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Effectuation, innovation and performance in SMEs: an empirical study

David C. Roach (Rowe School of Business, Dalhousie University, Halifax, Nova Scotia, Canada)
Joel A. Ryman (Department of Management and Marketing, College of Business and Technology, East Tennessee State University, Johnson City, Tennessee, USA)
Joyline Makani (School of Information Management, Dalhousie University, Halifax, Nova Scotia, Canada)

European Journal of Innovation Management

ISSN: 1460-1060

Article publication date: 9 May 2016

6396

Abstract

Purpose

Ever since Sarasvathy’s (2001) seminal article, scholars have sought to test effectuation’s affect on firm performance. Although recent work has begun the arduous process of testing effectuation’s effect on entrepreneurial performance, there is still much to learn about its impact on firm performance. One such area is the relationship between effectuation and innovation. The purpose of this paper is to first, propose a scale suitable to the explication of the effectuation construct relative to innovation. Second, it proposes a more parsimonious scale for the measurement of innovation. Third, these scales are tested relative to firm performance.

Design/methodology/approach

This paper develops and tests a structural model, which investigates aspects of effectuation as mediators between innovation orientation and product/service innovation. This is accomplished using a sample of 169 electronic product manufacturing-based small and medium-sized enterprises (SMEs). Subjective measures of performance are used as the dependent variable.

Findings

The three most widely used measures of innovativeness were found to break cleanly into two sub-constructs, namely innovation orientation and product/service innovation. Effectuation measures included means (who I know), leverage contingencies (experimentation), pre-commitments and affordable loss. Means and leverage contingencies were found to positively mediate innovation orientation and product/service innovation leading to increased firm performance. Affordable loss did not show a mediating role, but had a direct effect on firm performance.

Research limitations/implications

This study establishes two distinct sub-constructs of firm-level innovation; namely innovation orientation and product/service innovation. Second, by testing an innovation-centric effectuation model, this research establishes an empirical relationship between effectuation, innovation and firm performance.

Practical implications

Practical implications include establishing a relationship between means, leverage contingencies and innovation-performance, indicating that the ways through which small and medium-sized enterprises use their innovation networks may affect innovation outcomes and ultimately firm performance.

Originality/value

This research establishes an empirical relationship between effectuation, innovation and firm performance, extending effectuation theory from the entrepreneurship to the innovation literature.

Keywords

Citation

Roach, D.C., Ryman, J.A. and Makani, J. (2016), "Effectuation, innovation and performance in SMEs: an empirical study", European Journal of Innovation Management, Vol. 19 No. 2, pp. 214-238. https://doi.org/10.1108/EJIM-12-2014-0119

Publisher

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Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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