Innovation in SMEs: the impact of strategic orientation and environmental perceptions

Purpose - To investigate the role and impact of strategic orientation and environmental perceptions on innovation and supporting mechanisms such as process technologies and management practices, in SMEs. Design/methodology/approach - A quantitative approach based on a random sampling methodology of 1,000 SMEs. Construct validity was tested in the qualitative phase of the research. Findings - SMEs can be categorised as either prospectors or defenders. This polarisation was confirmed in this study. For example, prospectors are more likely to engage in new product development, whereas defenders are five times more likely to modify an existing product than introduce a newly patented product. Prospector‐type firms tend to deploy more new process technologies and leading management practices compared with defender type firms, particularly in a turbulent operating environment. Defenders recognise the need to “catch up” and indicate that they intend to introduce process technologies over the next two years. Firms tend to place a greater emphasis on innovation in turbulent operating environments. Research limitations/implications - The study was restricted to two different sector types: engineering and electronics. Future studies should examine other sectors and their sub sectors, possibly augmented by qualitative in‐depth case studies or an ethnographic approach. Practical implications - The practical implications of the study are outlined in the paper. Chief executives are encouraged to align their strategic orientation with their innovation strategy. In addition, defender type firms should consider the greater use of process technologies and management practices. Originality/value - This paper contributes to the integration of strategic orientation and innovation.