The economy of the world is rapidly changing. When this is the case, an enterprise’s ability to change or adjust is essential if it is to be successful. In the increasingly competitive business world, continuous innovation plays a crucial role in dictating global competition and ensuring one acquires the extra factors of production necessary to maintain a sustainable economic growth path. The conviction among humans is that a high standard of living ought to be determined by a high rate o employment so as to guarantee maximized utilization of resources and ensure wide participation in the wealth of the society without necessarily transferring payments. In order to promote these goals, Small and Medium-sized Enterprises (SME) play a critical role as the ideal vehicle. The major challenge, however, is understanding the policy measures that can guarantee undistorted competition. It is unclear the extent to which SMEs can independently act in the process of internalization. Do they only act as suppliers in the competitive globe characterized by large-scale enterprises? This is debatable. To date, it is unclear whether Small and Medium-sized Enterprises are driven by globalization or whether they act as the driving force.
Theoretical Debate/Competing Theories
The economic theory dictates that the size of a firm incorporates some advantages and disadvantages. For instance, large-scale enterprise units have higher returns to sales as their advantage, with high costs of internal coordination as the disadvantage (Bass et al. 2007). Smaller units, meanwhile, have an advantage when it comes to flexibility because of their ability to compensate disadvantages brought about by managerial behavior. All these factors influence a company’s innovation potential and the effects of employment innovation.
Generally, it is considered that due to their access to resources (financial), large firms possess an innovative potential that is higher when compared to SMEs in capitalism. Although this is the general presumption, several arguments have been put forward as to the important role that SMEs can play in national and regional innovation process. These arguments are based on the concepts of routines, lesser dependency in technological development and putting less importance to the problem of principal-agent.
According to Pavirr (1987), SMEs are not greatly bound by routine. Because of this, they have a management process that has a subjective willingness to use innovation. Whereas this cannot be generalized to all SMEs, most of them have proved to be flexible enough to meet the expectations. Most SMEs have communication channels that are short and easy. This ensures that the enterprises’ ability to adjust to any change in the business environment is high. This also contributes to the high flexibility in the learning process internally. Consequently, this brings about a higher alignment to innovation (Bass et al. 2007)
It is not in question whether large firms have quick access to improvements in technology. However, this is not an implication that they are inclined to adopt them. In the business sector, innovations have always threatened the equilibrium in the market. This may prove to be costly, hence most large-scale enterprises opt to ignore or abandon the technological paths. This is not the case with SMEs, whose flexibility means they are unlikely to be ‘locked’ to the existing plant, organizational structures o technology.
In any firm, large or small, the basic motive brought about by innovation is the probability to generate returns on investments in innovation. In the principal-agent context, this acts as a barrier to large firms to be innovative. In practice, innovations in large firms end p benefiting the firms as opposed to the employees (inventors). Because of this, SMEs have an advantage as they can be seen in the developer, union of owner or the manager (Bass et al. 2007). In essence, this is unlike the large-scale businesses that cannot fully enjoy the benefits of innovation. As such, SMEs are in a better position to adopt basic innovations when compared to the large enterprises.
Research Gap Identified By the Article and the Objectives
According to the author, there are several studies that have examined the SME sector in the economy of Germany. These studies may include aspects such as the effects of specific employment of innovation in the industry. Comparative study on innovative and non-innovative enterprises has also been done to determine the impact innovation has in the economy. Although thorough research has been conducted to determine the impact of innovation in the economy, more so with the SMEs, the field of the maritime industry in Germany is unexploited.
Similar to any research study, the article has various objectives. First, there was need to give an insight as to the position of SMEs in the economy of Germany as regards to the maritime industry. This was necessary so as to enable investors understand the type of market they are in and the possible innovations they need to make. The article also seeks to analyze the market from various viewpoints in order to shed more light on the operations in the maritime industry. Because this sector was previously not researched on, this study was crucial.
Limitations of this Methodology
Questionnaires as a means of research have their inherent limitations. In this case, the researcher used multiple choice questionnaires that were forwarded to most enterprises in the maritime industry. The first limitation of this method is that there is no assurance that the interviewee would give their sincere perspectives to the issues raised. Some of them may opt to intentionally give information that is misleading. The fact that they may not benefit in any way from the research means they cannot be trusted to give correct information. Secondly, there is no guarantee that all interviewees are literate. Some of them might not be in a position to understand how to read and write, meaning the information they give might not reflect the real position.
The study plays a crucial role in enhancing decision-making among the managers. This is facilitated by the fact that the questions raised in the questionnaire touch on the crucial aspects of the sector. For instance, the questionnaire covered the innovativeness of SMEs in the industry and whether innovative activities are determined by the firm's size. By understanding this, a manager will be in a better position to understand the latest innovations and the crucial role they may have in the industry (Bass et al. 2007). Consequently, this will facilitate proper decision-making in order to maximize on the profits. Managers will be in better positions to understand the innovative measures and practices they ought to avoid implementing.
The progress of SME internationalization and the barriers to internalization are essential to understand. Relating this to innovative activities in the SME sector is even better because managers get an opportunity to understand whether to adopt innovative measures to their businesses or not (Bass et al. 2007). The research involved sharing of businesses that are conducted internationally. Export shares were also taken into account to act as internationalization indicators and bring out the problems internalization brings.
Through the analysis given in the paper, managers get to understand a lot on how innovation plays a role in development of businesses. One of the roles of an entrepreneur is to be creative and innovative in order to maximize profits while minimizing losses. Through understanding how innovation is related to internationalization, managers get a crucial knowledge on the kind of decisions they should make. In essence, the findings of the report play a big role in influencing managers.
One of the key findings o the report is that almost 82 percent of SMEs carry out research and seek to develop new products. Of this percentage, 44 percent have been consistent. Most of the innovations are carried in the technical sectors with the aim of maximizing returns and minimizing costs. By studying and analyzing this trend, a prospective entrepreneur is able to understand the innovations that are essential in the industry. Without this, it will be very difficult to cope up with the situation.
There is need for an entrepreneur to understand the correlation between labor demand and innovation. Having a strong idea about this is crucial as it enables managers and CEOs to make better and informed choices. The author identified the Germany maritime industry as an unexploited sector that required a deep analysis in order to give ensure investors get more information. This was very crucial to investors who need to understand the economy of the maritime sector.
Bass, H., & Siebert, R. (2007). SME in Germany's maritime industry: Innovation, internationalisation and employment. International Journal of Globalisation and Small Business, 15-15.
Pavitt, K. (1987). The Globalizing Learning Economy. The Academy of Management Review, 125-125.