Network Cooperation, Innovation, Internationalization and Economic Performance of SMEs: An Exploratory Study

Abstract

This paper explores the relationship between network cooperation, innovation, internationalization and economic performance of manufacturing small and medium enterprises (SMEs) of engineering goods industry located in Bangalore city, India. At the outset, it is observed that SMEs receive the maximum assistance in the realm of product specifications. Moreover, they do not resort to manufacturing new products as much as they resort to product modifications or process improvements. Further, it is found (using Chi-square test of independence) that higher the network assistance received from an external network, greater is the innovation performance of SMEs. Subsequently, using analysis of variance (ANOVA), export intensity (proxy for internationalization performance) of SMEs is found to have a significant positive association with both the degree of their network cooperation and of their innovation performance. Lastly, it is observed that higher the degree of each of network cooperation, innovation performance and internationalization performance, better is the economic performance (measured by total sales turnover) of SMEs. These results have significant implications for the policy makers of the country to give due attention to network cooperation, innovation and internationalization as the means of enhancing the economic performance of SMEs.

Figure 1 Network cooperation, innovation, internationalization and economic performance of SMEs

Table 1 Distribution of sample firms based on type of products

Table 2 Description of interaction frequency scores with network participants

Table 3 Descriptive statistics of network assistance

Table 4 Distribution of firms based on the degree of network assistance

Table 5 Descriptive statistics of innovation variables

Table 6 Distribution of firms based on the degree of innovation performance

Table 7 Descriptive statistics of internationalization variables

Table 8 Contingency table: network assistance and innovation performance

Table 9 Chi-square results for network assistance and innovation performance

Table 10 Robust tests of equality of means for export intensity across levels of network cooperation

Table 11 Post-hoc multiple comparisons using Games-Howell test for export intensity across levels of network assistance

Table 12 One-Way ANOVA table for export scope

Table 13 One-Way ANOVA for export speed

Table 14 Robust tests of equality of means for export intensity across categories of innovation performance

Table 15 Post-hoc multiple comparisons using Games-Howell test for export intensity across categories of innovation performance

Table 16 One-Way ANOVA for export scope across categories of innovation performance

Table 17 One-Way ANOVA for export speed across categories of innovation performance

Table 18 Robust tests of equality of means for sales turnover across categories of network cooperation

Table 19 Post-hoc multiple comparisons using Games-Howell test for sales turnover across categories of network cooperation

Table 20 One-Way ANOVA for sales turnover across categories of innovation performance

Table 21 Post-hoc multiple comparisons using Tukey’s HSD test for sales turnover across categories of innovation performance

Table 22 Correlation: internationalization performance and sales turnover