An examination of small and medium enterprise innovation in an emerging market economy

Donard Games

Research output: ThesisDoctoral Thesis

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Small and Medium-sized Enterprise (SME) innovation has become a key factor in enhancing SME performance. In Indonesia, SME innovation is seen as critical as SME owners are dealing with unprecedented competition and abundant business opportunities. Free trade in the ASEAN (Association of Southeast Asian Countries) also presents competitive challenges and opportunities for Indonesia’s SMEs. In addition to changes in the economic landscape, Indonesia is experiencing major social changes. Increasing gender equality, migration, and age cohort changes as a result of the demographic bonus arguably influence SME innovation. Previous research has suggested SME innovation research needs to adopt a broader approach to innovation, incorporating people and cultural issues as a way of building a more comprehensive understanding of the area.

The present study focuses on innovation in Minangkabau SMEs in Indonesia. There is currently no empirical research providing a comprehensive overview of SME innovation in Indonesia and in a Minangkabau context. The Minangkabau are an ethnic Indonesian group that are regarded as highly entrepreneurial, with a culture that encourages entrepreneurship. Minangkabau SMEs can be found across Indonesia and internationally. The present study was designed to provide a comprehensive understanding of Minangkabau SME innovation by considering the economic, social and cultural context of these businesses operating in Indonesia.

Both qualitative and quantitative research methods were used to explore Minangkabau SME innovation. First, a phenomenographic approach was used to examine interviews with Minangkabau SME owners that asked how they interpreted and implemented innovation. Second, a survey was undertaken with Minangkabau SME owners to examine relationships between innovation constructs, innovation outcomes and personal values.

Innovation-related constructs examined in this study included organisational structure, future orientation, risk-taking, Minangkabau values, external changes and competition, innovation climate, incremental innovation, radical innovation, and innovation implementation. Data were collected from 400 Minangkabau SME owners residing in four Indonesian cities. A partial least squares approach was used to analyse the data and estimate the suggested structural models.

The research makes important contributions to our knowledge of innovation in SMEs. Firstly, future orientation, incremental and radical innovation, innovation implementation, and a top down approach led to better Minangkabau SME innovation outcomes. Secondly, social changes, competition and changes, and cultural values did not significantly influence innovation outcomes; suggesting SME innovation in Indonesia has been isolated from the external environment. Thirdly, power was found to be the most important value type related to Minangkabau SME innovation, although tradition was also valued. This may signify a link between a collectivist culture and innovation. Fourthly, trust and networks were also important. The findings suggested that, in the Minangkabau’s collectivist culture SME owners did not seek the support of social networks to enhance innovation outcomes. The study suggested Minangkabau SME owners need to proactively engage with their external environment, benefit from Minangkabau networks and be strategic thinkers if they are to successfully pursue business opportunities and improve innovation outcomes.
Original languageEnglish
QualificationDoctor of Philosophy
  • Sneddon, Joanne, Supervisor
  • Soutar, Geoff, Supervisor
Publication statusUnpublished - 2015


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