Effects of IT on Ability to Innovate: A research on SMEs

This research explores the effects of information technology on the ability of small and medium-sized enterprises (SMEs) to innovate. It examines how technology enhances their products, processes, innovations, and key management practices. The study uses empirical methods to survey SMEs and analyze the data using SPSS and MS Excel.

Effects of IT on Ability to Innovate: A research on SMEs
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Abstract
The advent of information technology has led to great innovation in almost all the spheres
of life more so the business enterprises who use the technologically advanced tools to manage
their business. Although most innovations are majorly used by the large corporation, it is vital to
note the application of technology in the small and medium-sized enterprises(SMEs) is critical to
enhancing regional economic development since these businesses are more dynamic and able to
adapt to the changing technological space. Most research has done on the impact of innovation
on the large corporation but less has been done to the effect of innovation on a SMEs in terms of
how technology enhances their products, processes, innovations and key management practices.
This research is therefore devoted to the finding out the effect innovations have on SMEs by
using empirical methods to study and survey the various SMEs locally and the various literature
written about them. The research questions shall be unique as most of them shall come from the
one on one meeting the pleminiary study conducted to have the hypothesis formalized. The
quantitative analysis of the data collected from the survey shall be analyzed using the software
combination of SPSS and presentation of finding modeled in Ms excel charts.

Introduction
Since the introduction of information technology as a discipline, there have been some
critical organizational functions that can not be separated from the use of information
technology. The IT has become an Integral part of the whole business ecosystem as it is used to
collect data, analyze data which help in aiding decision making in the company (Szymanski,
Stanislawski, & Blazlak, 2018). This decision made can inform the correct action that the
company can take to make the business more competitive. The small and medium-sized
enterprises have not been left behind as they increasingly adopt information technology to
increase their innovative ideas and dynamically change their products and services which in
effect improve the regional and global economy (Qingrui, 2012).
Information technology has made the world a global village. Globalization has been fully
effected as a business continues to conquer new and foreign markets removing the geographical
barriers. Information technology plays an important role in ensuring the success of globalization
as the various information systems continue being used by different corporations to make new
products and innovate on the existing products in a way that consumer globally like. The
consumer has become king in the economic marketplace and will always pay for what brings the
value for money. The growing increase in innovation among corporations is a sure indicator of
how an information system is a key to this globalization as most of this technological
advancement in one way or another uses some components of IT to ensure the technology
connects with the users. Artificial intelligence, the Internet of Things are just some of the few
innovations that have been made revolutionary due to the advent of IT (Palazzi, Sgrò, &
Ciambotti, 2018).

I am critical to note even the SMEs do benefit from this innovation hence the need to
analyze the current state of affair among the SMEs and how the innovations they project
contribute to the regional and global economy. Although some studies have been directed to the
discovery of effects of IT on SMEs innovation capacities and general contribution of these
innovations to global economies, very little empirical work have been done to this effect (Al-Tal
& Emeagwali, 2019).
In this study, the use of information systems among the SMSes around the
Ballarat business center formed the core area of survey to gauge the effects of the information
system on their innovative ideas and the relationship that exists between the innovations and
information system was established. The research question was majorly derived from the
previous studies while new and emerging questions were derived from the literature review and
the recommendations derived from the business managers from the Ballarat business center. The
data was collected and analyzed using the SPSS software using the quantitative analysis
mechanisms. The result was made presentable using the MS – Excel charts (Yohei Kobayashi,
2014).

Literature Review
Information technology plays an important role in innovation among the SMEs as it
generally improves on their strategic objectives, improves resource allocations and general
project management within the SMEs. (Abdelouahab, 2018) has identified some of the key roles
that SMEs play in the whole innovation space. He summarized the key benefits as improving on
processes workflow, improving on the tools used by the business to collect and analyze data for
decision making hence more accurate actions taken from the informed decision made from the
data. (Massimo Florio, Aleksandra Parteka, & Emanuela Sirtori, 2018) in their paper discovered
that information technology and its application is key in making tactful and strategic decision of
the business through the use of innovative mechanisms and tools from the information
technology domain. The SMEs can benefit from the key insights they receive from forensic
analysis of their data to innovate on products that their prospective consumer wants hence
achieving competitive advantages. In their paper, (Alghamdi, 2018), innovation such as social
media has been a breakthrough for most of the SMEs globally. The SMEs with very limited
marketing and advertisement budgets have been saved by such innovative technologies such as
Facebook to market their product at a relatively cheaper cost but reaching a larger target group.
This has made them competitive with some of the established corporations. According to
(Sánchez, Salazar, & Basilio, 2012), the SMEs have a great impact on the global economy as
some of their innovations which started as startups have been brought to the global markets by
the use of information technology. The great challenge faced by this SMEs ability to innovate
has been identified by (Sánchez et al., 2012) to be linked to the ability to have better collateral to
secure loan facilities from the banking institutions and the microfinance. This has seen most of
the innovative ideas proposed by this SMS staying at the ideation stage for perpetuity.

According to (Madrid-Guijarro, Garcia, & Van Auken, 2009), innovation is identified as
one of the very key factors that firms use to ensure a competitive advantage in today's’ global
economy. They further asserted in their paper that those firms that do not embrace technological
advancement put their whole venture into great risks or becoming those non-competitive firms
and soon will be an ongoing concern. The paper, however, has identified the innovations
exhibited by the SMEs as critical to making the regional economy and the general global
economy more competitive. The various barrier to innovation has a very critical impact on the
firm's processes, products and management as a whole hence the paper insisted that the barrier to
innovation such as capital barrier must be removed to continue making this SMEs more
competitive and sustainable in the long run.
According to (Hughes, 2009), the government policies and general regulatory framework
are critical to the continues innovation potential for the SMEs. Very restrictive policies on
innovation affect the performance of the firms in relation to their local, regional and global
competition. The paper further asserted that government revenue from the innovation brought by
this SMEs is enormous hence should be allowed to operate their business in a rather non
restrictive environment free from bureaucratic red tapes which generally hinder innovations in
the SMEs domain which in effect denies the consumer access to better products and services
from the these SMEs (Dzikowski, 2016).
Further analysis of the effect on innovation on SMEs was conduct by (Vatamanescu,
Gorgos, & Alexandru, 2018) and in their paper, the duo confirmed the importance of innovations
in ensuring the various firms have better decisions making capacity in carrying out a SWOT
analysis of their potential ventures. The duo has identified innovation to be a critical
breakthrough in concurring some of the opportunities that exist in the market gaps where these

SMEs operates. Despite major corporation adopting technology in almost all their spheres and
processes, the SMEs are have not fully gone technological due to their limited budgets. The
paper has recommended the SMEs to solicit funds to have innovative ideas towards the market
gaps that exist in our current global economy. This will make them more competitive both
locally, regionally and globally.
(Olmos-Peñuela, García-Granero, Castro-Martínez, & D’Este, 2017) in their research
paper has proposed a more lucrative model that can help the SMEs battle the meager budget
constraints that they currently face. In their model which includes collaborating with the public
research organization(PROs) to improve their innovative capacities is quite intriguing. The paper
has shown the model can unlock the potential of the SMEs by having access to funds and
incubation facilities for their innovations. This shall make the SMEs focuses on the key
innovation and reduce the worry on funding and incubation infrared needs. Such collaborations
like seen in most developed countries like the US has seen the mushrooming of the startups
which have made the economy of the US more competitive since most of these startups later
become full corporations which in turn contributes to the nation’s GDP (Mathe, 2015).
(Soto-Acosta, Popa, & Palacios-Marqués, 2016) in their empirical study on the effects of
innovation on the performance of organizations and more specifically the SMEs has found that
it is vital for the SMEs to continues embracing innovation if they are in any way to benefit from
the Internet, E-business, E-commerce technological advancement which is still growing. The
study has confirmed that most of the innovations are geared toward improving connectivity
between the customer and general business environment both internal and external. They
asserted that key performance indicators can only be enhanced with better tools and
technological innovations. The business can also use innovative technology to come up with a

better solution that reduces key risk indicators in the business making the business more
collaborative and more sustainable in its growth strategies (Paun, 2011).
According to (Hashi & Stojcic, 2010), the relationship between the firm performance and
innovation was analyzed since there has been a contracting report which shows there may be
zero relationships between the innovation brought by a firm and the general improvement in the
performance of a firm. The lack of empirical study led them to write their paper. Results have
however confirmed, corporations who use innovations to automate some of their business
processes have seen a rather increase in productivity and performance of their employees since
most time is spent in work that is geared to making the firm more competitive as opposed to
doing manual, repetitive tasks which can easily be automated by innovative solutions.
Despite numerous literature written about corporations and the impact of innovations on
their general performance and contributions to GDP, little research has been focused on an
empirical study of SMEs to find out the actual scenario on the ground with regard to the SMEs.
This research identified that gap in the literature and put forward an empirical study of SMEs
around the Ballarat business center to act as a sample for the survey and combine the data from
literature review to discuss the current impacts the innovations have on the SMS performance
and general business competitive advantages.
Methodology

The research methodology used in this research is the empirical study which involved
surveying the SMEs around the Ballarat business center which acted as our primary data. The
research generally followed the following research process (Raymond, Uwizeyemungu, Fabi, &
St-Pierre, 2018)
Research process
Define the problem

At this stage, the key issue was the general lack of empirical studies done in relation to
the impacts of innovations on SMS led to the conducting of this research to find some insights
that scholars who have majorly focused on the big corporations have missed. The Research
questions formulated as shown below (Zulfiqar Ali, Hongyi Sun, & Murad Ali, 2017)
Research Question
What are the effects of innovation son SMEs
How can the innovation capacity of SMEs be improved
What contributions do SMEs make to the national economy
This led to the formulation of the research objectives which must be fulfilled to ensure
the research questions highlighted above are answers. The research objectives include
The main objective: To find out the impact of innovation on SMEs in Ballarat business
center
Specific Objectives
To review the literature on the effects of innovations on businesses
To find out gaps in the literature with regard to impacts of innovation from SMEs
To collect data on SMEs innovations impacts
To analyze data collected from innovations made by SMEs
To discuss the impacts of SMEs’ innovations to the economy

Research Design
The research adopted the following research methods to ensure the research gets the data
needed to inform the decision made in the discussion phrase (Stettner, Aharonson, Amburgey, &
Bezemer, 2014)
Research methods
Survey of sample
The Ballarat business center to was the sample population used in the survey as it has
been predominately made up of SMEs in the Australian business ecosystem. The number of
SMEs to be sampled was 50 using random sampling techniques (Xie, Zeng, Peng, & Tam, 2013).
Questionnaires
Questionnaires were designed to formulate questions that the surveys team will use to get
quantitative data more quickly. The choice to use questionnaire was influenced by the relative
cheap to design and execute. The questionnaire was simply designed in the Google forms and the
link sent to the prospective correspondence from the 50 SMEs samples. This made the research
team collect a huge amount of data with modern tools which make it easy to analyze and make a
key decision from it, (Robinson & Stubberud, 2011)
Interviews
Interviews were used by the research team to have a more qualitative analysis of the
situation by interviewing a sample of 10 SMEs manager and business owners to have more
insight into the various impacts the innovation s they have made to not only the business but also

the general economy. Interview though expensive is important to get instant feedback on the
progress of the research since most it is done on one to one making it ideal for getting qualitative
data for the research. (Molina-Morales, Garcia-Villaverde, & Parra-Requena, 2014)
Observation
Direct observation was used by the research team to compare the process flow of SMEs
who uses innovative technologies versus those that don’t use. This requires expert judgment to
make conclusive evidence of great impacts of these innovative processes on general business
performance (Didonet, Simmons, Díaz‐Villavicencio, & Palmer, 2016).
Literature review
This research method is key in getting what the scholars have done in the past with regard
to the subject matter and use their finding to inform some for the discussion made form this
research paper. The survey reviews up to 30 scholarly journals, books and papers to get more
insights into the current state of the mater with regards to the impacts the SMEs have made to the
general firms’ performance and economic growth.

Data collection and analysis
The research tool was used to get usage of IT based on the past and current environment.
The table below shows the results obtained from the respondents
IT level of usage Mean (n) Std.Dev
IT used < 5 year ago 5892 50 3534
Current 7746 50 4646
The above table indicates there is generally increase in the number of IT-enabled system
being adopted by the 50 samples implying that most of the business in the Ballarat follow new
innovative ideas to conduct their business
The research tools asked the various SMEs sampled the effects the innovative
technologies witnessed in their firms have impacted their firms in terms of the following five
metrics, new products championed, new methods of production, yielded new organizational
types, made changes to the procurement process. The table below shows the results
Innovation (n) Min Max Mean Stand.
Dev
The new
production
has been
brought
about by
innovation
50 8 45 41.8 39.8

New
Production
methods
brought by
innovations
50 6 40 35.8 33.8
Innovation
has
stagnated
developmen
t of new
products
50 2 10 13.8 10.9
Innovation
has
increased
product
develomentr
life cycle
50 10 40 43.8 40.8
Innovation
has
imprived
customer
satistifcation
50 30 45 45.9 39.7

The results show that business has a different utilization of innovation to achieve a
general increase in business performance. The result shows that most of the innovations brought
by the information technology have generally increased customer satisfaction as more feedback
gets collected analyzed and key production decisions made to affect the feedback requests. This
was closely followed by the new production mechanism brought about by the new technological
advancement and innovations that these SMEs have introduced in their businesses.
Discussion and Implication of the Research
This research was out to find out the effects of innovations and technological inventions
in the business with a more keen interest in the SMEs. Most researchers have targeted the big
corporation to conduct their studies into analysis the impacts the innovations have on the

performance of the corporations. This research has gone extra miles to use empirical studies to
have the data from 50 SMEs analyzed using the research tools identified in this research. The
research has shown that SMEs utilization of innovation generally leads to customer satisfaction
in the products and services that the SMEs offer. This is because technological advancement and
innovation have made it easier for the customer to have their feedbacks quickly implements into
the production circle. The innovations have targets customer needs making the SMEs who use
innovation have a better competitive advantage as compared to those who rely on the
contemporary mechanisms in their business processes. The data from the research imply more
innovations should be corrugated among the SMEs to make them more regionally and globally
competitive in today's interconnected world. This will make them not only improve their
performance but also increase their contributions to the GDP of the county.
The research has provided data that show that the general business environment which
the SMEs operates on must be made nonrestrictive for their innovations to prosper. This implies
that the government should amend laws and regulations that are restriven to allow the execution
of SMEs prosper. The research has also implied that access to capital is a key hindrance to
making the needed innovation to facilitate economic growth and development by these SMEs. It
is recommended that the SMEs collaborate with public research organizations to have their ideas
incubated and piloted. These ideas have the potential to change the economic landscape of the
countries corporations get born from these ideas as seen in developed counties like the US.
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Appendix A: Research plan