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Resource scarcity in SMEs: effects on incremental and radical innovations


  • Tino Woschke
  • Heiko Haase
  • Jan Kratzer


Purpose - This study deals with the impact of resource scarcity on the innovation performance of small and medium-sized enterprises (SMEs). The objective of this paper is to scrutinise whether resource scarcity among SMEs has an effect on their innovation performance. Design/methodology/approach - The sample was based on panel data for 302 SMEs from the mechanical and electrical engineering sectors. Firms were divided into four groups by resource scarcity: a) human resource scarcity, b) financial resource scarcity, c) both types of resource scarcity, and d) no resource scarcity. To test for significant inter-group differences in innovation performance, we carried out a MANCOVA and a multiple discriminant function analysis. Findings - Our results indicated that resource scarcity can have a positive effect on incremental but not radical innovation performance in SMEs. However, we found this to be true for financial resource scarcity only. Research limitations/implications - These results may not be applicable to all SMEs, as we only focused on the industries of mechanical and electrical engineering. Future studies should focus on analysing the internal structures of SMEs that led to our results. More research should also be conducted on ways that resource-limited SMEs can appropriately conduct radical innovations. Finally, resources should be made available for both practitioners and academics explaining why the acquisition of resources is not always be the best option in response to limited resources. Practical implications - These results indicate that resource-constrained SMEs, especially those that struggle with limited finances, should concentrate their innovation activities on incremental rather than radical innovations. Originality/value - This study closes the knowledge gap as to whether it is beneficial for resource-limited SMEs to focus on either incremental or radical innovation. From the theoretical viewpoint, the resource-based view provides two strategies for resource-limited SMEs: acquiring new resources or recombining available resources. We were able to clearly demonstrate for the first time that the recombination of resources is especially important for SMEs that specifically wish to pursue incremental innovation.

Suggested Citation

  • Tino Woschke & Heiko Haase & Jan Kratzer, 2017. "Resource scarcity in SMEs: effects on incremental and radical innovations," Management Research Review, Emerald Group Publishing, vol. 40(2), pages 195-217, February.
  • Handle: RePEc:eme:mrrpps:mrr-10-2015-0239

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    Cited by:

    1. Zhuquan Wang & Memon Rafait Mahmood & Hafeez Ullah & Imran Hanif & Qaiser Abbas & Muhammad Mohsin, 2020. "Multidimensional Perspective of Firms’ IT Capability Between Digital Business Strategy and Firms’ Efficiency: A Case of Chinese SMEs," SAGE Open, , vol. 10(4), pages 21582440209, December.
    2. Mahmutaj Lura Rexhepi & Krasniqi Besnik, 2020. "Innovation Types and Sales Growth in Small Firms: Evidence from Kosovo," South East European Journal of Economics and Business, Sciendo, vol. 15(1), pages 27-43, June.


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