Strategic capabilities for product innovation in SMEs

With the advent of globalization and the knowledge economy, an important issue has arisen concerning the relationship between the strategic capabilities of SMEs and their capacity to innovate. From a contingency perspective, one would argue that the firm's strategic capabilities can be leveraged for the purposes of innovation to the extent that these capabilities are in strategic co-alignment. This gives rise to the following empirical research questions: (a) are the networking, R&D and technological capabilities of SMEs co-aligned such that one can observe different organizational gestalts, and (b) does co-alignment of these capabilities lead to a successful outcome in terms of innovation? In answer to these questions, the authors present the results of a study of 205 Canadian manufacturing firms. Through cluster analysis, three gestalts are identified - entrepreneurial SMEs, engineering SMEs and administrative SMEs. Analysis of these gestalts indicates that entrepreneurial SMEs clearly lead the other two in R&D capability and product innovation.