Innovative firms or innovative owners? Determinants of innovation in micro, small, and medium enterprises

The crux of innovation is on the jockey, not the horse. A smaller horse helps.

Innovation & Enterprise

Innovative firms or innovative owners? Determinants of innovation in micro,
small, and medium enterprises (World Bank, May 09)
Author: de Mel, Suresh ; McKenzie, David ; Woodruff, Christopher ;
Abstract - Innovation is key to technology adoption and creation, and to
explaining the vast differences in productivity across and within
countries. Despite the central role of the entrepreneur in the innovation
process, data limitations have restricted standard analysis of the
determinants of innovation to consideration of the role of firm
characteristics. The authors develop a model of innovation that
incorporates the role of both owner and firm characteristics, and use this
to determine how product, process, marketing, and organizational
innovations should vary with firm size and competition. They then use a
new, large, representative survey from Sri Lanka to test this model and to
examine whether and how owner characteristics matter for innovation. The
survey also allows analysis of the incidence of innovation in micro and
small firms, which have traditionally been overlooked in the study of
innovation, despite these firms comprising the majority of firms in
developing countries. The analysis finds that more than one-quarter of the
microenterprises are engaging in innovation, with marketing innovations the
most common. As predicted by the model, firm size has a stronger positive
effect, and competition a stronger negative effect, on process and
organizational innovations than on product innovations. Owner ability,
personality traits, and ethnicity have a significant and substantial impact
on the likelihood of a firm innovating, confirming the importance of the
entrepreneur in the innovation process.
http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2009/05/18/000158349_20090518125334/Rendered/PDF/WPS4934.pdf