Innovation and business performance in small enterprises. An enterprise-level analysis

This paper explores links between developed innovations and business performance in small enterprises with fewer than 50 employees. It also examines how performance has changed over time during a period of five years. The empirical evidence is based on two quantitative datasets describing innovation and business performance in 145 small enterprises in 20052009. The study makes a contribution to academic literature by providing a detailed view of the differences in performance across innovation types. The results suggest that during the period of five years, non-innovators have been the best performing enterprises in terms of operating earnings and return on investments while radical innovations can be connected with sales growth. During the recession, the less vulnerable enterprises have been non-innovators and innovators characterised by the high diversity of developed innovations. Applying these results helps small business owners to consider what is the nature and timescale for getting return on innovations. © 2011 Imperial College Press.The corresponding author gratefully acknowledges the financial support from the Association of Private Entrepreneurs. In addition, the researchers would like to thank the reviewers for their comments on the earlier version of this paper. The researchers would also like to express their gratitude to Mrs. Pirkko Airas for reviewing their English. -