Knowledge management challenges in small-and medium-sized enterprises

Background & Research Focus Managing knowledge for innovation and organisational benefit has been extensively investigated in studies of large firms (Smith, Collins & Clark, 2005; Zucker, et al., 2007) and to a large extent there is limited research into studies of small- and medium- sized enterprises (SMEs). There are some investigations in knowledge management research on SMEs, but what remains to be seen in particular is the question of where are the potential challenges for managing knowledge more effectively within these firms? Effective knowledge management (KM) processes and systems lead to improved performance in pursuing distinct capabilities that contribute to firm-level innovation (Nassim 2009; Zucker et al. 2007; Verona and Ravasi 2003). Managing internal and external knowledge in a way that links it closely to the innovation process can assist the creation and implementation of new products and services. KM is particularly important in knowledge intensive firms where the knowledge requirements are highly specialized, diverse and often emergent. However, to a large extent the KM processes of small firms that are often the source of new knowledge and an important element of the value networks of larger companies have not been closely studied. To address this gap which is of increasing importance with the growing number of small firms, we need to further investigate knowledge management processes and the ways that firms find, capture, apply and integrate knowledge from multiple sources for their innovation process. This study builds on the previous literature and applies existing frameworks and takes the process and activity view of knowledge management as a starting point of departure (see among others Kraaijenbrink, Wijnhoven & Groen, 2007; Enberg, Lindkvist, & Tell, 2006; Lu, Wang & Mao, 2007). In this paper, it is attempted to develop a better understanding of the challenges of knowledge management within the innovation process in small knowledge-oriented firms. The paper aims to explore knowledge management processes and practices in firms that are engaged in the new product/service development programs. Consistent with the exploratory character of the study, the research question is: How is knowledge integrated, sourced and recombined from internal and external sources for innovation and new product development? Research Method The research took an exploratory case study approach and developed a theoretical framework to investigate the knowledge situation of knowledge-intensive firms. Equipped with the conceptual foundation, the research adopted a multiple case study method investigating four diverse Australian knowledge-intensive firms from IT, biotechnology, nanotechnology and biochemistry industries. The multiple case study method allowed us to document in some depth the knowledge management experience of the theses firms. Case study data were collected through a review of company published data and semi-structured interviews with managers using an interview guide to ensure uniform coverage of the research themes. This interview guide was developed following development of the framework and a review of the methodologies and issues covered by similar studies in other countries and used some questions common to these studies. It was framed to gather data around knowledge management activity within the business, focusing on the identification, acquisition and utilisation of knowledge, but collecting a range of information about subject as well. The focus of the case studies was on the use of external and internal knowledge to support their knowledge intensive products and services. Key Findings Firstly a conceptual and strategic knowledge management framework has been developed. The knowledge determinants are related to the nature of knowledge, organisational context, and mechanism of the linkages between internal and external knowledge. Overall, a number of key observations derived from this study, which demonstrated the challenges of managing knowledge and how important KM is as a management tool for innovation process in knowledge-oriented firms. To summarise, findings suggest that knowledge management process in these firms is very much project focused and not embedded within the overall organisational routines and mainly based on ad hoc and informal processes. Our findings highlighted lack of formal knowledge management process within our sampled firms. This point to the need for more specialised capabilities in knowledge management for these firms. We observed a need for an effective knowledge transfer support system which is required to facilitate knowledge sharing and particularly capturing and transferring tacit knowledge from one team members to another. In sum, our findings indicate that building effective and adaptive IT systems to manage and share knowledge in the firm is one of the biggest challenges for these small firms. Also, there is little explicit strategy in small knowledge-intensive firms that is targeted at systematic KM either at the strategic or operational level. Therefore, a strategic approach to managing knowledge for innovation as well as leadership and management are essential to achieving effective KM. In particular, research findings demonstrate that gathering tacit knowledge, internal and external to the organization, and applying processes to ensure the availability of knowledge for innovation teams, drives down the risks and cost of innovation. KM activities and tools, such as KM systems, environmental scanning, benchmarking, intranets, firm-wide databases and communities of practice to acquire knowledge and to make it accessible, were elements of KM. Practical Implications The case study method that used in this study provides practical insight into the knowledge management process within Australian knowledge-intensive firms. It also provides useful lessons which can be used by other firms in managing the knowledge more effectively in the innovation process. The findings would be helpful for small firms that may be searching for a practical method for managing and integrating their specialised knowledge. Using the results of this exploratory study and to address the challenges of knowledge management, this study proposes five practices that are discussed in the paper for managing knowledge more efficiently to improve innovation: (1) Knowledge-based firms must be strategic in knowledge management processes for innovation, (2) Leadership and management should encourage various practices for knowledge management, (3) Capturing and sharing tacit knowledge is critical and should be managed, (4)Team knowledge integration practices should be developed, (5) Knowledge management and integration through communication networks, and technology systems should be encouraged and strengthen. In sum, the main managerial contribution of the paper is the recognition of knowledge determinants and processes, and their effects on the effective knowledge management within firm. This may serve as a useful benchmark in the strategic planning of the firm as it utilises new and specialised knowledge.

Power relations and small and medium-sized enterprise strategies for capturing value in global production networks: visual effects (VFX) service firm in the Hollywood film industry

Power relations and small and medium-sized enterprise strategies for capturing value in global production networks: visual effects (VFX) service firms in the Hollywood film industry, Regional Studies. This paper provides insights into the way in which non-lead firms manoeuvre in global value chains in the pursuit of a larger share of revenue and how power relations affect these manoeuvres. It examines the nature of value capture and power relations in the global supply of visual effects (VFX) services and the range of strategies VFX firms adopt to capture higher value in the global value chain. The analysis is based on a total of thirty-six interviews with informants in the industry in Australia, the United Kingdom and Canada, and a database of VFX credits for 3323 visual products for 640 VFX firms.

The role of innovation intermediaries in collaborative networks of small and medium-sized enterprises

The major challenge of European Union’s agricultural industry is to ensure sustainable supply of quality food that meets the demands of a rapidly growing population, changing dietary patterns, increased competition for land use, and environmental concerns. Investments in research and innovation, which facilitate integration of external knowledge in food chain operations, are crucial to undertaking such challenges. This paper addresses how SMEs successfully innovate within collaborative networks with the assistance of innovation intermediaries. In particular, we explore the roles of innovation intermediaries in knowledge acquisition, knowledge assimilation, knowledge, transformation, and knowledge exploitation in open innovation initiatives from the wine industry through the theoretical lens of absorptive capacity. Based on two case studies from the wine industry, we identified seven key activities performed by innovation intermediaries that complement SMEs’ ability to successfully leverage external sources of knowledge for innovation purposes. These activities are articulation of knowledge needs and innovation capabilities, facilitation of social interactions, establishment of complementary links, implementation of governance structures, conflict management, enhancement of transparency, and mediation of communication. Our in-depth qualitative study of two innovation intermediaries in the wine industry has several important implications that contribute to research and practice.

Open innovation in small and medium-sized enterprises (SMEs): External knowledge sourcing strategies and internal organizational facilitators

In this paper we explore how small and medium-sized enterprises (SMEs) engage in external knowledge sourcing, a form of inbound open innovation. We draw upon a sample of 1,411 SMEs and empirically conceptualize a typology of strategic types of external knowledge sourcing, namely minimal, supply-chain, technology-oriented, application-oriented, and full-scope sourcing. Each strategy reflects the nature of external interactions and is linked to a distinct mixture of four internal practices for managing innovation. Both full-scope and application-oriented sourcing offer performance benefits and are associated with a stronger focus on managing innovation. However, they differ in their managerial focus on strategic and operational aspects.

Who needs it? An exploratory investigation into the reaction of small and medium enterprises to mobile data technologies

The technological environment in which contemporary small and medium-sized enterprises (SMEs) operate can only be described as dynamic. The seemingly exponential nature of technological change, characterised by perceived increases in the benefits associated with various technologies, shortening product life cycles and changing standards, provides for the small and medium-sized enterprise a complex and challenging operational context. The development of infrastructures capable of supporting the Wireless Application Protocol (WAP)and associated 'wireless' applications represents the latest generation of technological innovation with potential appeal to SMEs and end-users alike. The primary aim of this research was to understand the mobile data technology needs of SMEs in a regional setting. The research was especially concerned with perceived needs across three market segments; non-adopters of new technology, partial-adopters of new technology and full-adopters of new technology. Working with an industry partner, focus groups were conducted with each of these segments with the discussions focused on the use of the latest WP products and services. Some of the results are presented in this paper.

Explaining internationalisation of small to medium sized enterprises within the Queensland food and beverage industry

The prevalence of International New Ventures (INVs) has increased during the past twenty years. Nevertheless, to date there has been no general consensus within the literature on an explanation as to the rapid internationalisation of some firms. Do they follow a similar process to other firms that internationalise based on a more ‘measured’ incremental sequential process of internationalisation. This paper proposes and tests an innovation diffusion model of the internationalisation of small firm INVs and others by drawing on key innovation diffusion models from the literature. The results of this analysis indicate that the synthesised model of export adoption is effective in explaining the internationalisation process of INVs and other firms within the Queensland Food and Beverage Industry. Significantly, the features of the original innovation diffusion models developed in the consumer behaviour literature, which had limited examination within the internationalisation literature, were confirmed. This includes the ability of firms, or specifically decision-makers, to skip stages based on previous experience.

Do programs to improve business performance in small and medium manufacturing enterprise improve opportunity recognition?

Increasing awareness of the benefits of stimulating entrepreneurial behaviour in small and medium enterprises has fostered strong interest in innovation programs. Recently many western countries have invested in design innovation for better firm performance. This research presents some early findings from a study of companies which participated in an holistic approach to design innovation, where the outcomes include better business performance and better market positioning in global markets. Preliminary findings from in-depth semi-structured interviews indicate the importance of firm openness to new ways of working and developing new processes of strategic entrepreneurship. Implications for theory and practice are discussed.

Unintended consequences of regulatory reporting requirements for small and medium size construction entities : Australian evidence

The Queensland Building Services Authority (QBSA) regulates the construction industry in Queensland, Australia, with licensing requirements creating differential financial reporting obligations, depending on firm size. Economic theories of regulation and behaviour provide a framework for investigating effects of the financial constraints and financial reporting requirements imposed by QBSA licensing. Data are analysed for all small and medium construction entities operating in Queensland between 2001 and 2006. Findings suggesting that construction licensees are categorizing themselves as smaller to avoid the more onerous and costly financial reporting of higher licensee categories are consistent with US findings from the 2002 Sarbanes-Oxley (SOX) regulation which created incentives for small firms to stay small to avoid the costs of compliance with more onerous financial reporting requirements. Such behaviour can have the undesirable economic consequences of adversely affecting employment, investment, wealth creation and financial stability. Insights and implications from the analysed QBSA processes are important for future policy reform and design, and useful to be considered where similar regulatory approaches are planned.

Improving opportunity recognition and business performance in small and medium manufacturing enterprises through design innovation programs

Increasing awareness of the benefits of stimulating entrepreneurial behaviour in small and medium enterprises has fostered strong interest in innovation programs. Recently many western countries have invested in design innovation for better firm performance. This research presents some early findings from a study of companies that participated in a holistic approach to design innovation, where the outcomes include better business performance and better market positioning in global markets. Preliminary findings from in-depth semi-structured interviews indicate the importance of firm openness to new ways of working and to developing new processes of strategic entrepreneurship. Implications for theory and practice are discussed.

Exploring the international market selection of small to medium sized enterprises

Research into the international market selection (IMS) of small to medium sized enterprises (SMEs) commonly identifies psychic distance and networks as being the most important determinants of a firm’s IMS. Whether regional factors, such as bilateral and multilateral regional integration, are important as determinants of IMS is not well understood. This paper utilises a multiple case study method through in-depth interviews to investigate, in the context of the current business environment, how important regionalisation, psychic distance and networks are as determinants of IMS among SMEs in the food and beverage industries within Australia and Malaysia. The study found regional considerations to be important to the IMS of Malaysian but not Australian firms, while psychic distance was considered an important determinant on IMS by only half of the sampled firms. The role of networks, however, was considered the most important determinant of IMS among all the sampled firms.