
there are few divisions .At times the devices
that we use, need modern expertise and
knowledge. Since the machinery is state of
the art, there are times when we have to
have difficulty in carrying out innovations
types. So specifically, it’s the technology that
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we need more expertise in. When we bring
the latest machinery at first, there are
problems, as we lag behind from the world
in this field. So to reach to that level, is
always difficult.
While the Quality Control Manager agreed that there are chances sometimes to lag
behind in some expertise, the general Manager Disagree by saying that he did not see any
such problem.
b. Financial Barriers and role of banks loan
When asked do you find any financial constraints to carry out innovation (socially
sufficient amount of funding required carrying innovation-related research work) and
does your SME get financial aid from banks easily whenever needed? The Marketing
Manger said;
If our SMEs are asked about, we do not
borrow from bank.
The quality control Manager however added that they invest their own money;
We never have applied for any loans. We
invested our own capital thus far.
The General Manager said;
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We do not go for loans from banks. They
might give us loans but the issue is that the
long term benefits are lesser than the
demerits of bank loans.
There seemed to be an agreement that they do not have any such problems for financing
and they refrain from taking bank loans for the hidden strings attached to it.
c. Role of Government and its Agencies Like SMEDA
When the managers were probed to tell the researcher about the role of Government and
specially the SMEDA, their responses showed a clear disagreement about any supportive
role of the government. The Marketing manager said;
No. there is no support from either
government or its agencies like the SMEDA.
They never do any financial support, they
seldom gives ideas though. Government is
never supportive.
The quality control Manager sounded different in as much as he appreciated the advisory
role of SMEDA. He said;
No, did not get any support. We just get
ideas from SMEDA occasionally.
The General Manager also accepted that while the government has not given any
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substantial support SMEDA has helped, he told;
The government does not support in
anyway. However, SMEDA has given
technical support one odd time.
So the researcher analyzed that the government role is not supportive but SMEDA gave
technical and advisory help to this SME.
6. Impact of adoption of innovation on SME growth
The researcher tried to probe how the manager viewed the impact of innovation on the
SME growth. The researcher asked all the respondents the question, do you consider
innovation as any activity which improves competitiveness in your SME and why are the
innovative activities undertaken?
The marketing manager responded that;
Yes, it improves competitiveness; there is
always a need to be innovative so that you
can sustain your market share.
If we need to survive in the market we need
to be innovative. We can only stay in the
market if we innovate, we have to respond to
the market and be dynamic towards the
overall environment otherwise we would not
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survive.
While the quality control manager also agreed by saying;
Yes, it helps in making the SME competitive.
Basically all of it is carried for one sole
objective, to meet the market demands. My
work is related to production and we need
innovation to meet the demands timely.
Ensuring that, we increase sales and
resultantly our profits grow more.
The general manager agreed and answered in rather more technical way;
For instance if we are using new equipment
like using HPLC after we used UV, this
certainly help in bringing better
performance. This helps competitiveness
and improves the growth capability of the
firm. He added that; for growth and survival
SME needs innovation.
III. Conclusion
Hizat pharmaceutical is private local pharmaceutical SME. It is one of the pioneers in the
field because it was established in Hayatabad industrial state at a time when there was
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very small number of pharmaceuticals present. Although started in a small building with
only ten products, the SME has reached to a good market share. Enlightened by the
vision of the founder, who himself was a marketer and had an entrepreneurial personality,
the SME present an entrepreneurial and innovative culture and structure. The size of the
firm is sufficient enough to carry meet the demands of the market in an innovative way.
The organizational processes make this firm innovative and this is possible because of the
innovation potential of the employees, the availability of the state of the art labs and
usage of latest technology for production processes.
Although the pharmaceutical has educated staff, state of the art labs and robust product
innovation, the art of innovation diffusion is gradual. A more likely reason for this is the
more centralized structure. This Pharmaceutical collaborates and share knowledge with
different pharmaceuticals believing that this helps mutually and adds values to the firm.
The knowledge and skill level of the employees is good enough to identify the potential
opportunities in the market. This is largely a market oriented organization and innovates
to meet the current demands of the market. This pharmaceutical believes that the products
of the competitors are sources of innovation ideas and that is why it believes that there is
no serious challenge of idea stealing to them as they also get ideas from others. Hizat
pharmaceutical views the customer input very important in making organization more
innovative but they do not interact with them directly rather get their views from the
sources like doctors, distributors and the franchises. Suppliers also have a very important
role in their organizational innovativeness and they treat suppliers as their “strategic
partners”.
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Although the ideas that come from different sources are discussed in meetings and with
the concerned departments, the lead role in decision making still rests with the chairman
and this centralization sometimes makes the rate of the diffusion of innovation gradual
and steady. The marketing research for innovation adoption and diffusion is mostly
formal which involves the R&D employees and the marketing staff but the management
overall supervise it. The risk taking is calculated and the products get tested before its
commercialization.
There are no such barriers like lack of professional expertise on behalf of the employees
and neither Hizat face any financial problems. This pharmaceutical considers that there is
no support from government to help the firm and SMEDA sometimes just play the
advisory role in some technical issues.
This Pharmaceutical does not consider bank loans as an option even if they are offered by
banks because there are problems later on borrowing from banks. Hizat pharmaceutical
considers the adoption and diffusion of innovation to the firm as their competitive
advantage which helps in increasing the market shares and this adoption of innovation
gives growth to the firm.
Case 2: Wisdom Pharmaceuticals Industrial Estate Hayatabad Peshawar.
I. Profile of the case
Wisdom Pharmaceutical is situated in Hayatabad, Peshawar,Khayberpakhtunkhwa. This
is a young SME started in 2015. Wisdom pharmaceutical started its operations with
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manufacturing of 60 products and has still that number as it has not been given license for
increasing the number by any stretch. As a new firm it has not yet got too many products
and has little market share for this reason. The main process of Wisdom pharmaceutical is
formulation and it has not done much research to carry processes in an innovative way.
This pharmaceutical has not done any patents or any radical innovation. However, it uses
contemporary techniques in marketing and production. The human resources of Wisdom
pharmaceutical are qualified and possess the required experience.
ii. Analysis of Data
1. Type of Enterprise and Nature of innovation
a. Entrepreneurship and Innovation in Culture and Structure
The pharmaceutical is more of a formulation type of SME working in the formulation of
only basic molecules and does not take many risks for this purpose. The response of the
quality control manager in this regard was also not much encouraging;
I think the Culture is encouraging but you
cannot call it entrepreneurial as we do not
take many risks with our products and
processes. The vision of the CEO maters in
this regard and his view is that first we
should focus on the formulation of basic
products to get entry into the market.
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The views of the Marketing Manager also reiterated that the there is not much innovation
in this organization as they tend to focus more on the basic products to penetrate in to the
market.
b. Size of the SME and Innovation
The Director of the SME said that size of the SME is good as per as innovation capacity
on the basis of the number of employees is concerned. He said;
We have got around fifty people. We can
meet the current market demands and new
product development using these resources
so I think the size is sufficient as per as the
current market demands are concerned.
The marketing and quality control managers also agreed that the size of the organization
is sufficient to meet the current market demands but if we have to make this organization
more innovative, we need to human resources. The quality control manager said;
Yes the current market challenges can be
meet with this size and I think if we need to
innovate more, then we would need more
human resources.
The researcher observed that the size of the SME both employees wise as well as units of
production wise was sufficient for the current activities which are not highly innovative.
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c. Organization Processes and Innovation
The director of Wisdom pharmaceutical shares that they carry on contemporary practices
as other firms in this cluster do; he was recorded saying this;
Yes we follow the contemporary techniques
in the marketing and production and all
other routine processes of our organization.
We use the latest machinery as all other
companies are using here in this cluster.
The quality control manager also backed up the equipment and the staff of the
organization. He said;
Yes, I think we have got latest equipments
for our production and our staff has the best
skills. So we can say that we have got
potential for carrying out innovative
processes in our organization.
The Marketing manager also agreed for the organizational processes as being innovative.
He said;
I understand that the processes of the
organization are well in accordance with the
advances of today’s technological work.
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But their overall response to the researcher did not reveal that the processes of this
organization make it innovative. The researcher also observed that there were no properly
arranged office places and the communication system also looked like quite a routine
one. For instance, in the presence of the research, the director needed to consult with the
quality control manager and instead of using any intercom, he sent another staff member
to locate him. The researcher noted this in the diary purposely as he thought that for an
organization to carry the processes in an innovative way these days, there are present
proper communication systems.
d. What Makes the SME Innovative?
To the question that what makes this organization innovative, the Director said;
I think we have been using the same state of
the art lab equipment as most of the modern
Pharmaceuticals would do. We have
qualified staff that is second to none.
The quality Control Manger however said the same thing in a much brief manner;
The staff of our firm and the advance
machinery that we have makes our SME
innovative.
The marketing Manager said that whatever they do in this SME is for making it
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innovative, he said;
I think overall, what we do we are doing it
to make the firm more innovative as we
associate growth with organizational
innovation.
So the director and the managers agreed that the equipment and staff of make the
organizational processes more innovative.
2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
To the question, how are innovations developed from infancy to marketing stage? The
director said;
Our ideas mainly come from market and
then we have our own team who discuss the
ideas. We hold meetings regarding the
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development of new products and processes
in our organization.
The quality control manager also agreed that it all begins from the market but this is a
comprehensive process. He said;
It is basically a comprehensive process
starting with market demand and the
customers. The marketing people bring
those ideas here and we try to focus on
those which are practical and compatible to
our resources.
The marketing manager also declared Market as a starting point stating;
Marketing human force is the one who
comes off with ideas from the market and
then those ideas are discussed with the
director.
So all the respondents in their responses reported that the innovations start from market
and hence market is a starting point.
b. Rate of Adoption of Innovation
When the director was asked, how you rate your SME as one adopting Innovation
comparing to others, he responded that;
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We almost have the same rate with every
other SME here as we follow the same
procedures as themselves.
Although the director claimed that this SME has the same adoption rate as other, the
quality control manager response showed that they need improvement. He Said;
I think the CEO encourages people as to put
forward innovative ideas and we also adopt
innovation. I would say we can still be more
open and our culture can be more
entrepreneurial too.
The marketing manager also said that the organization needs more openness;
I think we can be more open and more
robust than what we are now.
While the director himself responded for good rate of adoption and diffusion of
innovation to the organization, the managers’ response was more to tell that they need
further improvement and openness so that they reach to good rate of adoption of
innovation.
c. Collaborations and level of mutual trust
The Director responded that they do collaborate when needed. He said;
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Yes we do collaborate with each other.
Whenever we need any help or guidance we
can consult with other pharmaceuticals.
The quality control manager also said;
Yes we collaborate with two other firms
which are older and experienced in this
field.
We do trust them and they trust us.
The marketing manager also said that since this is a new organization hence they need to
collaborate. He said;
As a new firm we need to seek support from
other established firms and for that we have
collaboration with Zinta and Hizat
Pharmaceuticals as we have trust in their
capabilities and progress. Yes we do trust
each other in this collaboration.
The responses suggest that Wisdom pharmaceutical tries to collaborate as it is a new
organization and it needs guidance and support from collaborators, so it’s more like for
gaining than giving.
d. Sharing Knowledge Sources
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When asked whether they share knowledge sources, the response of the director was;
Yes we do with few pharmaceuticals with
which we have collaborations.
Also the quality control manager said;
Yes why not, if we have to collaborate, we
need to share knowledge mutually.
And the response of the marketing manager was also in a positive. So the overall
responses of the managers of Wisdom pharmaceuticals about the knowledge sharing were
an agreement.
e. Value addition through collaboration
When asked, what values these collaborations add to your innovation, the director said;
When we are lacking something technical or
physical or logistic, we can put forward our
demands to the collaborating firms. When
they need any support in this regard, we
provide them too. Since we import the raw
material, it also happens at times that we
actually import together with which the
costs of shipping are shared.
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This again substantiates the argument that since Wisdom is a new pharmaceutical, the
collaborations are carried more for getting support from the already established
collaborators. The import with collaborators in this SME is an emergent theme for the
researcher as the researcher did not study it the review of literature and hence had not
added in the interview protocol.
The response of the quality control manager was;
To a certain degree yes! We get technical
and expert support from our collaborators.
And the marketing manager responded in more marketing perspective that;
Yes collaborations add values in production
of innovative product as well making the
marketing and organizational processes
innovative.
They all agreed that there are benefits to their firm from collaboration.
3. Drivers and sources of Innovation In organization
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
a. Drivers and Sources of Innovation in SME
When asked about the drivers and sources of innovation .The director replied;
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Our main source of information beside our
marketing staff and innovative ideas
generation is Internet technology. These
days it’s a huge advantage.
About the drivers of innovation, the quality control manager added;
The main driver’s of innovation in our firm
is the human resources. The skills of the
employees to use the latest technology help
us a great deal.
Whereas the quality control manager associated the skills of the technical employees as
the driving sources, the marketing manager said that the marketing people are the main
sources. He said;
Those employees who are working
especially in the market are the drivers of
innovation.
The researcher concluded that the main sources of innovation in this organization are the
marketing staff, the technical staff and the internet technology.
b. Idea Sources for new products and services in SME
About the idea sources for new products and services, the director said;
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The new product ideas also come from
internet research but the major source is the
market itself.
The quality control manager said;
We get new product and services ideas
through the marketing people and mostly
these people bring practical ideas.
The response of the marketing manager was;
The employees of the organization and the
market are main sources.
So they strongly and unanimously called the market, employees and the internet
technology as the idea sources for new products and services in Wisdom
Pharmaceuticals.
c. Knowledge and training level of Staff of the SME
When asked, do you think that the staff of your firm has the required knowledge and
training for innovation? The director response was;
We have qualified pharmacists as our
production and quality control manager.
The ministry used to ask for one year
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experience, then three years and now they
are asking for ten years experience for these
specialized positions. So a person with this
much experience has got the required
expertise to do any new experiment or
innovation.
The response of the quality control manager was;
Yes, we have got well educated and well
experienced people.
Similarly, the marketing manager also reported that;
The staff of our organization has the
required knowledge, education and the
requisite experience through which they can
carry innovation.
Therefore, the researcher found a strong agreement in the response that the level of
education and training of staff of Wisdom pharmaceutical is of a level which can help in
carrying innovation.
d. Customers Input
All the three respondents were agreed about taking the input of the customers indirectly
from doctors and pharmacy shops. The quality control manager said that they hold the
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key;
Yes, Customers holds the key. The most
important feedback is that of the customers
but in our case we bring the input of
Customer through our marketing staffs who
are informed from the customer input by the
doctors.
e. Role of Suppliers in innovation diffusion and Adoption
The response of director about the role the supplier was a straight and big No; however
the marketing manager justified this because he thinks since they do only basic products,
the raw material of that can be found with any suppliers. He said;
Well we do not make radical innovations
and we take the routine molecules with
which we are working for some time now. So
the role of the suppliers becomes of little
value.
So for Wisdom pharmaceutical the role of Suppliers is not important.
f. Screening and evaluating Ideas
When probed about how the ideas are screened and evaluated the director said;
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We normally get these ideas from the
marketing people. When they put forward
their ideas we check its compatibility to our
system and our organizational resources. We
also check the feasibility against the
regulation of the Ministry which grant
license. However, when the management is
convinced that the product is demanded and
has a value in the market, then we apply for
license.
The answer of the quality control manager was;
In light of recommendations of the
marketing people our Director decides what
the feasibility of the ideas is and how our
firm meets.
The quality control manager response can be attributed to a more centralized system for
evaluation and screening of new ideas.
The marketing manager also affirmed the response of the QCM as;
The director of the firm screens and
evaluates ideas.
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The aggregate of the responses can be summed up like this that there is feedback of
management based on market demands but still the final authority is the Director himself
whether to take or drop any idea.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
The director of wisdom pharmaceutical negated any chance of conducting formal
marketing research by saying;
No we do not carry any formal research. We
just respond to the findings of the marketing
people.
The quality control manager’s answer was not too different, said;
No there is no formal research rather we
rely on our marketing people for gap
identification.
While the marketing manager also told that part of the job of marketing people, they
conduct research but not formally. He said;
As part of the duty, my marketing team tries
to carry research and assess the
environmental conditions.
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So the researcher assumed that overall there is no R&D and the research to adopt
innovations in this organization is not formal.
b. Risk calculation and test marketing
The director of Wisdom pharmaceutical did not respond to this probe question positively
and the researcher found that they do not test market or calculate the risks.
5. Barriers to the Diffusion of Innovation
a. Lack of expertise
To the question whether they find it difficult to have sufficient expertise while carrying
out specific innovation type, the director disagreed by saying;
No we do not have any problems or lack of
expertise. We have been doing the
production of these products for a long time
now and we have somewhat become
specialized in it. The ministry has regulation
regarding these things. We have qualified
pharmacists as our production and quality
control manager. The ministry used to ask
for one year experience, then three years
and now they are asking for ten years
experience for these specialized positions.
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So a person with this much experience has
got the required expertise to do any new
experiment or innovation.
The quality control manager said;
The staff is well educated and they have
good amount of experience to carry on our
processes in an innovative way.
The marketing manager agreed for the qualification part but for the experience he thinks
there is still need of experienced people. So they agreed that the level of education and
experience of the staff is good.
b. Financial barriers and role of banks
The respondents strongly agreed about the financial problems but said that there is no
way they can consider bank loans as these are not on favorable interest rates.
b. Role of Government and its Agencies Like SMEDA
The researcher asked the respondents about the role of the government and agencies like
SMEDA and the response of the director was;
No, they never helped us in anyway.
The quality control manager went an extra yard and saying;
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SMEDA has done nothing as per my
knowledge and the government authorities
have shown no interest whatsoever.
The marketing manager also disagreed for any positive role of government rather term it
as unfriendly. He said;
Government is not business friendly
unfortunately. Also SMEDA which is
originated to help small businesses is also
not doing any favor.
So the story of the government non-friendly role and the inactiveness of SMEDA are
reported by the overall respondents.
6. Impact of adoption of innovation on SME growth
When asked about the impact of adoption of innovation on SME growth and why SMEs
innovate, the reply of the director was;
Yes indeed, it has an overall effect on the
competitiveness because the market share
and the sales can increase accordingly. The
increase in sale can increase the market
share and hence can help in growth of the
SME, which is why innovation can be
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related to growth
Also the quality control manager said;
Adopting innovation is aimed at growth of
the firms and that is the case in our firm too.
We assume that adopting more innovations
mean more market share and more growth.
To be stand out and unique and to maximize
profit, we need our organization to be
innovative.
And the marketing manager also shared that the impact of adoption of innovation has a
role in growth and performance, told;
Adopting innovation is aimed at growth of
the firms and that is the case in our firm too.
We assume that adopting more innovations
mean more market share and more growth.
SMEs innovate to beat competitors and
maximize market share.
So, overall the respondents of Wisdom pharmaceutical agreed that the impact of adoption
of innovation on organization growth and performance is positive and that they try to
innovate to get market share from the competing firms.
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III Conclusion
Wisdom Pharmaceutical is a private pharmaceutical SME established in 2015 and the
ministry issued license for 60 products. The pharmaceutical is in its evolutionary stage
and the culture, although is encouraging but not much innovative. Since the vision of the
director is more to established the basic products working on some basic molecules, the
SME risk taking equals zero and hence cannot be called entrepreneurial. The size of the
organization is enough to meet the current market demands and the education and
training of the existing staff is sufficient to carry organization processes with the help of
latest technology and labs in an innovative way.
The rate of adoption of innovation in the organization is fair and the innovations origin is
basically the market itself. Collaborations and knowledge sharing prevail in this
organization as they look to it more of an opportunity for themselves to get some
technical support from the other established collaborators like Hizat and Zinta
pharmaceutical. The main goal of the collaboration besides the technical support is to
import the raw material together sometimes. This is a new emergent theme for the
researcher. The drivers of innovation and the idea sources of new product and services in
wisdom are the employees, the technical staff who can handle the internet technology and
also the marketing people. The pharmaceutical gets inspiration and ideas from
competitor’s products and has the values the customer’s input too. However, due to a
more centralized structure the power rests with the director whether to drop or try an idea.
The nature of research to identify gaps for innovation is informal and the main
functionaries of this function are the marketing people. While there is no barrier as per as
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the expertise level of the employee is concerned, there however are financial barriers
sometimes. Although banks can help giving loans, due to the heavy rates of interest
Wisdom does not consider this option. Although the government role is somewhat
unfriendly for businesses and SMEDA role is also nominal, Wisdom still believes in
making innovation as it is a source of their growth and increase in market share.
Case 3: Zinta Pharmaceuticals
I. Profile of the case
Zinta Pharmaceutical was established in 2007. This SME is a fast growing innovative
organization and it has established itself very well in the local SMEs. The market
responsiveness and the employees’ standards are the core things in its evolution thus far.
Zinta pharmaceutical use promotional tools also like manufacturing promotional products
as clocks, pens and bags etc which carry the logos of the organization. So Zinta has
evolved accordingly with the passage of time.
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
a. Entrepreneurship and Innovation in Culture and Structure
The culture of Zinta pharmaceutical is entrepreneurial and the management is willing to
take calculated risks. For instance when there is a need to install a new machine or
equipment, the management gives it a try though they know the theoretical knowledge
about it but the practical knowledge is tested by doing. This is how risk taking prevails in
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this organization. There I also a strong market orientation in this SME and the competing
firms are observed closely so that the market opportunities can be explored fully. The fact
is that this organization like all other firms needs innovation to remain in the market. The
product manager related this fact in these words
If you keep looking the competing firms
introducing some molecules before you and
you do work out there comes a time that you
are literally out of the market. So practically
speaking, this organization is bound to be
entrepreneurially proactive as without we
cannot survive.
b. Size of the SME and Innovation
All the interviewed managers agreed that the size of organization is important in carrying
out innovation. Their stance is that if you need to make innovation happen you need an
increased number of technical employees sometimes who can be handy in carrying out
the specific innovations. The response of the quality control manger in this regard was;
Size maters, if we need to launch new
products we, need new molecules for that
and often need to increase the number of
technical staff and need right man for this
type of innovation.
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c. Organization Processes and Innovation
The organizational processes of Zinta pharmaceutical although make the SME
innovative, it needs further improvement. Some of the machinery used is not fully
automatic and cannot give the desired output, the output that can be achieved with the
latest ad state of the art machines. The quality control manager puts it this way;
Like as you can see this machine, this is like
a semi automatic machine, four people can
be involved working on it and can offer
errors too. However there are other
machines operating in the same sector
which are fully automatic and have more
capacity.
However the product manager viewed that there are best brains in the management and
the staff is excellent too. The supply chain management of this organization is more
innovative and the organization utilizes technology too.
d. What Makes the SME Innovative?
The quality control manager of Zinta pharmaceutical did not look convinced when asked
what makes the SME innovative. He said;
There is still room for improvement but then
again there are certain machines that we
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owned here in this pharmaceutical that only
very rare SMEs own in the cluster, besides
one cannot incorporate innovations
simultaneously in all sections but it’s a
steady process and we are doing just about
the same; said the quality control manager
of the firm. On the other hand the marketing
manger associated the innovativeness of the
SME with the human resource practices and
the state of the art laboratory.
So overall, the researcher got the feeling from the responses believe that the organization
still is in evolution phase towards becoming more innovative and the HR practices and
state of the art labs are contributing in this regard.
2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
The quality control manager of Zinta elaborated that;
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There is a huge amount of input involved
from market while the innovations are
developed from infancy to the marketing
stage. In the opinion of the quality control
manager it starts from research of market
for example, most of the products are being
produced keeping in view the specific
market requirements of specific places like
NamakMandi (which is a specific area in
Peshawar) .Instead of this approach when
we carry research and develop innovations
on the basis of that we can have more profit
and sale.
The researcher here presumed that Zinta pharmaceutical does bring
innovations for specific Niches. This is actually an emergent theme
as the researcher did not study it in literature. The product manager
also told the researcher that market is the starting and ending point
of any innovation in this organization. Whereas the marketing
manager came up with a new theme for the researcher saying that
the development of innovation from infancy is somewhat a ‘cyclic’
process.
As he stated;
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It is a cyclic process. As it starts as a result
of the finding of the marketing research on
customers’ feedback, competitors and
market trends and go back to market once
innovation is completed.
So the diagram of how the marketing manager stated regarding the development of
innovation from infancy this will look like this:
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Diagram: Cyclic Process of Innovation Development
b. Rate of Adoption of Innovation
The adoption and diffusion of innovation in Zinta pharmaceutical is comparatively well.
Although they did not adopt quite rapidly but as compare to quite few other firms, the
innovation adoption rate is high. The Product manger said;
There are machines which the other
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Marketing Research
MarketCustomersCompetitor
Market trend
Marketing Staff
SME R&D
Innovationdevelopment
pharmaceuticals do not have in the cluster.
There are machines like the HPLC which is
an automatic machine and some of the other
competing firms do not have it with them.
So the researcher felt that there is an agreement in the respondents that there is adoption
and diffusion of innovation with a faster speed.
c. Sharing Knowledge Sources
Zinta Pharmaceutical has knowledge sources shared with the firms that they have
collaborations with. The knowledge sharing with networks has mutual beneficial effect
on all the participating firms. The quality control manager of Zinta pharmaceutical put it
this way;
Knowledge is an ocean and you need to
share it as it increases. We benefit by
sharing knowledge with our networks.
All the other managers also agreed that they share knowledge with firms that have
collaborations with them.
d. Collaborations and level of mutual trust
Hizat pharmaceutical has established collaborations and they do trust their collaborators
to a certain degree. The quality control manager said that;
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They do not normally trust blindly on
collaborators but there are defined areas
where we do and there are other areas
where we just try to restrict. For instance,
one of the colleagues from another
pharmaceutical came here and he needed
some help in a particular test. I conducted
that test here on our own equipment and the
results were good. Now when he went to his
pharma, he will try it there and will not only
take the accuracy of our equipment and test
for granted.
The marketing manager also suggested that;
They collaborate with two sister
pharmaceutical and they have mutual trust
The product manager also said that they
have collaborations with two other firms
especially where we trust each other in
some technical areas trust and not beyond
that level.
Product manager of Zinta pharmaceutical also suggested that as for as the technical
collaboration is concerned, that is good but we do not actually do trust on collaborations
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in marketing as there occur the commercial clash then. He said;
To certain degree we do trust but not beyond
that. For instance in some technical areas
we seek each other support but in terms of
our sales and customers, we cannot.
So the overall management of Zinta pharmaceutical viewed collaboration as something
that has mutual benefits and that is why they collaborate but they trust collaborating firms
to certain degrees of technical nature and not for marketing or sales.
e. Value addition through collaboration
About a question what values collaborations add, the quality control manager
spontaneously said;
That yes it does add values in terms of
knowledge and experience. He added that
when they find it difficult to run a particular
test due to lack of technical knowledge or
experience, it worth to call upon a
collaborator because it can save a lot of
time by involving an expert of the relevant
field.
The product manager said that the collaborations are important and they can help in
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making solid networks. He viewed that;
We carry collaboration with firms in the
same industry, with academia and with
suppliers.
The marketing Manager of Zinta pharmaceutical also strongly agreed that collaborations
add value.
So overall the three managers strongly agreed that collaborations can add values in terms
of saving time.
3. Drivers and sources of Innovation In organization
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
a. Drivers and Sources of Innovation in SME
The sources of innovation in this organization can be the Internet technology, the experts
on the field. If for instance there is a need of making new products for which new
molecules are required, the quality control manager suggested that the use the Internet
technology as well as seeking support from some expert in the field. While the marketing
manager reported Management of the firm, R&D , Employees working in the market as
the sources of Innovation in the SME, the product manager straight away his weight
behind the internet technology in as driver of innovation. He put it this way;
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I think the technological revolution is the
first and foremost important driver of
organization innovation. As with the advent
of Information technology, nothing has been
difficult and we believe that this has made
research about new molecules easy.
b. Idea Sources for new products and services in SME
When the quality control manager was asked about the idea sources he said that;
Employees with insight, market and
competitors as sources of new products and
services in Zinta pharmaceutical are
sources for new products and services.
The product manager also counted for more or less the same idea sources for new
products and service like Market, Customers, Competitors, Suppliers and Collaborators.
The marketing manager also strongly agrees for Market, Competitors products, R&D.
So, overall the researcher found an agreement in the responses of the respondents on the
value of market, competitors, customers and the R&D employees of the firm as the idea
sources for new product and services.
c. Knowledge and training level of Staff of the SME
The quality control manager said that;
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There are slight issues sometimes regarding
lack of specific experience or training but
that is sorted out through the support of
collaborators.
The product manager also said that;
There can be small issues of technical
nature and the staff may not be able to fix it
up but the management then consults the
collaborators or some expert from the
market to train the staff.
The marketing manager however reported that the knowledge and training of the staff is
sufficient. The researcher presumed from the slight difference in the views of marketing
manager from the other two managers that, the marketing manager is satisfied with the
training and knowledge level of the marketing staff whereas the other two managers look
for more improvement in the technical training and knowledge of the staff.
d. Customers Input
There is proper segmentation and departmentalization in the Zinta pharmaceutical and
every segment and department has to play it role. The quality control manager said that
the marketing department is there and they take feedback from the sale force regarding
the views of the customers about our products. The product manager said that the key to
modern day innovations is the customer; he said it this way;
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Customer has become the central point and
can be termed as a king.
Also the marketing manager strongly agreed with the customers input and he said that in
any sector customer feedback is important and it’s their input which can tell about the
desired changes which prompt innovations in organizations. So the three respondents of
Zinta pharmaceutical strongly agreed that the role of customer in innovation adoption and
diffusion in any organization is of central importance.
e. Role of Suppliers in innovation diffusion and Adoption
There is regular contact with the suppliers regarding the quality of raw material. We do
have good contact with them and all of the internal and external players. The marketing
manager said that
The whole dynamics of the organization
depends on the internal and external players
and the Suppliers are one among them.
f. Screening and evaluating Ideas
When probed about how the ideas are screened and evaluated the quality control manager
said that;
There are different departments and all of
them have their input in the idea screening
and evaluation.
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The product manager responded that;
The managers get ideas themselves and
from their teams. These ideas are then
forwarded either formally or most often
informally to the CEO. The CEO calls a
meeting and decides the future of the ideas
after through discussions with all the
concerned departments or managers.
The marketing manager also said that;
The decision of idea screening lies with the
CEO although sources can be different.
The researcher deduced that there is no board of director meeting for idea screening and
evaluation and the organization CEO is all in all whether to take or to drop any of the
ideas brought to him. The structure thus is more centralized.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
According to the quality control manager of Zinta pharmaceutical, there is a formal
marketing research for identifying the gaps and the opportunities in the market and it is
important that there must be proper formal research, he added further that;
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It is through the formal research that the
right fit between the gaps and the resources
can be established.
The marketing manager added that;
They have predefined roles and plans for all
departments and they identify the gaps
through that.
However, when the researcher asked about the way they carry their formal research, the
respondents refrained as they feel that is one of their business secrets.
b. Risk calculation and test marketing
About the question whether they calculate risk and test market before commercialization.
The quality control manager told;
The researcher that there is a proper
calculation of risk and we do test marketing
too. Without this it is not possible for us to
carry on innovations. The innovations that
Zinta are carrying or has carried thus far
are based on risk calculations otherwise
there will be likely chances of it being
failed.
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5. Barriers to the Diffusion of Innovation
a. Lack of expertise
The researcher found that all the responding managers were strongly disagreed about any
lack of expertise. The quality control manager said that;
He is particularly certain about his team
and that they do not have any problem or
lack of expertise as such.
The product managers also disagreed about any lack of expertise and they said that there
is no such barrier to us in Zinta pharmaceutical.
b. Role of Government and its Agencies Like SMEDA
There is a strong disagreement among the respondents about any possible government
help or support. They unanimously and strongly disagreed about any positive role of
government or any of its subsidiaries in making organization innovative or helping it
becomes innovative. The quality control manager rather with a very balanced view told
that;
SMEDA role as a helping hand is also a
question mark and none of the respondent
said anything noteworthy about SMEDA.
6. Adoption of innovation and SME growth
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a. Why SMEs innovate
The quality control manager believes that their marketing channels are innovatively
operating. The procedures are mostly carried through latest technologies. Internet is
followed as source of communication in and out of the firm. This is all done to make this
organization as stand out and prominent one in the market. The product manager of Zinta
responded more objectively by saying that;
It earns competitive advantage and for
organizations to earn more prolifically, their
processes and their technology has to be
more innovative.
b. Impact of adoption of innovation on SME growth
This is a key theme of the current study. The researcher made an effort to find out the
relationship of SME growth and innovation adoption. Different managers put forward
their views. The quality control managers said that;
There is certainly improvement of
competitiveness in SMEs when they are
organized innovatively. The local market
follows the British and the American
pharmacopeia. When a research is carried
out by the multinational firms due to the
abundant resources they have, it becomes
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difficult for local firms to follow that.
However, we do believe that when these
local organizations are operated
innovatively, they certainly have competitive
advantage over other.
The product manager also agreed that SME grow because of the innovations he said;
The investments that the organizations bring
in their technology and processes are all
directed towards growth of firm.
The marketing manager also agreed that when SME follow any specific innovation, it is
aimed at the growth of the SME.
III. Conclusion
Zinta is a pharmaceutical in Hayatabad Peshawar which is risk taking, proactive and has
an encouraging culture for innovation and entrepreneurship. Zinta is market oriented and
serves the market demands by adopting innovative practices in the organization. Zinta has
got latest machinery is aiming to be more advanced as per as the equipment is concerned.
The responsible managers of Zinta all believe that the size of SME means when it comes
to making the SME more innovative and entrepreneurial , both ways, number of
employees and the units for manufacturing as sometimes to make new products you need
more technical people to make the innovation possible. Although Zinta pharmaceutical is
one where all the machines are not entirely automatic and there is room for further
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improvement but the skills of the people managing the organization, the quality control
and the production departments make its processes innovative. For Zinta, development of
innovation from infancy to marketing stage is like a cyclic process which starts from the
market as it has a market orientation and it ends up carrying the innovations processes or
market. Although it cannot be termed as the either the innovator firm, it is an early
adopter and has machines of high quality which only few firms in the cluster have. Zinta
pharmaceutical has the belief that collaborations add valves like it can save time and can
solve some technical issues it does not trust the collaborators blindly.
Beside the market and the employees of the pharmaceutical itself, among the other
important sources of innovation and ideas generation, Internet is rated very highly by the
managers. They also take inspiration from the products of the competitors and the
training level of the staff members is satisfactory. Along with this, customers are also
important. The marketing research to carry any innovation in the organization is formal
but the final authority is the CEO and hence the structure is more centralized. Although it
feels that the impact of innovation on the growth of organization is immense and that it
gives growth and competitive advantage, the management is disagreed about any positive
or supportive role of Government or its agencies like SMEDA.
Case 4: Aries Pharmaceuticals
I. Profile of the case
Aries Pharmaceuticals is a leading provider of medicines to fight infectious diseases,
cardiovascular and metabolic disorders, pain management and serious mental illness. It
was started in 2004, but historically medicine is the family business of the owners and
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they have been in this business for the last 50 years. Earlier the owners were in marketing
and distribution. They imported from china and few other countries. Now they are in
manufacturing for the past 12 years, during this time we have recorded subsequent
growth and progress. Aries started up with marketing of around 20 products and right it is
manufacturing about 90 products. Another 110 products are in the pipelines for the last
two years and by the mid of this year they will be ready as Aries planning and minutes of
the meetings showed their work towards setting up new sections now.
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
a. Entrepreneurship and Innovation in Culture and Structure
The official website of Aries has its mission statement which reads like this;
“Realizing our mission and excelling as a
company requires us to make every effort to
build a diverse and motivated work force
composed of leaders at all levels across the
organization. To encourage our employees
to achieve their fullest potential, we are
committed to developing their leadership
and professional skills as well as helping
them maintain an appropriate balance
between their personal and professional
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lives. Our culture is entrepreneurial in
which we encourage innovative people”.
This shows that this firm is willing to motivate the employees for innovative activities
across the organization. The director of Aries explained that our family business was not
manufacturing, it was distribution and marketing. Then he took a step by introducing the
manufacturing side along with the existing marketing and distribution practices. Now
they focus on the supply chain management and have also ventured into production
which they intend to expand as well. So, Aries is a pharmaceutical SME in the Hayatabad
industrial state which offers an entrepreneurial culture and innovative structure for the
employees to excel their skills and maintain a balance between their personal and
professional lives.
b. Size of the SME and Innovation
The director of Aries pharmaceutical is of the opinion that
Size of the organization does play in a
positive way. Innovation starts from small
steps and it always go up. The organization
builds up upon your human resources and
as you go along your production capacity
and your capabilities and the number of
human resources increase and thus the
expansion of the organization always seeks
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innovation in structure and functions.
So to the management of Aries pharmaceutical, the size is also an indication of the
expansion and growth.
c. Organization Processes and Innovation
The CEO of Aries Pharma views to the mission statement as a one important hallmark of
Aries in the sense that it is market driven. He said that
Our processes are market driven and
customer oriented all the times.
The Director of Aries elaborated this point about how the organization processes make it
innovative, he said that a lot of our efforts go into the R&D sector. We also keep
ourselves well informed about the current marketing practices being practiced abroad and
the standards followed therein. This ultimately affects the quality which in the long run
helps you grow your reputation as a quality manufacturer. Furthermore, he revealed that;
We try to incorporate new technologies and
for that we hire consultants. Who come and
tell us about our quality and our production.
This is a new emergent theme for the researcher as the researcher did not study the role of
Consultants in the diffusion of innovation in SMEs.
d. What Makes the SME Innovative?
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The director said that they are not like the run of the middle kind of firm. He rather likes
comparing this organization with the local pharmaceuticals of KPK. Most of them just
manufacture syrups and they sell them, but that’s an old technology. He said that;
We are manufacturing dry injection powder
and have come up with infusions and new
products which are innovative and new
thoughts which are used all over the world.
He added that so far we have had success in these and this has become our strength and
that is why look for new products and provide them to our clients or doctors. The same
were the statements of the CEO and he said
Diversification in the product line is what
can be attributed to the innovativeness of
this pharmaceutical.
The researcher therefore gathered that the management of Aries especially the director
has intentions of working on different product lines and has added diversification which
makes the organization innovative.
2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
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regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
The director of Aries offered a comprehensive response to the question how the
innovations are developed from infancy to marketing stage. He said
It all starts with your vision, if you have a
vision and you have a strong commitment
towards it, because it is always difficult, it is
expensive, it is time-consuming and it is
risky as well. So it all comes up with vision
followed up by your will. If these both are
present, then you start up innovating.
However, nowadays it has become easier to
be innovative with the advent of these
technologies like the internet as it is just a
click away. Sometime you can use the
Google and YouTube to learn innovation as
compared to the old days. Even our elders
in this business used to go to as far as
china, Korea, Germany to see a machine
and how it works and makes a decision .So
it was way too expensive then. But not now
and things have moved on in this regard.
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So the director of Aries related the innovation in firm to the vision of its CEO and the
marketing trends.
The CEO also had nearly the same views and the same is shared on the official website in
this way:
It all depends on the vision of the
organization head, a visionary person
always backs up his team to carry on
innovative activities. I encourage people
coming up with ideas; we do discuss those
ideas in meeting of board of directors. After
the feasibility is checked, the ideas are
conceived accordingly.
So the researcher marked the vision of the CEO as an emergent and important theme
which was not originally included in the interview protocol.
b. Rate of Adoption of Innovation
Aries pharmaceutical is more open to innovation. The director stated that they are unlike
some of the other pharmaceuticals in the cluster who use old technologies and machines.
Most of the firms here follow the same old
practices. Those firms do not take new
technology or machines as they think these
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are too expensive but in our company we
invest in new technology, we invest in
human resources, we do not cut edges from
finances allocated to consultative processes.
The CEO also told that they believe we are more open to innovation diffusion than any
other firm here. He further added that;
We take consultancy, we take new machines
and we invest to get the best human
resources.
The researcher observed that the offices were well furnished and had latest computers in
them. The office places were separated and they did not sound noisy rather looked a
professional outfit. The manufacturing area and the offices were separate from each other
and there was a harmony in the environment of the firm.
c. Sharing Knowledge Sources
The director of Aries said that they share knowledge. He said that;
Sometimes we seek help where others have
new machinery and we need to know about
that. It’s not that you can be stand alone and
still survive, you still have to be connected
no matter how much resources you may
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have. That’s how we share knowledge as
some other day they might need to know
something from us.
So to the management of Aries, it is not quite possible to work in industry alone.
d. Collaborations and level of mutual trust
The Director and CEO of Aries told the researcher that they collaborate and they do trust
the collaborators all but vigilantly. They said;
We have close linkages with Departments of
Pharmacy; have close collaboration with
PCSIR as we sometimes need their expertise
in conducting tests which we otherwise
cannot do here.
So in real term, they have more linkages with academia and have double helix kind of
model as both the organization, University of Peshawar department of Pharmacy and
PCSIR that the respondents mentioned in their answers are research based.
e. Value addition through collaboration
The director and CEO of Aries pharmaceutical agreed that there are benefits from
collaborations and it can help make the organization more efficient. The director said
that;
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Networking and collaborations can make
the production efficient and result into more
value added products.
3. Drivers and sources of Innovation In organization
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
a. Drivers and Sources of Innovation in SME
The Director of Aries pharmaceutical rated the customer feedback and the market very
high as drivers and sources of Innovation in this SME. He said
For me the customer feedback is the
backbone because it is their feedback which
tells you what the customers need from us
and what ideas do they have about these
products which they share with the doctors.
A part from this, we do market research and
data collection to see who sells what and at
what price, in what volume etc. So market
feedback, your employee’s feedback and the
customers are the main sources of
innovation.
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So this SME has a wholesome system of dealing with the market by taking a feedback
from customers and valuing it in one place and conducting research about the products of
the customers though the employees.
b. Idea Sources for new products and services in SME
The Director of Aries pharmaceutical while responding about the idea sources for new
Products and services in his SME explained that;
In Pakistan we are all generic
manufacturers so our products are not
radically innovative. In this sector we
mostly go and visit the United States
pharmacopeia or the British pharmacopeia
or the European pharmacopeia. Also, we
follow those 12 reference countries which
have been nominated by the Drug
Regulatory Authority of Pakistan. We can
easily look into the food and drug
administration (FDA) which grant licenses.
So the researcher could list that in Aries
pharmaceutical the idea sources for new
products and services are US and British
Pharmacopeia and the reference countries
nominated by DRA.
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c. Knowledge and training level of Staff of the SME
The director of Aries agreed that;
The staff members who are with them for a
longer period of time now are well equipped
with the required knowledge and training.
They do possess ideas and skills how to
carry on innovation.
d. Customers Input
Aries pharmaceutical is different from some of the participating cases in taking the input
of customers too. The make use of the internet technology and the social media. As the
Director of Aries put it;
We have the email on our product labels
and also we have our whatsapp, they also
can give us feedback on our official face
book page.
Our marketing people makes it absolutely sure that the product serves the needs and
wants of the customers. In this regard their feedback is crucial, said the CEO.
e. Role of Suppliers in innovation diffusion and Adoption
When asked about the role of the suppliers, the director of Aries agreed that we always
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ask the people who work in the raw materials as to what trends are going on in the
market.
We do ask them which raw material is
purchased in bulk quantity. We take their
input in spotting out the market trends as
well and they believe that the long term
relationship with our suppliers and the
supply chain is vital in diffusion of
innovation in firm.
f. Screening and evaluating Ideas
While elaborating the idea screening and evaluation process, the director of Aries said
that sometimes some ideas are very good but they require huge financial means. So we sit
and our board of directors weighs different options, comparing them to our financial
position.
For all ideas you need to see its economic
position and feasibility. There are ideas
which look very bright but they are not
pragmatic. We do encourage our clients and
all other stakeholders for idea generation
and even criticism is taken positively too.
We know that this can improve us. So the
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board of Directors after the meeting decides
about which molecule and product can be
approved and is feasible.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
When asked whether they have a formal or an informal marketing research, the response
showed that they follow both formal and informal research. The director said;
Most often it’s not the formal research that
we follow; rather the customer’s feedback
sets the tone to find the gaps in the market.
But some other times, we also go for the
marketing research where we feel that the
customer’s feedback is not substantially
sufficient.
b. Risk calculation and test marketing
About the risk calculation and test marketing the director of Aries said that;
They do calculate the risk associated with
the products, they have the R&D and have
the procedures related to the test marketing
as well.
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So in many cases they do test market before going into commercialization of our
products. The practice in Aries is that they go progressively about and introduce little
quantity first and then commercial their products based on the testing of prototype or
sample you can say.
5. Barriers to the Diffusion of Innovation
a. Lack of expertise
The director and CEO said that they have sufficient human resources to carry on our
innovations both in production and processes. The director said that internally they have
the requisite resources and human expertise but externally we are facing problems.
Especially;
External players like the government
agencies make it difficult.
b. Financial barriers
Since Khyberpakhtunkhwa is marked as a red zone, it’s hard to mark financers for
businesses as compared to other parts of the country. But we do not take loans from
banks. Aries director said;
Although financial problems come in our
way when we discuss innovations in our
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organization but we never opt for bank
loans as they become burden then.
c. Role of Government and its Agencies Like SMEDA
There are huge barriers as the government authorities’ keeps you engaged in very
unproductive and long sessions. There always is the red tapes’ of bureaucracy that keeps
you stuck up into pity issues. Looking into the available research, Pakistan is not an
investment friendly country. There is no ease of doing business in Pakistan. At times you
have to keep on struggling even for your smallest right.
Our pharma sector is suffering a lot from
the policies which the governments have
adopted from time to time in the name of
regulation. They mostly are
counterproductive.
However the director also added that, SMEDA has supported partially as part of their up
gradation effort for industrial units. He added;
Today even they [SMEDA Representatives]
were here as they wanted to show this unit
to some of the consultants. They did so as
they feel that the donors have mistrust and
feel that there are no economic activities in
here. Other than this, they can’t have much
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to offer, the research they have is mostly
obsolete and they cannot guide us much in
this regard.
6. Impact of adoption of innovation on SME growth
a. Why SMEs innovate
The director of Aries said that;
This is a core belief that without innovation,
there can’t be any growth.
b. Impact of adoption of innovation on SME growth
The director of Aries said that;
For business growth, you have to be
different, you need be innovative, without
being innovative and you will be like all
other people laying in the same lot, said the
director of Aries.
III. Conclusion
Aries pharmaceutical started production in 2004 but the owners were associated with
medicine field before as well. The culture is entrepreneurial and innovative people get a
motivation in this regard. Aries focus on its R&D activities and the marketing activities
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which help Aries for the long run. A unique attribute of Aries Pharmaceutical is hiring
consultants when they need help in incorporating new technologies. Another hallmark of
Aries pharmaceutical is its focus on making their product line more diversified, making it
more innovative. The CEO of Aries pharmaceutical is visionary and in this way he
encourage employees for innovation activities although innovation is expensive, time
consuming and difficult to execute. Aries pharmaceutical believes in making full use of
technology and has its facebook, whatsapp groups through which they can interact with
the people concerned. Aries also support knowledge sharing and collaborations more so
with the academic institutions. Aries do follow the products of multi-national
pharmaceuticals but they do that in line with the ethical practices. The new product and
service ideas are discussed in the board of director meetings and a proper procedure is
followed. The firm has sufficient human resources to carry its innovations both in
production and in processes. However, there are hurdles to Aries from the public
bureaucracy as it can unnecessarily delay procedures. Although financing can be a
problem sometimes but the bank loans are not considered by Aries as they become
burden. The core belief of Aries pharmaceutical is that without innovation, firm cannot
really grow.
Case 5: Stanley Pharmaceuticals
I. Profile of the case
Stanley Pharmaceuticals was established in 1995 as a private company registered with the
government of Pakistan. This pharmaceutical was established as family enterprise in
1995, one of the first few established in the industrial state Hayatabad, Peshawar. Since
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its establishment, Stanley has been a very dynamic and entrepreneurial firm. It has
produced medicine which is used by patients with trust. Because of the high demands of
the products, Stanley has evolved very well and has established its reputation. Stanley has
established its footings in a very short period of time and has received awards such as the
ISO 9002 certificate back in 2000, an appreciation and motivation at a very young age.
Beside this award, the market has always responded well and in a way Stanley has
produced goods which are highly demanded. For future plans, the management looks
forward to the infrastructure improvement and setting up a new Syrup facility which they
deem to be sufficient to meet the national demands. The quality control laboratory is well
equipped and has all the desired equipments for testing the raw material both in process
and finish products. The Company has a production and Quality Control Staff which is
highly qualified and has 20 to 30 years of experiences in reputed National and multi
National firms.
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
a. Entrepreneurship and Innovation in Culture and Structure
The group product manager of Stanley told that it is a structurally centralized
organization. He explained that;
Our General Manager/Chief Executive
makes most of the decisions which shape the
structure of our organization. However the
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administration does encourage new ideas
and the culture in that regard is
entrepreneurial. The general Manager said
that we promote the innovative culture and
we have been quite supportive in this
regard. Our employees share ideas and are
proactive in this regard, however to
maintain the unity of command, this office
decides about the future of which idea is
workable and which is not.
So it can be inferred that the organizational structure of Stanley is centralized yet it
encourages the staff idea generation and as such the centralized structure does not bother
the innovation processes in the organization too much.
b. Size of the SME and Innovation
The group Manager of Stanley said that the company is scattered over an area of 3 Acres.
It has manufacturing units for Syrups, Drops, Tablets, Dry Syrups and Capsules. So the
size of the company is readily fit for organizational innovation both infrastructure wise as
well as human resources wise. An antibiotic unit is also under the construction and this
will also fill the demands from the market. He added that;
I would not say that these things are leading
to radical innovations but certainly to the
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incremental innovations.
The Management of Stanley viewed size of the firm as something directly associated to
the innovation capacity of the firm.
c. Organization Processes and Innovation
Stanley is operated in a unique and modern way. It has a computer culture and internet
accessibility is to every department and section. Although for record keeping, lettering is
still an option but more than this, for immediate actions follow the official emails and the
official chat rooms for the office bearers. This does not waste much time which is the
case with formal letter writing for communication. The group product manager added that
they are probably the 5th or 6th company as per as sales are concerned. They sell their
products not only in other provinces but also to other countries like Afghanistan. He
further told;
Our Innovative management practices make
us to make good deals with distributors and
thus we can export well.
d. What Makes the SME Innovative?
The group Product Manager and General Manager attributed their innovativeness more to
their internal sources. The group product manager told that;
The managerial practices and the employees’ education and skills make us innovative.
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2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
When asked about the development of innovations from infancy, the group product
manager briefly answered that;
This process starts when the marketing
department brings ideas and we decide if
the ideas are workable then we develop
those innovations.
b. Rate of Adoption of Innovation
The management of Stanley said that they are among the early adopters and they think
that they have the capacity to adopt both human resource wise and space wise.
The group Product Manager said that we are competing well. I think we have done well
in this front so far all though we work in prescription products and not in the specialty
products.
We have the belief that we ought to follow
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ethical procedures and that’s why we do not
go into specialty products as most of them
follow the unethical trends.
However, we follow the most updated channel management procedures. We are
comfortable even with our products like paracetamol. The main focus of Stanley is on
process innovation and organizational innovation than the radical product innovation.
c. Sharing Knowledge Sources
The management of Stanley agreed that they are in touch with academic institutions. In
this regard the product manager held the view that;
They share knowledge sources with
academic institutions like Khyber girls
medical college, the pharmacy faculty and
Rehman Medical Institute.
d. Collaborations and level of mutual trust
Although they do not have collaborations with partners in the industry, they have
collaborations with the medical colleges and universities and academia they do have
links. The group product Manager said in this connection that we have collaboration with
faculty of pharmacy, Khyber Girls medical college and Rehman Medical Complex
people, they all regularly visit us. With other SMEs we do not have any collaboration.
The group product manager said that;
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They believe that they should be
independent from any such firms and should
focus on own strengths. Beside this, they
have long terms collaborations with
suppliers too.
e. Value addition through collaboration
The Group Product Manager of Stanley said that;
Collaboration with academic institutions
such as the medical colleges enhances our
theoretical understanding and broadens our
vision in this regard. It helps mutually as
we benefit from their theoretical knowledge
and they get exposure to our practical
laboratories and equipments. Similarly
collaborations with suppliers help in finding
information about the market situation and
we prepare ourselves accordingly then.
3. Drivers and sources of Innovation In organization
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
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a. Drivers and Sources of Innovation in SME
According to the General Manager of Stanley the drivers and forces of innovation for our
firm are the employee, the market environment and the customers. We also attribute the
collaborators like the academic institutions and the suppliers as the sources of innovation
for ourselves. The Product Manager however looking to another aspect replied that;
We have drivers and players for innovation.
I am also a driver for innovation, so to
speak but we are not like those defined
drivers as are there in Multi-national
companies. Like I cannot say that there is a
specific market research officer. They do
that research but that is not their main job.
So we cannot say that there are specified
roles.
b. Idea Sources for new products and services in SME
The answer of the group product manager Stanley regarding the idea sources for new
products and services was more technical in nature and he tried to explain by putting the
example of a multi-national, he said that;
New product and service ideas come to the
surface through sources like the market
trends, the employees, the customers and the
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internet searches. The idea mainly comes
from market. For instance we have had our
products like Panadol and Paracetamol. A
multi-national company (GSK) produced
panadol forte which was very much
controversial and the results were also not
good. So we believe that these are the main
eye openers and measures. We see the
behavior of the products and then we see
how to work it out.
c. Knowledge and training level of Staff of the SME
We are very satisfied with the level of knowledge and experience of the staff. It’s the
emphasis of our Human Resource Management department to find the right man for the
right job and that is why we are satisfied. Also, since our firm is an established firm, we
also do not have an overwhelming issue of employees switching from Stanley to other
firms.
The quality control laboratory is fully equipped with all the required equipments for
testing of Raw Material, in process and finish products. Stanley has state of the art
machinery for manufacturing of pharmaceutical products. The group product manager
said that;
The production and Quality Control Staff is
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highly qualified having 20-30 years of
experiences in Multinational and National
Companies. There must be employees who
are lesser in education but they do have the
experience and exposure.
d. Customers Input
The customers give us ideas. That may be direct or indirect when the doctors tell us the
feedback of customers .The group product manager reiterated that;
The central point of importance is the
customer and yes we take their input. In
some cases the feedback come from big
customers like the distributors and in some
cases come from doctors who prescribe our
products.
e. Role of Suppliers in innovation diffusion and Adoption
For the management of Stanley, suppliers are important in the process of adoption of
innovation. The group product manager explained this in detail as;
Suppliers hold a vital role and if they are
not supplying the best quality of molecules
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or supply is late, the other competitors can
buy these raw materials before you and can
hence market the product before you. We
believe that the organizational innovation is
possible only by the procurement of high
quality raw material because we believe
that “QUALITY INPUTS RESULT IN
QUALITY OUTPUTS”. Aiming this, we are
taking the highest quality raw material from
quality sources and suppliers based in
countries like USA, Germany, Italy, Japan,
France and UK. So in order to be innovative
you got to have good links with your
suppliers. So it is important to keep good
and long lasting collaborations with
suppliers.
f. Screening and evaluating Ideas
Our organization follow the hierarchy and we normally do not break the protocols hence
when there come ideas to some junior management people, they do not come to this
office rather pass the ideas on to the senior people in their concerned department. They
then bring the ideas forward in meeting which can be screened and evaluated. The group
product manager said that;
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We have a system of idea screening; we get
ideas from different wings. We have 6 area
sales managers. However, we do not get
ideas from junior management level directly.
They give their ideas to immediate seniors
and managers who forward those ideas
then.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
It is kind of mixed approach. We follow the formal as well as the informal approach. The
group product manager said that;
We do research but for that we do not have
designated people around. In our cluster, I
can say that the rest are only manufacturers
but we try our best towards research as
well. That is probably the reason that we
have our operations in the whole Punjab,
interior Sindh and also Quetta.
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b. Risk calculation and test marketing
The Management of Stanley agreed that they do take their test marketing before
commercializing products. The general manager emphasized on the importance of risk
calculations and test marketing as
Without calculating the risks and test
marketing, it is quite unwise to launch
products.
5. Barriers to the Diffusion of Innovation
a. Lack of expertise
The group product manager response when asked whether there is any lack of expertise
in the organization said that;
The staff working in the production section
and the quality control section has an
intensive experience of around 20to 30
years. However, I must say that there must
be employees who are lesser in education
but they do have the experience and
exposure.
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b. Financial Barriers
While responding about financial barriers and the role of banks, the management of
Stanley were found saying that they do not have any such problems. They agreed that;
The banks do give good support and quite
generous in as much as the company profile
is strong but they have not taken any loans
as yet.
c. Role of Government and its Agencies Like SMEDA
The responding product and general managers of Stanley said that;
The governments do not support businesses
in anyway and SMEDA has not yet
performed to the satisfaction of business
fraternity at all.
6. Impact of adoption of innovation on SME growth
a. Why SMEs innovate
The managers of Stanley said that the SMEs do differently with innovations and this
earns them a competitive advantage, differentiating them from other firms. An affirmative
way, the group manager said;
With innovation, we can increase our sales,
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our market share and hence it can improve
and ensure growth.
b. Impact of adoption of innovation on SME growth
A very important part of the current research is to know what impact adoption of
innovation can have on growth of the case study SMEs. The general manager said that;
The SMEs adopt organizational innovation
so that it can grow and maximize its profits.
It helps in giving competitive advantage.
III. Conclusion
Stanley Pharmaceutical is a private family business at Hayatabad industrial estate
established in 1995. Although the structure and hierarchy is more centralized, Stanley has
reached to a high level of reputation in the market and this has been recognized by
awards such as the ISO 9002 certificate back in 2000.The human resources, the
managerial practices and the knowledge and skill level of the employees make Stanley an
innovative pharmaceutical. The firm follows the latest market trends in developing
innovations and adopts organizational and process innovation at a high rate. Instead of
collaborating with firms in the same sector Stanley utilizes it linkages with the academia
and considers the collaborations with medical colleges of more mutual value. However,
Stanley has established long lasting collaborations with suppliers without the cooperation
of whom the innovation in the organization may not be possible for Stanley, as they
provide quality raw material timely. The management of Stanley is agreed for the
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required qualification of the employees but believes a little more could be desired for the
amount of experience for carrying the innovation processes. While customers input plays
an important role in the innovation processes of Stanley, their feedback can either be
direct or indirect through the distributors and doctors. Although ideas generally come
through very formal protocols and only the immediate managers can be given ideas, there
is a proper system of idea screening and evaluation afterward involving the board of
directors. To identify and utilize the market opportunities, Stanley conducts a mix of both
formal and informal research. Even though Stanley is agreed that the government and its
agencies like SMEDA has not supported in anyways, Stanley does not face any barriers
either financial or Expertise. The management of Stanley believes that brining innovation
to the organization helps in differentiating it from competitors and gives competitive
advantage, through increased sales can maximize profits and can increase market share
thus ensuring growth.
Case 6: Delta Pharmaceuticals Risalpur
I. Profile of the case
This pharmaceutical was established in 1995 with the collaboration of the department of
Pharmacy university of Peshawar. This pharmaceutical can be attributed as the pioneer
firm in this cluster as there were no pharmaceuticals from national or regional origin here
but there were multi-national Pharmaceuticals.
Before coming to this sector and this business, the owner and the CEO of Delta
Pharmaceutical was a banker, a credit chief, and had implemented projects successfully
with the SMEs. When the nuclear experiments were planned, the government had the fear
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that there will be sanctions of different sorts. Most other sanctions could have been
afforded but not the medicine or life saving drugs. At that time, the main contribution in
this sector was the multi-national pharmaceuticals and their percentage was around 80%
while there were lesser pharmaceuticals from national origin.
The CEO of Delta was assigned the task by the provincial government to establish the
pharmaceutical sector in this province where there is no industry; it was a big challenge
though. On top of this, the CEO had worked with other sectors during his work as banker
but not specifically with the pharmaceutical one. The CEO discussed the idea with the
then vice chancellor, university of Peshawar, who was amazed and said, whether these
people will be competent enough to carry on this project! On the permission of the VC,
the CEO contacted the pharmacy department of university of Peshawar and where they
interviewed the ten PhD scholars there in the Department of Pharmacy working there at
that time. While talking to the interviewees, the CEO had developed the Concept that
since they have to carry this project in such a way that they can compete the outside
world, they need to focus and induct those people who have foreign academic
background. Since UK research portfolio in this area was good and USA was far, they
selected two Doctors following a very strict merit; one person who had done PhD from
UK in quality control and another who had done his PhD from university of Karachi. The
CEO did whatever those two PhDs suggested and never refused taking their suggestions.
They visited all the multi nationals through the support of ministry of health accompanied
by two drug officers. They took inspiration from their methods. During this project
design they found that the best area for medicine production is province of KPK as it is
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temperate. Because the environmental conditions like the humidity, temperature etc
matters in medicine production.
So one of findings of the CEO was that, the expenses of controlling the weather and the
humidity required for a company in Karachi is actually sufficient to set a pharmaceutical
here in KPK.
This is the unique contribution of delta pharmaceutical and the companies that followed
this system, actually gives the country economy around 1 billion PKRs annually. The
demand of Pharmacy graduates has increased substantially and there are many public and
private universities which produce pharmacists annually who are given jobs in this sector
which is comprised of at least 90 functional Pharmaceuticals in the entire province.
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
a. Entrepreneurship and Innovation in Culture and Structure
Entrepreneurship is deeply rooted because this has come out as an organization because
of the entrepreneurial mindset of the CEO. The culture encourages innovative ideas and
the CEO often says in meetings that “idea is money”. This encourages the employees to
bring ideas to the forum openly as they know the values of their ideas.
The CEO himself put it this way that;
We do have an encouraging and
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entrepreneurial culture. I can claim that
almost every unit in this cluster will have
people who worked and got trained with us.
In our culture, I have always followed the
protocols and treated officers and managers
accordingly, sometimes I have been harmed
by over trusting as well but I kept the system
open and I believed in the expertise of these
people. I have in fact invested the entire
money and time on the innovative ideas of
professional people which makes this
culture more entrepreneurial.
b. Size of the SME and Innovation
The size of the SME in terms of its number of employees and the manufacturing units is
an important theme for the current study. The researcher has probed this theme in Delta
pharmaceutical and the response of the CEO was recorded as:
The size of the SME matters no doubt. For
instance, I would not share name but one of
my counterpart in Peshawar opened a unit
in Peshawar and asked me to visit that.
When I visited that unit, I observed that he
had a very big unit area and buildings were
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also big but the production area was
considerably small. I told him that it like
fitting the stomach of an ant in a big
elephant. So I think overall, the size has to
be according to the demand of the
production.
c. Organization Processes and Innovation
The processes of organization determine whether the particular organization is a
innovative or not. The author probed this theme from the marketing manager and the
CEO. Although the marketing manager told that the processes of their firm are
innovative, the response of the CEO was more explicit and is recorded as;
Our organizational processes are innovative
and we follow the latest patterns in both the
production and processing. Yes off course,
there is innovation everywhere in our SME,
the machines, the formulation, the SOPs.
This is a fact that the pharmaceuticals will
remain till the age of mankind and this
presses and forces Pharmaceuticals to
follow innovation time and again. If I give
you an example of the product innovation in
this organization, we actually converted the
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film coated Brufen to Sugar coated one so
that patients can take it easily. Also, one
main fact about the pharmaceutical industry
is that there has to be proper dissolution of
chemicals in the desired proportions.
d. What Makes the SME Innovative?
To the question as what makes the SME innovative, the CEO of Delta pharmaceutical put
his weight behind the collaborations with academia. He responded as;
The CEO told that they followed the
collaborations with academia and that
helped them in long run. The Marketing
manager of Delta said that the
professionalism of the CEO and the way he
invited academics of high repute to give
their insight has practically helped in
making the firm Innovative.
2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
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a. Developing Innovations from infancy to Marketing stage
The process of innovation development from infancy through its commercialization is a
complex process. The CEO related this process to the partnership of marketing
department and R&D. He responded as;
Ideas come from market and are routed to
the R&D department. After the feasibility is
checked there, ideas are practically
implemented.
b. Rate of Adoption of Innovation
The CEO of Delta believes that the establishment of this pharmaceutical in itself is an
innovation. He associated his survival for 24 years on the basis of innovation.
Had he had not been innovative; he would
not have been able to compete for such a
long time, he further added.
The management of Delta also claimed that we are not adopters rather we are the
innovators. The CEO said that;
We have introduced many products which
are not introduced by any other firm in at
least this very cluster. Our rate of
innovation adoption is high and we are open
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to the ideas that we can see being
implemented in the multinational firms
abroad.
So overall the researcher observed that the cluster was led by Delta and almost all the
other managers from other firms responded positively about the innovativeness of this
firm when asked by the researcher.
c. Sharing Knowledge Sources
The management of Delta pharmaceutical agreed about sharing knowledge sources. Their
claim reflected that mostly they share knowledge sources as this is a pioneer
pharmaceutical in the area. He told;
We do share knowledge. We do tell to the
collaborators regarding the different
innovation in formulation.
d. Collaborations and level of mutual trust
To the questions whether they have collaborations and if there are any, do they trust the
collaborators, they researcher found the response of the CEO as;
Yes we do trust the collaborations entirely
and we are convinced that this helps all the
stake holders in diffusing the innovative
practices. Our pharmacists meet each other
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frequently in this cluster as well as other
clusters in the province and in the country.
We do trust each other in collaborations as
without trusting each other we cannot lead
to successful results.
e. Value addition through collaboration
To the question about the value additions from collaborations, the marketing manager
said that;
Collaborations normally are carried as they
are needed for making successful
innovations. So yes they definitely add
values to the collaborating firms.
The CEO also responded positively and said that;
Collaborations help in many ways, in fact if
I put it this way that it is the collaborations
which trigger innovations, I would not be
wrong. These innovations then curtail your
costs and increase your profits.
3. Drivers and sources of Innovation in organization
In this section the researcher tried to find out the various sources and drivers of
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innovation in organization. Different questions probed this theme as under:
a. Drivers and Sources of Innovation in SME
While the marketing manager said that the vision of the CEO, the R&D, the employees
are the sources of innovation the CEO said that;
The main sources and drivers of innovation
in our SME are the market itself and our
collaborations with the educational
institutes.
b. Idea Sources for new products and services in SME
The management of delta said that for new products and services there are many sources
which can be used for ideas generation but the major source without any doubt is Market
itself. He said that;
We can say the customers, the suppliers and
even the competitors are key players.
c. Knowledge and training level of Staff of the SME
The focus of the management is to find people who are well educated in the relevant field
as well as have the required training. In some cases the management provides them the
required training. It’s a perpetual process. He emphasized on the fact that;
Unless you have the required knowledge
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and training, you cannot survive. This is
why I believe that we have well educated
staff and we train them accordingly.
d. Challenges of Idea stealing
To the question whether idea stealing is a challenge the CEO said that I am hundred
percent agreed to this question. To add to this, I must say that if you have something
precious with you, you are supposed to have the worry of it being stolen.
To be honest in this field, if there are
stealers, this means that you have to take
extra care, in this sense, you create more
and more innovation in your organization,
more frequently
e. Inspiration from Competitors Products
The extant literature shows that competitor’s products are important inspirations for
innovations. The CEO of Delta pharmaceutical said that they do take ideas from market.
He said;
Before and during the marketing research
process, we do consider the products of our
competitors.
f. Customers Input
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Customers input are an important factor in innovation. All the innovations of the firm
make aims customer satisfaction. The CEO of Delta pharmaceutical agreed that
customers input is necessary and he put it this way;
The real origin of idea generation is the
customer.
g. Role of Suppliers in innovation diffusion and Adoption
The role of supplier is also important as reviewed in the extant literature. The quality raw
material makes their role important for most of the product innovations. The marketing
manager of Delta said that;
If we follow the demand and the supply
formula, the process starts from suppliers
and ends with customers.
Suppliers Producers Customer
h. Screening and evaluating Ideas
When probed about how the ideas are screened and evaluated the CEO and the
marketing manager said that the ideas are discussed by the board of directors once they
come from the different sources. The CEO said that;
If your idea is sellable, that is something
that will help your organization. The board
of directors decides what to take and what
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to leave apart.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
The marketing and R&D department of our firm carry on research to identify the
potential gap in the market and try to respond accordingly. The CEO explained this as;
The demand of the national and regional
pharmaceuticals arouse actually from the
fact that we needed to get rid of the multi-
national companies. This warrants a
thorough research process so the marketing
and R&D of our firm take this
responsibility.
b. Risk calculation and test marketing
We do test marketing and the samples are given to doctors and practitioners. It’s their
feedback that guides us to launch the products commercially or to make certain changes.
The CEO added objectively that;
It is very important. You have to calculate
the risks before commercializing your
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innovative products.
5. Barriers to the Diffusion of Innovation
a. Lack of expertise
The marketing manager and the CEO of Delta disagreed about any lack of expertise for
innovation.
We keep ourselves in line with the required
expertise for spreading the innovation
throughout this organization.
They claimed that their marketing process is unique and innovative; production is
innovative as well the management practices are innovative.
b. Financial Barriers
A lot of the times we have the problems of financings. We never took any loan from any
bank. We believe in research oriented innovation in this organization. The fact is that;
Banks do not give loans to everyone, they
grant loans to those firms which are
somewhat attached to the mafia which is the
biggest barrier in way of industrialization.
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c. Role of Government and its Agencies Like SMEDA
The CEO of Delta pharmaceutical looked unimpressed with the role of government and
its authorities like SMEDA. He said that;
SMEDA and other agencies like these are
good for nothing. If I say that these are
developed just to provide employment
opportunities to the off springs of the
privileged class, it would not be wrong.
SMEDA has given only one million PKRs to
one firm in Risalpur in the past 11 years.
You can imagine how they are committed!
On top of this, there are many authorities
who just come and go and waste the time of
the entrepreneurs, doing no good but trying
to exploit somehow for money making. They
never give any facility like the social
security or medical support etc.
6. Impact of adoption of innovation on SME growth
a. Why SMEs innovate
The CEO of delta said that with innovation grows the organizations, indeed. He said that;
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Even in the bad situations of the industry
overall, the main reason for the growth of
my Pharmaceutical company is the
consistency with which we innovate in our
processes and productions. Adopting
innovation or carrying out innovations
altogether means that you stand out as a
distinct firm as compared to your
competitors and hence can make more
profits.
b. Impact of adoption of innovation on SME growth
The management of Delta pharmaceuticals associates the survival of their firm to the
consistent innovation policies. He said that
For SME to survive, they need consistency
in innovations as that is the only way.
III. Conclusion
Delta pharmaceutical was established as a result of some kind of Double Helix model
work in 1995 when the owner of the firm was assigned the work of developing a
pharmaceutical cluster by the provincial government. A banker prior to that and having
worked with small business in grant section enabled him to move forward in this regard.
However, that was not enough, he did what an entrepreneur need to do, and he went to
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involve academia in this venture. The department of pharmacy, University of Peshawar
was chosen for this purpose and after getting permission from the then Vice chancellor of
the university, the owner through a lengthy process and detail interviews selected two
PhD academics, one had is degree from UK and the other had his PhD from University of
Karachi. The selection was made very transparent and no approaches were entertained
because the owner wanted to establish the footings of firm and industry on meritorious
ground otherwise the system will not last longer, he felt. The logic behind selecting the
academic with PhD degree from UK was that he had a fair bit of knowledge of UK
advance industries and since we had in our mind that we had to compete with multi-
nationals and aim to export as well. The expenses of controlling the weather and the
humidity required for a company in Karachi is actually sufficient to set a pharmaceutical
here in KPKThis is the unique contribution of delta pharmaceutical and the companies
that followed our system, actually gives the country economy around 1 billion PKRs
annually. The other side of setting this and similar other firms is the provisions of
employment opportunities. The demand of Pharmacy graduates has increased
substantially and there are many public and private universities which produce
pharmacists annually who are given jobs in this sector which is comprised of at least 90
functional Pharmaceuticals in the entire province.
The processes of Delta pharma are in real sense Innovative which make the organization
overall an innovative one, for instance it converted the film coated Brufen to Sugar
coated one so that patients can take it easily. In delta pharmaceutical an emphasis is laid
on the fact that there is proper dissolution of chemicals in the desired proportions. The
CEO of this firm has a strong conviction in collaborations, especially with the Academia,
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the suppliers and weighs the customer input as something very highly. To explore about
the environmental conditions and the opportunities, the management of Delta follow a
formal research involving the marketing staff and the R&D and yet the ideas screening
process is formal again involving meeting of the board of Directors. There are no internal
barriers like the lack of expertise of staff but there are financial barriers and neither the
government agencies like SMEDA nor the Banks support in this regard. The banks
normally have strong lobbies which they favor and not every small business.
Case 7: Iceberg Pharmaceuticals
I. Profile of the case
Iceberg started its operations at Risalpur, Nowshera Cluster of Khyberpakhtunkhwa in
2016 and hence it is a young and nascent enterprise. It started up with a small number of
products but now has a substantial growth. This firm is still in its evolution stage as it
started up last year but the market value and demand has substantially increased. A
hallmark of this firm is the qualified employees. Iceberg’s management focus on hiring
qualified people.
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
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a. Entrepreneurship and Innovation in Culture and Structure
About the entrepreneurship and innovation in culture and structure the Product manager
of Iceberg said that
In our organization we have got the
encouragement from the owners and they
support us. They also take risks but in a
calculated manner specially when financing
is concerned.
The quality Control Manager and Market Managers also said that this is an
entrepreneurial culture. Our owners fully trust us and they encourage innovations.
b. Size of the SME and Innovation
The Product Manager said that size does matter in innovation. He said that;
If we have more capable employees and
more units for production, we can operate in
more innovative manner.
The Quality Control Manager however highlighted the Size in terms of units and said;
Off course the more is the number of
machines and the laboratories space, the
better is the result.
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The Marketing Manager also agreed that Size is important and he said that;
In marketing processes especially, if I say,
the number of employees is very important.
We can carry on organizational activities in
more innovative ways if we have got the
adequate number of employees. That’s how
we can design and depute marketing teams
to work more innovatively.
c. Organization Processes and Innovation
The operations of a firm’s process in an innovative way make the overall culture
innovative. When probed whether the processes of the organization are innovative the
product manager said that;
We are a market oriented enterprise. We
believe in the fact that if our processes are
aimed at meeting the needs of the market,
we will be successful and this to me makes
the organization an innovative one.
Again the Quality control manager pointed out that;
For carrying on the production and
marketing processes we use latest
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technology and mechanisms respectively.
The interest that we have in maintaining the
highest quality forces us to make our
organizational processes innovative and
novel. So the management believes that
market orientation, use of latest technology
and mechanism are the key factor to make
the processes of the organization innovative.
d. What Makes the SME Innovative?
During the data collection interviews, the researcher found that different organizations
have different contributors for their innovativeness. Hence when the same theme was
probed in this firm, The Quality control manager said that;
The state of the art labs, the quality of work
force, the market orientation and the CEO
encouragement.
The Product Manager said that;
Our SME is market oriented and we follow
the latest trends in the field of
pharmaceuticals. This makes the SME
innovative.
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2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
The Quality Control Manager said that the initiatives always come from market when the
marketing people or the R&D team realizes some gap in the market. However, all the
wings and department are involved in the development of innovations from infancy till its
completion. The Product Manager also said that
Our marketing team brings ideas from the
market. We discuss those molecules in our
board meetings and pick the right ideas
towards practical implementation. So again,
market is the starting point.
So the Management of Iceberg unanimously agrees that the ideas come from market but
there is a co-ordination between different departments to complete the process.
b. Rate of Adoption of Innovation
Following the base theory of this research, the diffusion of innovation theory guided the
researcher towards finding that at what rate innovation are adopted. The quality Control
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Manager of Iceberg said that;
Although it’s a newly established firm, we
can say that the rate of adoption of
innovation is very high. Our strength in this
connection is the capable staff and
management who are aware of the
importance of innovation in organizations.
The product Manager also agreed that we are fast adopters of innovation. He attributed
this to the latest international research. He said;
We read latest international research and try
to implement, that’s the reason we can say
we initiated certain products which the
other pharmaceuticals do not have in this
cluster .The rate of adoption is high due to
the research orientation and following of
latest research in international journal.
c. Sharing Knowledge Sources
The product Manager of Iceberg told that in this cluster here, it’s quite an open system.
We do share knowledge with each other and
we do not normally refrain from sharing
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expertise with each other.
The quality control Manager also agreed and said that we do share knowledge with each
other especially with those firms we have collaborations with. The marketing manager
also agreed that knowledge sharing is mostly with the collaborating firms.
So, overall this SME does not feel anything wrong when sharing knowledge sources,
especially with the collaborators.
d. Collaborations and level of mutual trust
The quality control manager said that they carry collaboration with delta pharmaceutical,
a pioneer pharmacy of this cluster. He also pointed out that their collaborations are based
on certain policy;
We stick to our organizational policy but we
do believe and trust our collaborators as
they tend to give us benefits too.
The product manager also revealed that they have collaborations with a firm here in the
same cluster. We do consult with each other to make organizational processes more
innovative. However, when asked about the trust level, he said that it depends actually
what can be shared and what cannot be. We share that information which falls in the
technical category, however those information which are related to the sales and market
values, we do not normally share them with firms as eventually we become competitors.
So the trust on collaborators is mainly limited to the technical support and when it comes
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to the market or the sales information, the firm refrains collaborating.
e. Value addition through collaboration
The product manager of Iceberg said that collaborations do add value as for example they
can save time.
If for instance they know something
technical which we do not know, it’s a
benefit to learn it from them so that time and
processes are saved, vice versa.
The quality control manager said that;
The experience of collaborators can be
utilized in the way that if we want to acquire
a new machine or new techniques which
have not been used before, we may face
difficulties. In such cases it is always good
to find the collaborations with someone who
have practiced the same technique before.
The marketing manager also said that the basic theme behind collaboration is that it can
certainly benefit the stakeholders. He exemplified this as;
In our collaboration with Delta
pharmaceutical, we get the value as they are
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more experienced and we can learn from
that experience to carry on the
organizational processes in more innovative
ways.
So, the overall responses of the managers reflect that the collaborations add values by
time saving, learning from the experience of the collaborating firms and it renders mutual
benefits.
3. Drivers and sources of Innovation In organization
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
a. Drivers and Sources of Innovation in SME
The product Manager of Iceberg said that in this firm everybody plays a role in
innovation. The R&D, all the marketing people and the technical people specially holds
the key to innovation. The quality control manager explained that
Our employees, the research in academia
and industry, the marketing factors like
customers, competitors and the suppliers all
contribute towards innovation.
The marketing manager of Iceberg termed market as the main driver by saying that;
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Market comes at the very top but indeed the
importance of employees cannot be negated
as they are the ones who can see the gaps in
the market.
b. Idea Sources for new products and services in SME
To the question about considering the different idea sources for new products and
services, the product manager said that;
Most important origin for new product idea
is the market itself and the ideas normally
come from the customers through the
marketing people.
The quality control manager said that
We have quality staff; we get ideas from
customers, the competitors and the market
trends as sources of ideas.
c. Knowledge and training level of Staff of the SME
About the knowledge and training the product manager said that the people working with
us are generally educated as the demand of the job asks them to be so. The Quality
control manager He further added that;
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They do have the requisite knowledge but
sometimes they need more training and
expertise. At the same level, they need a bit
of exposure into more innovative firms as
well to become more proficient in making
the enterprise innovative.
The quality control manager said that;
I think this is our main strength. Our
management tries to make sure the people
they recruit make the best employees in the
long run and can bring innovation in the
organization. As per the training is
concerned, we do make certain training
arrangements.
The marketing manager added that I have full confidence in my team. Their training and
understanding is according to the latest standards. So the management of Iceberg agreed
that the level of training and education of the staff of the SME is up to the desired level
and expectations.
d. Customers Input
The product Manager of Iceberg responded that sometimes we do get ideas from our
customers who in this case are the doctors and practitioners. Also, we have contacts with
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some of our customers like for example if we produced ten thousand units of a product
and we do not get the orders for 4 months or more, we start contacting with our
customers and the doctors so they review our products. However the quality control
manager explained that;
In this sector we do not directly get ideas
from the customers but when the doctors
review our products as per their application
on the patients/customers, we go for the
improvements accordingly(Yes customers
are taken into account).
So the researcher felt that since the customer input is important, the process of taking
input is indirect most of the times.
e. Role of Suppliers in innovation diffusion and Adoption
The product manager of Iceberg told that we do get suppliers feedback and they tell us
what molecules are in the market mostly. But the answer of the Quality control manager
elaborated it in this way that the suppliers are important in the entire process. He said;
Actually their role define your processes to
be innovative are not. If they provide you the
latest molecule for which you have
researched, it definitely gives your
innovation a boost.
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So the role of supplier in making Icebergs, processes innovative is admitted by the
managers.
f. Screening and evaluating Ideas
When probed about how the ideas are screened and evaluated the quality control
manager of Iceberg said that;
The Board of Directors after the meeting
decides about which molecule and product
can be approved and is feasible.
The product manager offered a more explicit answer in this regard that;
We discuss ideas in meeting. We go about
the marketing input. For instance if we
consider new molecules, it’s a very technical
process. We evaluate the ideas against its
feasibility. We compare our sources as well
as the benefits that the products in
consideration will render.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
The quality control Manager said that;
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The marketing research is not formal but we
believe that our marketing people are
competent to identify the gaps with the
market. We calculate the risks in a way that
we produce the initial products on low
scale. Then we get feedback from doctors
and if the results are good, we do carry on
also if any modifications are suggested we
implement those in the commercial products
then.
The product manager explained it further that;
Technically speaking we are in no position
to go about an altogether new product or
molecule. We have our restrictions; the
regulatory authorities provide guidelines to
produce the products. Hence we often work
on those products that have been produced
by other multinational pharmaceuticals.
b. Risk calculation and test marketing
Risk calculation and test marketing are important themes as per as the innovation of
organization is concerned. The product manager added about the test marketing that;
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Initially we produce the trial batches and the low scale production is required to be
launched. So we do our calculations and once we get the review about it, then we
produce it on the commercial basis.
5. Barriers to the Diffusion of Innovation
a. Lack of expertise
The product manager agreed that sometimes we have the issue of finding the technical
expertise in our workers. But we try to fix the shortage through networking and
clustering.
The quality control Manager agreed and said that this is a field where new molecules
come each day. He said that;
We need to be up-to-date all the times. That
is why we take help in technical issues from
those professionals who are working with
other firms for long times.
b. Financial Barriers
The quality control manager agreed about the fact that financial barriers are always there.
He responded that;
We need finances sometimes which are not
available. Banks can be a source but their
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procedures and the strings attached to their
loans are not easily digestible so we in this
SME try to proceed according to our
budgets.
The product manager responded that For instance, we wanted to have a new machine
which we thought would give us good output too but our financial position did not allow
us to buy that. He said that;
Yes. Since it is a fast growing industry, we
always have the opportunity to get loan
from banks easily.
c. Role of Government and its Agencies Like SMEDA
The role of governments in the spread of innovations and the development of innovation
systems is an important factor. When the researcher probed this theme, the quality control
manager said that;
There is no support from any government
authorities rather they curtail and hinder
the processes by their overly interruptions in
the affairs of the firm sometimes can cause
delay in carrying out innovation.
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The Product Manager also agreed that we do not have any support from government
agencies and authorities in any ways. However, we get support from other firms and that
is a mutual process.
6. Impact of adoption of innovation on SME growth
a. Why SMEs innovate
The adoption of innovation in SMEs has an important impact role as reviewed in the
literature. The product manager said that;
By innovating, our exports can increase as
well as we can have increased market share,
said the product manager.
The quality control manager said that we carry innovative processes in our organization
that we become a prominent organization in market and attract more customers.
b. Impact of adoption of innovation on SME growth
The product manager said that we can have many benefits from innovation. We can start
up research products which can end up giving us advantage over other firms. Whereas the
quality control manager said that;
Being innovative organization means being
competitive. We can certainly have good
advantage over our competitors.
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In a more direct way, the Marketing Manager said that the impact of innovation in
organizations is positive and related to the growth. In fact the reason why organization
considers innovations is to grow.
III. Conclusion
Iceberg is a newly established pharmaceutical in Risalpur, Khyberpakhtunkhwa. During
the little time span it has emerged as one of the better pharmaceutical. The culture is
entrepreneurial and innovative and calculated risks are taken in different ventures. The
Management of Iceberg considers size of the organization important in the diffusion and
adoption of innovation as bigger size means more capable employees as well as more
units of manufacturing. Due to the use of latest machines and the market orientation and
the encouragement of CEO, the organization processes of Iceberg make it more
innovative. The development of innovation starts when the marketing team along with the
R&D identifies the gaps in the market, the concept development comes through the
Board of Directors decisions. The research orientation and dependence has improved the
rate of adoption of innovation and for some products, Iceberg has initiated even, taking
the lead role. Due to the open culture of the organization in particular and the cluster in
general, knowledge sharing has been an easy and routine practice. The management of
iceberg believes that collaborations add value and that is why we collaborate and trust the
collaborator as well. The collaborations can help in saving time as well in learning
technicalities. The idea sources are staff, customers, competitors and the market trends
for Iceberg. The management of Iceberg agrees as there is inspiration from the
competitor’s products and supplier’s role in the diffusion and adoption process is
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important. The market input plays a vital role in idea screening and evaluation as it helps
in comparing the sources and resource. The Marketing research is formal and the
marketing Department along with the R&D Department conducts the research, however,
care is taken in following the regulations from different bodies. The Management feels
that there are still some barriers in the technical sides, and they need to overcome through
the help of networking and collaboration. The financial barriers can pose issues to carry
on innovations but the banks options are not feasible although they may grant loans
easily. The government agencies and SMEDA role has not been visible in making this
sector a profitable one. The management views adoption of innovation as something
which adds competitive advantage and it helps in making research oriented products. The
SME can also increase its exports as innovation gives prominence and customer
orientation, leading to the overall growth of the SME.
Case 8: Rock Pharmaceuticals
I. Profile of the case
Rock is a pharmaceutical company which is technology oriented. Established in 2011, it
manufactures and markets medicine innovative and high quality medicine for prevention,
alleviation and cure of diseases. The products are manufactured for various diseases and
the focus is on those product conditions which can help save millions of people around
the world. Rock Pharmaceutical has collaborated with different firms of good repute and
has gradually manufactured and marketed products based on those license agreement
beside its own brand. Rock Pharmaceutical steer its R&D efforts with a motto of carving
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a healthier tomorrow. Customer support by offering them latest medicine at affordable
process is a core value of Rock. As it adds 20-30 products to its product line annually,
Rock pharmaceutical is one of the fastest growing pharmaceutical firms of the country.
Rock Pharmaceutical has export partnering with Mazhar brothers since 2004 and has an
annual Turn Over around 8 million US$, paying around 5 million US$ taxis to
Government of Pakistan. Rock pharmaceutical has its export to Srilanka, UAE, Uganda,
Nigeria, Bangkok, India, Afghanistan, Ghana, Uganda, and Uzbekistan (Source,
http://www.rockpharma.com.pk/index.html).
II. Analysis of Data
1. Type of Enterprise and Nature of innovation
a. Entrepreneurship and Innovation in Culture and Structure
The director of Rock pharmaceutical responded about the innovative culture and structure
of that The way we started our business in this sector, it itself is an entrepreneurship
because when we talk about the pharmaceutical sector, there are huge number of multi-
national companies operating already, to make your place in this sector is a daunting task
and huge risk in itself.
People normally have more trust in multi-
national companies and their products. That
is why it’s difficult for SMEs to find its
footings.
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The director administration also told that we have an entrepreneurial culture and we
follow an innovative structure. We have the latest technology for both production and
operations of the process. Our offices have computers and internet facilities. We believe
in the speedy and faster communication and use email concept for this too.
b. Size of the SME and Innovation
The admin director upon answering whether the size of the SME is sufficient for
Innovation told that
The size of our firm is sufficient. We have to
understand that the real emphasis is on the
quality of your work force.
The Director of rock pharmaceutical also held more or less same views as he said size
does not necessarily matter in the same that if you have limited number of employees but
if they are of good quality and has the ability to be innovative; their number does not
really make a problem. The same goes for the infrastructure as well.
c. Organization Processes and Innovation
When asked how the processes of the organization make it innovative, the admin director
told that our processes are technology oriented. As I said before, we have an internet
culture and we communicate through email. We also have a very detailed and interactive
official website of our firm. The director responded that;
We do improve our processes by bringing
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technological innovations as well
organizational innovation. Each day we
think what can be done new and novel that
can improve our organizational growth and
market share.
The researcher observed the information on the official website of rock pharmaceutical
and the technology orientation is one core competency as they have mentioned on the
website.
d. What Makes the SME Innovative?
When asked what makes the SME innovative, the director said that;
We actually follow the US pharmacopeia for
producing new items. So we keep an eye on
the advancements that they bring in their
production. We further our updating
according to their up gradation.
The Admin director also said that;
The research orientation and the use of
technology in processes and production
make this firm innovative.
The emphasis here again is on the technology and research.
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2. Diffusion and adoption of innovation
Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis
and the researcher is focused to find out the various aspects of Diffusion of Innovation
and its impact on the growth of SME. The researcher asked semi structured questions
regarding this theme as follow:
a. Developing Innovations from infancy to Marketing stage
To the question as to how innovation is developed from infancy, the Admin Director said
that we develop innovation by bringing the insight from market; the demand of market
actually guides us as to what to produce. The Director answered the same question by
saying that;
This is the age of technology, the internet
has revolutionized everything. Whatever
comes in the market in one part of the world
that becomes visible to the other part the
next day? So in my opinion, innovation
actually starts from market itself.
The management of Rock associated the development of Innovation to the market and its
trends.
b. Rate of Adoption of Innovation
The Director of Rock pharmaceutical said that in our cluster here in Risalpur, we have
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got eight enterprises which work in this sector. We are at the top of all in terms of
employee capability, chain management, installation of latest units and the sales. So in
my opinion we are more open to adopting innovation as compare to all other firms. The
Admin Director said that if you have visited the cluster here in Risalpur, you may have
seen that our firm stands very distinct as compare to the other firms in al regards. He said
that;
We have the latest technology and the best
human resources which enable yes to adopt
innovation in a more robust and faster
manner.
The official website of the firm also reflects that there are latest technologies and
machines but the people behind those machines are very important too.
c. Sharing Knowledge Sources
Although knowledge sharing is viewed by most of the participant managers of this study
to be important for innovation diffusion and adoption, the director of Rock said that;
We do not believe in sharing knowledge with
any other firm in the same sector rather we
think that our own competence will pay for
us more.
The director admin also said that we get knowledge from within our own sources. We do
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not believe in relying on any other firm here in this cluster. So there is no knowledge
share with anyone in this cluster.
d. Collaborations and level of mutual trust
When asked about the collaborations and mutual trust, the Director of Rock said that;
We do not have collaboration with any other
firm in this cluster but we have
collaboration with another firm in Karachi,
Mazhar brothers. The reason of not
collaborating with the firms in the same
cluster is the lack of trust.
The Admin director also said that there is collaboration with a firm outside this cluster
but not in the Risalpur Cluster here.
e. Value addition through collaboration
To the question what values do collaborations add, the director said that;
He would rather like to be neutral because
yes there are benefits from it but there are
problems as well, like your business secrets
can be at stakes too.
3. Drivers and sources of Innovation In organization
255
In this section the researcher tried to find out the various sources and drivers of
innovation in organization. Different questions probed this theme as under:
a. Drivers and Sources of Innovation in SME
The admin director told that the major drivers are market, customers, competing firms
and the people working in our firm. The response of the Director also substantiated as he
said;
Market is the main source. Similarly
employees and sometimes the other firms
can also be good sources of innovation.
So for the management of Rock, the drivers and sources of innovation are the market, the
customers, competitors and the employees.
b. Idea Sources for new products and services in SME
The idea sources for products and services are different. The director of Rock told that;
For us the main source is market and the
customers. The marketing people get ideas
from the customers and we then forward the
ideas to the concerned quarters to check for
its feasibility.
The admin director also said that same as are the drivers like the customers, our
256
marketing force and the Research and development people.
c. Knowledge and training level of Staff of the SME
The Admin director replied that at times we feel the need of further improvement and that
we do through training when particularly when some new machines are installed. The
director of the firm also agreed that sometimes there can be a lack of expertise but that is
overcome through training. He said;
Sometimes they lag behind in a particular
technique for which they are trained
through specialized people hired for
training.
d. Inspiration for Competitor’s Products
The director of Rock agreed that they get inspired from competitors products .He told we
do get ideas from the market and that is how you carry research over your competitor’s
products too. The admin director said that;
We believe that this is an open system. You
got to get something and give something
too.
e. Customers Input
The director said that we do not take customer input directly though but the doctors who
257
prescribe our products are actually those who give us ideas about products and its
development. The response of the director Admin was more or less the same saying that;
The firm does not work as a retailer where
we can get feedback from the customers
though but the fact is that the medical
practitioners do tell our marketing staff
what has to be done as per the needs of the
customers.
f. Role of Suppliers in innovation diffusion and Adoption
During the interviews process, the participating managers were found to have great value
for suppliers. When the same question was probed from the director of Rock
pharmaceutical, he reported that;
The respondents agreed that suppliers do
tell us what is demanded in bulk and also
about the market trends too.
g. Screening and evaluating Ideas
When probed about how the ideas are screened an evaluated the Director elaborated that;
Ideas are routed to the immediate reporting
officer. We believe that there is a proper
organizational structure. For instance the
258
marketing people like the medical
representative or sales executive share their
ideas with Regional Sales manager and then
they discuss it with the business manager
who takes the feasible ideas to finance
manager and this is how we work it out.
The director admin also said that we have a formal structure and we follow that hierarchy
while screening and evaluating those ideas.
4. Role of Marketing Research in finding the Environmental Conditions
a. Market Research: Formal or Ad hoc
The admin director said that with the advent of the internet, the ideas are readily available
and we follow the trends that we see on the internet. Also our marketing staff and R&D
carry on research to make the products more innovative and organization more
entrepreneurial. The Director said that they depend more on the secondary data. He
explained;
We more depend on the secondary data and
we feel that the marketing force does not
have the capability to identify the gaps or
carry out marketing research.
b. Risk calculation and test marketing
259
The director of Rock in response to whether they calculate risks and whether they test
market before commercialization said that;
When we get permission for a specific
product, we are instructed that within a
period of six months, we should prepare the
first batch of the product and testify it before
commercializing it.
The director admin said that we do follow the risk calculations and test marketing
concept. You cannot blindly go into the market launching your new product.
5. Barriers to the Diffusion of Innovation
a. Lack of expertise
When the director of Rock pharmaceutical was asked whether they have any barrier like
lack of expertise, he explained that;
When we introduce a new product, we invite
the product manager of firm like Merck
pharmaceutical unofficially. He ran initial
few batches for us. He looked after the
entire testing, manufacturing and quality
testing for us( so in this way seek
collaboration).This is how we basically
260
calculate or minimize the risk and later on
we follow those procedures.
The director admin also agreed for the lack of expertise and said that;
Medicine is a field where everyday there come new molecules. You do not have always
the capacity to work on each of the molecule. Sometimes we do face hindrances in this
regard and then we get the support from experts from other multinational firms. So yes,
sometimes we lag behind in expertise.
b. Financial Barriers
When probed about any financial barriers, the accounts director said that;
Since I am also looking after the accounts, I
have never applied for nay bank loan. We
rather plan to carry on new product and
processes development in accordance with
our resources.
The director also said that by the grace of Allah we never have taken any loan or fell
short of financing at any stage neither we have any partnership with anyone. We never
need to consult any bank for loan.
c. Role of Government and its Agencies Like SMEDA
They never come here. Not even in idea or concept development. The government
261
agencies and the regulatory authorities actually make it difficult for us most often. Some
time they delay the files for a long time. For instance if we apply today for a specific
molecule and the drug regulatory authorities or the ministry delay it for a longer time ,
who knows the product demand will be the same after that much delay. The director also
agreed that the role of government authorities and SMEDA is not encouraging at all. He
said that;
We do not have any support from them as
per now and we do not see if they will
support not only this firm but any other firm
in future.
6. Impact of adoption of innovation on SME growth
a. Why SMEs innovate
When probed as to why innovations are carried, the director said that;
We believe that if we do not innovate our
products will become obsolete and we will
lose our market share. In order to have
maximum market share, you need to
innovate only then your organization can
grow. It helps in growth of our organization
as well as gives us edge over our
competitors.
262
b. Impact of adoption of innovation on SME growth
The admin director said that Being innovative means being different and that is how a
firm can get competitive edge over other competitors. While the director said that;
Innovation definitely helps to improve our
competitive advantage.
III. Conclusion
Rock pharmaceutical is established in 2011; it manufactures and market innovative and
high quality medicine for prevention, alleviation and cure of diseases. The Management
of the firm regards the size of the employees and the manufacturing least important but
the quality of both is valued more in the organization. The Processes of Rock
pharmaceuticals are based on technological and organizational innovations. The Firm
follows USA pharmacopeia as the guide and benchmark. The rate of adoption of
innovation is speedy and there are latest machines like HPLC installed in the laboratories
and the employees are willing to utilize them. Rock pharmaceutical has got collaboration
only with Mazhar brothers, a firm in Karachi and has no collaborations here in this
cluster. Rock pharmaceutical does not value collaborations too much as it doubts that
with collaborations most of your business secrets are out. The drivers and sources of
innovations and idea sources for new products and services are market, customers,
competitors, employees and R&D. The employees of the firm or trained for whatever
skill they may lack. The role of competitors’ products, suppliers and customers is
important in the diffusion of innovation process for Rock pharmaceutical. There is proper
263
risk calculation and proper structure of carrying marketing research. Although there are
no financial issues and banks loan are not considered in Rock pharmaceuticals, there may
sometimes be the lack of expertise for which training sessions are conducted. The
government and its agencies like SMEDA have never helped this pharmaceutical in any
manner so far. However, Rock pharmaceutical innovate for maximizing its market share
and competitive advantage so that it survive for longer.
Chapter 5 Cross Case Analysis
5.1 Introduction
In this chapter the researcher discusses and analyzes the themes across all the cases. The
researcher discusses the findings aligned with the relevant literature and the research
questions and research objectives set forth in the previous chapters. The researcher tries
to keep the sequence of the themes as it is followed during the data collection stage while
administering the interview protocol.
264
5.1.1 The structure and Culture of SMEs
The literature shows that the structure and culture of organizations have a bearing on the
adoption and diffusion of Innovation. It has been studied by many researchers that
organizational culture is a vital player in affecting the organizational innovation through
creating an innovative environment in the organizations. Organizational culture is a
collective set of values, norms and beliefs that the employees of the organization share
and is exhibited in the overall processes and goals (Khazanchi, 2007). The respondents of
all the case study SMEs, except those of the Wisdom pharmaceutical, expressed that their
SMEs are entrepreneurial in nature and have a culture which promotes the adoption of
new ideas and innovations. The SMEs working in pharmaceutical sector have a tendency
of risk taking and going about new creative products and services as it is a science based
industry and they cannot stick to the same products for years as they can become
obsolete. So they need the flexibility in its structure and culture as to adopt innovations
and avoid inertia. The SMEs are generally known for its flexibility and acceptance to the
external changes. Any SME which do not get trapped to competence is when in the wake
of new technologies the existing professionals become redundant, firing old ones is not
feasible due to regulations/law and hiring new one is not available because of the
newness of the skills required. Therefore some SMEs end up as unable to exploit future
opportunities(Taipale-Erävala, Lampela, & Heilmann, 2015). However, the respondents
of the case study SMEs agreed that they tend to go for the uncertain and risky ventures as
the nature of the industry demands. As one of the respondents from the case study SME
said that;
Since it’s a science based industry,
265
Innovation in medicines, new developments,
new creations are inevitable so we have to
update our system and ourselves.
Not only the SMEs but the high tech organizations also need Innovative cultures. The
availability of innovation cultures work as a significant factor in high-tech organizations
and without innovation they will simply perish (McGourty, 1996; Angel, 2006). The
infusion of innovation in its culture should not be only restricted to idea generation but
also be implemented so that the firms can reap the fruits in true essence.
Although the views of the respondents of Wisdom Pharmaceutical reveal that they do not
tend to take many risks and are not willing to make changes to the culture and structure
because they mainly produce basic and not radical research based products, other
counterparts of the remaining seven SMEs unanimously accept the importance of being
adaptive and ready to change. As researchers have found that the adaptive cultures help in
nourishing creativity in ideas generation and implementation (Dennison,1996; Lee and
Yu,2004 ; Flynn and Chatman,2001). The researcher observed that there is some kind of
difference in the views of the respondents about the adoption and diffusion of innovation
and risk taking even in the same organization. This is quite cognizant with the extant
literature as studies show that even in the same firm different innovation approaches are
used. The logic behind this phenomenon is that different contexts need different
processes, which is better as context based innovation yields good results. Selecting the
best innovation for the specific situation is the best ploy (Griffin, 1997). However, the
aggregate of the responses, the researcher observation, and the available secondary
266
sources like the official websites and facebook pages suggest that the case study SMEs
working in pharmaceutical sector have entrepreneurial structure and culture.
The responses regarding the descriptive theme, the structure and Culture role in adoption
and diffusion of innovation in SME can be summarized in table 5.1 as below:
The
me
Hizat Wisdom Zinta Aries Stanley Delta Iceber
g
Rock
The
struct
ure
and
Cultu
re
Strongl
y
Agreed
as all
the
respon
dents
agreed.
Strongly
Disagree
as none
of the
responde
nts told
that the
culture
and
structure
is
entrepren
eurial.
Strongly
Agree.
Unanimo
usly said
the
culture
and
structure
is
entrepren
eurial
and
innovativ
e.
Stron
gly
Agre
e. All
repli
ed in
positi
ve.
Strongly
Agree.
Entrepren
eurial &
Innovativ
e
orientatio
n claimed
by all
responde
nts.
Strongly
Agree.
All
respond
ers
agreed
unanim
ously.
Strongl
y
Agree.
All
respon
ders.
Stron
gly
Agre
e.
Table 5.1
267
So except for the wisdom pharmaceutical all the other participating SMEs have an
Entrepreneurial and Innovative culture and Structure.
5.1.2 The role of Size in Adoption and Diffusion of Innovation
The extant literature about the firm size and its ability to adopt innovation has varying
views, and lacks an agreement about whether the smaller or larger size of the firm is
innovation friendly. Some existing theories show that small firms carry R&D activates in
product development while larger firms do so in process. Similarly small firms enter into
new markets and may ultimately dominate. Large firms invest more in process R&D
while small invest more in product R&D. Another important but seemingly abstract issue
might be the fact that the small SMEs understate its R&D expenses. The large firms
however cannot do it conveniently for the fact that they employee scientists and
professionals with more precise job descriptions ,their salaries can count for R&D
expenditures(Plehn-Dujowich, 2009).
However in the study of Scherer (1991) who did not include any small firms and was
replicated by Fritsch and Meschede(2001) in large firms, no significant difference is
realized. The researcher checked empirically whether the participating organizations
relate the size of the firm in their race towards adopting and diffusing innovation for their
growth. The respondents from Hizat pharmaceutical told that the size is not a big deal as
they believe more in the quality of the infrastructure and the employees than the size of
both these. They believe that the facilities and the equipment means. The Director of the
Rock pharmaceutical similarly disagreed about the importance of the size as he said that
it’s not their number and same is the case of infrastructure. He said;
268
To me size does not necessarily matter in the
same that if you have limited number of
employees but if they are of good quality
and has the ability to be innovative, their
number does not really make a problem. The
same goes for the infrastructure as well.
So two out of the eight participating organization disagreed about the importance of size
of the firm in the adoption and diffusion of innovation for its growth. However a
majority, six out of the eight participating SMEs unanimously agreed that the size of the
firm both on the basis of the infrastructure and number of employees matter in the
adoption and diffusion of organizational innovation. The size of the firms may not
necessarily lead to the radical innovations but it assists in the incremental innovations in
the organizations. As the group product manager of Stanley said that
Company is scattered over an area of 3
Acres. It has manufacturing units for
Syrups, drops, tablets, dry Syrups and
Capsules. So the size of the company is
readily fit for organizational innovation
both infrastructures wise as well as human
resources wise. An antibiotic unit is also
under the construction and this will also fill
the demands from the market. I would not
269
say that these things are leading to radical
innovations but certainly to the incremental
innovations.
The respondents of Delta Pharmaceutical also strongly backed the size of the
organization as parameter and catalyst in adoption and diffusion of innovation for its
growth. His response showed that not only the area of the firm but the production area
should also be substantially sufficient for making the organizational processes innovative,
else it would be like fitting the stomach of the an ant in an elephant. The majority of the
participating organizations showed unanimity in agreement with the fact that the Size of
organization matters in carrying the innovativeness. This is mainly cognizant with the
argument of Amara, Landry, Becheikh, & Ouimet, (2008)who believes that the Size
matters. They put their weight behind Size by saying that grown up SMEs have more
technical and financial capacity to meet the cost requirements needed to raise the novelty
and innovation level. As the majority of the respondents strongly agree that the Size of
the SMEs matter in their innovation adoption capacity and growth, it can be asserted that
the number of employees and units of manufacturing both needs to be sufficient so that
the SME adopt organizational innovation for its growth and performance. The responses
regarding the impact of SME Size on the adoption and diffusion of Innovation theme in
the organization is given in table 5.1.2
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Icebe
rg
Roc
k
Role of Strongly Agree. Strongl Strong Agree. Stron Stron Stro
270
Size of
SME in
innovatio
n
adoption
and
growth
Disagreed
.All
claimed
that size
does not
matter
All
respond
ed that
size
matter.
y
Agree.
Unanim
ously
said
that
size
matter.
ly
Agree.
gly
Agree
.
gly
Agree
..
ngly
Disa
gree
d.
Table 5.1.2
5.1.3 Organizational processes making the firm innovative
The organizational processes define the nature of the firms as to be either
entrepreneurially innovative or change resistant. Those firms which are carrying their
processes in an innovative way mould the fortune by capturing profits and market share.
The researchers who work on institutions have submitted that the ideas, norms and values
and beliefs in an institution shape up the routine organizational processes of these
institutions. Organizations must place in itself expectations as a hope for survival, though
these expectations may have very little to do with the actual realization of the
performance (Scott, 1987; D Aunno, Sutton and Price, 1991; DiMaggio and Powel,
1991). This pursuit of hope and expectations toward improving the performance of the
firms influence the organizations to bring innovations and carry their processes in such a
way that they perform well. However, the behavior of an organization is not merely a
reaction to the market pressures but also the internal pressure such as the regulatory
271
authority pressure, the pressure of meeting expectations of institutions(Greenwood and
Hinings, 1996). During the current study, an effort has been made to target and analyze
those SMEs/firms which have the capacity of adopting and diffusing innovation rather
than those which are resistant to change and are inertial in nature and behavior. The
researchers tried to investigate if the processes of these organizations make them
innovative. The participating SMEs agreed collectively that their organizational processes
are making them innovative. However not all have the same ways to carry their processes
in an innovative way. They have their own strengths while carrying the processes. For
instance the Hizat pharmaceutical firm associates the Managerial processes as something
which make the organizational processes innovative. As one respondent said that;
It depends upon the processes of the
organizations to make it innovative or
otherwise. It largely depends upon the
management as to how they utilize the
potential of the employees. Like for example
there are various divisions, there can be
account section, there is marketing section,
there is HR section and there is technical
staff. So it depends on the overall structure
of the organization and its management as
how they take ideas from the employees and
from the market. How they utilize and
channelize it then to be more innovative as
272
per as the processes are concerned.
Similarly a respondent from Stanley organization also said that the management
processes are the key towards making the overall organization processes innovative. He
relates the increase in sale both within the country as well as abroad to the innovative
processes of the firm initiated by the management. Another respondent of Stanley implies
that the processes are made innovative by the utilization of the latest technology in the
state of the art labs that they have.
Being Innovative in its processes is the necessity of the pharmaceutical firms as the
importance of medicine cannot decrease till the age of the mankind. The CEO of Delta
pharmaceutical said that although there is innovation in almost all parts of the
organization, their emphasis is on making the product more innovative and bring quality
while making it more consumers friendly and low cost. He exemplified the product
innovation in his organization by saying that;
We actually converted the film coated
Brufen to Sugar coated one so that patients
can take it easily. Also, one main fact about
the pharmaceutical industry is the fact that
there has to be proper dissolution of
chemicals in the desired proportions.
The Director of Aries pharmaceutical associates the innovation in its processes to their
R&D activities and their ability to keep up the pace with the innovations taking place
273
abroad. One unique attribute which is also marked as an emergent theme by the
researcher is the involvement of the consultants for making the use of the latest
technology in Aries pharmaceuticals. Similarly the aggregate of the responses of Rock
Pharmaceutical is also in agreement with the fact that they try to bring the latest
technology and machines to make their organizational processes more innovative.
Although the quality control manager of Zinta pharmaceutical believes that there is a
further need of bringing more latest machines which are fully automatic, he agreed with
the fact that the processes of their organization make it innovative as they still have
machines and technology which is better than most of their counterparts in the same
cluster. Another important aspect was added by the Product Manager of Iceberg
Pharmaceutical who said that when the market orientation is the aim, the processes of the
firm tend to make the firm innovative. He put it very simple as;
We believe in the fact that if our processes
are aimed at meeting the needs of the
market, we will be successful and this to me
makes the organization an innovative one.
So in general all the respondents of the eight participating firms agreed that the processes
make them innovative and they all had some different means and ways to support their
argument. The summary can be shown in table 5.1.3 as below
Theme Hizat Wisdo
m
Zinta Aries Stanley Delt
a
Icebe
rg
Roc
k
Organization Strong Strongl Strong Strong Agree. Stro Stron Agre
274
al Processes
making the
firms
innovative
ly
Disagr
eed.
y
Agree.
ly
Agree.
ly
Agree.
ngly
Agre
e.
gly
Agree
.
e.
Table 5.1.3
5.1.4 What makes the SMEs innovative
The researcher put this probe question to help the respondents explain their stance as to
how and what can they attribute to the SMEs innovativeness. This helped the researcher
to get explicit answers and most of the respondents came up with different factors which
can make the participating SMEs innovative. The respondents of Hizat pharmaceutical
associates that their nature as a pro-technology SME makes its product innovation more
robust as compare to other firms in the cluster. The quality control department and state
of the art labs help in this regard. This helps adding other product line as the ointment and
Nutraceuticals to this SME which can give competitive advantage. Similarly, the director
of Aries pharmaceutical response reflects that the diversification makes the SME
innovative as unlike most of the other Pharmaceuticals in this sector Aries does not
produce only syrups but dry syrup powders and other diversified products. Further, the
respondents from Stanley put their weight behind the managerial practices and the quality
of their employees both educations as well as skill wise for their organizational
innovativeness. The CEO of Delta pharmaceutical strongly believed that the
275
collaborations with academia like their joint venture with Peshawar University are
something that has helped making this an innovative organization. However, the
marketing manager of Delta pharmaceutical emphasized on the fact that the Vision of the
CEO is something that has helped in making the Pharmaceutical as an innovative one.
The researcher marked this as an emergent theme as it was not reviewed in the literature
whether the vision of the CEO or owner has a bearing on organizational innovation. The
quality control manager of Zinta pharmaceutical agreed that although there is a room for
improvement, their machines are of good quality and give good results to make the
process more innovative in this regard. The respondents of Iceberg pharmaceutical also
agreed that the encouragement and support that they get from their CEO help them make
the organization innovative. The respondents, especially the director of Wisdom
pharmaceutical were not very much convinced while answering to the question what
make their SME innovative but felt that the qualified staff and the state of the art
laboratories make it innovative. The respondents of rock pharmaceutical attributed their
organizational innovativeness to the US pharmacopeia as they follow it and update their
organization accordingly. So overall, the researcher presumed that there are different
kinds of players which make the participating organizations innovative. The table 5.1.4
shows these players for ease of readers as:
Theme Hizat Wisdom Zinta Aries Stanley Delta Iceber
g
Rock
what
makes
the
Stron
gly
agree
Agree
for
Agree
for
Strong
ly
Agree
Strongly
Agree for
Strongl
y Agree
Strong
ly
Agree
for
276
firms
innovat
ive
d for
*Rob
ust
and
frequ
ent
produ
ct
Innov
ation.
*Aut
omati
c
Mach
ines.
*Stat
e of
the
Art
labor
atoria
*Quality
Of Staff
and
State of
the art
laborato
ries.
*Qual
ity of
Mach
ines
which
give
accur
ate
result
s.
for
*Prod
uct
Divers
ificatio
n.
*Manage
rial
Practices.
*Quality
of
educated
and
Skilled
Employe
es.
for
*Vision
of the
CEO
(emergi
ng
theme))
.
*Collab
orations
with
the
Acade
mic
instituti
ons.
Agree
For
*Mark
et
Orient
ation.
*CEO
encour
ageme
nt.
*Follo
wing
USA
pharma
copeia
and
updatin
g the
organiz
ation
accordi
ngly.
277
l.
*Effi
cient
Quali
ty
Contr
ol
Syste
m.
5.2 Diffusion and adoption of Innovation
In this section the researcher tried to get to know how the innovation is diffused and
adopted in the participating SMEs from infancy to development stage and at what rate the
innovation is diffused as compared to the counterpart in the cluster. The researcher has
taken the insight from the Diffusion of innovation theory of Rogers which is a base for
this thesis along with other theories. Do they share knowledge sources, and whether
collaborations are carried with mutual trust or not and what values do these collaboration
278
add to these SMEs.
The Diffusion of Innovation (DOI) theory is an exponent of how, why and at what rate
new concepts and technology extend through cultures at both the individual and firm
level. DOI theory focuses on communication of innovation through certain
media/channels over time and within a social system (Rogers, 1995).He defined diffusion
as "the process by which an innovation is communicated through certain channels over
time among the members of a social system" (p. 35). He attributed an innovation as any
new idea, practice or object considered fresh to an individual (Rogers, 1995). Rogers
(1995) primarily discussed technological innovations. He explained that a technology is a
design for instrumental action that reduces the uncertainty in the cause-effect
relationships involved in achieving a desired outcome (Rogers, 1995). He made it clear
that a technology is information, not just equipment. Most technologies have hardware
and software components (Rogers, 1995). The hardware aspect consists of the tool that
embodies the technology as a material or physical object, and the software aspect consists
of the information base for the tool (Rogers, 1995).
Section 5.2.1 titled as how innovations are developed, section 5.2.2 titled as rate of
adoption of innovation, section 5.2.3 titled as sharing knowledge sources, section 5.2.4
titled as collaborations and level of mutual trust and in section 5.2.5 titled as value
addition through collaborations, the researcher has explained the how the diffusion of
innovation theory worked for the case study SMEs.
5.2.1. How Innovations are developed from Infancy?
The researcher tried to investigate the process of innovations development in the
279
organization from infancy to the marketing stage. The intention was to know what are the
factors which are involved in this processes and where does it initiate from. Another aim
was to find out whether there are any identifiable stages of the Innovation developments
which could then be used as a guide as to where it starts from and where it ends. To the
researcher, these mark the points and players which are important in the adoption and
development of innovation process. The important variable that was found while
addressing this process was the involvement of marketing as one of the most important
players. Although all the eight participating SMEs had different ways of carrying the
development of Innovations from infancy, the most common variable however is market,
an important driving force. For example, the respondents of Hizat pharmaceutical told
that they follow the multi-national firms when they opt for developing innovative
products as the formers follow research oriented products. However they believe that it
depends entirely on how the internal processes are efficient and cost effective. They
develop their innovations keeping in view the 4 Ps of marketing, i.e. the product, place,
price and promotion. So Hizat follow the market when it tends to develop innovation
from infancy based on their research about the latest products launched by the multi-
nationals working in the same sector. Similarly, the respondents of Wisdom
pharmaceutical calling it a comprehensive process revealed that the marketing people get
the creative ideas about developing innovations and they bring them to the firm. Once the
ideas are discussed in the meeting, the feasible ideas are taken to initiate the innovation
process.
The quality control manager explained the process of the innovation development from
infancy with a relative reservation that their innovations development is mostly for some
280
targeted areas. His point of view was that instead of producing for a specific Niche the
best ploy could be to make research oriented products which could be catered for a larger
target audience. The Niche concept is an emergent theme for the researcher. The Product
manager giving his insight to the innovation development process from the infancy
related it to be a cyclic process. He told that
This is complicated and cyclic process
which starts from the market and ends with
the market. The marketing people bring the
ideas from the market either from the
customers, the pharmacy shops/retailers or
the doctors. These ideas are discussed in
detail and then if found feasible, there
comes the stage of innovation development
from infancy.
This cyclic nature of Innovation is yet again a grounded or emerging theme for the
researcher as the literature review had not has anything about this phenomenon. So
largely, the respondents from Zinta Pharmaceutical relate that the starting and ending
point of the innovation development is the market itself. The Director of Aries
pharmaceuticals told that it’s an expensive, risk and time consuming process which
cannot be carried unless and until there is the vision and will. The CEO of Aries has the
same view as given on the official website of the firm. He viewed it as
Vision of the organization head, a visionary
281
person always backs up his team to carry on
innovative activities. I encourage people
coming up with ideas; we do discuss those
ideas in meeting of board of directors. After
the feasibility is checked, the ideas are
conceived accordingly.
(Source: http://www.ariespharma.com.pk/index.html).
The process of innovation development in Aries starts up with the vision of CEO and is
actualized as the people are encouraged who come up with creative and novel ideas.
The Stanley pharmaceutical attribute the development of innovations to the managerial
practices while the Delta pharmaceutical consider their collaborations with the academic
institutions to be something that can help in development of innovations. However the
Iceberg viewed their collaborations with business partners like Delta as something which
help in innovation development. Although the Rock pharmaceutical has no collaborations
for innovations development, the employees of Rock play vital role in this context.
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delta Iceb
erg
Rock
How
Innovati
ons are
develope
Strongl
y Agree
for
market
Strongl
y Agree
for
Marketi
Strongly
Agree
for
market
Strongl
y Agree
for
CEO
Strong
ly
agree
for
Strong
ly
Agree
d for
Stro
ngly
Agre
e for
Strong
ly
Agree
for
282
d from
Infancy?
input as
stimuli
when
develop
ing
innovat
ions.
ng staff
role.
role and
orientati
on
which
makes
the
process
a cyclic
one
vision
in
innovat
ion
develop
ment.
manag
erial
practic
es in
develo
ping
innova
tions.
educat
ional
and
researc
h
institut
ions.
busi
ness
partn
ers
like
Delt
a.
emplo
yees’
role.
Table 5.2.1
5.2.2. The rate of adoption of innovation
The researcher tried to test and correlate the Diffusion of Innovation theory of Rogers,
one of the base theories for this thesis in this section. DOI was a famous theory of Rogers
through which he categorized the organizations and individuals as innovators, early
adopters, early majority, late majority and laggards. The researcher used this descriptive
theme to know how the participating SMEs can be categorized to which specific category
as put forth by Roger in his famous theory. The responses of participating managers
and/or directors are different from each other to certain extent however almost all of them
agreed that the rate of diffusion and adoption of innovation is comparatively better. One
of the respondents of Hizat pharmaceutical though told that the structure of the
organization can be a slight hindrance, the other told that the rate of adoption and
diffusion of innovation is good. The respondents agreed for steady and gradual shifts but
283
they told that their approach is constant that is why organization is becoming innovative
since it is established. The respondents also told that they follow the regulations of the
ministry which cannot be overturned but our culture is comparatively innovative and that
is how we have a better rate of adoption and diffusion of innovation. The researcher also
observed that the Pharmaceutical was started from a basic building in the center, which
looked older and different from the other state of the art laboratories constructed off late.
The respondents of Wisdom pharmaceutical also agreed that they follow the latest trends
and are as good in adopting innovation as other counterparts but the researcher observed
that most of their workplace was manually administered and that the offices looked more
routine than innovative in that regard. In the main office there was one computer against
three officer’s chairs. Also, the director told in responses to a probe question that they
follow the formulation of more generic products and do not go for a research of market in
that regard. As for as the Zinta pharmaceutical is concerned, the respondents unanimously
agreed that their organization has a fairly decent and faster rate for adoption of innovation
as some of the machines in their organizations are advanced and the other pharmaceutical
may not have them for instance the HPLC, which give good results. Similarly, the
respondents of Aries pharmaceutical has a strong agreement for their faster rate of
adoption of innovation as they believe that unlike other pharmaceuticals in the cluster,
they do not term bringing new and advance machines as something expensive , rather
they term this as their investment. They also believe investing in their human resources
by arranging trainings for them as well as hire consultants for carrying certain latest
procedures in the organization. The Aries pharmaceutical has a functional and
comprehensive website that has made all the available information for the stakeholders.
284
The respondents of Stanley also agreed that they are accepting innovations
wholeheartedly and are open to it. They do not go into specialty products because they
think that sometimes to get your feet established there, you may need to follow a bit of
unethical practice. However, they do believe in adopting the organizational and process
innovation more rapidly than the radical innovations. The respondents of Delta
pharmaceutical especially the director very convincingly told that the initiation of this
firm at a time when there was no pharmaceutical here in this cluster itself is an
entrepreneurial and innovative act and it suggests that Delta is not actually adopter but
Innovator itself. Also, the survival of the firm for the past 24 years is associated with the
faster adoption of latest and innovative procedures on the basis of the collaborations with
the academic institutions. The respondents of Iceberg strongly agreed that their firm is a
fast adopter of innovation and the means they use for adoption is the international
research in latest journals of high repute. This has paid off for their early adoption of
innovation so much so that they have manufactured products successfully following the
research which have not been produced by any other firm in the cluster. The researcher
observed that the firm has added a good number of products to its line although the firm
is not very old. The researcher also observed that there are state of the art laboratories and
computer systems in all the offices. Although Iceberg does not have an official website as
yet, it has an official facebook. The respondents of the Rock pharmaceutical strongly
agreed that the rate of adoption of innovation in their organization is faster and they
respond quickly to innovations. Our ability to adopt quickly is due to the fact that we are
at the top of all in terms of employee capability, chain management, installation of latest
units and the sales. The researcher also observed computerization and internet facilities in
285
all the offices beside the functional and detailed official website of Rock pharmaceutical.
Therefore the researcher can assess that except for Wisdom pharmaceutical which work
only in formulation and has no intention for innovation or even proper computerization
and can be termed as a late majority if not laggards, the other participating
pharmaceutical are early adopters of innovation and Delta pharmaceutical can also be
termed as the innovator in Nowshera cluster as it follows strong collaborations with
academic institutions in light of which it produce research based products earlier than
most of the participating pharmaceuticals. The findings about the rate of adoption of
innovation are given in table 5.2.2
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Icebe
rg
Rock
Rate of
Adoptio
n of
Innovat
ion
Early
adopter.
Late
adopte
rs.
Early
majorit
y.
Early
adopte
rs.
Early
adopters
.
Innovato
rs.
Early
Adop
ters.
Early
Adop
ters.
5.2.3 Sharing Knowledge Sources
As discussed in the literature review, learning of knowledge and its sharing is highly
important. The sustainable economic development can be ensured by the collaboration
carried for knowledge sharing (Singe and Scharmer, 2001). Knowledge is a compact
286
body of facts that are accumulated by humans and any new knowledge creation is largely
based on the recombination of the knowledge that already exists in the firms. But so far
as innovation is concerned, the type of knowledge that is resulted due to the
reconfiguration of existing knowledge, the SMEs often makes trends towards incremental
innovation only. This trend can be changed however if a ploy of external networking is
incorporated through knowledge spillover (Yang et. al, 2010; Kostov, 2010).The
knowledge gained from outside is well distributed in SMEs inner clusters by interaction.
SMEs depend more on the tacit knowledge as these SMEs lack the potential to acquire
more codified and quantifiable knowledge that is more scientific in nature (Bougrain and
Haudeville, 2002). The researcher investigated whether the participating SMEs have
practiced sharing their knowledge sources with each other. The responding the managers
unanimously agree to the significance of Sharing of knowledge sources. Since it is one of
the oldest firm, the system is more developed than some of the nascent organization here,
the Hizat pharmaceutical believe in sharing knowledge sources. As this is a knowledge
based and more porous industry, the knowledge sources cannot be kept hidden as well, so
more often technical knowledge sources are shared mutually. The respondents of Wisdom
pharmaceutical were also found to be appreciating the importance of knowledge sharing
but they restrict this only to the collaborating firms. The majority of the respondents from
Zinta Pharmaceutical also unanimously agreed that they share knowledge sources as they
believed that it gives mutual benefits. The quality control manager of Zinta
pharmaceutical rather believed that it increases with sharing as he said that;
Knowledge is an ocean and you need to
share it as it increases. We benefit by
287
sharing knowledge with our networks.
Similarly the respondents of Aries also agreed that they share knowledge sources and not
always give rather than sometimes they also get knowledge from other firms especially
when the new processes and technology demand surface in our firm. They also agreed
that it is hard to work alone in the same industry and not sharing knowledge sources. An
important fact about Stanley pharmaceutical is however that they share knowledge
sources with academic institutions specialized for medicine study like the Khyber Girls
medical college and Rehman Medical Institute. The Delta pharmaceutical also strongly
believe in sharing knowledge particularly with the collaborators. This was substantiated
by the responses of Iceberg pharmaceutical respondents who strongly agreed that they do
share knowledge especially from collaborators like Delta pharmaceutical in the Nowshera
cluster wherein they get technical knowledge from Delta but they often keep the
information related to the sales and market values private. Unlike all the other
participating pharmaceuticals, Rock pharmaceutical did not agree about knowledge
sharing as they do not think it is worth doing because most of the knowledge is taken
from internal sources and sharing it externally will leave your organization privacy at
stake. They believe that the internal sources are sufficient for innovation instead of going
to the external sources. However, the researcher observed that Rock Pharmaceutical is
somewhat trapped by its competence. As it prefers the known skills experienced more
frequently in the yester years and do not look for new competence either due to the lack
of its availability or by the regulations making its implementation harder for
them(Taipale-Erävala et al., 2015). So there is found an agreement about the significance
of sharing knowledge sources in seven out of the eight participating firms. The aggregate
288
responses can be coded and summarized in table 5.2.2
The
me
Hizat Wisdom Zint
a
Aries Stanle
y
Delta Icebe
rg
Rock
Shar
ing
kno
wled
ge
Sour
ces
Stro
ngly
Agre
e
Strongl
y Agree
Stro
ngly
Agre
e.
Strongl
y
Agree
Strong
ly
agree.
Strongl
y agree
Stron
gly
Agre
e.
Disagre
e.
5.2.4 Collaborations and level of mutual trust
In this section the researcher discuss the cross case responses of the participating
organizations regarding the Collaborations and level of mutual trust they have on their
collaboration. The literature has revealed that collaboration is of immense importance
although there are varying concepts of authors whether collaborating with the educational
institutions is better or with services. The later is supported as (Tödtling and Kaufmann,
2009) said that establishing relationship with service organization than with educational
organizations help in innovation as it requires practical knowledge, however he also
signified the importance of educational institutions by giving the view that in order to
stimulate more advanced kind of innovation and using large size, firms interact with
universities for requisite knowledge accumulation(Tödtling et al., 2009).However a more
289
contrasting view is that the firms that are opportunistic, will risk it for not getting all the
required information. However, Institutional partners are lesser opportunistic than the
market partners as the later compete for profit maximization in the same industry(Kim
and Lui, 2015). The respondents from the participating SMEs also had the mixed views
about whether they prefer to collaborate generally or with specific institutions and
whether they trust fully or hold back in some specific areas. The respondents of the Hizat
pharmaceutical agreed that they do collaborate and do trust their sister organizations
specifically but not generally with other pharmaceuticals as they have the same
commercial benefits attached to certain innovations. As the quality control manager said
it simply that;
Yes we do collaborate. We trust our
collaborators but not entirely as after all we
do have commercial purposes to meet too.
For that reason we decide on how much we
can share and how much we need to hold
back.
The respondents of Wisdom pharmaceutical and the Zinta pharmaceutical also
substantiated this view by mentioning their collaboration with Hizat pharmaceutical as
this is a pioneer pharmaceutical in this cluster and the sisters firms like Wisdom and Zinta
take the input from them. Most importantly as the Wisdom pharmaceutical shared that
sometime they do carry these collaborations for importing raw material with their
collaborators too. This was mark as an emergent theme by the researcher as this was not
290
reviewed in the literature. Zinta pharmaceutical also reiterates the fact that they do trust
to certain level and not beyond that as one respondent said that
To certain degree we do trust but not beyond
that. For instance in some technical areas
we seek each other support but in terms of
our sales and customers, we cannot.
The respondents of Aries agreed about the importance of collaborations and they also
collaborate with the business firms and the institutions to carry innovations. They
collaborate with PCSIR where they conduct some tests which are otherwise difficult to do
in-house. Their collaboration presents a double helix model where they mostly interact
and collaborate with the academia. They respondents of Stanley were also convinced
about the importance of collaborations with academic institutions like medical colleges to
operate innovatively. They however added a new facet to it by saying that they have
collaborations with Suppliers as they make it a more strategic partnership. The delta
pharmaceutical in Nowshera Cluster also strongly agreed that the diffusion of innovation
is made prompt by collaborations and they added that they trust their collaborators fully
as it benefits all the stakeholders. The respondents of Iceberg pharmaceutical also agreed
that they have collaboration with Delta pharmaceutical and they do trust each other
although there is clear policy about the level to which can go in collaborations. They
collaborate for technical support mostly. The Rock pharmaceutical although did not agree
for collaborating with the firms in the cluster they did agree about their collaboration with
a firm in Karachi which is their export partner as well. So overall, the participating SMEs
291
agreed about the importance of collaborations in the innovation of their organizations
although their collaborations are different in ways and means from each other. The
summary of this theme is given in table 5.2.4
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Icebe
rg
Rock
Collaboratio
ns and level
of mutual
trust
Agree
d
Strong
ly
Agree
d
Strongl
y
Agreed
Strong
ly
Agree.
Strongl
y
Agreed.
Stron
gly
Agree
d.
Stron
gly
Agree
d.
Agree
d.
5.2.5 Value addition through collaborations
The researcher tried a probe question to reinforce the finding about the collaboration
theme. The respondent of the participating strongly agreed in unanimity about the
importance and value additions of collaborations to their respective organization whereas
Rock pharmaceutical was the only one which remained neutral , as they have more trust
in their own R&D and do not go to collaborations for innovations. Whereas some
strongly believed that it adds values to the extent that sometimes it triggers innovation in
the firm. The most important values that the respondents stated are the time saving,
technical guidance, cost cutting, profit maximization, provision of insight into market
situation, more value added products can manufactured, broadens the knowledge base as
well as it can help in imports and exports. So the overall responses of the participating
292
firms showed a strong agreement over the questions of adding values to their firms
through collaboration except the Rock pharmaceutical which remained neutral. The
responses are given in the table 5.2.5 below
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Iceb
erg
Roc
k
Value
addition
through
collaboration
s
Strong
ly
Agree
d
Strong
ly
Agree
d
Strongl
y
Agreed
Strongl
y
Agree.
Strongl
y
Agreed.
Stron
gly
Agree
d.
Stro
ngly
Agre
ed.
Neut
ral.
5.3.1 Drivers and sources of Innovation
An important part of the current study was to identify the various sources and drivers of
innovation in the participating firms. The researcher identified this theme from the review
of literature and believed that it will help recognize the various sources which help the
innovations in the participating firms in particular and the clusters in general. The sources
which set the SME innovation base can be broadly categorized as the internal and
external sources however the researcher used this theme to draw collective responses
from the respondents about both internal and external sources. The internal R&D has
been a traditional source of new product innovation and has been considered as one of the
best asset, giving edge over the competing firms and rivals. This makes a close
293
innovation model labeled by the discovery; development and commercialization of
technology (Teece, 1986; Chesbrough, 2003).However there are researchers who put
their weight behind the importance of external sources and open system for more robust
and frequent innovation. They relate that the cooperation mode of SMEs signifies that for
their innovation these SMEs seek cooperation from external world either vertically by
setting up relations with educational and research organizations or/and laterally through
linking up other SMEs(Yao, 2008). The respondents from Hizat Pharmaceutical
unanimously agreed about the internal and external sources of innovation as driving their
innovation process. The internal sources are like the R&D, the employees specially the
technical staff and the most important external driver for Hizat is the Market itself.
Similarly, the respondents from Wisdom pharmaceutical relate the human resources,
especially those who work in the market, the internet technology used in the firm for
doing research as their internal sources and market trends as their external source for
making innovation happen in their organization. The Zinta pharmaceutical respondents
unanimously agreed for the employees, the R&D and the internet technology present in
their firm as internal sources whereas the experts from outside the firm as the external
sources and drivers of Innovation. Although Aries has a comprehensive system for
organizational innovation, the respondents strongly agree that the market research,
market intelligence about who sells what and above all the customers are the main
sources of innovation. The Stanley respondents identified the employees, the market
environment, customers and the collaborators as their important innovation drivers. Delta
pharmaceutical respondents state the employees, the vision of the CEO, R&D and the
educational institutions as the drivers of Innovations. Whereas the Iceberg respondents
294
stated that there are internal sources like the R&D, the technical staff and the external
sources like the customers, competitors, the suppliers and at the very top, the market
itself. Similarly for Rock pharmaceutical internal driver of innovation is the employees
whereas externally it looks to the market, customers and competitors for innovation. This
showed that the most dominant drivers of innovation in the participating organizations
are market, the employees, R&D, customers and the internet technology as these are
mentioned by most of the respondents as the sources of innovation in their organization.
The summary of these drivers is given in table 5.3.1 as below
Theme Hizat Wisdom Zinta Aries Stanley Delt
a
Iceb
erg
Roc
k
Drivers and
Sources of
Innovation
in SME
R&D,
employ
ees ,tec
hnical
staff,
Market
Marketi
ng staff.
Internet
technolo
gy.
Market
trends.
Employ
ees,
R&D,
the
internet
technolo
gy,
External
Experts
of the
field
Marke
t
researc
h,
Marke
t
Intelli
gence,
custo
mers.
Employ
ees.
Market
Environ
ment.
Custome
rs.
Collabor
ators.
CEO
Visi
on,
R&
D.
Educ
ation
al
instit
ution
s.
R&
D.
Tech
nical
staff.
Cust
omer
s,
Com
petit
ors,
Supp
Emp
loye
es.
Mar
ket.
Cust
omer
s.
Com
petit
ors.
295
liers.
Mar
ket.
5.3.2 Idea Sources for new products and services
This sub theme was researched through a probe question in all the participating SMEs so
that the researcher can come up with more detail responses from the respondents in
substantiation of the previous main theme. The ideas for new products and services can
come from various sources. The extant literature suggests that there are internal as well
external resources. Sometimes a more demanding customer can help provide the base for
new product and service. Meeting the customers demand can always help the firm’s
managers to brainstorm and produce innovative ideas (Kristensson et al. 204). Lead
customer innovation is an example where these customers are business clients who are
keenly interested in some kind of specific innovation. These clients are those who
participate in risk taking experiments and innovations in their organizations (Von Hipel,
1986). Some researchers also believe that the human resources are sources of new
product or service innovation in the organization(Cohen and Levinthal, 1990; Rose et al.,
2009; Henard and McFadyen, 2012) however their number cannot be too large as mostly
a large number of employees are preoccupied by the daily routine activities of their
organizations(Nonaka and Takeuchi, 1995). A more dynamic marketing strategy owned
by firms can get ideas from the market through it marketing process (Knight et al.,
1995;Hill, 2001).There are views in the extant literature that networks are of great use to
296
meet the specific needs of organizations to fill up the gap of specific knowledge
deficiency(Gomes-Casseres, 1997). In the current study, the respondents of Hizat
pharmaceutical enumerated market, marketing staff and the technical staff as their idea
sources. The respondents of Wisdom put their weight behind the market, marketing staff
and other employees of the organization for providing ideas for new products and
services. Zinta pharmaceutical termed market, competitors, customers and the R&D
employees as the sources of new product and service ideas. The respondents of Aries
looked more towards the pharmacopeia of advanced countries like USA or UK and the
reference countries nominated by DRA, drug regulatory authority. The respondents of
Stanley strongly agreed for the market trends, the employees, the customers, the internet
searches and market as their innovative product or services sources. The researcher found
the respondents of delta Pharmaceutical convinced about the Market, the customers, the
suppliers and even the competitors as the key sources of new products and service ideas.
Further, the iceberg respondents unanimously agreed about market, customers, marketing
people, and market trends as sources of ideas. The most dominant responses of these
respondents are given in table 5.3.2
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Iceb
erg
Rock
Idea
Sources for
new
products
and
Market,
Marketi
ng
staff.
Technic
Marke
t,
Marke
ting
Staff,
Market,
Competit
ors,
Customer
US
and
British
Pharm
acopei
Market
trends.
Employ
ees.
Mark
et,
Custo
mers,
suppli
Mar
ket.
Cust
omer
Mark
et.
Custo
mers.
Mark
297
services al staff. Emplo
yees
s.
R&D
employee
.
a. The
referen
ce
countri
es
nomin
ated
by
DRA.
Custom
ers .inte
rnet
searche
s.
Market.
ers.
Comp
etitor
s.
s.
Mar
ketin
g
peop
le.
Staff
,
cust
omer
s.
Com
petit
ors.
Mar
ket
trend
s.
eting
Peopl
e.
R&D
Table 5.3.2
5.3.3 Knowledge and training level of Staff of the SME
In order to make the organization innovative and keep pace with the contemporary trends,
298
the organizations need to have the best staff equipped with requisite knowledge and
training. As some researchers have viewed that a good pool of skilled and educated
human resources can add to the innovativeness of firms as they adopt technological
advances and meet the labor demand, collect new ideas and absorb these ideas within the
firms (Cohen and Levinthal, 1990; Rose et al., 2009; Henard and McFadyen, 2012). In
the current study this theme is checked mainly to know respondents views of how the
employees are important players for innovation and whether they have the desired
knowledge and training level to carry innovations in their organizations. All the
concerned managers and CEOs from all the participating organizations responded that
they strongly believe in the importance of knowledge and training level of the staff for
making the organization innovative. The respondents of Hizat pharma strongly agreed
that the professional staff has the required level of education to carry out the processes in
innovative ways and the little bit of lack in experience is fulfilled by getting training from
the seniors in the department. The unanimous agreement of Wisdom respondents was that
the level of education and training of staff of Wisdom pharmaceutical is of an extent to
which they can help in carrying innovation. Although there was not a unanimity of views
regarding the knowledge and training level of the respondents of Zinta pharmaceutical,
the researcher presumed an agreement about thus theme, not strong though . The
respondents of Aries pharmaceutical strongly agreed that the staffs who are working with
them for a long time now have the requisite knowledge and training for carrying
innovation. Stanley respondents giving credit to the human resource management
department for selecting and retaining the best human capital strongly agreed that their
employees possess the knowledge and training for carrying innovation in the
299
organization. Although the respondents of Delta believed that the employee development
is a perpetual process, they agreed that the employees posses the required knowledge and
training and wherever they feel their staff need to be trained, they arrange training for
them. The iceberg respondents agreed about the potential knowledge and training of the
employees for innovation however they also seemed convinced that there is a need of
further training in some areas. Similarly the respondents of Rock pharmaceutical also felt
that sometimes there is further training required, especially when they bring new
machines. In that case they hire trainers for the employees who get trained through those
specialized people.
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delta Icebe
rg
Roc
k
Knowledge
and training
level of Staff
of the SME.
Agreed.
Need
improv
ement
in
training
level.
Strong
ly
Agree
d.
Agreed.
Need
improve
ment in
training
level.
Stron
gly
Agree
d.
Strong
ly
Agree
d.
Strong
ly
Agree
d.
Agree
d.
Need
impro
veme
nt in
traini
ng
level.
Agr
eed.
Nee
d
imp
rov
eme
nt
in
trai
nin
g
300
leve
l.
5.3.4 Challenge of idea stealing/ copyright
The researcher tried to investigate this theme because in the extant literature it was
reviewed that there are problems like this which does not help the innovation process in
the long run. The original works of the firms are sometimes imitated by the other firms
and hence take the advantage as the imitations are much cheaper than innovating. The
copyrights law and rules vary from region to region and hence in those states which do
not observe high copyrights it is better to protect the firms innovation from being theft so
that the investments of firms for growth are protected(Fan, Gillan, & Yu, 2013).The
developing countries contribute about 2/5th to the world’s research and spend around one
quarter on R&D yet their inventions are claimed to be imitative (Lorenczik & Newiak,
2012). However some researchers noticed a 47% failure of innovators as compared to
only 8% failure rate for late entrants. Imitation of innovation is owned by those firms
which have little skilled people, shortage of finances and low experimental equipment’s.
These are however followed by the imitating firms mainly for the advantages to face low
risks and low investments(Yao, 2008).
In the current study the researcher probed as to how the participating firms look to this
issue. The Hizat pharmaceutical responded in agreement that this indeed is a challenge to
protect the innovative ideas. Their main concern was the leaving employees who join
other firms for better salaries. When they leave, they take the ideas regarding the
organizational innovation and that is how the idea stealing becomes a challenge. However
301
the respondents of Wisdom strongly disagreed about the issue of idea stealing claiming
that this is an open industry and the scientific base of this sector does not help protect
much of what we have or what other firms have. Because mostly all these relevant
information are readily available on the internet. The respondents of Zinta pharmaceutical
also did not consider it to be a serious threat. Similarly the respondents from Aries and
Stanley also did not view it as a potential threat. So the researcher found that the
Peshawar cluster has not viewed the copyrights problems as to be something very serious.
In the Nowshera cluster, Delta pharmaceutical considered the idea stealing as threat as
well as an opportunity as the CEO/Director said that;
To be honest in this field, if there are
stealers, this means that you have to take
extra care, in this sense, you create more
and more innovation in your organization,
more frequently.
However the other firms in the same sector like the Iceberg and Rock pharmaceutical also
did not view it as a threat. Overall, only two firms, Hizat and Delta pharmaceuticals
viewed it as a challenge and the researcher found one thing in common in both these
pharmaceuticals, both of them are pioneers in their respective firms in as much as the
participating firm’s ages are taken into account. This gave the substantiation to the
theoretical/ literature claim that the risk involved with innovating firms sometimes avoid
pioneering although they may know about the potential benefits about innovating(Zheng ,
2006).
302
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delta Iceb
erg
Rock
Challenge of
idea stealing/
copyright
Strong
ly
Agree
d.
Strongl
y
disagre
ed.
Disagr
eed.
Disagr
eed.
Disagr
eed
Strongl
y
Agreed.
Disa
gree
d.
Disag
reed.
Table 5.3.4
5.3.5 Inspiration from Competitors Products
A somewhat relevant to the previous theme, the researcher wanted to triangulate the
findings of the previous theme by probing whether the respondents agree or not about
getting inspiration from the competitors product. Also, there was the intention to see if
competitor can also play the role of driver of innovation. The respondents from nearly all
the participating organizations disagreed. Only the Delta pharmaceutical and Rock
pharmaceutical in the Nowshera cluster agreed about the fact that they get ideas from the
market and hence need to look into the competitor’s products. Therefore the researcher
found this theme to be the one which can be discarded as the respondents from the
majority of the participating firms think it to be covered in previous themes.
5.3.6 Customers Input as driver of Innovation
During the review of literature, the researcher found that the customers are an important
player of innovation. It is one of the most important external players. As Kristensson et
303
al. (2004) suggested that the competent customers having a vision can trigger the
management to brainstorm and innovate. Customer’s involvement is a good way to bring
information to the innovation processes of an organization. This works on the basis of the
fact that customers know their needs best and when they have a chance, they can best
tailor the products according to their needs, better than any other producer does. Most of
the customers are well versed about the market prevailing situations (Gassmann, 2006;
Von Hippel, 2005). In the current study all the participating firms have agreed that
customer is a very important factor in the innovation process but there are industry
specific conditions to this fact. The majority of the participating organizations asserted
the importance but told that there is no direct contact with the customers rather some
middlemen or firms play the role of a bridge in this connection. In case of Hizat
pharmaceutical, this feedback and reviews of customers/patients come through
franchises, distributors and the doctors. The respondents of Wisdom pharmaceutical
agreed outright about the importance of customer feedback in the innovation process and
they consider the marketing people as the players who get these ideas through doctors.
Similarly, the respondents of Zinta pharmaceuticals also termed the customer feedback as
the central point of importance and their marketing people share the feedback they get
from market with the production and quality control department. Aries pharmaceutical go
an extra yard as per as the customer feedback is concerned as they do not merely get the
feedback through market team rather they use the innovations of social media as
whatsapp and facebook to interact with the customers, so much is customer feedback
crucial for them. Stanley pharmaceutical get customer feedback both directly from their
bigger customers like the distributors and individual customers like the patients through
304
doctors. Delta pharmaceutical associates the customers as the origin of innovation.
Iceberg pharmaceutical also agreed about the fact that customer feedback is important but
they also think that they get the feedback through doctors who review the products in
light of patient’s responses. Rock pharmaceutical value the inputs of the customer too but
they too take the feedback from the medical practitioners through the marketing staff and
not directly from the customers.
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delta Iceber
g
Roc
k
Customers
Input (as
driver of
Innovation)
Strong
ly
agreed
.
Strong
ly
agreed
.
Strongl
y
agreed.
Strongl
y
agreed.
Agree
d.
Strong
ly
Agree
d.
Agree
d.
Agr
eed.
Table 5.3.5
5.3.6 Role of Suppliers in innovation diffusion and Adoption
Gäre and Melin( 2011) put the suppliers role right up there with customers as an
important factor for organization to innovate.Similarly authors like De Winne and
Sels(2010) also suggested that the role of suppliers is important in the innovation process.
Suppliers role in innovation is highly rated as more than 70 percent SMEs rate it from 4
305
to 5 on likert scale. As the ups and downs in the supply of raw material can become a big
external barrier for innovation in organization(Saigosoom, 2012). The extant literature
suggest that this is an important factor for firms to innovate and that is the fact that the
researcher wanted to check whether it plays any role in the diffusion and adoption of
innovation in the participating firms. The respondents of the Hizat pharmaceutical argued
about the vitality of the suppliers in their innovation process so much so that they
consider it to be a strategic partner for long run. Since this was not reviewed in any
academic literature during the review which gives the feeling of it being a grounded or
emergent theme to the researcher. The respondents of the Wisdom pharmaceutical did not
consider it as an important factor as they formulate only the basic generic products and
for that the raw can be acquired from any suppliers easily. Zinta pharmaceutical also
found suppliers as an important external player in the dynamics of the innovation process.
Aries pharmaceutical also strongly agreed about the fact that since suppliers can help in
identifying the current market trends, their role in the adoption and diffusion of
innovation is highly important, that is why they establish long term relationship with
them. However Stanley pharmaceutical terms it as one very important factor as its
respondents agreed that the organizational innovation process is possible only because of
the timely procurement of quality raw as their slogan is “QUALITY INPUTS RESULT
IN QUALITY OUTPUTS”. The respondents of Delta pharmaceutical overall agreed very
strongly about the role of the suppliers in their innovation process and the CEO collected
his thoughts by saying that if the demand and supply phenomenon is taken into account,
process of our product innovation starts up with the customers and completed by the
producers upon the provision of the quality raw material by the suppliers. Similarly, the
306
respondents of Iceberg strongly agreed about the importance of suppliers role in the their
innovation process and they even went to the extent that the suppliers actually define the
process to be either innovative or otherwise because if they do not provide you the best
raw material for those molecules which they have researched, the process of innovative
products cannot be completed in time. Rock pharmaceutical also agreed that suppliers
share the information about what is the trend and what is bought in bulk. So overall all
the participating organizations agreed about the fact that suppliers play a decisive role in
the adoption and diffusion of innovation process except for Wisdom pharmaceutical. The
responses are summed up in table 5.3.6
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delta Icebe
rg
Roc
k
Role of
Suppliers in
innovation
diffusion
and
Adoption
Strong
ly
agreed
.
Disagre
ed.
Strongl
y
agreed.
Strong
ly
agreed
.
Agree
d.
Strong
ly
Agree
d.
Agree
d.
Agr
eed.
5.3.7 Screening and evaluating Ideas
After knowing about the factors which can play a role as drivers of innovation in the
participating organization, the researcher tried to probe how the ideas are screened and
307
evaluated. This is important especially as it can give an insight about the organizational
structure, culture and behavior towards the innovative and creative ideas. Because in
some closed and strict organizational structures, ideas cannot groom as the high ups
follow their own methods and do not intake from any of the middle managers or
supervisory level managers. The Hizat pharmaceutical respondents added in this
connection that they connect in formal meetings of all concerned departments and their
ideas are discussed there in technical terms. Wisdom pharmaceutical respondents to the
question regarding this question showed that the director of the firm holds the key in
making the decision whether to take or drop any idea. So here it showed that the system
does not consider the ideas and inputs of others although it takes the feedback but
decision making power lies with the director. The researcher probed this question from
Zinta pharmaceutical. The aggregate of the responses can be summed up like this that
there is feedback of management based on market demands but still the final authority is
the Director himself whether to take or drop any idea. The respondents of Aries
unanimously agreed about the fact that all the stakeholders give ideas and even criticism
is also taken positively but in the end the board of director in its meeting decides which
idea is to be taken and which one has to be dropped. On the contrary, Stanley
pharmaceuticals is not all that open to junior level management as per as the idea
evaluation and screening is concerned. They follow hierarchy and protocol while the
decision about ideas pick and drop lies with the top management only. In Delta
pharmaceutical, idea screening and evaluation is done by the board of directors who see
the commercial value of the ideas. Similarly, Delta pharmaceutical also get the ideas
screened through the board of directors meetings. However, the idea screening and
308
evaluation of Rock pharmaceutical follows the structural formalities and it comes from
the bottom to top through the immediate manager. The aggregate responses of all
participating firms are summarized in table 5.3.7
Theme Hizat Wisdom Zinta Aries Stanley Delta Iceb
erg
Roc
k
Screenin
g and
evaluatin
g Ideas
Forma
l
Meetin
gs.
Director
picks or
drops
ideas.
CEO
makes
decisio
n on
feedbac
k of
manage
rs. No
board
meeting
.
Board
of
director
s
decides
. Ideas
are
taken
from all
stakeho
lders.
Top
Manage
ment
screen
ideas.
Board
of
directo
r
evalua
te if
the
ideas
are
sellabl
e.
Boar
d of
Dire
ctors
eval
uates
the
ideas
.
Hier
arch
y
and
Stru
cture
is
follo
wed.
5.4 Role of Marketing Research in finding the Environmental Conditions
This section of the interview guide helped the researcher to probe about the role of
marketing research, the importance of R&D and the environmental conditions which
either promote or hinder the adoption and diffusion of innovation in the participating
309
firms. The researcher also believes that an important outcome of this section of the
interview guide, specially the probe question regarding the marketing research
triangulates the previous findings like how the ideas are screened and evaluated. New
ideas exist because of a dialogue carried out by individuals through their social
interaction in quest of developing new products , rendering new services and carrying on
new organizational processes(Leonard andSensiper,1998 ;Brown and Duguid,1998).A
deep insight into the issue reveals that ideas do not come up spontaneously rather are the
result of a complex and a variety of overt and covert processes(Schulz and Hoegl,
2008).The firms in quest of this target, deploy a strict marketing intelligence system
through innovating, creating opportunity-ability which helps in floor setting for market
responsiveness, market externalities and flexibility (Sambamurthy et al, 2003). The
researcher of the current study tried to investigate the theme by asking about the nature of
marketing research. The theme was probed through (1) whether there is formal or ad hoc
research (2) is risk calculated and test marketing done prior to commercialization of new
products.
5.4.1. Market Research: Formal or Ad hoc
The extant literature revealed that those firms which have stronger R&Ds are more into
innovative products than those which do not invest in R&D. Although the small firms are
not normally considered much for R&D activities, the researcher tried to investigate the
phenomenon in the participating SMEs. The unanimous response from all the
respondents of Hizat pharmaceutical showed a strong agreement that there is formal
marketing research involving the R&D and the marketing employees who try to figure
310
out the opportunities in the market and the organization makes the necessary adoptions.
The researcher found a strong disagreement about Wisdom pharmaceutical that there is
no R&D and the research to adopt innovations in this organization is not formal. On the
contrary to Wisdom pharmaceutical, Zinta pharmaceutical practice a formal research for
identifying gaps to work out innovatively, the respondents mark there formal research as
a business secret and did not share how they carry it. A rather unique way is adopted by
Aries and Stanley to have a mix mode where it follows a predominantly informal
research based on customer feedback but at some other time follow the formal research
where it follows a formal research involving it R&D. The latter happens specifically
when the customer feedback is not substantial. In delta pharmaceutical research is formal
through R&D whereas the Iceberg pharmaceutical in the same cluster at Nowshera
conducts research through the marketing people without having designated procedures in
an informal way. The Rock pharmaceutical also has a mix research method for market
gaps identification as it follows both formal R&D research and informal research. Hence
only Wisdom pharmaceutical among all the participating firms is the one which does not
have a proper marketing research or not even the ad hoc research for bringing the
innovative productions or processes as it operates in a more routine method. The
responses are summarized in table 5.4.1
Theme Hizat Wisdom Zinta Aries Stanley Delt
a
Iceber
g
Roc
k
311
MarketR
esearch:
Formal
or Ad hoc
Strongly
Agree
for
formal
research
by
R&D.
Strongly
Disagree
d.
Strongl
y
agreed
for
R&D
researc
h.
Mix
mode
, both
forma
l and
infor
mal.
Mix
mode,
both
formal
and
informa
l.
For
mal
Rese
arch.
Con
duct
ed
by
R&
D.
Inform
al
Resear
ch
carried
by
Marke
ting
people
.
Mix
ed
mod
e of
resea
rch.
Table 5.4.1
5.4.2 Risk calculation and test marketing
The researcher tried to probe whether there is some mechanism of calculating the risk
attached to making any innovations in the participating firms. The respondents of Hizat
Pharmaceutical strongly agreed that without proper risk calculation and test marketing,
the innovations of organization cannot be commercialized. However the respondents of
Wisdom pharmaceutical did not respond to this probe question positively and the
researcher found that they d not test market or calculate the risks. All the respondents of
Zinta pharmaceutical strongly agreed that there is proper test marketing and risk
calculation procedures for each innovation to take place otherwise it will not be possible
to make these innovations a success. In Aries pharmaceutical, R&D works for assessing
the risk associated with any innovative product before its commercialization. The Stanley
312
management also agreed for test marketing before commercialization and termed it rather
unwise to commercialize without test marketing. Delta pharmaceutical respondents also
agreed explicitly about the importance of test marketing and risk calculations of their
innovative products prior to commercialization. The respondents of Iceberg unanimously
agreed about the test marketing and risk calculation and added that they produce on low
scale the initial batches of their innovative products and until they get reviews from the
doctors and practitioners, they do not commercialize. However the respondents of Rock
pharmaceutical added that it is actually a regulatory act too. When they get permission
from the concerned ministry, they are directed to prepare the initial batch which is tested
before commercialization. Again, the aggregate of the responses showed that only in
Wisdom pharmaceutical, there is no test marketing and risk calculation whereas all the
other have considered it very important. The Wisdom pharmaceutical produce more of
the routine products than the innovative products therefore they may not test them or
calculate risk attached to it. The findings are summed in table 5.4.2
313
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Ice
ber
g
Roc
k
Risk
calculation
and test
marketing
Strongly
Agree
for risk
calculati
on and
test
marketin
g.
Strong
ly
Disagr
eed.
Strongl
y
agreed
for risk
calculat
ion and
test
marketi
ng.
Strong
ly
Agree
for
risk
calcula
tions
and
test
market
ing.
Strongl
y Agree
for risk
calculat
ions
and test
marketi
ng.
Strong
ly
Agree
for
risk
calcula
tions
and
test
market
ing.
Str
on
gly
Ag
ree
for
ris
k
cal
cul
ati
on
s
an
d
tes
t
Stro
ngly
Agre
e for
risk
calc
ulati
ons
and
test
mark
eting
as it
is a
regul
atory
requi
314
ma
rke
tin
g.
reme
nt
too.
Table 5.4.2
5.5 Barriers to the Spread of Innovation
During any process of change and knowledge flow, there are often resistances among
which sometimes, there are some which take positive corrective measures to define and
implement innovation (Maurer, 1996; De Jager, 2001). Resistance to the diffusion of
innovation is different from inertia in organization. While resistance is a state of re-action
to change, inertial state of organization is the state of inactiveness over a long period of
time. Firms do not normally want to innovate and change according to the external
modifications and changes having the difficulties and lack of administrative potential. In
economic terms, inertia is the state of a firm where it lacks a plasticity to capitalize on the
persistence of forms and functions (Rumelt, 1995; Bazerman, 2005).The inertial state of
firm is related to the routine exercises of firm which are non-deliberate, repetitive,
contextual and process related. Employees in an enterprise where routine is prevalent
saves time and less consummate them as they can get away with mental stress and
tiredness. They make use of the scarce information. However if this kind of routine work
stops the organization to undertake any innovation, this situation is a real alarm (Egidi,
1996).
As a matter of fact, the research has found some techniques and strategies to solve the
315
issue of inertia but the exact solution is still an open challenge for the reason that the
cultural inertia adds to the fragility conventional operative approaches based on technical,
sectoral and financial players. This form of inertia presents serious hurdles to the
diffusion of innovation even in advanced economies. In some organizations and fields
imitational behavior and the launching of a positive word of mouth process may help to
inculcate a creative behavior and positive conditions to establish contact channels,
channels of information , relationship with research centers and clusters and hence induce
an innovation based developmental policy. Sometimes, however, based on some
important operational problems and lack of proper diagnosis of inertia, firms prefer to be
an Inertial than active (Cannarella and Piccioni, 2007). The barrier to the adoption and
implementation of innovation is an important topic but it is studied in developed and
industrialized countries more than in less and developing countries (Bell and Pavitt,
1992).Barriers to innovations (as oppose to facilitators which motivate innovation) are
those factors which can hamper innovation in any way. It is important to find out the
impact of the barriers on innovation processes; however it is difficult to measure the
consequences of the barriers on the innovation. The barriers of innovation can be
categorized as exogenous or external and endogenous or internal barriers. The external
barriers include obstacles to supply, demands and environmental barriers. The difficulties
in receiving the raw, financing and technological knowledge are included in supply
related barriers. The market constraints, customer’s needs meeting and perception of risk
in innovation processes are demand oriented barriers. The government regulations, policy
implications and anti-trust measures are categorized as environmental barriers. Whereas
internal barriers can be placed into firstly, resource based such as; lack of funds,
316
technical skills, and lack of management time. Secondly, into culture and system
oriented, out dated accountancy system. Thirdly, behavioral barriers like the top
managers fear of risk and employees resistance to accept change and innovation (Rush
and Beassant,1992).Common sense will tell that the relationship of barriers to innovation
is negatively associated with firm performance however another facet makes this
assumption more complicated, if the barriers act as stimuli to innovation rather than
obstacles and hurdles. As the SMEs lag behind in internal resources and expertise, it
needs technology and resources from external networks and collaborators to overcome
the barriers. More barriers mean more networking needed.
As a matter of fact, SMEs everywhere face more challenges and inhibitors as compare to
large firms but in developing and less developed countries the insufficient technology and
policy infrastructure are more threatening. The lack of education and on job training can
be a constraint and barrier. Also the financing of banks for innovation activities is another
barrier. Further, the cultural and norms control effect on the manufacturing of new
products can be one other important barrier(Hadjimanolis, 1999).
The researcher wanted to study the barriers to diffusion of innovation across the
participating firms. The researcher identified two types of barriers for the diffusion of
innovation during the review of literature which are (1) lack of expertise or skill barrier
and (2) financial barriers and tried to test these in the participating firms in the current
study. The aggregate of responses are discussed in the sub themes below.
5.5.1 Lack of expertise
During the current study the researcher probed whether the participating firms find it
317
difficult to have the expertise for the adoption and diffusion of innovation. Two out of
three respondents from Hizat pharmaceuticals agreed that there is a lack of expertise for
certain specific innovations to diffuse in the organizations more so because of the fact
that the state of the art laboratories need to be operated by people skilled with latest
technical expertise. Wisdom pharmaceutical disagreed for lack of any expertise as they
are satisfied with the level of education and skill of the employees. Zinta pharmaceutical
also disagreed strongly for lack of expertise and skills as a barrier. The respondents from
Aries pharmaceutical added that internally they are satisfied with the expertise of the
employees but externally they face overwhelming problems from the government
agencies. This is an emergent theme for the study as government agencies are barriers to
the adoption and diffusion of innovation in the organization. The respondents of Stanley
also agreed that this is a barrier and there are problems especially in the level of
education of the employees which may not help in innovation adoption process although
there maybe experience. The respondents of Delta pharmaceutical strongly disagreed
about any lack of expertise as a barrier to the adoption and diffusion of innovation rather
they asserted that all their process like the marketing process is unique and innovative;
production is innovative as well the management practices are innovative. The
respondents of Iceberg termed the lack of expertise as an important barrier and they also
faced it as sometimes they need to update the expertise level as per the changes and
advancements occurring in technology and may not be able to do so however they
counter with it by seeking help from experts working in other organizations for long time.
Hence, networking is utilized. Similarly, the respondents of Rock pharmaceutical also
considered lack of expertise as a barrier but they also take help from expert managers
318
working with multinational firms like Merck. This is done specially when they produce
some new molecules and they also try to overcome this barrier through networking. The
researcher found that all the participating firms consider the lack of expertise for
innovation as an important barrier, however some of the firms overcome through
establishing networking and collaborations.
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Iceb
erg
Roc
k
Lack of
expertise
as a
barrier
Strongl
y Agree
Strongl
y
Disagre
ed.
Strongl
y
disagre
ed.
Strongly
disagree.
Strongl
y
Agree.
Disagre
e.
Agr
ee.
Agre
e.
Table 5.5.1
5.5.2 Financial Barriers and role of banks
One of the most important internal barriers can be lack of funds and financing to the
SMEs (Pietier, 1984; Rush and Beassant, 1992). The lack of financing has a massive
impact during the implementation stage of innovation process in the SMEs (Tidd et al.,
1997). During the current study the researcher tested this barrier by probing the
319
participants from all the case study SMEs. The responding participants viewed this
problem differently and it was noted that this is a case to case barrier. There seemed to be
a strong disagreement that financing is a problem for them and also they refrain from
taking bank loans for the hidden strings attached to it. The respondents of Wisdom
strongly agreed that they face financial problems but they also did not want to borrow
from banks as they term it not worthy due to the high interest rates. Zinta pharmaceutical
also disagreed about the financial problems and they also preferred not to consider loans
from banks for carrying out innovations. Aries pharmaceutical considered financial
problems as a barrier to innovation but they also not opt for bank loans. Stanley neither
considers it as a problem nor does it make loans an option. To Delta pharmaceutical
financing is a barrier for innovation process and getting bank loans is not easy either
because banks lend loans to firms attached to certain lobbies. This is also marked as a
unique emergent barrier. The iceberg pharmaceutical also considers financing as a
problem but it does not considers bank loans as they believe there are always strings
attached to it. However, Rock pharmaceutical does not have finance as a barrier to their
innovations neither does it borrow from banks as they have socially sufficient funds
available to them. The researcher found that most of the participating firms do face
financial problems but the bank loans system is either very tricky or very heavily rated
for the high interest rates. That is why even if these firms feel the need for borrowing,
they try to manage from other sources but not go to the bank loans. There is a balance as
4 out 8 participating firm considered financing as a barrier to carry innovation and the
remaining 4 voted against this as a barrier. However, a unique unanimity is found in all
the responses for not considering bank loans to overcome the financial barriers. This is an
320
indication of the fact that there is either lack of trust on banks for incurring hidden
charges or the lengthy procedures. The summary is given in table 5.2.2
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delta Iceb
erg
Roc
k
321
Financial
Barriersand
role of
banks
Strongl
y
disagre
e
Strong
ly
Agree
d for
financi
al
barrier
s but
banks
are not
an
option.
Strongl
y
disagre
ed.
Agree
for
financia
l
barriers
but
loan is
not a
solution
.
Disagr
ee as
we do
not
have
financi
al
barrier
.
Strong
ly
Agree
for
financi
al
issue
but
banks
are not
suppor
tive.
Agre
e.
But
bank
loan
s
have
strin
ged
attac
hed
to it
so
we
do
not
cons
ider
that.
Dis
agre
e
for
fina
ncia
l
barr
iers
and
do
not
con
side
r
ban
k
loan
s.
Table 5.2.2
5. 6 Role of Government authorities like SMEDA
One of the most important environmental factors reviewed in literature is the government
322
role. The role of governments becomes more important as they need to steer innovation
by making the conditions innovation friendly through introducing social capital
frameworks, cooperation and reciprocity for learning(DePropris, 2002). On the contrary,
some studies rate the government policies and regulations as a potent barrier as much as
the financial barriers and lack of skills in the workforce (Hadjimanolis, 1999). The
government role, be that is regulatory or supporting, can either encourage or discourage
the firm innovation policy. By providing financial support and relaxation through
breaking tax, the governments can make the environment conducive for innovation
adoption whereas it can derail the innovation strategy of firms by strictly regulating
them(Damanpour,1991 ;King and Anderson,1995 ;Toranatzky and Fleischer , 1990 ;
Scupola,2003).The participating firms in the current study unanimously and strongly
agreed that there is no support from the government and the role of SMEDA, an agency
specifically made for supporting the small and medium enterprises is also not worth
mentioning. Hizat, Wisdom and Zinta pharmaceutical is found to be critical about the
government in general and SMEDA in particular for not playing its due role. Aries
termed these two as barriers straight away although SMEDA officials at times visit just to
show them as doing something. While Stanley considered government and SMEDA as
non supportive, Delta went extra yards by considering them as trouble makers for the
business community through their unnecessary regulations and policies. Iceberg and
Rock also considered the role of government to be discouraging and that of SMEDA as
the one which cannot be called encouraging either as Rock pharmaceutical held the view
that SMEDA does not even help in the concept development and the ministry cause delay
due to which the demanded new products cannot be supplied in time. So it is observed
323
that the government and its concerned agencies are not working in favor of the business
development rather have become barriers by the overwhelmingly no supportive business
policies. The aggregate answers of respondents from all the participating SMEs are given
in table 5.3 as;
Theme Hizat Wisdo
m
Zinta Aries Stanley Delta Ice
ber
g
Rock
Role of
Government
authorities
like SMEDA
Strong
ly
disagr
eed for
any
positiv
e role
of
govern
ment
Strong
ly
disagr
eed for
any
positiv
e role
of
govern
ment
Strongl
y
disagre
ed for
any
positive
role of
govern
ment
Disagre
ed for
any
positive
role of
govern
ment.
Strongl
y
disagre
ed for
any
positive
role of
govern
ment
Strong
ly
disagr
eed for
any
positiv
e role
of
govern
ment
Str
on
gly
dis
agr
ee
d
for
an
y
po
siti
ve
Stron
gly
disagr
eed
for
any
positi
ve
role
of
gover
nmen
324
rol
e
of
go
ver
nm
ent
.
t
Table 5.3
5.7. Impact of adoption of innovation on SME Growth
Innovation can be said to have substantial amount of impact on firm effectiveness but
empirical effect on performance is always hard to represent. However investing more in
R&D can guarantee competitive advantage over firms having less competencies in
R&D(Vollenhoven and Buys, 2010).The empirical outcomes of research carried out has
emphasized on the fact that if an organization remains innovative for a longer period of
time, there are likely chances that it persist with its competitive advantage for longer(Le
Bas and Scellato, 2014).Being persistently innovative means that a firm can have a far
reaching impact on the innovation fields incorporating in economics, can leave its mark
on the firm long term strategic management and above all the public policy concentrated
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innovation(Peters, 2009). If the firm persistence is substantiated, it would second the
Endogenous Growth theory which relates the persistent and long run economic growth to
be a function of the firm attainment of technological knowledge(Romer, 1990).The
strategic management point of view also suggests a persistent loop of innovation and this
will make the firm standout and will give the firm a competitive advantage beside inter-
firm performance sustainability(Ganter and Hecker, 2013). The innovation rate of the
firms defines their destiny for future performance (Banbury and Mitchell, 1995;
Damanpour, 1991). The more the efficiency of the firm in products processes and
services, the more it meets demands of the firms and can even create the opportunity for
firms to enter new markets (Brown and Eisenhardt, 1995; Burgelman, 1991). Literature
also suggests that the SMEs face a very important challenge of the prominent changes in
its environment. These uncertainties leave the entrepreneurs with no other option but to
think as to how to get a competitive advantage over the rivals firms operating in
knowledge based economy (Damanpour and Evan, 1984).An enterprise can only survive
if it adopts the capability of technological innovation. A competitive advantage can be
gained with the acts of innovation in the very broader sense; adopting new technology as
well as adopting new methods for doing things (Porter, 1990).Theorists consider
innovation more distinct from invention as innovation is a useful exercise having
practical applicability, a distinguishing feature of innovation from invention. Innovation
practically contributes to the performance of the enterprise (Schetze and Gibson, 1997;
Cooper, 1998).
All the participating SMEs consider innovation has an impact on the performance and
growth of the firm. Hizat pharmaceutical associated its importance to the amount of
326
competitive advantage it brings to the firm resultantly the market share is increased. The
market demand can be met by being innovative. Wisdom pharmaceutical consider
diffusion and adoption of innovation important as it improves the firm performance
overall leading to an increased profits and market shares as it adds uniqueness. Zinta
pharmaceutical also viewed that the adoption and diffusion of innovation make the
organizations grow. Aries pharmaceutical also suggest that since adopting innovation
improves the market share, it increases the growth of the firm. Stanley added that the
reason why SMEs adopt innovation is that they want to grow. Delta pharmaceutical
strongly emphasized that not only can we associate the growth of SMEs with innovation;
they are the only sources for the survival of these SMEs. The Iceberg pharmaceutical said
that being innovative means being competitive and thus growth is ensured. Similarly,
Rock pharmaceutical also agreed with the fact that innovation gives firm competitive
advantage over other firms. So there is a strong unanimity among all the eight
participating organizations about the importance of innovation for growth of the SMEs.
So, all the cases strongly agreed that the adoption of innovation is important for
organization growth and is positively related to growth.
Theme Hizat Wisdo
m
Zinta Aries Stanle
y
Delt
a
Icebe
rg
Roc
k
Impact of
adoption of
innovation
on SME
Growth
Strong
ly
Agree
d that
innova
Strong
ly
Agree
d that
innova
Strong
ly
Agree
d that
innova
Strongly
Agreed
that
innovatio
n has
Strong
ly
Agree
d that
innova
Stro
ngly
Agre
ed
that
Stron
gly
Agree
d that
innov
Stro
ngly
Agre
ed
that
327
tion
has
positiv
e
impact
on
growth
.
tion
has
positiv
e
impact
on
growth
.
tion
has
positiv
e
impact
on
growth
.
positive
impact on
growth.
tion
has
positiv
e
impact
on
growth
.
inno
vatio
n has
posit
ive
impa
ct on
grow
th.
ation
has
positi
ve
impac
t on
growt
h.
inno
vatio
n has
posit
ive
impa
ct on
grow
th.
Table 5.4
5.8 Conclusion
This chapter made an integral part of the thesis because in this chapter the researcher
tried to bring together the responses of all the case SMEs. During this cross case analysis,
the research found that all the participating SMEs except wisdom tend have an
entrepreneurial culture and structure. The sizes of the SME in terms of infrastructure and
the numbers of human resources have impact on the adoption and diffusion of innovation.
All the case study SMEs approved their processes for making their SMEs innovative
although they have different procedures. All the case SMEs have different players for
making their SMEs innovative. The development of innovations from infancy to
marketing is associated with the market role, the collaborations with the academia and
business partners, vision of CEO and the employee skills/education. The diffusion of
innovation theory of Rogers entails the rate of innovation diffusion as an important
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characteristic which defines the whether the organization is an innovator or a follower. In
the current study, the researcher found that Delta pharmaceutical can be categorized as an
innovator for its role of setting up the firm at a time when there was no other firm
especially in the specific cluster in which it is operating. The other cases including Hizat,
Zinta, Aries, Stanley, iceberg and Rock are early adopters whereas Wisdom is a late
adopter which relies only on formulation and the rate of innovation adoption is
comparatively slow. The case study firms agree with the fact that they share knowledge
sources so that they can make the firm more innovative but Rock is an exception.
Similarly all the case study SMEs value collaborations as important for making their
SMEs innovative however the nature of collaboration and the level of mutual trust therein
are different. As per the drivers of innovation is concerned, the market, the employees,
R&D, customers and the internet technology are viewed as vital in the participating
cases. Although the cases seem to have faith in the fact that there is always room for
improvement, they are convinced that the training and expertise level of the employees is
sufficient for current ventures. The is a disagreement for the idea stealing as majority of
the cases reported that this is an open market and system and that is why idea stealing is
not a barrier rather it is a stimulus for persistent innovation. The participating firms all
except wisdom agreed for a positive role of suppliers in innovation diffusion. While
making the innovative products, the role of test marketing and market research is
considered by seven participating cases as against one, Wisdom pharmaceuticals. The
participating SMEs consider lack of financing as a barrier but they do not consider
borrowing from banks as the interest rate is high. The cases consider the government role
as to be negative in making the innovation diffusion process effective. However, it is
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concluded from the case study SMEs that innovation helps in their growth as it ensures
competitive advantage.
Chapter 6: Discussion and Conclusion
This chapter discusses the key findings of the current research in connection with the
main research question where the researcher intended to find whether the diffusion of
innovation in organizations has a role to play in the growth and performance of the case
study SMEs. The findings and conclusions about the research propositions and themes
are discussed in the opening section of this chapter. Also, the themes which are identified
in the main literature review are discussed in line with the research objectives. This also
discusses the implications for theory and practice/policy as well as the implications for
methodology.
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6.1 Conclusions about research propositions and themes
In this section the researcher discussed the findings substantiating the research
propositions.
6.1.1. The nature of organization and type/s of innovation related to the adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan.
The conclusions are drawn for first proposition and a link is established between the
nature of organizations and type/s of innovation under consideration related to the
adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan. In
section 5.1.1 of previous chapter, it is shown that the participating SMEs consider the
nature and structure of organization as important for carrying specific innovation types.
The more entrepreneurial the nature of organization, the more is chance for adoption and
diffusion of innovation. The entrepreneurial nature of organization also depends on the
type of industry or sector the firm works in. The pharmaceutical industry is more research
oriented and knowledge based, so there are more chances of innovation diffusion and risk
taking. The culture of firms in the case study SMEs is flexible enough to change
according to the needs of the industry but all SMEs are not always adoptive to changes
and the degree of change acceptance is even different in different wings/departments of
the same organization. However, this is consistent with the extant literature as
Griffin(1997) suggests this is due to the fact that different situations and contexts need
different processes which result in more robust innovations. However it is also implicit
that structure of an organization is a double edged sword. At the same time it can make
the firm adaptive to innovation or un-adaptive, if it is more centralized and has more rigid
hierarchal structures, marked as an emergent theme from the response of a participant
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from Hizat pharma, the structure sometimes can be a barrier in the adoption of
innovation. Hence, it is observed from the participants views and the researcher own
observation that the SMEs which have more entrepreneurial and innovative in nature and
structures tend to be more open to adoption and diffusion of innovation which help them
grow more faster than those which have rigid and un-entrepreneurial structures.
6.1.2 The role of technological organizational and environmental conditions for the diffusion of innovation in SMEs of Khyber-Pakhtunkhwa, Pakistan.
The conclusion for second proposition related to the role of technological, organizational
and environmental conditions and their link with adoption and diffusion of innovation is
discussed in this section. These conditions are outcome of the researcher findings from
the respondents in the case study firms and are shown in different sections of previous
chapter. As mentioned in section 5.3.1 of the previous chapter technological conditions
and factors are some of the most dominant players for the SMEs to adopt innovation.
Some firms like Zinta actually termed the technological revolution of the recent years as
the most important stimulus of organizational innovation. There are other firms which
also consider that their organizational processes are innovative only because of the
technology they use for their production in the state of the art laboratories. As discussed
in section 5.2.4 of chapter 5, the firms can add values through collaborations and it
largely is steered by the technical or technological need of the firms that they collaborate
within the cluster or outside the cluster. The technical staff is one of the important
internal drivers of innovation as responded by the case study SMEs in section 5.3.1. This
is thoroughly cognizant with the extant literature and in fact the firms which are
persistently growing they do so by acquiring the technological knowledge for economic
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growth (Romer, 1990). Similarly significant are the organizational conditions for the
adoption and diffusion of innovation itself. The internal R&D, the employees, the
organization structure and the culture, the vision of the CEO and owner are all the
organizational conditions and forces which work either to encourage the adoption and
diffusion of innovation or discourage it depending on how these conditions operate.
Although R&D is not as developed in all the case study organizations and is not an
integral part of their innovation activities, employees make the most integral part of
innovation process as exhibited in table 5.3.1. There is a common belief in all the
participating organizations that if there are more employees with technical knowledge
and creative ideas, there will be more innovation in the organization. This belief is
substantiated by the fact that some of the firms do not want greater number of employees
rather they prefer to have more quality employees than huge quantity lacking quality.
This is discussed in section 5.1.2 of previous chapter. Along with the R&D and
employees, the organizational structure and culture is also important organizational
condition/factor for adoption and diffusions of innovation. The structure of SMEs tends
to be more flexible as compare to the big firms. The more the entrepreneurial is the
structure and culture; the more are the chances of survival of SMEs. The case study
SMEs in the current study mostly have entrepreneurial culture and flexible structure for
taking calculated risks and making the processes innovative. There is unanimity in all
except one case study SME that organizational structure is an internal factor for adoption
and diffusion of innovation. As discussed in section 5.1.1 of previous chapter the culture
of organization is a collective set of norms and values and it represents the overall
processes and goals of the organization involving the employees (Khazanchi, 2007).
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Marked as an emergent theme during the data collection, the vision of CEO is another
important internal condition for adoption of innovation in SME. The Visionary CEOs can
sense the importance of different factors both internal like selecting the best human
capital who know the innovations and external factors like collaborations and networking
with business partners as well academic institutions.
Apart from the aforementioned organizational conditions, there are environmental
conditions which were also found as significant for the adoption and diffusion of
innovation in the organization. Among these conditions are the market trends, customers,
competitors, suppliers, collaborations and networking and the government intermediaries.
These environmental conditions have influenced the case study firms either way. The
market and its trends have been observed as one of the most dominant condition for
triggering innovation in these case study firms. As evident from section 5.3.1 and 5.3.2
nearly all the participating SMEs have noticed market, market trends and marketing
intelligence as the main sources for both, new product and service idea generation as well
as making these SMEs innovative. This external player is important to be considered as
cited by authors who wrote that this helps the paradigm shift in firms from imitation to
innovation (Yong & Ho, 2006). Customer is also an important external player which is
considered as a prime partner in the overall innovation process. Contrary to the findings
of some authors like Edvardson et al (2000); (Sundbo), 1997; Easingwood, (1986), this
research found that the customers make a good source of idea generation. As discussed in
section 5.3.1 and 5.3.2 of previous chapter, six out of the eight case study SMEs have
associated the new idea generation for product and service to the feedback of customers,
either direct or indirect. As mentioned in 5.3.6, the competent customers are the ones who
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stimulate the innovation process of the organization. In most cases the feedback of
customers come through to these SMEs indirectly from franchises, distributors and
doctors but in some cases the firms do interact with customers through their websites and
social media apps like facebook and whatsapp. The customers also participate in the
innovation process as their demands which force the management of firms to innovate.
Another external environmental factor which was discussed with the respondents in the
current research is competitors role in driving innovation process but since only two
participating SMEs out of the eight considered it important as they thought since they
study market, they study competitors products too, but they also did not consider
competitors as something directly influencing the innovation process, this was discarded
as a theme as discussed in 5.3.5 of previous chapter. Another environmental condition,
which is marked important in the literature as something right up there along with the
customer, the supplier’s role is highly vital. Consistent with the extant literature the
current study also found that supplier’s role is vital for carrying innovations in the case
study SMEs. Marked as an emergent theme in section 5.3.6, this environmental condition
is said to have an important role as it can be strategic partner for long term. Apart from
only one participating firm, the rest of the participants consider the timely completion of
innovation process only and only when the suppliers provide quality raw material timely.
Furthermore, collaborations and networking where the SMEs share knowledge sources
and expertise also trigger innovations and most often these collaborations are carried out
for getting technical knowledge. As discussed in 5.2.3 and 5.2.4, these collaborations are
carried either between other businesses or with academic institutions. The participating
SMEs substantiated the extant literature by agreeing strongly about the positive role of
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collaboration in diffusion and adoption of innovations. The role of government and its
agencies is identified as an important condition in the extant literature considered
embarking the economy of a country on track. Although some of the previous studies like
that of De Propris( 2002) presents the positive role of the government in making the
business environment more investment friendly and innovation friendly, the findings of
the current study falls more nearer with that of the study of Hadjimanolis(1999) who
considered the excessive regulations of the government as big a barrier as that of the
financial and skill barriers for innovation. The government role theoretically is positive as
suggested by extant literature for making the necessary financial arrangements on one
hand and by making the tax burden lesser on the other hand; the current study practically
observed that the participating firms are dissatisfied with the role of the government.
They consider that the government has caused several problems by being a watchdog and
not a facilitator. The specific governmental agencies established to support small
businesses like SMEDA has also not played its role, not even in a smaller capacity of
concept development and guidance for the participating case study SMEs. As discussed
in section 5.3.3 of the last chapter, these government agencies visit the participating firms
once in a while but not for their betterment just to get some rewards from them. The
participating firms also mentioned that the relevant ministries have somehow curtailed
and hindered their innovation processes by delaying their requests for licensing and
permissions for new molecules. This external environmental condition has brought the
local businesses at stake and because of the non supportive role of these public
organizations; the local small businesses did not flourish.
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6.1.3. The adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan has a positive relationship with the availability of internal and external sources of innovation
The conclusions are drawn for the third proposition in this section. First it is discussed
that the adoption of innovation is influenced by the internal and external sources of
innovation and then this adoption of innovation leads to the growth of the SMEs. During
the review of literature for the current study, few drivers and sources were identified for
the adoption and diffusion of innovation in SMEs. Then the researcher asked about these
sources from the respondents whether these have the same impact in these case study
SMEs as shown in the extant literature. These sources are internal as well as external. As
discussed in section 6.1.2 of this chapter, these drivers can be technological,
organizational and/or environmental. These drivers include the market, employees,
customers, competitors, suppliers, networking and collaborations and the government
intermediaries. As discussed in section 6.1.2, only two drivers have not a substantially
positive role for innovation adoption and these two external drivers are the competitors
and government agencies. The rest of the drivers play a vital role in promoting diffusion
and adoption of innovation in the case study firms. The important part however is
whether these innovations after being diffused to the participating SMEs plays a role in
growth of SMEs or not and why the efforts are made by the SMEs to be innovative. The
answer to this research question is addressed in more detail in section 6 of chapter 4.
Consistent with the previous work of Rormer (1990), Vollenhoven and Buys (2010), Le
Bas and Scellato (2014), Peters (2009), the current research also found that the
participating SMEs consider persistence in innovation as the way forward for long run
competitive advantage over the competing firms. The researcher observed the conviction
337
of participants that when they operate organization innovatively, this helps the firms an
increased share of market which ultimately ensure growth. The researcher found that
these participating SMEs not only innovate for current market demands but innovations
are aimed largely at finding the long range strategic growth and survival for longer period
of years. Also, the nature of pharmaceutical industry is of a kind that if the firms do not
innovate, their molecules will become obsolete and will have an adverse effect on their
sales. Some of the participating firms also believe that the more innovatively they operate
the organizations, the better are their chances for unique products which help increase
their export which ultimately help in firms growth. Thus theoretically it has been
established from the responses of the participating managers and CEOs that with
innovation their organizations grow.
6.2. Implications for Theory
The focus of this research study was to study among other theories, the diffusion of
innovation theory of Rogers and its application in the Pharmaceutical sector of
Khyberpakhtunkhwa, Pakistan. The intention was to see whether the diffusion of
innovation theory can be tested in the context of Pakistan and its province
Khyberpakhtunkhwa which pose a unique, different as well as challenging context for
businesses. The study was successful in finding that organizational innovation diffused
and adopted in the case study organizations has helped these organizations to grow their
size both in terms of number of employees and infrastructure on one hand and market
share and profits maximization on the other hand. This study is unique in the sense that
the diffusion of innovation theory was not tested in the pharmaceutical sector of
Khyberpakhtunkhwa before and since this study was qualitative in nature, it provided
338
deep rich data about the case study Pharmaceuticals. This study elaborated the
environmental, cultural, structural and contextual impediments posing challenges for the
case study Pharmaceutical SMEs which may be addressed for better business growth of
this sector in particular and other small business in general. An enabling contribution for
body of knowledge is the finding of this particular study that unlike the western world
and developed economies where the government organizations help promote the
innovations establishing National and Regional Innovation systems, the situation in
Khyberpakhtunkhwa is different. The government agencies are more a threat for being
overly bureaucratic in their approach and not encouraging. The government neither
provides funding to the business community for introducing more innovative products
and service nor does its policy help in smoothing the flow of work for these individual
SMEs.
This study also explored that there are financial barriers in the way of adoption of
innovation and hence the growth of the case study SMEs, these firms however do not go
for loans from the commercial banks even if they are easily granted to them. The reason
for such a refrain is mainly the high interest rates charged by the banks on the business
loans they lend to these SMEs. There is a need of the state/central bank to intervene in
this situation both by making a uniform strategy nationwide and by instructing the
commercial banks to provide soft loans especially to the small businesses which are
nascent. Resultantly these firms will operate innovatively and hence would play a
positive role in economic development of the country.
This study also explored that the vision of the CEO or owner is very important in making
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the SMEs entrepreneurial and innovative although all level of employees play their role
in the process. There are case studies SMEs in this particular research where the vision of
the SME led to a successful implementation resulting in an entirely entrepreneurial setup
although the environmental conditions for the business were not supporting. This suggest
that without a visionary leadership, the adoption and diffusion of organizational
innovation would not have been realized in some of the case studies SMEs as there were
quite a few challenges to be addressed in the beginning. The research also tested the
cultural theory and found that the organizational culture is vital to the diffusion and
adoption of innovation in these SMEs. This is particularly articulated by the fact that
there are managerial practices which make the environment more innovation friendly and
help the workforce for making innovation an integral part of the organization culture.
This study also added a dimension to the existing patterns of adoption and diffusion of
innovation from the firm’s perspective that in order to incorporate technological
innovation in organizations, the firms can best serve their cause by outsourcing part of
their projects to consultants who are credible in the specific field. Another very important
addition to the theoretical knowledge is the exploration of the fact that the various types
of innovations in organizations are influenced by specific market places or niches. Based
on this finding, the organizations can focus on specific geographic areas which demand
specific product types. This study also explored that the process of adoption and diffusion
of Innovation in organization is somehow a cyclic process which starts the loop from
market leading to the producers and completes the loop by commercialization to the very
markets. Although this process involves many other stakeholders like the R&D, the
marketing staff, the product and production department but eventually it meets the market
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which is starting point in most cases. There are instances in this particular study that
highlights the role of the suppliers as important and that it can work as a strategic partner
for the small and medium enterprises in as much as becoming a strategic partner for long
run for importing raw material with these SMEs. This is a contribution of this study to the
existing body of knowledge. An interesting aspect about these local SMEs is that they
normally share knowledge sources with each other in technical ways but when it comes
to the knowledge and information about the sales and market share, they refrain. This is
also a finding of this study about these local SMEs and may serve as a guide for future
research whether it will be better for these sources or not to continue doing so. This study
also introduced that although the government role overall is a question mark, there are
cases where a little push from the government has proved to be a huge boost for these
SMEs. This is marked as triple helix model as in one SME the role of government and
academic institutions have met a high degree of success and has resulted in long term
benefits for the SME on one hand and the society on the other hand. This highlights the
importance of the government role and it can be anticipated that should there be more
encouragement and support from the government, the small business fraternity can groom
further. Last but not the least, this study has developed an operational definition of
Organizational Innovation in light of the literature reviewed in detail. This definition can
help and facilitate the future research of this nature and context.
6.3. Implication for Policy and Practice of Future Trends
This study upholds some policy and practice implications for the case study SMEs. The
study has the following implications for these SMEs and government.
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1. This study highlighted that although the government role overall is a question mark,
there are cases where a little push from the government has proved to be a huge boost for
these SMEs. This is marked as triple helix model , a government pulled triple helix
model( Etzkowitz and Zhou, 2007) as in one SME(Delta pharmaceutical) the role of
government and academic institutions have met a high degree of success and has resulted
in long term benefits for the SME on one hand and the society on the other hand. This
highlights the importance of the government role and it can be anticipated that should
there be more encouragement and support from the government, the small business
fraternity can groom further. The government needs to be more proactive in this regard
and should make the departments like SMEDA more functional so that they should
establish with these SMEs in their innovative ventures from concept development to
commercialization phase.
2. The government can make the concerned ministries more innovative by making
internet technology more prevalent to decrease the adverse role of filing of documents
from the SMEs to these ministries which takes a whole lot of time and as such is a
potential barrier in making the smooth adoption and diffusion of innovation. This will
help in minimizing the time span taken by the concerned ministries for the
documentation. Resultantly, the SMEs will be able to introduce their innovations timely
and there will be no grievances on their part.
3. The practitioners can also improve their organizational innovation by making the
culture more research oriented and making the research work of the developed world
regarding similar kinds of SMEs readily available to the R&D and employees. The
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research orientation can help diffusion of latest innovation to the SMEs and can help the
practitioners to exploit the latest research before the competitors.
4. The management of the SMEs can make the structure of the organization more open
and decentralized which may help in nurturing more innovative ideas resulting the
organization to be more innovative. For example, while making the decision for
innovations in the organization, they may take the personnel who can have any relevance
with the innovation idea in question rather than restricting the process only to top
management.
5. The management may hire people who are well versed and up-to-date with modern
technology and research so that there is no skill barrier for adoption of innovation in their
organization. The innovative and skilled workers can help organizations to gain
competitive advantage over the competitors.
6.4 Limitations of the study
This is a study of a unique nature in the sense that no prior qualitative research on the
diffusion and adoption of Organizational Innovation in the Pharmaceutical Sector SMEs
was conducted in the Khyberpakhtunkhwa province of Pakistan. Since it was a
qualitative case study research the researcher found some real life contextual findings
from this study which other studies could not do as most of these kinds of studies are
conducted in the developed world but not in developing world. Furthermore, if there are
343
efforts made in this regard the studies were not all that wholesome as they did not focus
on the diffusion of innovation and SMEs growth from such broad perspective. Some of
the researchers did study but only the barriers to innovation in SMEs. Examples are that
of (Hadjimanolis, 1999) who studied barriers in Cyprus SMEs and that (Saigosoom,
2012) who study the barrier and opportunities in Taiwanese SMEs . The current study
however tried to present a wholesome perspective in terms of making the contextual,
cultural, organizational, technological, environmental accounts of the local SMEs and
relate their role with the diffusion of innovation theory. This brings new and
comprehensive perspectives to the trend of Innovation studies in SMEs.
However this study also has some minor demerits and limitations. Although an effort was
made to get the detail knowledge of the phenomenon under study in as much detail as
possible, the study is still more for a cross- sectional than a longitudinal data. This could
not guarantee an in-depth knowledge and understanding of the diffusion and adoption of
organizational Innovation in these case study SMEs. However it must be added here that
this limitation does not have a serious impact on the findings of the study as the overall
research objective is achieved which was to see how innovation is adopted and diffused
in the SMEs and whether it gives growth to these SMEs. This objective has been
achieved by this Study.
This study lack the statistical generalizability because the methodology used for this
study is qualitative in nature and that is the reason that the researcher studied the in-depth
responses of the participants in the specified contexts in a limited audience. All these
conditions restricted the statistical generalizability and instead this study aimed at the
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analytical generalizability.
Another limitation of this study is the fact that the researcher could not triangulate most
of the information by cross checking with secondary data because there were quite less
number of managers who were willing to share the office record and files. Also, the data
available on the websites of some of the case study firms was more generic in nature and
this could not very well interpret or measure the level of growth these firms could
achieve while adopting innovations. However, this limitation has been addressed by
asking the same level of questions from different managerial groups in separate offices.
This helped the researcher to triangulate the responses as described in detail in chapter 4.
Nevertheless , these limitations did not impede the study in much greater extent rather
these show the direction towards other future research studies and this study has achieved
the research objectives of this research.
6.5 Implication for Methodology
The methodology adopted for the current study also offered some implications beside
some of the qualities attached to this methodology. The first and most prominent issue
was getting to the respondents. This offered much hurdles as mostly people do not share
their time for research studies in our society for many reasons; firstly, they think it will
disclose some of their business secrets. Secondly, mostly the business fraternities feel
that it takes much of their working time if they entertain the researchers and academicians
coming to them for research projects. Thirdly, they also feel that since these researches do
not have any value for making their businesses profitable, it is unwise to spare time to the
researcher especially for interviews. The researcher found it difficult to get time from the
345
respondents on his own as approaching them randomly, they often used to tell they were
busy for some meetings. The researcher then got help from friends and relations in this
regard who knew the people working for the pharmaceutical sector. In this regard, one of
the researcher relative who has worked in pharmaceutical sector for around 20 years
helped vitally. Since he has mostly worked in the multinational or national
pharmaceutical of good reputation he was welcomed mostly by the local pharmaceutical.
Beside this, a PhD classmate from Iqra National University who has his own
pharmaceutical company and has acquaintances in most of the local pharmaceuticals also
helped immensely. So had it not been them, the data collection through interviews would
not have been easy at all. However even with their support and help, it took more than
one visits to finally interview the target audience. The data collection phase due to the
above mentioned obstacles took more time than anticipated and the process was finalized
in three months instead of the scheduled 6 to 7 weeks time. After the interviews the
transcription was yet another hurdle. As only two interviews were conducted purely in
English language, the rest were either mixed or in Pashto. This made it difficult to
transcribe as the researcher repeatedly listen to each and every response so that no
important point is missed. Unlike the two interviewees whose interviews were just
listened and transcribed verbatim, all the remaining interviews had to be listened many
times word by word. Although the repetitive play and pausing made it very hard at the
beginning, at the end it all worked as there came many points and themes which could
have been missed if the interviews were listened only once. This actually began the
within case analysis for the researcher initially. Another remarkable issue was condensing
the collected data in a meaningful and organized manner so that the formal analysis could
346
be done. Although in qualitative research, there is no hard and fast rule as to how it could
be done; the researcher followed the broader suggestion of Miles and Huberman (1994)
and using the respondent’s feedback, the available secondary data in form of official
facebook or websites and the observation. The data was condensed by placing all the
answers of respondents from the same firm in an MS word table. The fonts of the
important points/themes were changed into bold and where there were emergent themes
into italic form. A detailed note of this is given in chapter 3.This is also a contribution of
sorts because this method has not been used in any research of local Pharmaceutical
sector in Khyberpakhtunkhwa, Pakistan.
6.6. Directions for Future Studies
This study offers few implications for researchers for future studies. The first futuristic
implication of this study is replication of this study in other regions of the same province
which have got clusters like the two clusters studied in Peshawar and Nowshera regions
of Khyberpakhtunkhwa. Also, the same can be done in other provinces and specially
those which have got populated clusters so that the impact of clustering, collaborations
and networking for adoption and diffusion of innovation can be studied in further detail.
This will also establish whether the cultural and context specific impediments have got
any bearing on the findings of the studies as the environment of this province is
somewhat different than the other provinces. This study can be further extended to other
sectors of small and medium business and not only the pharmaceutical sector which will
show the impact in other fields and offer a more comprehensive picture.
Furthermore, this research also offers a future implication for a positivist approach of the
347
same study so that the relationship of adoption and diffusion of innovation and growth of
SMEs can be studied statistically.
Another important future implication is to study the relationship of adoption and
diffusion of organizational innovation and SMEs growth as established in this cross
sectional case study research for a more specified period of time, making the study more
a longitudinal one. This will offer a further holistic picture of the phenomenon; however
more resources will be required for it.
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Appendix A: The interview protocol
Tell us something about the historic background of this SME?
Tell us something about the timeline and current market evolution of the SME?
Is your SME structurally Innovative and has an Entrepreneurial culture?
How does the size of your firm matter in innovation?
How do you believe that your organization processes make it Innovative?
What in your opinion makes the SME innovative?
How are innovations developed from infancy to marketing stage?
How do you rate your SME as one adopting Innovation comparing to others?
Do you have collaboration with any other firm to carry out innovation?
Do you share knowledge sources with other SMEs?
369
To what extent do you trust collaborators?
What values do these collaborations add to your innovation?
What are the sources (drivers) of innovation in SME?
Where do the new product or service ideas come from to your SME?
Do you think that the staff of your firm has the required knowledge and training for
innovation?
Does idea stealing create problem to your SMEs? Should be in barriers to innovations.
Do you take the customers input in innovation and new product development?
Does supplier in any way help you in innovation process?
What is the method of idea Screening and Evaluation in your SME?
To what extent your SME follow a proper formal market Research or Ad hoc research to
address the Gap in the market (Environmental Conditions).
Do you calculate the risks attached to your radical products before marketing or do you
test market your products first?
Do you find it difficult to have sufficient expertise while carrying out specific innovation
type?
Do you find any financial constraints to carry out innovation (socially sufficient amount
of funding required carrying innovation-related research work)?
Does your SME get financial aid from banks easily whenever needed?
To what extent you get support from government agencies, SMEDA if any?
Why are the innovative activities undertaken?
Do you consider innovation as any activity which improves competitiveness in your
SME?
370
Appendix B: Master Table
Theme
Ali Raza MM Hizat
Asif Raza PM Hizat
Imtiaza Hussain GM Hizat
Tahir ali shah Director
Arsheed Ali QCM Wisdom
Numan MMWisdom
Shabir hussain QCM Zinta
Navid PM Zinta
Mohammad Arif MM Zinta
Dr yousaf sarwar DirectorAri
Ghulam Sarwar Khan CE
Zahid Gul GrouPMStan
Riaz Khan GM
Ashfaq Paracha CEODelta
Shahzad Khan MMDelta
Kamran Iceberg
Haseeb ul haqQCM
MG Khan MM
Tahir Salim Director Rock
M Akram Noor DA
371
Wisdom
es O Aries
ley
3.Entrepreneurship and Innovation in structure and Culture
Agree
Agree
Strongly Agree
Disagree
Disagree
Disagree
Agree
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree
Agree
Strongly Agreed
Strongly Agreed
Strongly Agreed
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree,
4.Size
Disagree.
Disagree.
Disagree
Agree
Agree
Agree.
Strongly Agree
Strongly Agree
Strongly Agree.
Strongly Agree
Strongly Agree
Agree
Agree
Strongly agree.
Strongly agree.
S
t
r
o
n
g
l
y
A
g
r
e
e
Strongly Agree.
Strongly Agree.
Di
sa
gr
ee
.
Disagree ,
372
.
5.Organizational Processes
Strongly Agree.
Strongly Agree,
Agree.
Agree
Strongly Agree
Strongly Agree
Agree
Strongly Agree.
Strongly Agree.
Strongly Agree
Strongly Agree.
Stronglyagree
Strongly agree
Strongly agree
Strongly agree
Strongly Agree.
Strongly Agree.
Strongly Agree.
Agree.
Agree.
6.what makes it Innovative
Strongly Agree
Strongly Agree
Strongly Agree,
Agree
Agree
Agree.
Agree.
Agree.
Agree.
Strongly agree.
Strongly Agree.
Agree.
Agree
Strongly
Strongly agree.
Strongly Agree.
Strongly Agree.
Strongly Agree.
A
gr
ee
.
Agree
7.Development of Innovation from Infancy
Strongly Agree
Strongly Agree
Agree,.
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree (N
Strongly Agre
Strongly Agree for it as a
Strongly Agree.
Strongly Agree
Strongly .
Strongly agree
Strongly.
Strongly agree
Agree.
Agree.
Agree
Agree.
Agree.
373
. . ich).
e.
cyclic process.
.
8.Rate of adoption of Innovation
Agree.
Agree.
Agree (Structure is a barrier)
Agree.
Agree
Agree
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly Agree.
Agree.
Agree.
Strongly agree.
Strongly agree.
Strongly Agree.
Strongly Agree.
Strongly Agree
Strongly Agree
Strongly Agree.
9. Sharing knowledge Sources
Strongly Agree
Strongly Agree
Strongly Agree.
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree.
Strongly Agree.
Strongly Agree
Strongly Agree
Strongly agree.
Strongly agree.
Strongly agree
Strongly agree
Strongly Agree.
Strongly Agree.
Strongly Agree.
DisAgree.
DisAgree.
10.Coll
Ag
Ag
Ag
St
Str
St
Str
St
Stro
Str
St
St
St
Str
St
S
t
Str
St
A
gr
Agree.
374
oboration and trust on collaborators
ree.
ree
ree.
rongly Agree
ongly Agree
rongly Agree
ongly agree.
rongly Agree.
ngly Agree
ongly Agree
rongly Agree
rongly agree.
rongly Agree
ongly agree.
rongly Agree.
r
o
n
g
l
y
A
g
r
e
e
.
ongly Agree.
rongly Agree.
ee
.
11. Value addition through collaborations
Strongly Agree.
Agree.
Agree
Strongly Agree Sometimes we Impo
Agree as we get technical and expert sup
Agree .
Strongly Agree
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly agree.
Strongly Agree
Strongly agree.
Strongly Agree.
Strongly Agree.
Agree.
Strongly Agree.
Neutral.
Neutral.
375
rt together as well.
port.
12.Drivers and sources of Innovation
Strongly Agree
Strongly Agree.
Strongly Agree
Strongly Agree
Strongly agree
Strongly Agree.
Strongly Agree.
Strongly Agree for technologica
Strongly Agree
Strongly agree.
Strongly Agree.
Agree.
Strongly agree.
Agree
Agreed
Agree.
Strongly Agree.
Strongly Agree.
A
gr
ee
.
Agree.
376
l revolution.
13.Idea Sources for new products and services
Strongly Agree.
Strongly Agree
Strongly Agree
Strongly Agree
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly Agree
Agree
Agree.
Agree.
Strongly agree.
Agree.
Agree.
Agree.
S
t
r
o
n
g
l
y
A
g
r
e
e
.
Strongly Agree.
Strongly agree.
A
gr
ee
.
Agree.
14.Kno
Ag
Str
Agr
Str
Stro
Str
Agr
Ag
Agr
Stro
St
St
Str
Agr
Ag
Ag
Agr
Ag
A Agree.
377
wledge and Training level of Staff
ree.
ongly Agree.
ee.
ongly Agree
ngly Agree
ongly Agree
ee.
ree.
ee.
ngly Agree
rongly Agree
ronly Agree.
ongly Agree.
ee
ree.
ree.
ee.
ree.
gr
ee
15. Challenges of Idea stealing
Strongly Agree.
Strongly Agree.
Strongly Agree.
Disagree
Disagree
Disagree
Disagree.
Neutral,
Disagreed .
Disagreed
Disagreede
disagreed
Disagreed
Strongly Agree.
Strongly Agree.
disagreed.
disagree.
disagree.
di
sa
gr
e.
Disagree.
16. Inspiration for Competitior,s Products
Strongly Agree innovation
Agree
Strongly Agree.
Agree
Agree
Agree
Agree
Agree
Agree.
Agree
Agree
Agree.
Agree.
Agree.
Agree.
Agree.
Yes.
Yes.
378
17. Customers Input
Agree.
Agree.
Agree.
Agree
Agree
Agree
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly Agree.
Strongly Agree
Strongly Agree
Agree
Agree.
A
g
r
e
e
.
Agree
Agree.
A
gr
ee
.
Agree.
18. Role of Suppliers
Strongly Agree .strategic partner
Agree.
Agree
Disagree
Neutral
Disagree
Strongly Agree.
Agree
Agree.
Strongly Agree
Strongly Agree
Strongly agree.
Strongly Agree.
Strongly Agree.
Strongly Agree
Agree.
Strongly Agreed.
Agree.
Agree
Agree.
19.S A A A S St S A A A St S S S St S A A A A Agr
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creening and evaluating Ideas
gree
gree.
gree
trongly Agree.
rongly Agree.
trongly Agree.
gree.
gree.
gree.
rongly Agree
trongly Agree.
trongly Agree.
trongly Agree.
rongly Agree.
trongly Agree.
gree
gree
gree.
gree.
ee.
20. Market Research: Formal or Adhoc (Envir Conds)
Strongly Agree.
Strongly Agree.
Strongly Agree
Disagree.
Disagree.
Disagree.
Agree
Agree
Agree
Agree
Agree
Agree.
Agree.
Agree
Strongly Agree.
A
g
r
e
e
.
Disagree.
Agree as marketing people do it.
N
eu
tra
l.
Neutral.
21.Risk Calculation and test
Strongly
Agree.
Agree.
Agree
Agree
Agree
Strongly Agr
Strongl
Strongl
Strongly
Strongly Agr
Strongly
A
g
r
e
Agree
Agree
Agree.
Agree.
380
Marketing
agree.
ee.
y Agree.
y Agree
Agree
ee.
Agree.
e
22.Barriers to the Spread of Innovation(Expertise)
Agree as sometimes the state of the art labs need
Agree as there maybe lack of expertise at times.
Disagree as I don’t see any such problems.
Disagree as we do nto have any barrier as per as t
Disagree as we do not have any lack in expertise.
Agree to certain extent as I think the qualificati
Disagree as I am satisfied about the expertise level.
Disagree.
Disagree.
Strongly Agree as Govt bureaucracy ,policies get you stuck.
Agree.
Agree that there are barriers as more e
Agree there is room for improvement.
Strongly Disagree.
Strongly Disagree.
Agree , we have the issue of finding the
Agree, day. We need to be up-to-date all the times. That is why
Agree.
Agree.
Agree that we have expertise issues sometimes.
381
technically experienced people.
he Expertise of Employees is concerned
on is always there but need more experience sometimes.
xpertise is required.
technical expertise in our workers. But we try to
we take help in technical issues from those professionals who are working with
382
fix the shortage through networking and clust
firms for long times.
383
ering.
23. Financial barriers and role of banks.
Disagree about financial problems and loans fro
Disagree
Disagree
Strongly Agree for financial barriers but and bank
Strongly Agree and because of this barrier we do not go into radical in
Strongly Agree as this is the main barrier. Bank loa
Disagree about the financial problems. We don’t have any suc
Disagree.
Disagree.
Agree but loan is not an option.
Agree but loan is not opted for.
Disagree
Strongly Disagree
Strongly Agree that financing is a problem and banks are not sup
Strongly Agree.
A
g
r
e
e
.
h
a
v
e
t
h
e
o
p
p
o
r
t
u
n
i
t
y
Agree.Financial barriers are always there. We need finances som
Agree. For a new SME like ours in order to find finan
B
y
th
e
gr
ac
e
of
Al
la
h
w
e
ne
ve
r
ha
ve
ta
ke
n
an
y
lo
an
or
fel
As I am also looking after the accounts, I have never applied for nay bank loan. We rather plan to carry on new product and processes
384
m banks.
s give money but with heavy interests rate
novations. Bank loan is not an option
n is not a viable answer.
h problems.
portive.
t
o
g
e
t
l
o
a
n
f
r
o
m
b
a
n
k
s
e
a
s
i
l
y
.
etimes which are not available.Banks can be a source but their procedures
cing is always a major challenge. Yes banks can give cre
l
sh
or
t
of
fi
na
nc
in
g
at
an
y
st
ag
e
ne
ith
er
w
e
ha
ve
an
y
pa
rt
ne
rs
hi
p
development in accordance with our resources.
385
and the strings attached to their loans are not easily digestible so we in this S
dit but the procedures are tiring as well as the interest is d
wi
th
an
yo
ne
.
We never need to consult any bank for loan.
386
ME try to proceed according to our budgets.
aunting.
24. Role of Governement authorities like SMEDA
Disagree for gover
Disagree that gove
Disagree for governeme
Strongly Disagree f
Strongly Disagree, they ha
Strongly Disagree a
Disagree for their suppor
Disagree for the
Disagree, neither SMEDA nor
Strongly Disagree they are m
Strongly Disagree
Strongly Agree t
Strongly Agree that
Strongly Agree that Govern
Strongly Agree that
Disagree for the
Disagree.There is no sup
Disagree as Unfortu
They never come here. Not even in
The role of government authorities and SMEDA is not enc
387
nment and SMEDA support
rnment and SMEDA supports
nt overall support ,however SMEDA has given technical support one od
or their positive or supportive role.
ve no interest. SMEDA has also done nothing
s govt role is not business friendly as well as SMEDA has d
t in any way. SMEDA role is also not worth mentioning
positive role of Governemnet and SMEDA
any other Agency has helped as yet.
ore of barriers than a support
, they hamper fluency towards Innovation
hat Government does not support.
Government and SMEDA does not support.
ment does not support.
Government and SMEDA does not support.
role .No. We do not have any support from governm
port from any government authorities rather they curtail and hinder the proces
nately no, government does not support these SMEs. We ha
idea or concept development. The government agencies and the regulatory authorities actually mak
ouraging at all. We do not have any support from them as per now and we do not see if they will support not only this firm but any other firm in futu
388
d times.
one no favour too.
ent agencies and authorities in any ways. However,
ses by their overly interruptions in the affairs of the firm sometimes can cause
ve not seen they come to support, they always come with mon
e it difficult for us most often. Some time they delay the files for a long time. For instance if we
re.
389
we get support from other firms and that is a mutual
delay in carrying out innovation.
itoring stick in their hand and in fact that sometimes has a ne
apply today for a specific molecule and the drug regulatory authorities or the ministry delay it for a
390
process.
gative impact on the organization to carry on innovation.
longer time , who knows the product demand will be the same after that much delay.
391
SMEDA has also not played a massive role.
25. Impact of adoption of innovation on
Strongly Agre
Strongly Agre
Strongly Agree as H
Strongly Agre
Strongly Agree that
Strongly Agre
Strongly Agree that
Strongly Ag
Agree that adoting spec
Strongly Agree as wit
Strongly Agr
Strongly Ag
Strongly Agre
Strongly Agree that
Strongly Agre
Yes, We can
Being innovative
The impact of
In
no
va
tio
n
de
fi
nit
Being innovative means being differe
392
SME growth
e as it improves competitiveness and market share.
ed
PLC is better than UV. Helps competitiveness and improves growth capabi
e that innovation has an overall impact on competitiveness
it plays role in the growth and more market share.
e for its role in growth.
by innovatively organization, the firm becomes more competitive.
ree as it brings growth
ific type of innovation make organization grow.
h adoption of innovation SMEs grow.
ee for Market share.
ree that it gives competitive advantage.
e that with innovation SME grow and maximize profits.
with innovation SME grow.
e that with innovation SME grow.
have many benefits from innovation. We can start
organization means being competitive. We can certainly have good adv
innovation in organizations is positive and related to th
el
y
he
lp
s
to
im
pr
ov
e
ou
r
co
m
pe
tit
iv
e
ad
va
nt
ag
e.
nt and that is how a firm can get competitive edge over other competitors.
393
lity of the firm.
up research products which can end up giving us
antage over our competitors.
e growth. In fact the reason why organization considers
394
advantage over other firms.
innovations is to grow.
26.Why SME Innovate
Strongly Agree as it is for s
Strongly Agree as it enable
Strongly Agree as with it SME grow a
Strogly Agree for Market S
Strongly Agree that it gives uniquen
Strongly Agree as with inno
Strongly Agree that SME.
Strongly Agree that wi
Strongly Agree that it maximizes profits and
Strongly agree as with this our firm gro
Strongly Agree as with Inn
Strongly Agree that SM
Strongly Agree that SME in
Strongly Agree that SME innovate fo
Strongly Agree that SME in
Strongly Agree, Our exp
Strongly Agree,We carry innovative
Strongly Agree ,Being inn
St
ro
ng
ly
A
gr
ee
,
W
e
ca
rr
y
on
Strongly Agree, We believe that if we do not innovate our products will
395
urvival in the market
s competitiveness which helps in meetin the market demand
nd survive.
hare increase and growth
ess and maximize profits
vation Competitors can be beaten and market share can be m
th innovation it earns competitive advantage and
also SME grow through the competitive advantage.
w.
ovation SMEs get competitive advantage.
E innovate for increasing sales, market share an
novate for competitive advantage and is differentiated fr
r competitive advantage and growth.
novate for competitive advantage and growth.
orts can increase as well as we can have increased
processes in our organization s that we become a prominent organization in mar
ovative means that you are never satisfied with your perfor
in
no
va
tio
n
as
it
he
lp
s
in
gr
o
wt
h
of
ou
r
or
ga
ni
za
tio
n
as
w
ell
as
gi
ve
us
become obsolete and we will lose our market share. In order to have maximum market share, you need to innovate only then your organization can gro
396
s in time.
aximized.
earn more profits
d ensures growth.
om others,
market share.
ket and attract more customers.
mance and that means that we have to consistently work ou
ed
ge
ov
er
ou
r
co
m
pe
tit
or
s.
w.
397
t ways and means, new to the firm and new to the market to
398
have edge over our competitors.
399
Appendix C: Letter to the participant
Dear Sir/Madam,
I am a Doctoral Research Student at Iqra national University, Department of Management
Sciences. The purpose of my research is to understand the diffusion of organizational
innovation and its role in the growth of Small and Medium Enterprises of Khyber-
Pakhtunkhwa, Pakistan. Although Innovation Diffusion is essential for SMEs, it is
unclear from literature how it plays its role in growth of SMEs in Khyber-Pakhtunkhwa. I
will contribute to explore this research gap better. In particular, my research focuses on:
1.Exploring the sources of Innovations, the Internal and external sources. 2. Examining
which Technological, organizational and environmental conditions are conducive for
Innovation diffusion and adoption.3. Exploring which type of SME favors which kind of
organizational innovation. 4. How the innovation is adopted by the SMEs and how this
innovation help these SMEs to grow.
My research findings will help inform the SME regulatory authorities of Pakistan in
better policy making and policy adoption for SMEs, increasing their entrepreneurial and
400
Innovation orientation. I intend to observe the firm and conduct the face to face
interviews with the top level Managers of the SMEs. The interviews will not be more
than 45-60 minutes. At the end of the research, I will send you a soft copy of the report if
requested.
I completely understand the issue of confidentiality for conducting this research to which
I will completely adhere. I will keep the name of the company and all those I interview
confidential (if requested) and I can also sign a confidentiality agreement (if required). I
would be grateful if you could arrange a time to be interviewed. Looking forward to
hearing from you.
Kind Regards,
Mohammad Daud Ali
Doctoral Research Scholar Management Sciences,
Iqra National University
Mobile: 0331-4422765 / 0314-9954847
E mail:[email protected]
401
Appendix D: Release form/ information sheet
Diffusion of Organizational Innovation and the growth of SMEs: Case study
evidence from Small and Medium Enterprises of Khyber-Pakhtunkhwa, Pakistan
Researcher(s) Introduction
I am Mohammad Daud Ali, currently a PhD candidate from Iqra National University,
Peshawar. I am conducting a research project for my PhD thesis on Diffusion of
Organizational Innovation and the growth of SMEs: Case study evidence from
Small and Medium Enterprises of Khyber-Pakhtunkhwa, Pakistan under supervision
of Dr. Syed Imad Shah of Institute of Management Studies, University of Peshawar.
Project Description and Invitation
The project aims to determine the role of Diffusion of organizational innovation in SMEs
growth. The research will follow a Qualitative research methods and will involve semi-
structured interviews with Top Managers of the case study Small and Medium
402
Enterprises of Peshawar Khyber Pakhtunkhwa in regard with the Sources of innovation,
Conditions for innovation and the barriers they face in the diffusion of organizational
innovation.
Participant Identification and Recruitment
This research project will focus on employees of Small and Medium Enterprises of
Peshawar in Pakistan. The research aims to designate top level managers from SMEs in
Peshawar, Pakistan for detail interviews. This number of participants is needed for the
methods of analysis selected for the project. Participants will be selected based on
personal contacts and their willingness to participate. The research will not seek any
personal information from the participants. The research will ask for information
regarding how organizational innovation is diffused in SMEs and does it help the SME
growth, what are the internal and external sources of innovation, what are the favorable
technological, organizational and environmental conditions for diffusion of innovation.
Whether there is a specific type of organizational innovation followed by certain type of
SME? Are there any barriers to the diffusion of innovation?
Research/data collection Procedures
For interview: I will use personal contacts and references, to make initial contact with
HR/Line managers to request for interview. Those who will agree I will take an
403
appointment for meeting to have an interview for 40-50 minutes.
Data Management
All data will be kept confidential and used only for the research project. The data will be
processed by me under supervision of my supervisor. The project findings will be
compiled for a PhD thesis which will be submitted for the final examination. There will
be no specific participant identity appearing in the thesis (if the respondent does not allow
to present their identities) and thus, confidentiality of identity will be preserved.
Participant’s choices
1. Permission is granted to use my full name and that of the organization in the thesis and
subsequent publications 2. Permission is granted to use an alias only so as to disguise my
name and that of the university in the thesis and subsequent publication contains the
interview guide.
Participant’s Rights
You are under no obligation to accept this invitation. If you decide to participate, you
have the right to:
- Decline to answer any particular question;
- Withdraw from the individual interview at any time as you wish, before
completion of the interview with you;
- Ask any questions about the study at any time during participation;
404
- Be provided with information on the understanding that your name will not be
used in the research;
- Be given access to a summary of the project findings when it is concluded.
- Ask for the recorder/ mobile phone recording to be turned off at any time during
the interview.
405
Researchers Contacts
Mohammad Daud Ali
PhD candidate
Department of Management
Sciences
Iqra National University
Peshawar.
T:+923314422765
Dr.Syed Imad Shah
Supervisor
Institute of
Management Studies
University
Of Peshawar.
T: +923339288420
E
406
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