Innovating SMEs in China: Unlocking Competitive Advantage & Sustainable Growth - Essay Sample

Introduction

Innovation is considered one of the essential impetuses to achieve a competitive upper hand and obtain sustainable development for small and medium-sized enterprises (SME's) (Dijk, 2017). Even so, SME's in China have lately tackled numerous problems that limit innovation performance. The economy of China has leaped forward since the execution of economic reform and open-door regulations and laws in 1978 (Hutzschenreuter, 2009). China is late in entering the modern industry; however, a hugely successful one. The fast development in dynamic SME's is one of the most essential achievements of the general macro-economic restructure. Also, as a significant propeller of the economic boom in China, Chinese SME's make tremendous growth to GDP and job opportunities improvement (Li et al., 2015). For instance, Chines SME's reflect around 61% of the state's GDP and offers around 87% of the most current employment in 2013 (Meredith, 2017).

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Involving the development of economic globalization and technological revolution, business have to make new and develop their commodities, services and manufacturing activities to achieve a competitive upper hand in the market share (Li et al., 2015). Thus, the innovation ability as an driver of the technology progress is of considerable significance to all organizations, particularly for SMEs. Also, many enterprises initiate their business activities from small or medium-sized companies (Ping, 2008). SMEs offer a breeding basis for better commodities and services. For example, Chinese SMEs provided 75% of better products and 65% of invention patents in 2012 (Siu, 2012). Therefore, SME's have been involved in a significant role in the innovation of products and manufacturing processes. Even so, Chinese SMEs have experienced numerous failures concerning technology innovation, which indicates numerous constraints that are still present to limit further innovation activities of SME'S in China. Generally, it is essential to crucially recognize and analyze the challenges of innovation for SMEs in China (Sun, 2019). SME's are the growing point of any economy, and they are essential particularly in the development of the Chinese economy. Institutional situations are significant aspects of the development of SMEs (Hirsch-Kreinsen, 2008). Various development models create in different kind of institutional situations. Integrating the study on the SME development model of domestic scholars involves different models. This paper will focus on the innovation business model while analyzing the institutional situations in the activities of the development of the model and its related theory. Since the levels of economic development among countries in the world are different, SME's in the same industry; however, in various nations possess their qualities and quantitative standards (Bigliardi & Galati, 2018). The standards of China's SMEs are developed in line with the employee numbers; sales made the total number of assets and properties, and so on. SME's vary in size, involving the upper limit of SME and the lower limit of SME's (Cantamessa & Montagna, 2015). SMEs in China continue to grow to be 172, 805, the number of registered SME's in the year 2002 (Tsvetkova et al., 2014). It accounted for 95% of the total percentage in China, and currently, the number of SMEs is 37,500,000, accounting for 99% of total registered enterprises. The sector leads to 75% of job opportunities in the regions (Tsvetkova et al., 2014).

Research Questions

• How do Chinese SME's utilize the innovation development model?
• What practices do owners of Chinese SMEs perform on the innovation development model?
• What are the benefits and challenges affecting the innovation development model in Chinese SMEs?

Research Objectives

• To determine Chinese SME's utilization of the innovation development model.
• To evaluate the practice of Chinese SME's owners on the innovation development model.
• To establish the benefits and the challenges affecting the innovation development model in Chinese SME's

Despite research indicating the benefits of innovation, little knowledge is available on how Chinese SME's utilize the innovation development model and the factors favoring the sector to make it a leading propeller in the economy of China (Mukwasi & Seymour, 2012). This study, therefore, aims to research in the innovation development model of Chinese SME's enterprise clusters.

Literature Review

The evolution of SME's cluster development model has occurred in particular areas involving the growing trend toward SME's clustering. Even though the size of a single enterprise in an area may fail to be significant, the industrial size of that region may be huge, since economies of scale can be achieved when a considerable measure of SME's agglomerate in a particular region (Ping, 2008). The traits and methodologies of the development of SME's cluster development model include the Wenzhou model, Southern Jiangsu model, Shenzhen model, and Zhongguancun model (Ping, 2008). The sources of funds vary being form individual, state sources, international funds, and bank loans. Other factors involving the technological content varies between the model with the first two being low while the rest being high (Stampfl, 2015). The same traits apply to the quality of employees. Shenzhen is a unique financial zone that developed an extroversion economy by involving international investment. The state of Shenzen city attempted to create an environment for growth. In line with the circumstances of cluster development, the rationale should use the external economy theory, agglomerative economy theory, and the transaction network theory (Stampfl, 2015).

Innovation refers to the introduction of a better commodity, processing activity, market, supply source in the industry. It also consists of developing an existing ides involving a step-wise process to develop a commercially viable commodity. Innovation is stereotypically regarded as the propeller of SME's business because they are dynamic. However, it is also incorporated in large organizations as well. Innovation is significant since it actualizes an idea to a useful concept. The basics of the innovation model in Chins revolve around solving problems that are present within the region (Rahman & Ramos, 2012). Therefore many SMEs are solutions to problems such as transport services—also, the SME's aim to adapt to change, especially in China experiencing numerous changes (Rahman & Ramos, 2012).

Since change is necessary, innovation allows the business to shift and continue to be in existence. However, the objective remains to be profits, and therefore as long as the SME's are making profits, they will remain. With markets globally becoming more interlinked, better opportunities are emerging in SME's new markets with new requirements and problems. For example, in China, it is estimated to be the leading market where innovation permits a business to capitalize on the opportunities available (Rahman & Ramos, 2012). There are also challenges involving innovation which include the technological set-backs of innovation. The most significant risk of SME's in innovation involves whether the concept will be viable or not. Therefore, many business attempt trials on a small scale as a pilot device to prevent huge losses. Another challenges involves finances and market failure. In SME's, there are two essential processes shown which involve the new knowledge and design of better working methods on the lines of production of goods and services (Ping, 2008). Thus, it is essential to improve management systems and exploration of personal funds, which is knowledge, which can be used for the utilization of business resources, permitting a new production course of action. In better discussing the occurrence of innovation, a research was conducted that developed models used to explain various stages where knowledge is managed made up of various phases that propel innovation. Innovation development is different within the enterprises affected by the type of activity and operation (Innes & Wiesner, 2012). In SME's, there are small and medium technology-based companies, which include a very skilled workforce and little hierarchical levels, fewer departments. In this case, the innovation development process offers the potential to manage knowledge much more efficiently than large companies. The significant steps involved include the idea of an invention, development of the idea, and the commercialization of the concept.

Significance of the Study

The information that will be attained from this research will be expected to offer a better understanding of the innovation business model in SME's in China and the enterprise clusters. The information that relates to improving the sector and the process of innovation in SME's can be used by policymakers, mid to high-level ministry staff, researchers and the development facilitators to differentiated approach to develop the SME's sector and improve the economic sector through better innovation having eliminated existing challenges affecting innovation. It is hoped that with this understanding, policymakers and extension officers involved in the development of SME's will be better able to aid the individuals to develop the will to be more innovative and increase the business sector.

Research Methodology

The research topic is designed to study the innovation business model of Chinese SME's enterprise clusters. The type of research design used in this study is a descriptive survey design. A questionnaire will be used to collect primary information from small-holder business owners. The questionnaire will offer a guide to the interviewer and cover all subject matters involved in the objectives of the study. Semi-structured interview programs will be used to collect information from the respondents. The sampling procedure that will be used to recognize the respondents to participate in the survey will be a random sampling technique. The identified population will be divided to select a sample size that will ensure different groups of populations to be represented. Multi-stage sampling will be used in the study to select a smaller sample and acquire smaller units of sampling. Purposive sampling will then be followed, and the first selection will be the central point.

References

Bigliardi, B., & Galati, F. (2018). An open innovation model for SMEs. Researching Open Innovation in SMEs, 71–113. https://doi.org/10.1142/9789813230972_0003

Cantamessa, M., & Montagna, F. (2015). Business model innovation. Management of Innovation and Product Development, 115–135. https://doi.org/10.1007/978-1-4471-6723-5_7

Dijk, M. P. V. (2017). Classifying small enterprise clusters: A Conceptual Enquiry in Ahmedabad. Indian Industrial Clusters, 207–218. https://doi.org/10.4324/9781315252438-13

Hirsch-Kreinsen, H. (2008). Innovation strategies of non-research-intensive SMEs. Change in SMEs, 171–184. https://doi.org/10.1057/9780230227781_10

Hutzschenreuter, J. (2009). Hypotheses and research model. Management Control in Small and Medium-Sized Enterprises, 86–111. https://doi.org/10.1007/978-3-8349-8395-4_4

Innes, P., & Wiesner, R. (2012). Beyond HRM intensity: Exploring intra-function HRM clusters in SMEs. Small Enterprise Research, 19(1), 32–51. https://doi.org/10.5172/ser.2012.19.1.32

Li, Z., & Wang, S. (2015). The Small-medium Enterprise in New Zealand. Advances in Social Sciences Research Journal, 2(7). https://doi.org/10.14738/assrj.27.1271

Meredith, S. (2017). Environmental innovation and small and medium-sized enterprises. Small a...