Innovation Management in Emerging Market: SMEs in the Chinese Electronics Industry - Research Paper Example

Innovation management in emerging market: SMEs in the Chinese electronics industry Introduction SMEs account for about 99.6% of the total Chinese enterprises, 58.5% of the GDP and 75% of employees in towns that have SMEs (Charter & Clark, 2006). The risk for establishing business is greater for SMEs than larger businesses as they are unable to absorb the initial costs. The liberalization and reforms has led China to adopt a policy of development of a wide range of electronic products which include personal computers, consumer video discs, digital televisions, integrated circuits, and cellular telephony (Linden, 2004). It was the general impression that SMEs were mere final assembly lines with little innovation added to the product pr production process. Entry barriers are low as technology is matured. This increases competition and hence innovation is considered essential. The concerns for the SMEs are environmental protection, low margins, high energy consumption, loss of export markets and access to technology. To manage an SME requires strong organizational structure, management commitment and involvement of the top management (Seeley, Smith & Lanham, 2001). This research would determine if the entrepreneurs in China have become innovative in managing their businesses to overcome and how this has been possible. Literature Review Innovation is not just about technology but also understanding untapped user needs that must be addressed in a path-breaking manner (NASSCOM, 2007). Innovation has to occur at every stage through value addition to the customer. Managing innovation is the top most priority in businesses as technology is becoming standardized and commoditized. Firms that innovate will survive and grow. Innovation implies to do things in a different way to achieve new levels of output. Taiwan has the leading position as the international supply base for the PC industry (Ernst & Guerrieri, 1997). This gave rise to SMEs in China in the electronics industry. Most of China’s electronics industry is concentrated in the southern coastal provinces and mostly confined to final assembly process with limited local value added. The Chinese market for telecommunications equipment is one of the most attractive markets worldwide. China has been an attractive destination because of low labor and raw material costs. Industrial output has increased at huge rates in China in recent years, growth averaging 12.6% a year (Seeley, Smith & Lanham, 2001). Most SMEs in China are labor intensive with low centralized production. They lack technology and specialization and are slow in production. There is low awareness of environmental protection and no such system is in place (Charter & Clark, 2006). The SMEs are adding to the pollution and e-waste, which require increase the need for innovation in managing these firms. The English language is another barrier to the growth of the SMEs in China and added to this is the lack of quality software in Chinese language (Kraemer & Dedrick, 2001). Since the quality of production by local PC manufacturers was low, the government opened the doors to foreign enterprises in the hope that this would lead to the development of the sector. The Chinese SMEs are active within the vertical markets and hence the country lacks the horizontally diversified groups like those of Japan and Korea (Linden, 2004) while Seeley, Smith and Lanham (2001) contend that innovation has to be brought about through vertical disintegration where technology is handled by a small group of specialists. Foreign investment and technology transfer has inundated China but the SMEs continue to face problems. The government supports the SMEs by extracting technology from the foreign countries. The SMEs have to encounter overseas competition in addition to overcoming technology barriers (Seeley, Smith & Lanham, 2001). A widely dispersed market cannot consolidate or gain from expertise of others. Identified all SMEs are attached to a consortium each of them benefits from any development that takes place. It also helps in maintaining the scale of economies, which becomes essential as the electronics SMEs are capital intensive units. It also helps to manage price fluctuations. Research Questions The literature review suggests that the SMEs need to evolve and this requires innovation in management which extends beyond technology. While some authors contend that the country lacks horizontally diversified groups, others feel innovation can be brought about through vertical integration. Knowledge is fragmented and needs research. The research questions should thus be: 1. Does the government encourage innovation? 2. What is the level of education and training of the managers considered essential for innovation in management? 3. What is the level of pollution and e-waste generated by the SMEs? 4. How many SMEs are really conscious of introducing innovation in management? Research method This study would require an in-depth analysis which means a qualitative approach would be adopted. Logical positivism employs the quantitative and experimental methods to test deductive generalizations (Amaratunga et al., 2001). This requires independence of the observer from the subject being observed. Hypotheses have to be formulated in advance for subsequent verification. The explanations in this method are reduced to the simplest possible elements in order to facilitate analysis. Secondary data will be collected through literature review as it generates new understanding through reflection or knowledge integration (Feurer & Chaharbaghi, 1995). It saves time and high quality of data is available. Literature review distinguishes what has been done from what is to be done. Literature review helps in the synthesis and analysis of the relevant published work. Literature on innovation management would also be studied. The secondary data would be supported by primary data collected through interviews over phone. Interviews of some managers of SMEs would be conducted over phone. Because of distances involved, prior appointment through email would be sought. Certain areas would be targeted like the southern coastal provinces. The government executives would also be interviewed. Since all may not respond at least 20 emails would be sent out, anticipating that ten might respond. Interviewing is a mode of inquiry aimed at understanding an experience and meaning that person make of that experience (Seidman, 1998 cited by Eggenberger & Nelms, 2006). The individual in-depth interview allows the interviewer to delve deeply into social and personal matters (DiCicco-Bloom & Crabtree, 2006) and it unveils a person’s emotions, beliefs, problems, experience and actions (Eggenberger & Nelms). Interviews can capture some of the subtle complexities underlying the decision-making process that can be missed by large-scale statistical analyses (Herod, 1993). This method ensures objectivity, detachment and hierarchy which are more important than individualized concerns. Reflection It is uncertain how much literature would be available on innovation in management in the SMEs in the electronics industry in China. Ethical concerns may arise when the managers have to reveal the corporate policies. They may be reluctant but their responses would indicate to what extent the firm is discharging its obligations in brining about innovation. Names of the persons giving the information would not be revealed in the research process. The concerned managers would be assured that the information would be confidential and the recordings of the interviews would be destroyed as soon as it is transcribed. Collecting the database of the SMEs would require the help of the regional government. Compiling and analyzing data would be done through sophisticated software. The findings would give direction to the SMEs that are unable to find resources to bring about change in their management. Conclusion There is no unique research method and each method has its own difficulties. The categories listed for research may not be comprehensive or may require further sub-categories. Besides, it is difficult to predict how many participants would be willing to respond in the first place, and then how many would register true opinions. Attempts will be made to ensure the reliability and validity of the data collected. Very often, firms tend to conceal the true picture especially when their strategies fail. Firms may not be willing to comply with some research. References: Amaratunga, D., Baldry, D., Sarshar, M., & Newton, R., (2002), Quantitative and Qualitative Research in the built environment: application of mixed research approach, Work Study, Vol. 15 No. 1 2002, pp. 17-31 Charter, M., & Clark, D., (2006), Issues and capacity-building needs of the Asian electronics sector, AEDE, 12 Jan 2008 DiCicco-Bloom, B., & Crabtree, B. F., (2006), The qualitative research interview, Medical Education 2006; 40: 314–321 doi:10.1111/j.1365-2929.2006.02418.x EGGENBERGER S.K. & NELMS T.P. (2007) Family interviews as a method for family research, Journal of Advanced Nursing 58(3), 282–292 doi: 10.1111/j.1365-2648.2007.04238.x Ernst., D. & Guerrieri, P. 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