1. Connecting the Nodes: An Interactive
Perspective of Innovative
Microenterprises in a Mature Sector
Clarissa Sia-Ljungström
School of Economics and Management
Lund University
clarissa.sia-ljungstrom@fek.lu.se

2. Background
! Innovation process have been a focus of research from various
perspectives, however most have been focused on empirical
examples from high-tech industry or large companies.
! Most economies are driven by SMEs and mature industrial
sectors are being renewed through innovations (Coenen et al.,
2015) by newly founded small firms, who are seen to be key
agents of change (Trippl and Otto, 2009).
! Microenterprises are defined as employing fewer than 10
persons and whose annual turnover and/or annual balance
sheet do not exceed EUR 2 million. (European Commission,
2013)

3. ! Food sector considered traditional in many economies due to use of mature technologies, slow growth and low
levels of R&D.
! Accounts for about 11% of employment in Europe with connections to other industries (Avermaete et al., 2003)
! Swedish food industry is 4th largest industry with production volute of €18.8m (2010) with about 3275 enterprises
(Eurostat 2007).

5. What is Innovation?
! Innovation may be classified by six attributes (Baregheh et
al, 2009):
1) Nature (new or improved product/process/services
2) Type (product/process, radical/incremental
3) Stages (adoption, implementation, development)
4) Environment (organization, customer, consumer)
5) Means (idea, market, creativity)
6) Aims (economic, competition)
! Innovation is the multi-stage process whereby organizations
transform ideas into new/improved products, services or
process, in order to advance, compete and differentiate
themselves successfully in their marketplace. (Baregheh et
al, 2009)

7. Barriers to Innovation for
microenterprises
Categories of
barriers
Internal Barriers
External Barriers
Cost Factors
‣ High costs
‣ Excessive risks
‣ Innovation costs
‣ High cost in establishing and
maintaing external contacts
‣ Lack of funding for understanding
market conditions and demands
Knowledge Factors
‣ Lack of & keeping qualified personnel
‣ Lack of IT infrastructure
‣ Limited training and education
‣ Internal resistance to change
‣ Lack of potential external partners
‣ Risk of knowledge sharing with
external contacts
‣ Resistance to external input
Market Factors
‣ Not having relevant experience and
knowledge of market and competitors
‣ Pre-conceptions on target market
based on previous experiences
‣ Subjected to external market
turbulence and forces
‣ Limited access to communication
channels for establishing industry
contacts
Regulation Factors
Not having understanding or keeping
up-to-date of regulatory demands and
changes
‣ Insufficient governmental support or
lack of awareness of knowledge of
sources of support
‣ Unfamiliarity with support
infrastructure
‣ Hampered by bureaucratic
requirements

8. Capabilities for overcoming
barriers to innovation
! Dynamic capabilities (Grant, 1991): organizational structures and managerial process
which support productive activity (Teece et al., 1997), capacity to reconfigure or
combine different capabilities or the manipulation of knowledge resources (Wang &
Ahmad, 2007; Hewitt-Dundas, 2006; Eisenhardt & Martin, 2000)
! Components factors of dynamic capabilities (Wang & Ahmad, 2007):
1) Adaptive capability: Firm s ability to identify and capitalize on emerging market
opportunities, balance the configuration and recombination of knowledge, artifacts and
actors, eg: through alliances (identification of partners)
2) Absorptive capacity: Ability to recognize, learn, incorporate and apply new
knowledge (Cohen & Levinthal, 1990), eg: through management of external knowledge
and through its application of new knowledge (past experiences, skills of employees
and fit of external actors skills)
3) Innovative capability: Ability to develop new products and/or markets through
aligning strategic innovative orientation with innovative behaviors and process. eg:
behavioral advantages (Demirbas, 2010) (networking abilities and characteristics,
linkages and connections to relevant actors and resources)

9. Interactive Perspective
! Dynamic capabilities and component factors describe the types of abilities to successfully
recognize, understand and use external resources in the innovation process.
! External resources needs to be transform and this often takes place during the interaction
process when new knowledge and resources are gained and behaviors are modified
(Lundberg, 2002).
! Evolution of innovation models supports the interactive nature of innovation process.
! Innovation studies using interactive perspective includes:
a) Cluster/Regional innovation level (Lundvall, 1992; Edquist, 1997; Nilsson &
Moodysson,2011)
b) Firm Innovation level (Hoffman et al., 1998; Avermaete et al., 2003; Powell & Grodal,
2005)
c) ARA model: Interactive perspectives on business relationships between and within firms
and among individuals by the IMP group of researchers.

10. Analytical Framework &
Methodology
! Interviews, Snowball Sampling Secondary Data collection
! Use of critical events analysis (ePNA from Halinen et al.,
2013) and creating narrative to compose the story for each
case.

11. Four innovative microenterprises in the
Swedish Food Sector

12. Comparative Analysis
! Three main themes identified:
! 1) Critical elements of interactions during innovation
- Failure as the foundation to innovation
- The strength of old ties
! 2) Development and enhancement of capacities
- Behavioral considerations of microenterprises
- Utilizing and enhancing capacities
! 3) Management of relationships in networks
- Sharing and calibrating ambitions and visions
- Saying goodbyes

13. Comparative Analysis
Findings
! Experiencing failures and learning how to handle failed outcome
can prepare microenterprises for similar events along the
innovation process. Size and magnitude of failure can imply and
opportunity to learn or can cause defense mechanism to be put
up.
! Renewal of old ties not only meant faster and sometimes easier
access into an established network, but can also help develop
and enhance existing capabilities due to familiarity to ease
interaction and exchange of knowledge.
! Interaction styles of microenterprises owner/managers influence
the type of resources accessed through interaction.

14. Comparative Analysis
Findings
! Ongoing calibration of ambitions and visions necessary to
maintain up-to-date communications and expectations.
! Awareness of dual roles of external actors can be both beneficial
in gaining access but also potential conflict as innovation
process develops.
! Choice of network partners should take into consideration more
than the direct benefits of collaboration (such as direct access to
external resources) but a long-term view for the innovation
process in developing capacities.
! Saying goodbyes to certain collaborations and relationships is
necessary and can be useful to free up resources that were
otherwise tied up.

15. Conclusion and Recommendations -
Theoretical contributions"
! Critical interactions during innovation: experiences
drawn from failed innovation-related interactions, when
actively reviewed can help contribute to the understanding
of how capacities can help overcome barriers to innovation.
! Knowing thyself for microenterprises: Self-evaluation is
important: existing capabilities and skills, alignment of
expectations
! Multi-facet management of interaction in network: ability
to manage collaborations, interaction between resources
and paradoxical relationships

16. Conclusion and Recommendations -
Practical implications for managers"
! Maintaining a resource-motivated network:
identifying the type of network not just by reach but
the level of interaction, density and strength of ties of
the actors, resources and activities in the network.
! Calibrating capabilities: charting existing
capabilities and have peer-comparison based both
on historical and current strengths. Being aware of
changing roles and responsibilities during the
innovation process means constant calibration and
adjustment of roles and responsibilities during the
innovation process.

17. Conclusion and Recommendations -
For policy makers"
! Requirements for grants and applications: Cost and regulatory
factors most cited form of barriers, reflect a low-risk profile of
stakeholders and outdated documentation requirements
! Renewal of mature industry: Policies can help facilitate industrial
renewal, not one-size-fits-all model but to encourage natural
systems of innovations through existing companies and key actors in
the system.
! To intervene or to let nature takes its course: Failures in
innovation cases can be used as learning points or best-practices
that should be taken into consideration. Grants and aid should be
provided with right mode of delivery, even with the pairing of relevant
key actors/organizations and not assume direct correlations between
financial aid and assessment of early or past innovation results.