Power of being small and entrepreneurial and essentiality of innovation for excellence in performance and global competitiveness: a case of SMEs in a developing country context

It is well accepted that SMEs in emerging economies significantly contribute to employment, GDP and the social well-being of people. However, a strategic approach to innovativeness is needed to achieve excellence in performance for global competitiveness. This paper provides the findings of a study carried out to explore the innovative behaviour of manufacturing SMEs in the Western province of Sri Lanka. Necessary information was collected using a stratified sample survey among SMEs. The findings were further investigated and triangulated with focus group discussions. The results revealed that SMEs engage moderately in product/service and process innovations and improvements, though almost all are new to the firm. Inward-oriented isolated firms with limited linkages or information channels were found to be one of the main reasons for less innovativeness. The study suggests that supportive infrastructure and links with the government institutions, research and technical support centres, and universities should be significantly improved. Furthermore, required policy adjustments in foreign trade, investments, and foreign employment should be made for the development of SMEs.