Enablers, barriers and challenges: a study of innovation capabilities among SMEs in Singapore

This research study seeks to understand the drivers, enablers and barriers to innovation among SMEs in Singapore. Over the past several decades, the Singapore government has been instrumental in driving the innovation and growth of the economy. Since the establishment of the Economic Development Board (EDB) to spearhead innovation initiatives and policies in the earlier decades, Singapore’s national innovation system has evolved from being dependent on foreign-MNCs to one which embraced a diversified enterprise ecosystem of both foreign and local enterprises. The Singapore government’s commitment to innovation is further reflected in the amount of investment it has pledged to spur innovation among local firms. Indeed, the recent years have seen an increase in government funding, initiatives and support to build an ecosystem of innovative enterprises. Despite strong governmental support for innovation, studies have shown that SMEs in Singapore were still not proactive in taking steps to innovate and transform their businesses. Given this background, this research study attempts to first examine whether the lack of proactive innovation is prevalent among local SMEs or whether the phenomenon is only specific to certain industries. The research then attempts to understand the innovation process of local SMEs by specifically looking at the extent to which dynamic capabilities are being developed. Drawing on the works of Teece et al., (1997), the study explores the micro-foundations and ways in which Singapore SMEs engage in “sensing”, “seizing” and “reconfiguring” activities to develop the dynamic capabilities required for innovation. By applying organizational learning and network theories, this study also aims to unpack the underlying mechanisms which enables SMEs to develop dynamic capabilities and hence the capability to innovate. The findings of the study revealed that SMEs in the technological and professional services industries were more proactively engaged in “sensing”, “seizing” and “reconfiguring” activities and hence a relatively higher degree of regenerative dynamic capabilities being developed compared to SMEs in non-technological industries such as manufacturing, logistics and warehousing. This is also evident from the higher degree of partnerships and alliances formed and greater adoption of internationalization strategies to innovate compared to SMEs in non-technological industries. The key innovation priority for SMEs in the technological and professional services industries was business model innovation whereas SMEs in non-technological industries were focused on technological innovation. More importantly, this study also revealed that it is the presence of “organizational learning” mechanisms and network capabilities which facilitated the development of dynamic capabilities and ability of SMEs to innovate for sustainable competitive advantage