Innovation processes: do they help or hinder new product development outcomes in Irish SMEs?

Small- and medium-sized enterprises (SMEs) make a considerable contribution to the development and diffusion of innovation as well as accounting for the bulk of economic activity and employment in Ireland. A formal process for managing the stages of innovation projects is generally cited as a key component of best practice in new product development (NPD). Successfully managing innovation is an important business objective for SMEs, and yet, relatively little is known about how innovation-active firms approach innovation and, specifically, whether firms use formal processes to manage their NPD activities. This study of innovation-active Irish SMEs finds that three quarters of firms report that they do not operate a formal innovation process, yet this is not associated with poorer performance in terms of revenues from new products and services; and there are few differences between firms with formal innovation processes and firms with informal innovation process across each stage of the Innovation Value Chain. Having a more formal innovation process is, however, associated with success at bringing novel products to market. This study contributes to our understanding of the management of innovation in SMEs and to the emerging literature on SMEs that has emphasised both the prevalence and the effectiveness of informal management processes.