The Role of Innovation for Entrepreneurial Start-up or Firm Growth - Literature review Example

THE ROLE OF INNOVATION FOR ENTREPRENEURIAL START-UP AND/OR FIRM GROWTH al Affiliation THE ROLE OF INNOVATION FOR ENTREPRENEURIAL START-UP AND/OR FIRM GROWTH Introduction Innovation has continued to play a crucial role in the establishment of new businesses as well as the growth and expansion of existing businesses. It has continued to provide an avenue through which business can increase their market shares and in return boost their income. The aim of this paper is to explore the role of innovation in entrepreneurial start-ups and the growth of firms. In order to examine the role that innovation play in the start-ups and in the growth of companies and businesses, this paper reviews literature from academic journals that provide detailed and state of the art literature and content on innovation, entrepreneurial start-ups and the role that innovation plays in the growth of businesses. In the review of these academic journals, the paper looks into the objectives of the academic journals, the data analysis in the journals and the findings and conclusions. This is done so that the role that innovation plays in business can be understood and deeply explored. Method of Selecting the Journals As indicated earlier, this paper will rely on academic journals that explore the topic of innovations, entrepreneurial, startups and growth of firms and businesses. The paper will use a total of 20 academic journals that explore the above stated subject under consideration. In selecting the academic journals that are used in the paper, a Meta-analysis of the various business journals on the topic of discussion was done. This involved the performing a combined analysis of the quantitative results of a wide range of empirical studies on innovation, entrepreneurial starts ups and growth or expansion of firms. In selecting the twenty sources of information, journals that have objectives of understanding the relationship between the subjects of innovation, entrepreneurial stars ups and business development were selected (Heshmati 2011). The academic journals that are selected for the study are those that are statistically compatible.This means that the data that is obtained from the academic journals might be different, but they all have same or almost the same characteristics. This is done so that they results and findings from the articles and journals can be generalized to help in determining the role player by innovation in entrepreneurial start-ups and growth of firms or businesses. The use of this Meta-analysis method in the selection of the journals that are used in the study helps in addressing the lack of statistical evidence in some journals. In the selection of the academic articles used in this paper, there was a study of the textual content of journals followed by the selection and categorization of the useful and meaningful parts. The selected parts and categorized parts are the ones that are used to form a theoretical framework upon which this paper is based. Innovation, Entrepreneurial Start-ups and Growth of Firms Acs and Storey (2004) defines the concept of innovation as one that involves putting of inventions in practice. Davidsson (2009) indicates that a technological approach to innovation focuses on process or product invention. Innovation can also be understood to be the development of new products, services or processes.It can also entail the exploitation of newer markets and developing or coming up with newer ways of organizing a business (Chen, Cao and Ma, 2008). The innovation process can be a radical process or an incremental process. In the radical scenario, it takes place at once. On the other hand, incremental innovation is a process that occurs over a duration of time and takes place in stages over a period. According to Aislabie (2012), innovation normally applies to the entrepreneurs who create new startups from scratch and those who are already running their businesses. However, the challenges that are faced by these two groups of entrepreneurs are in most cases different. The entrepreneurs who came up with new ventures from scratch strive to do whatever it takes to be able to make their ventures succeed (Dougrain and Haudeville, 2012).They perform all tasks, work for long hours and try to show creativity and resourcefulness in order to help make the new venture succeed. On the other hand, the existing businesses that want to succeed and grow strive very hard to foster the culture of innovativeness and resourcefulness in the organization to help them grow. In firms where innovation of exists, there is normally the chances that the business will be able to improve and increase its income and revenue from the sale of its good and services. There are several roles that are played by innovation in entrepreneurial start-ups and in the expansion of firms. Blundel and Hingley (2011) indicate that each and every firm or business has its priorities, as well as sector specific issues that it needs to balance. However, those that fail to be innovative normally face the risk of losing the ground to their competitors, losing the key staff or employees or even operating inefficiently (Gilbert, McDougall and Audretsch, 2006). This, therefore, implies that innovation can be a very critical differentiator between successful start ups and failed star ups. It also differentiates between market leaders and their rivals in the same market. Helps Respond to Competition and Trend in the Market A study by Gries and Naudé (2010) on the top innovative companies showed that innovation helps businesses or firms discover the opportunities that exist now and those that may emerge in the near or distant future. It is further indicated that successful companies not only respond to the current needs of its customers but also anticipate the future needs of the customers. This will allow them to meet the future needs quickly and efficiently. Though innovation, businesses are able to stay ahead of their competitors in the market. Baumol (2004) states that it is through innovation and anticipation of the future needs that firms such as Ample have been able to grow and increase their market base over the years. A study by Shane and Venkataraman (2000) on various SMEs found out that those businesses that are able to come up with innovative products that are unique in the market have higher chances of succeeding than those that are not innovative. Wong and Autio (2005) state that modification of a company’s processes or mode of operation can give it a competitive advantage over its competitors and thereby allowing it to succeed and also be able to grow. Innovation should, therefore, be included and incorporated as a key part of the business plan of a start-up venture. Aids in Making Most of What is Already Available Minniti and Naudé (2010) believe that innovation is not only about coming up or designing new products to be sold in the market. Innovation also involves focusing on the existing business processes and practices. This is normally done in order to increase the profits, improve overall efficiency, cut costs and find new customers or clients (Chaston and Mangles, 2007). Those businesses that are able to innovate and improve their business practices are not only able to attract better staff members but also retain the existing valuable staff. This is something that is very crucial in the long-term health of the business. When the firm can do this, it will go ahead and boost its performance in the market and also be able to expand and grow to newer markets. Start-ups that are innovative normally attract the best available staff in the market, and this allows the business to be able to grow and succeed in its market of operation. Helps in Developing New and Unique Selling Points Leibenstein (2008) shows that consumers normally view innovation as something that adds value to both the company and the products that the company deals with or sells. In a saturated market, start ups can use innovation to be able to get commercial advantage. According to Goedhuys and Sleuwaegen (2010), some customers are willing to even pay more for a well-designed and innovative product or service rather that going for a cheaper product that is less executing. Hausmann and Rodrik (2003) state that Apple has been able to cut a niche for itself in the market and grow its income exponentially since 1997 through innovation. Despite the fact that there are cheaper options to the Apple products, some consumers prefer the innovative Apple devices and this has allowed it to grow (Freel and Robson, 2004). Star up business, can create a unique entry and selling points by coming up with innovative processes or innovative business practices. This allows the start up to thrive even in a saturated market or a rapidly shifting one (Goedhuys et al., 2008). Helps in Increasing Efficiency A business that is operating efficiently not only meets its objectives but is also able to have a competitive advantage over its other rivals (Audretsch and Keilbach, 2004). Entrepreneurial start ups that have innovative businesses practices and processes are able to reduce their operating cost and minimize waste. When this is done there are higher chances that the business will end up being a success (Autio and Parhankangas, 2008). A business or firm that operates inefficiently in the market normally has higher operating costs. Due to this, such businesses will tend to find it had to grow since they are not able to compete with the rivals who and innovative and are working efficiently. Exploitation of Newer Markets A study by Acs and Szerb (2009) on various entrepreneurial start-ups indicate that those businesses that are innovative are normally able to exploit markets that had not been previously explored. This trend has been seen explored in the technological field. Entrepreneurial start ups that have been able to come up with innovative operating procedures, business practice and marketing strategies have been able to exploit markets that had not been previously exploited. This has allowed the businesses to thrive and make profits over the short period of their existence. Existing businesses also try to come up with new and innovative products that target a particular segment of the unexploited market. This permits them to increase their market base and expand. Conclusion Innovation is a very critical aspect of any entrepreneurial start up or a business that wants to grow. Those entrepreneurs who come up with new businesses from scratch are required to be creative and innovative. This allows them to be able to come up with unique ideas that will allow the new venture to thrive in the market. Innovation allows starts ups and existing firms and businesses to be able to respond to trends and competition, make the most of what is already available, create unique selling points, increase efficiency and exploit new markets. The start ups that fail to be innovative in most cases end up underperforming in the market compared to those that are innovative. Reference List Acs, Z., and Storey, D 2004 ‘Introduction: Entrepreneurship and Economic Development’, Regional Studies, vol.38, no. 8, pp. 871–7. Acs, Z., and Szerb, L 2009, ‘The Global Entrepreneurship Index’, Foundations and Trends in Entrepreneurship, vol. 5, no. 5, pp. 341–435. Audretsch, D. B., and Keilbach, M 2004, ‘Entrepreneurship Capital and Economic Performance’, Regional Studies, vol.38, pp.949–59. Autio, E., and Parhankangas, A 2008, ‘Employment Generation Potential of New, Technology-Based Firms during a Recessionary Period: The Case of Finland’, Small Business Economics, vol.11, pp. 113–23. 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