Diffusion of Organizational Innovation and the Growth of

SMEs: Case Study Evidence from Small and Medium

Enterprises of Khyber-Pakhtunkhwa Pakistan

Mohammad Daud Ali

A PhD thesis submitted to the Department of Business Administration Iqra National

University Peshawar.

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I declare that this thesis is entirely my own work and I have referenced other’s Ideas or

concepts in the text and in Bibliography.

Mohammad Daud Ali

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To my parents and my siblings specially my sisters

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Acknowledgment

This work would not have taken shape without the support of my supervisor Dr. Syed

Imad Shah. His unwavering support and patience immensely helped me to complete my

thesis. He supported me how to be an independent writer and academic. Dr. Syed Imad

Shah always spared time and whenever I emailed him, he responded in detail and well in

time.

I am also highly indebted to Professor Dr. Shahjehan who motivated me during the entire

process. His motivation enlightened me and broadened my vision not only in this PhD

work but for my career at large.

I also acknowledge the support of Malik Taimur Ali khan who as the Registrar supported

us in the administrative process. He always tried to process the student’s work on priority

basis.

Good friends and peers are the must-haves for a PhD student. It is there support which

encourages getting over the agonizing feeling of solitude during the tiresome process of a

PhD. I specially acknowledge the support and help of (late) Farman Ali kaka who always

spent time with me during most of the traveling I did for data collection and even during

the course work. It indeed is a very sad feeling for me not to have him around when I

have done the work.

My friends Syed Arshad Ali shah, Dr. Muhammad Shakeel, Muhammad Nisar khan

Yousafzai , Muhammad Abdul Haseeb Khan, Dr. Mian Ahmad Jan and Ali Raza also

supported me at each step during my PhD. Without their support and motivation, it

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would not have been possible.

My sisters also supported me and their motivation meant a world to me during the

completion of this research work.

Finally, I extend my gratitude to my late father whose motivation throughout my life

made it a guiding principle for me that “I can if I think I can”.

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Table of Contents

Chapter 1: Introduction to this Research.......................................................................................

1.1 Background..............................................................................................................111.2 Small and Medium Enterprises in Pakistani Perspective........................................141.3 Problem Statement...................................................................................................181.4 Objectives of the Study............................................................................................201.5 Significance of the study.........................................................................................211.6 Scope of this Study..................................................................................................221.7 Nature of the Study..................................................................................................221.8 Structure of the Thesis.............................................................................................24

Chapter 2: Literature review..........................................................................................................

2.1. Introduction.............................................................................................................262.2 The Growth of SMEs: Paths to walk.......................................................................272.3. SMEs and Entrepreneurial Orientation...................................................................282.3.1. The role of E-Commerce in SMEs of Developing Economies............................292.3.2. SMEs innovation through government intermediaries........................................302.4 SME and the Challenges..........................................................................................30

2.4.1. SMEs Competence and its side effects............................................................312.5. An Evolutionary note on Innovation.......................................................................33

2.5.1 Different types of Innovation............................................................................372.6. A review of novelty and innovation in established SMEs......................................392.7. Innovation or Imitation Strategies: Pros and Cons.................................................422.8. Invention, Innovation, and Discovery....................................................................442.9. Innovation and firm performance...........................................................................492.10. Effect of SMEs size and Characteristics on Nature and type of Innovation.........512.11 Not just Innovation but Persistent Innovation!......................................................532.12 Theories of organizational Innovations.................................................................54

2.12.1 Organizational Design theories.......................................................................552.12.2 Organizational Cognition and learning theories.............................................552.12.3 The organizational Change and Adaptation theories......................................562.12.4. Cultural theory at work in Innovations and Inventions.................................56

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2.13. Organizational Innovation....................................................................................592.13.1. Operational definition of organizational innovation for the current study....65

2.14 The Technological, Organizational, and Environmental Factors Effecting SMEs 662.15. Determinants of successful organizational Innovation: A review of current Research.........................................................................................................................672.16 Idea Generation in Small Companies....................................................................702.17 The external network and collaborations for innovation.......................................72

Chapter 3: Conceptual Framework, Research Methods and Design, Analysis Techniques

.......................................................................................................................................................

3.1. Introduction.............................................................................................................743.2. The Conceptual Framework....................................................................................763.3. The Study, the Methodology, and the Methodological Considerations..................78Construct Validity:.........................................................................................................82Internal Validity:............................................................................................................83External Validity:...........................................................................................................83Reliability......................................................................................................................843.4. Case Selection and Design......................................................................................84

3.4.1. Sources of Information....................................................................................853.4.2. Interview Data Triangulation...............................................................................88

3.4.3. Selection of Case Study SMEs........................................................................893.4.4. Identification of Respondents..........................................................................903.4.5. Interview Protocol...........................................................................................91

3.5. Data Analysis Methods...........................................................................................923.6. The 8 Case Study SMEs.........................................................................................943.7. Data Coding: Developing Categories and Themes.................................................95

3.7.1. Themes.............................................................................................................963.7.2. Additional emergent themes during data collection........................................98

3.8. Condensing the Data...............................................................................................99

Chapter 4 Case presentation and within case analysis.................................................................

Case 1: Hizat Pharmaceuticals.....................................................................................101

Case 2: Wisdom Pharmaceuticals Industrial Estate Hayatabad Peshawar..................................

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Case 3: Zinta Pharmaceuticals.....................................................................................................

Case 4: Aries Pharmaceuticals.....................................................................................................

Case 5: Stanley Pharmaceuticals.................................................................................................

Case 6: Delta Pharmaceuticals Risalpur......................................................................................

Case 7: Iceberg Pharmaceuticals.................................................................................................

Case 8: Rock Pharmaceuticals.....................................................................................................

Chapter 5 Cross Case Analysis....................................................................................................

5.1 Introduction............................................................................................................2615.1.1 The structure and Culture of SMEs................................................................2615.1.2 The role of Size in Adoption and Diffusion of Innovation.............................264

5.1.3 Organizational processes making the firm innovative........................................2675.1.4 What makes the SMEs innovative..................................................................271

5.2 Diffusion and adoption of Innovation....................................................................2745.2.1. How Innovations are developed from Infancy?.............................................2755.2.2. The rate of adoption of innovation................................................................2795.2.3 Sharing Knowledge Sources...........................................................................2825.2.4 Collaborations and level of mutual trust.........................................................2855.2.5 Value addition through collaborations............................................................2885.3.1 Drivers and sources of Innovation..................................................................2895.3.2 Idea Sources for new products and services...................................................2915.3.3 Knowledge and training level of Staff of the SME........................................294

5.3.4 Challenge of idea stealing/ copyright.................................................................2965.3.5 Inspiration from Competitors Products..........................................................2985.3.6 Customers Input as driver of Innovation........................................................2995.3.6 Role of Suppliers in innovation diffusion and Adoption................................3005.3.7 Screening and evaluating Ideas......................................................................302

5.4 Role of Marketing Research in finding the Environmental Conditions................3045.4.1. Market Research: Formal or Ad hoc..............................................................305

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5.4.2 Risk calculation and test marketing................................................................3075.5 Barriers to the Spread of Innovation......................................................................310

5.5.1 Lack of expertise.............................................................................................3125.5.2 Financial Barriers and role of banks...............................................................314

5. 6 Role of Government authorities like SMEDA......................................................3165.7. Impact of adoption of innovation on SME Growth..............................................3195.8 Conclusion.............................................................................................................321

Chapter 6: Discussion and Conclusion........................................................................................

6.1 Conclusions about research propositions and themes...........................................3246.1.1. The nature of organization and type/s of innovation related to the adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan......................3246.1.2 The role of technological organizational and environmental conditions for the diffusion of innovation in SMEs of Khyber-Pakhtunkhwa, Pakistan......................3256.1.3. The adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan has a positive relationship with the availability of internal and external sources of innovation...............................................................................................330

6.2. Implications for Theory........................................................................................3316.3. Implication for Policy and Practice of Future Trends...........................................3356.4 Limitations of the study.........................................................................................3376.5 Implication for Methodology.................................................................................3386.6. Directions for Future Studies................................................................................340

Bibliography................................................................................................................................

Appendix A: The interview protocol...........................................................................................

Appendix B: Master Table...........................................................................................................

Appendix C: Letter to the participant..........................................................................................

Appendix D: Release form/ information sheet............................................................................

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Abstract

This research is conducted to examine the diffusion of organizational innovation and its impact

on the growth of Small and medium enterprises of Khyberpakhtunkhwa, Pakistan. The study was

conducted in the pharmaceutical sector in two clusters i.e. Peshawar and Nowshera of

Khyberpakhtunkhwa. A case study research design was adopted for the study and data was

collected from through semi-structure interviews. The interview protocol was developed by

identifying the themes from the literature review. The protocol was modified slightly after the

pilot study of two enterprises and some emergent themes were added to it. The interviews were

administered with the different top level managers of each SME. The semi-structure interviews

were conducted for primary data whereas the official websites/facebook pages of the firms and

non-participant observations were used for secondary data. The research was successful as it

established the relationship of diffusion of innovation and SMEs growth as well as put forth

some suggestions for making the enterprises innovation friendly. This study also unearthed some

barriers and environmental conditions which hinder the diffusion of innovation in SMEs. The

study made some methodological contributions as it is the first of this kind in Pakistani

perspective. This study offered implications for theory, policy and practice as well as offered

some directions for future research.

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Chapter 1: Introduction to this Research

This Chapter introduces the current research. The researcher has tried to shed light on the

background of the study in the first section. This section has presented the case with the

view to ascertain that small and medium enterprises play an utterly important role in

economic growth. In the next section of this chapter the researcher presented the problem

statement. This section elaborated that although SMEs are important for economic

growth, they face many limitations which hinder their development however they seek

way outs to survive the adverse business conditions. For this purpose, SMEs rely on

innovation to increase their life span. This is followed by the section where the

perspective of Pakistan Small and Medium Enterprises is presented. The next section

enlisted the objectives why this research is carried; the significance of the study and its

scope as well as the nature of the study is explained in last sections of this chapter.

1.1 Background

In developing economies, the importance of Small and medium enterprises is

acknowledged for years now (Kayanula and Quartey, 2000). The economic growth and

the employability needs of the developing countries can be accomplished through SMEs.

Small and medium-sized enterprises (SMEs) are often referred to as the backbone of the

economy as they provide the source for jobs and social cohesion(Wee & Chua, 2013).

However, many of these enterprises have failed to grow further than their micro

enterprise nature, sometimes progressing at best to a small or medium size (Kaya Nula &

Quartey, 2000). SMEs face a variety of limitations owing to the difficulty of absorbing

large fixed costs, the absence of economies of scale and scope in key factors of

production, high unit costs, and poor cash flow (Rothwell, 1991; Parker et al, 1995 &

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Rammer and Schmiele, 2008). Due to a meager credit worth , SMEs are discredited for

gaining finances and thus do not survive in crunch times leading to eventual failure(De

Maeseneire & Claeys, 2012).

During the late 70s through early 80s SMEs started to become more innovative and

flexible. The effort was intended to reduce costs and work more efficiently than the large

firms. On a lower note, however, SMEs are labeled for being a fragile financial entity

which can go broke frequently. Besides sometimes these enterprises are stereotyped for

producing lesser quality and short living products. In the developed world, SMEs depend

on the business life cycles and a booming economy means booming number of firms

which do not dye .On the contrary, the SMEs growth in a developing economy depend on

Crisis cycles (Farinha and Félix (2015). An SME has the risk of being bankrupted at the

very early stage as they often do not survive their second year .It is often felt essential

that the SMEs lacking sufficient funds of their own need to get enough funds from

banks. The entrepreneurs who want to invest their financial and human resources to

SMEs do so only when they feel that there is a substantial political stability.

Furthermore, security and safety is also an integral part for SMEs establishment in a

country. An increase in crime rates results in a decrease in SME establishment.

Historically speaking businesses operated successfully in proximal and favorable

geographic locations. In fertile land, favorable environment and demographics have

determined effect on SMEs growth and it reassures that the mortality rates of the SMEs

are lower.

SMEs can grow to become corporate units only and only if they are innovative

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(Cannarella & Piccioni, 2003). Innovation refer to as the use of advance products,

processes, services, technologies or ideas accepted by markets, governments, and society

(Christensen, 2002). Innovation and invention differs from each other. Whereas

innovations mean the use of new ideas, invention refers only to the idea creation (Davila

et al, 2006). An innovation is a useful exercise having practical applicability, a

distinguishing feature of innovation from invention. Practically, innovation contributes to

the performance of the enterprise (Gronhung and Kaufman 1988; Padmore, Schetze and

Gibson, 1997; Cooper, 1998).

Innovation is not always the creation of new ideas but the accepting of an idea to modify

the operations. Innovation has been recognized as an important tool for a country’s

economic prosperity (Schumpeter, 1911) as it leads to entrepreneurship. Since the

characteristics of SMEs change from case to case, it does not have a clearly agreed upon

definition as yet (Lopez and Aybar, 2000).Using the capitalization, sales, employment and

profitability measures, the definitions of SMEs always become unreliable(Kayanula and

Quartey, 2000). As per the EU directions, SME is a firm employing less than 250 people,

have less than 50 million Euros(De Maeseneire and Claeys, 2012). The commonly

accepted definition however is given by Osei et al; (1993).He categorized an enterprise

on the basis of its number of employees. He considered a micro enterprise as one with

less than 5 employees; the number of employees in a small enterprise is 5 to 29 while the

number of employees in a medium enterprise is from 30 to 99. Buckler, (1997) describes

innovation as something like a spiritual force, culture or environment which guides

organizations towards value creation.

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1.2 Small and Medium Enterprises in Pakistani Perspective

As per the state bank of Pakistan prudential regulation document, Small and Medium

Enterprise Financing, A small Enterprise is any business entity which has up to 20

employees, be they are contractual and an annual sales turnover of up to Rs.75 million. A

medium enterprise is any entity which is ideally not a public limited firm and has from 21

to 250 employees if it is a manufacturing and services enterprise and from 21 to 50

employees if it is a trading enterprise in both case the per annum sales turn-over is above

75 million and up to 400 million PKRs(Sme Sbp, 2011). According to the FBS, in

Pakistan there are around 3.2 million economic establishments. There is 90 % of that

enterprise which has an employment base of 99 employees. The GDP contribution of the

SMEs is 30% beside their 25% earning in exports and 35% in manufacturing value

additions.

The realization of importance of SMEs in the growth of economy motivated the

Government of Pakistan to declare SMEs as one of the four important pillars for the

revival of economy in 1999-2000.At the beginning of the new millennium Pakistan

reached to an extent of macroeconomic stability and the focus was then to trigger the

growth of economy so that to reduce poverty, create jobs, and induce rural development.

The strictly developed financial policies enabled the government for a fiscal space to

work out on the equal geographic distribution of the policy to accomplish the targets.

Also, according to the poverty reduction strategy paper and Medium Term Development

Framework document the SME has been identified by Pakistan government as one of the

important tool for economic growth and developing private sector (Poverty, 2007).

Although the government devised policies for the development of private sector but there

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is a strong need for the government to focus on the SME policy whilst the sustainable

private sector growth is targeted. Adopting an SME centered policy will not only help in

improved growth rates but will also ensure to get rid of the wealth in equal accumulation

and income generation.

As there is a huge proportion of poverty in rural settings mounting for 34.7% as

compared to 20.9% in the urban areas, the rural areas must be considered for investments

and for job creation while an SME policy is devised(Poverty, 2007). Learning from the

growth and industrialization of 60s wherein the GDP was 6+ but even then the poverty

was on the rise as well, due to the fact that focus was laid on large scale organizations

only. The SME policy document of the first five years of the new millennium

documented the recommendation of SME policy task force to support idea that the

economic growth and prosperity must be necessarily based on SME development.

Although the government of Pakistan initiated the policies to promote the small industries

in the past as well but it faced problems like overly emphasizing on manufacturing than

service industries, giving more attention to hardware than software, lack of a policy

framework which could indicate the role of all the stakeholders who can play role in the

uplift of small industries and finally, lack of actions carried out to develop the

complementary skills.

Following the 60s and 70s policies of employment promotion and growth, in the 80s and

90s, initiatives like the yellow cabs and youth investment were taken, but these policies

focused only on individual employability opportunities rather than focusing on enterprise

development. On top of this, due to the low loan portfolios, the SME financing

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henceforth is least favored by banks.

As an outcome of the government of Pakistan efforts to strengthen SMEs, a private sector

structure, SMEDA has been established for playing a vibrant role. As an institution,

SMEDA has worked appreciably to develop SMEs but a coherent SME policy can be

more effective in implementing the aggressive SME development initiative. The efficacy

of SMEDA is however curtailed mainly due to the fact that SME development falls under

the umbrella of many ministries and both federal and provincial government levels which

do not come under any of control of SMEDA. Also SMEDA lacks both human and

financial capitals to cover the initiate an outreach program. Although an SME bank is

created as an effort to develop SMEs. In its early time, the bank focused on a single point

agenda of providing financing to the SMEs, although on a small scale.

In Pakistan, there is no single definition of SME and all the concerned departments such

as the state Bank, provincial labor departments and Federal labor of statistics define SME

in their own way. This lack of unanimity makes it difficult to target firms, carrying on

with the development programs and collect data. According to SME policy, the

government should devise one definition which is approved by all public and private

enterprises and should subsequently give a time frame of two years for the firms to align

themselves with the policy recommended SME definition. Any enterprise will be

considered as an SME which has paid up capital of Rs.25 million, an annual sales

amounting for up to 250 million rupees and has an employee strength of up to 250

employees(Poverty, 2007).

From Pakistani perspective, SME is traditionally an enterprise which is engaged in

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business activities, whatever legal form it may have. The SMEs are differently described

even from one province to another. In the province of Punjab any enterprise which has a

fixed investment worth of at least Rupees 20 million, excluding its building and plot cost.

However, in Sindh province SMEs are fixed investment amounts for around 10 million

rupees. Although most of the Pakistani villages are self-reliant on the basic necessities

and have their own specialist technical workers for their activates, many families depend

on the cottage industry for making money, the industry is considered to be one big

contributor to the overall GDP of the country. As the small business face severe financial

constraints, they do not produce the desired output and hence can only contribute about 5

to the entire GDP. The SMEs in Pakistan accommodate around 25% of the labors; there is

a necessity for the improvement of the SME sector to cope with the unemployment

situation. The areas of Punjab like Sialkot, Faisal Abad and Gujranwala and that of Sind

like. Hyderabad and Karachi are hubs of SMEs. There are also some areas of Kashmir

where there are small and medium size enterprises. In the face of some serious financial

constraints, the SME industry in Pakistan seems not to function properly.

At times the revenue generated by these firms have nothing more worth than to bear the

operational expenditures and no extra money is left to expand the business. Due to its

inability to create economy of scales, the products produced in SMEs are no way near

those which can be produced on large scale in the open market. Due to the lack of quality

control check and the coordination among these SMEs, the products normally cannot

match the export standards and there is difference in prices of due to the lack in mutual

coordination. The lack of technical knowledge of the owner, the operations carried out in

the firms are through the out dated methods and technologies. Sometimes the wholesalers

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take the goods from the producers at the cost price and leave them with profits to make,

which discourages the producers who then drop down the quality. The energy crisis in

rural and sub urban areas discourage the installation of small enterprises .Besides, the

high electricity tariffs and the frequent fluctuations also add to the problems of small

enterprises. The free trade and the dumping policies make it further difficult for the small

enterprises to grow as these firms cannot compete with their internationally developed

export quality competitors. The SMEs face problems to channel their products as there is

a lack of proper communication channels and the weak networking on the part of these

SMEs. Following the networks and proper communication channels will enable them for

gaining more competitive advantage. In order to minimize the trade deficit that Pakistan

is facing these days, SMEs need to produce goods and products which are high quality

and which can be used as an alternative of the imported products. The SMEs must be

helped by the public agencies in this regard as to participate in global trade expos in the

outside world. The SMEs in Pakistan do not only give economic growth a chance and

contribute to GDP, but is believed to maintain the cultural identity as well.

1.3 Problem Statement

SMEs are vital to the development of any economy as they usually form the bulk of

economic activity (Kaya Nula & Quartey, 2000) especially in the developing world. Most

of these SMEs do not live their second “birthday” because of certain limitations. These

limitations include lack of capital, human resource challenges, market-based challenges,

unfavorable legal, regulatory conditions and weak institutional rules (Abor and Quartey,

2010; Kayanula and Quartey, 2000; Mensah, 2004). Also, due to the lack of relationship,

enhanced repute and collateralization, the SMEs do not get as good amount of funds as

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larger firms do (De Maeseneire & Claeys, 2012). An SME bank borrowing demands for

credit has a direct bearing on its interest along with its internal financial volume. Credit

supply , however depends on the fact that whether an SME can initiate cash-flows and

can repay its debts in time (Farinha & Félix, 2015).Innovation is one of the key means by

which SMEs can overcome these severe business conditions to survive and grow into

large corporate units (Subrahmanya et al, 2010). Academics have studied the various

innovations (Sundbo, 2003; Van der Aa and Elfring, 2002) that can be adopted by SMEs.

These studies on innovation have concentrated on process and technological innovation

(Hoffman et al, 1998; Julien et al, 2004; Kalantaridis, 2010). Few studies have looked at

organizational innovation among SMEs with the exception of Salavou et al (2004) who

looked at organizational innovation in SMEs from the context of strategic orientation and

competitive structure in Greek SMEs. Although the importance of Internationalization

and strategy in SMES is of immense imsportance yet very little work has been done

academic research wise on this area. Due to its very opportunistic, unplanned and

reactive nature strategies for SMEs may not be developed. Although literature sheds light

on some SMEs as proactive, innovative and risk taking to enter into foreign markets. A

differentiated strategic orientation is missing in literature(Giovanni, 2012).

This study will reflect the diffusion and adoption of organizational innovation among

pharmaceutical SMEs of Khyberpakhtunkhwa, Pakistan. This sector is chosen for the

understanding that since pharmaceutical industry is a science oriented area and these

enterprises follow latest research. The knowledge based nature of these pharmaceuticals

can be associated to the adoption of innovations. There have also been studies on the

spread and adoption of innovation (Hinson, 2007; Klaas et al, 2010). Several models have

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been developed regarding the spread and adoption of innovative methods (Wade, 2009).

Theoretically, the question still remains: what conditions are necessary to spread of

innovation among enterprises? Do these innovations lead to enterprise success? Also, few

studies have focused on a qualitative approach (O’Dwyer et al, 2009) with most studies

focusing on quantitative approaches (Udry and Goldstein, 1999; Nordman and Tolstoy,

2011; Salavou et al, 2004; Subramanyah et al, 2010) in studying the phenomenon. SMEs

tend to have flexible organizational structures therefore conducting qualitative research

will afford the opportunity to observe their innovation processes in real life situations

using case studies. This study will therefore adopt a qualitative approach using multiple

case studies that present the real situations within which innovations have to be adopted

and their impact on SMEs overall success or failure.

1.4 Objectives of the Study

The objectives of the study are:

i. To identify the sources of organizational innovation in small and medium scale

enterprises (SMEs) of Khyber-Pakhtunkhwa, Pakistan.

ii. To determine how organizational innovation diffuses/spreads among SMEs of Khyber-

Pakhtunkhwa, Pakistan.

iii. To explain the conditions necessary for the diffusion of organizational innovation

among SMEs of Khyber-Pakhtunkhwa, Pakistan.

iv. To identify the barriers to the spread of organizational innovations of SME’s of

Khyber-Pakhtunkhwa, Pakistan.

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v. To explore the impact of type of enterprise on the nature of organizational innovation

adopted.

vi. To understand whether adopting Innovation can help the enterprise grow.

1.5 Significance of the study

This study can be significant for many reasons but apparently it can be important for at

least the four reasons. Firstly and most importantly, when the effect of nature of SME on

adoption behavior is identified, it will help in making specific innovations to specific

SMEs, for example an entrepreneurial pharmaceutical SME of Khyberpakhtunkhwa can

be assumed to adopt new and research based molecules or utilize the latest instrument.

Secondly, it emphasizes to spot out the sources of innovation among SMEs. Once these

sources are identified they can then be used to influence any future innovative methods

that can have a positive inclination on enterprises. Thirdly, recognition of the conditions

necessary for spread of innovation will help organizations to work as to focus on

achieving the favorable conditions and desired effects. Finally, understanding the positive

relationship between SMEs performance and adoption of innovation will build

confidence for these enterprises to easily adopt any future innovations that enhance their

Organizational Effectiveness. This also will help identify the barriers which could then be

addressed properly and resultantly, the performance of the firm will lead it to growth. It

will bring in the perspective on this phenomenon from KPK and Pakistan, hence

contributing to the extant literature.

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1.6 Scope of this Study

This research has a focus on the Diffusion and Adoption of innovation in the

pharmaceutical SMEs of Khyberpakhtunkhwa, Pakistan. The study aimed at studying

those SMEs which are operating in Khyberpakhtunkhwa. This research aims at studying

the Characteristics of the firm which are bearing an impact on the diffusion and adoption

of Organizational innovation in these case study SMEs. The study also attempts to find

out the various sources of organizational innovation in the selected SMEs. Another aim of

this study is to find out those conditions which trigger the diffusion process and those

barriers which hinder the same. This study however is focused only on only eight case

study SMEs from both the Peshawar and Nowshera clusters which operate in

Pharmaceutical sector and does not focus on any other Sectors. These are those firms

which are listed on the website of Small and Medium Enterprises Development Authority

website and the study does not reach to any big national or multi-national firms in this

sector.

1.7 Nature of the Study

A qualitative approach helps understanding and analyzing of change situation in case

study organizations. Through qualitative research the social realities, experiences and

meaning they attribute to words are understood and properly perceived(Taipale-Erävala,

Lampela, & Heilmann, 2015). This study uses semi- structured interviews and case study

methods help to obtain deep rich data on organizational innovations among SMEs of

Khyber Pakhtunkhwa, Pakistan. The strengths of constructing understanding through

case studies comprises the possibility of producing new thorough insights through the

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varied nature of data collected from several sources (Creswell, 2007). A multiple case

study method is followed for the current study. Hakim (1987) believes that data and

evidences taken from multiple sources make case study analysis more complete and

rounded. As a research strategy, the focus of case studies is unraveling the nature of

dynamics present within situations. They are especially valuable when the laboratory type

of controls are not feasible and/or ethically unjustified (Miles and Huberman, 1984; Yin,

1994; Remenyi et al., 1998). Case Study research is way too important and helpful in

those areas where there is an aim or tendency towards building an incremental theory and

develop new theoretical relations(Dwyer, Gilmore, & Carson, 2015).

Simon et al. (1996) argued the same way, examining many cases concurrently, the

analysis is enriched as issues are compared, contrasted and elaborated. Case studies

usually deploy a combination of data collection methods like library data sources,

interviews, questionnaires and at the best observation too which all go beyond all

historic, behavioral and attitudinal lines of inquiry (Eisenhardt, 1989; Yin, 1994).

While quantitative data do sometimes form part of case studies, they are largely

qualitative. Case studies usually depict an authentic, though summarized record of events,

the main players concerned, and other influencing variables, and generally have an

institutional focus (Rosselle, 1996). The current research method is in perception with the

philosophy of inducting theory and case studies (Eisenhardt, 1989). There are some

researchers who already conducted exploratory research and have used generally used

statistical survey techniques to improve the key subjects in the broad area of SMEs

innovation (Nordman and Tolstoy, 2011; Subramanyah et al, 2010).

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The SMEs for this study will be those which are adopting Modern Management practices

especially Organizational Innovation. This research will select 08 registered SMEs; the

number of employees in these enterprises must not be more than 99 employees. There are

no exact norms on optimum number of cases in multiple case studies (Perry, 1998) and it

is not easy to ensure whether the number of cases analyzed is enough as a basis for

generalization (Swartz and Boaden, 1997).

Eisenhardt (1989) in this context advises analyzing between four to ten cases that it is

generally quite demanding to build a theory of adequate complexity from less than four

cases. The SMEs will be selected using SMEDA data base.

1.8 Structure of the Thesis

This section of the chapter tried to present the structure of the thesis so that a glance can

acquaint to the summary of all the six chapters of the thesis.

Chapter 1 provides a brief overview and introduction to this research. It explains

the background, the SMEs in Pakistani perspective, the problem statement, research

objectives, and significance of the study, scope and nature of the study.

Chapter 2 reviews the academic and professional literature. This has two distinct

parts; first it reviews the Small and medium Enterprises literature from different aspects.

Second; it reviews the various aspects of innovation and the theories related to it. Then

there is an attempt to augment the two parts i.e. the SMEs and Innovation for the specific

requirement of this research.

Chapter 3 explains the research framework, methodology and methodological

considerations, case selection and design, data collection and analysis methods, a brief

24

introduction to case study SMEs, the data coding and development of themes and finally

the data condensation criteria and methods.

Chapter 4 draws the within case analysis of all the 8 case study pharmaceuticals.

A brief profile of each case SME is presented followed by an in-depth discussion about

the themes analyzed on the basis of how each participant from the same case resembled

or differed while responding about the same theme.

Chapter 5 presents a cross case analysis by comparing the aggregate answers

about each theme of all the case study SMEs. The findings of each case in-line with

relevant literature are discussed in detail.

Chapter 6 finally discusses the findings in relation with the research propositions,

implication for the theory, implications for the policy and practice, implications for

methodology, limitations of the study and directions for future research.

25

Chapter 2: Literature review

2.1. Introduction

This chapter discusses the pertinent extant literature. In the first section of this chapter,

the work of different authors related to the SMEs growth paths is discussed. The

researcher tried to describe the various strategies mentioned by various authors which can

lead to the growth of SMEs. In the next section, an effort is made to describe the

literature related to the SMEs internationalization and its significance for the economic

well being of the developing countries. Afterwards, the researcher has reviewed the

SMEs entrepreneurial orientation and the role that Ecommerce plays for SMEs

innovation, as per the specific relevance of both these to the current study. In the next

section, the researcher reviewed literature related to the role of SME innovation through

the government intermediaries as well as the challenges to the SMEs. The SMEs

competence and the threats this can pose to the growth of SMEs is reviewed as well. The

next section of the thesis is devoted to an evolutionary note on innovation as innovation

one very important variable in the current study. The various types of innovations is also

reviewed in this section while in the following section the novelty and innovations in

established SMEs is described from the extant literature. The pros and cons of the

innovation and imitation strategies are discussed as reviewed from the relevant extant

literature. The next section described the role of innovation in SMEs performance and the

role that size and characteristics play on type and nature of innovations. This chapter also

has reviewed the literature relevant to the importance of persistent innovation and not just

innovation. Before devising an operational definition of Organizational Innovation from

the extant literature for the current study, the relevant theories of organizational

26

innovation are reviewed briefly in the penultimate section. Whereas in the ultimate

sections, the literature related to the different technological, organizational and

environmental conditions, the idea generation sources in SMEs and the determinants of

successful organizational innovation is reviewed.

2.2 The Growth of SMEs: Paths to walk

The growth of firms follows different paths. Market penetration and increasing efficiency

does not add too much to growth but rather some infrequent ways that are used for firm’s

growth such as opening up new ventures and entering into export markets may help firms

grow more. Since it is important for an economy to have new SMEs as well as long

survived SMEs, growth of SMEs is essential for countries. External factors such as

business cycle, economic dynamism and level of competition play a role. Internal factors

like, firm capabilities, type of activities and extent of planning for growth are important

factors. Cooperation mode of innovation means that the SMEs seek cooperation from

external world vertically by setting up relations with educational and research

organizations and laterally through linking up other SMEs(Yao, 2008).As compared to

establish SMEs, the new launched SMEs grow at a faster rate. Growing SMEs plan more

suitably for growth than the stable ones which have experienced the decline before. The

ambition of firms to grow leads the way to growth as well (Wakkee et al., 2015).

2.3. SMEs and Entrepreneurial Orientation

Generally it is believed that Entrepreneurship is related to growth, innovation and

flexibility (Drucker, 1985; Backman, 1983; Birch, 1987), which lays the foundation of

entrepreneurship. Due to the speedy globalization of businesses it has become imperative

27

for SMEs to internationalize. SMEs need to have entrepreneurial behavior in order to

globalize. The significance of SMEs in the economic growth and job creation in the

developing countries is widely recognized, through which national development can be

achieved.

Entrepreneurial Orientation is an important element for the sustainable performance of

firms as it shapes up the purpose and vision for gaining competitive advantage. Firms are

entrepreneurial if they innovate, take risks and are proactive. Since its proposition by

Miller (1983), EO has been regarded as pro activeness, risk taking, innovation,

rejuvenation, opportunity seeking ability of firms. Innovativeness is the basic function by

which the SMEs leave the current technology or processes and switch to initiate new

technology and processes, or exploit new marketplaces. A SMEs that is entrepreneurial in

nature enters into unknown markets, dedicates a large portion of the firm financial

resources to go for outcomes not well known and borrow heavily .i.e. the SMEs take

risks. According to the researcher, SMEs in developing countries adopt

internationalization primarily through exporting and hence internationalize. In order to

make the most of the new opportunity in the marketplace firms need to be proactive than

to be reactive. This entrepreneurial method puts the SME ahead of its competitors in

exploiting new opportunities. The proactive first mover can make huge profits as opposed

to the late adopters. Due to numerous constraints to domestic SMEs in skills, resources

and experience, the need of learning innovation and producing novel services and goods

for export becomes more important(Taylor, 2013).

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2.3.1. The role of E-Commerce in SMEs of Developing Economies

In the study of (Hussain and Centre, 2014) ecommerce has been one of the best tool to

create innovation for SMEs. A substantial rise of 120% due to the online trade in china

and the capital increase counted from 1.6 billion to 43 billion US$ in a decade is an

example of substance. Sometimes ,the case may be like that Ecommerce draws around

business for SMEs but these firms cannot benefit from it due to lack of facilities of

storage or of Exports restrictions.

Many developing countries have tried their luck at E-Commerce but due to very high

costs for introducing ICTs a very little realization of this dream have been possible as yet;

only 1.6% of global E-Commerce comes from Middle East and Africa. Ecommerce is a

source of SME development as it enables the firms to showcase its talent globally. The

technical support in form of ICT/ITC can help SMEs in three broad areas such as spotting

out opportunities, marketing intelligence and to develop specific solutions. Lack of

internet infrastructure and online mode of payments are the problem of E-commerce in

SMEs .The kinds of banks that operate in the developing countries are still conventional

and they do not have online systems. Adoption of new technologies is the needs of the

hour for economies to bring up diversification to services, so that the least develop

countries lessen their dependence on commodities. Connectivity is the way forward for

bringing up transparency, a knowhow of E-government and E-Education so as to affect

the rural areas positively. As oppose to bureaucratic norms, E-commerce helps in

bringing a cost effective way of governance into play(Hussain & Centre, 2014).

29

2.3.2. SMEs innovation through government intermediaries

A very little has been done to explore the utility of applying the open innovation in SMEs

in developing countries. Whereas the SMEs of developed world seem to have learnt the

art of innovating, the SMEs of developing world still find it difficult due to many

obstacles to find a way through innovation. The National Innovation initiatives offer

chances for economies to grow and prosper as innovation is one big mean of achieving

economic prosperity. While incorporating innovation hubs as being important for

national and local growth, developing countries will find many hurdles while doing so.

A model which can involve experienced inventors and research teams and government

agencies as intermediaries may connect with SMEs to produce innovatively. Government

also plays a vital role in promoting innovation as it provides roadmaps through its

programs ,promote innovation through introduction of innovation friendly policies and

protect innovation through regulations(Yao, 2008). Due to the recognized fact that SMEs

resulted substantial economic growth, this spurs innovation in a country as well.

2.4 SME and the Challenges

SMEs, especially those operating in the developing world face challenges of fewer

resources, less inventive, creative employees ,lack of understanding of idea generation,

owners technical education, previous work experience and technical skills of workers.

Very little and rare use of internet only limited to email is seen even in some SMEs of

developed countries. Far little of the benefits are perceived by the firms, and

organizations are hardly ready to adopt them, while competitors may put pressure

alongside. Lack of judicial systems that are efficient enough to make good solutions to

30

address the issues adds to the problem even further. Paradoxically, developing countries

either have very strong or very weak intellectual rights regime. Lack of financial and

managerial resources to utilize the external network is one other problem.

Social interactions based on trust developed from the repeatedly successful transactions

between firms, long term loyal customers and suppliers can get over the legal obligations.

Also the government agent can firstly recommend to partner or not some firms, 2ndly

provide better legal services for SMEs and keep record of the agreements in detail.

Lack of enforcement and improper, insufficient legislation is highly ranked barrier in the

way of SMEs making(Vrgovic, Vidicki, Glassman, & Walton, 2012). SMEs face many

hurdles internally such as the lack of resources and deficiency in meeting up the many

challenges of the new business environment. This is more common in developing

countries where the entrepreneurs lag behind in specialized education as well as

international exposure (Antoldi et al., 2011).

2.4.1. SMEs Competence and its side effects

The entrepreneurial competence of SME is geographic based and this varies from country

to country. The SMEs must try and invest heavily in competence renewal so that they are

redundant in competence situation. The environmental changes affect the mode in which

an SME operate. The structural changes occurring in the industry take a serious test of the

SMEs survival potential where some may shape up and some may shape out. The affects

of environmental changes plays an important part in the survival of SMEs. SMEs greatly

add to the job creation as in the EU, It has been the best example wherein SMEs have

contributed 66% in the job market. Competence is an overall performance effectiveness

31

starting from basic level of proficiency to excellence level expertise. Competence can be

termed as skilled base and competency as behavior based.

Over the recent decades, many models and theories have come forth regarding the

classification of competence into individual as well as organizational level. But in case of

SMEs this classification is hard. On the contrary a new concept of Entrepreneurial

competence can forecast the fate of SMEs categorically. Firms need to penetrate through

new marketplaces, develop new goods and services and have lesser costs consumed in

creating value. For Entrepreneurial SMEs to be termed as a successful one, it should have

the ability, intention as well as opportunities. With this it can continue to grow and gain

competitive advantage. Individual competence links with the prowess and knowhow to

effectively perform a specific assignment. Job competence is a set of motives, traits,

skills and knowledge individuals need to smoothly perform their jobs. Professional

competence is shaped by workplace environment, personality of workers and their level

of motivation. As strength of SME, the functionality in operation gives a unique kind of

customer orientation to SMEs. Sometimes, though the customization is so much so that it

can cause a serious inconvenience in the processes of the firm as per every customer you

cannot change the processes. Strong entrepreneurial abilities are needed to bring about

product innovation and capturing new market share(Taipale-Erävala et al., 2015).

SMEs are best known for its flexibility and acceptance to the external changes and any

SME which do not competence trap is when in the wake of new technologies the existing

professionals become redundant, firing old ones is not feasible due to regulations/law and

hiring new one is not available because of the newness of the skills being respond to such

32

change positively may end up as unable to exploit future opportunities. In SMEs,

common traps are those of the familiarity trap wherein the firm favors and prefers the

known over the unknown and propinquity trap where the firm sees to the nearest

solutions as oppose to exploring the novel solutions(Taipale-Erävala et al., 2015).

2.5. An Evolutionary note on Innovation

Derived from a Latin word Innovare meaning to make a new thing, innovation is a very

complicated topic. Due to an increasing importance of Innovation, a variety of definitions

have been put forth in the academic literature representing various aspects of innovations

but mainly the two stand out that is the newness which includes the use of new

knowledge and its relativity to some organizations(Jaskyte, 2002).

In the 20th century, innovation has become one of the most important and popular topics

but still very little heed has been paid to dig out its roots and origin from the categories

and critical review of the available studies on innovation. According to the economic

historian, A. P. Usher and W. Rupert Maclaurin, the technological innovation was a

tradition historically known as technological change. This according to Godin (2010a) is

concerned with industrial manufacturing as the technological invention. On the other

hand, another tradition which developed in 1970s, treated technological innovation as the

commercialization of Inventions done through technologies. Freeman (1974), defined

technological innovation as a vital condition and important element of competition for

firms and countries. The Chris Freeman approach regarding the technological innovation

is multifaceted as compared to the American approach and hence it draws a conceptual

framework of its own kind. Contradicting to the American approach mainly in four ways,

firstly, it is descriptive and not econometric; secondly, its focus is both on product and

process innovation. Thirdly, it guides in strategic policy making and fourthly, it should

aim at developing a technological innovation theory. Invention is an idea, model or a new

or an improved product, process, system or devices whereas Innovation is the commercial

transaction of the new ideas and models (Freeman , 1974).

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Freeman made a note on Research-intensive-industries, following his efforts to

rationalize the importance of technological innovation for poor state of knowledge and

improvement of society, as a vital trend of technical change (Freeman, 1974). According

to the conclusions of Freeman which he drew after using the OECD and US national

Science Foundation database, Small enterprises have advantages over the large firms in

the early stages of inventions whereas the larger firms tend to dominate in the later

stages. Since technological innovation is mainly product innovation, it is in other ways a

gateway for commercialization as it takes the route of product launching for customers or

processes introduction for firms. Freeman on the basis of previous literature on

technological innovation placed together a National Innovation framework as before that,

innovation usually was discussed as an academic discipline. He further added that

Innovation is not only useful for firms and individuals but it is also a source of national

growth as a whole(Godin, 2012). To a certain extent, innovation is hegemonic but not

monopolistic. This hegemony is due to two factors, firstly, researchers use the

appropriated innovation while others do not use it markedly though they invariably use

innovation too. Secondly, government through rules and regulations, make the Innovation

studies an important area and legitimize its understanding(Godin, 2012). An important

debate has spurred on how innovation should be managed because Innovation has

become a reason for survival of firms. However, on the other hand, innovation has the

facet of risk attached to it which may be to the extent that the organization is completely

devastated. As a continuous process, innovation management has changed for the past

four decades as hopes are continued for the best possible practice, which is a time relative

process. The best practice does not automatically come out rather every context favors

34

different models. Every approach, as such has its merits and demerits (Drucker, 1999;

Golder, 1996; Rothwell, 1994).

A general notion is that most high technology companies adjust and manage their

innovation strategies to their business context, which is referred to as contextual

innovation. Focusing on different activities of innovation refers to as innovation process.

Governing and organizing the different innovation processes means innovation

management. The R&D activities of an organization not only include the innovation

processes but also the invention processes that is why an assumption can be made that

R&D management is considered broader than innovation management. There has been

disagreement as to the number of innovation management generations and also the

contexts where they exist. However, the most dominant view suggest about four

generations of innovation management. These innovations work in different conditions

and require different type of innovation processes.

The corporate R&D laboratory made a hallmark of first generation of innovation

management. The second generation largely relied on project management techniques in

R&D. The third generation of innovation management showed signs of the intra-firms

functional collaborations whereas the fourth made knowledge gained from customers and

competitors as base for designing the normal and routine R&D activities more flexible

(Niosi, 1999). However, the current trends show that the firms are more prone to follow a

particular context rather than following the existing generation of Innovation. This

approach is called Contextual innovation.

A weak link in the Generations concept is its formality. Because of the fact that not all the

35

firms take formal routes to incorporate innovation as most of the enterprises rely on

informal ways and intuitions which have done successful innovations following informal

intuitions. Even in areas similarly matched, many firms adopt different approaches to

innovate (Griffin, 1997; Nessim et al., 1995, Brown and Eisenhardt, 1997). Also, there

are studies which show that even in the same firm different innovation approaches are

used. The logic behind this phenomenon is that different contexts need different

processes, which is better as context based innovation yields good results. Selecting the

best innovation for the specific situation is the best ploy (Griffin, 1997).This reflects on

the phenomenon that a single innovation management approach is not applicable

presently. The innovation management of an organization has a relationship with its

environment; both internal and external. The internal environment of an organization has

two aspects which are important, the structure and strategy of organization. The strategy

of an enterprise writes the script for organizations whether the firm has an imitation

policy, a follower policy or an innovation leader in the industry. This in turn determines

the significance of innovation to the organization. Furthermore, the structure of firms

determines how the innovation activities and practices of organizations are organized

functionally or divisionally. The external environment effects the organization of

innovation in the country, for instance, regulatory principles and rules prevalent in the

country (Teece, 1997; Chiesa, 2001).

There is every possibility that there are more contextual innovation factors belonging to

the internal and external environments. The four main types of the contextual factors

among which the first two belong to internal whereas the latter two belong to external

environment are, Type of innovations including incremental, radical and transformational

36

etc. Another is types of organizations such as functional, organic, decentralized or

centralized. Third are types of industries such as SME, high-tech, supplier-driven and

FMCG. Last are the types of culture or country such as authoritative, egalitarian or

democratic. The relationship between the manager’s decisions and the contextual factors

depend on two vital aspects, Firstly, the contextual factors often need the operational and

strategic decision making from managers. A new to the firm innovation can be carried

within house or externally, which is a strategic decision. Similarly, the managing of new

products for as asked by the existing customers is different as compared to the new

products development for unknown and unfamiliar customers of the incumbent

companies, as they are less prepared (Moore, 2002). On the other hand, the new to the

firm innovations will need flexibility in innovation processes as it will be like a trial and

error method, reiterating the processes and altering the decisions accordingly so that the

there are calculated risks involved. One gets a general feeling from the literature that the

contextual factors limit each other’s effect. For example, it cannot be hoped that an

enterprise that has developed the follower strategy will never go for radical type of

innovation. Another example is that a high-tech industry will rely mainly on the

technology while innovating.

2.5.1 Different types of Innovation

Product innovation means the emergence of a new product or an addition of a variety to

an existing product for the satisfaction of customer’s needs. This type of innovation helps

to set up at least a monopolistic position for the newly introduced product or product

feature. The vital role of product innovation means that in many industries and markets a

high degree of innovation is persistent for products and ensures product competitiveness.

37

The innovative behavior of product innovators can be addressed through three pertinent

theories at least. The first argument is that of R&D Sunk Cost, which means that the

amount of money that is used in setting up R&D infrastructures is irrecoverable to the

extent that the firm generates income through these R&D endeavors, though such profit

generation can be guaranteed only and only when the continuum of such activates are

ensured.

(Phillips, 1971) put forward the success breeds success argument. This means that

successfully innovative firms may have an impact on the firms to create conducive

environment for further persistent product innovation.

The appropriation theory put forward by Teece (1986) means that through protecting the

intellectual property rights, new products tend to deliver the persistent rewards.

Comparably, it is something relative as to protect the patents is much harder where

imitation is simple and frugal.

Process innovation relates to the firm efforts in the R&D operations to lessen their unit

cost of production and to produce top quality, customers centered products. It is pertinent

to note that the manufacturing of new products makes parts of the process innovation .As

it is difficult to separate process innovation from organizational innovation, a thin line

however can be drawn in that process innovation encompasses the installment of new

equipment that renders technical change in the firm. The firm’s process persistency can

be seen in its associated sunk costs in introducing heavy production method.

Marketing innovations include the market segmentation and opening new markets and

38

decisions of method to serve these markets Johne (1999).As the point of ambiguity is

between the different innovation types, here again a problem remains unanswered. If the

marketing innovation does include the four marketing Ps, then Product is one of the

major P. which then makes the product "P" common to both the product innovation and

market innovation. The empirical evidences show that marketing innovations are vital to

develop and maintain a competitive advantage through lowering costs and differentiation

(Naidu, 2010).

The marketing innovation persistency is not all that higher for mainly three reasons,

firstly, the firms consider their customers while innovating and too often too much

innovation will leave the customers confused. Secondly, the disruptive technologies

argument holds that some of the leading firms failed due to the changes in markets. Since

firms do not have the luxury to enjoy old technologies for ever, technologies may be

updated but their markets should not be changed often, lastly.

2.6. A review of novelty and innovation in established SMEs

The increase in novelty in the innovation process helps firms to improve their

competitive advantage and also find other opportunities (Lynn et al., 1996; McDermott

and Hadfield, 2000; McDermott and O’Connor, 2002). The increase in the novelty and

uniqueness is correlated to risk (O’Connor and Veryzer, 2001) .It also requires more

resources in terms of human capital, knowledge basis as well financial back up(Stringer,

2000). Despite the fact that a long time has been spent in reaching to any conclusion

about to what exactly is the novelty and radical innovation, there is still no consensus as

some call it breakthrough innovation, some term it as disruptive innovation, some relate it

39

to significant innovation and some other call it major innovation (McDermott and

O’Connor 2002).

Those practitioners and researchers who see innovation from the customer angle term

those products as innovative which offer features and advantages like never before

(O’Connor, 1998; Leifer et al., 2000; Danneels and Kleinschmidt, 2001). From the firm

point of view, two things that make the products and production novel and new are

technologies and markets the production and product innovations are normally not

incremental and radical in nature rather have a lower or higher level of novelty (Green et

al., 1995; Daniels and Kleinschmidt, 2001). According to (Danneels and Kleinschmidt

(2001) and McDermott and O’Connor(2002), the degree of novelty in any product or

production can be linked to four knowledge basis i.e. Creation of new knowledge base to

tackle technological inexperience, skill and technique base knowledge coping with

technical experience lacking, Knowledge base for the development of new business

practices to address the business inexperience and investment in acquisition of

knowledge to tackle the technology costs. For many SMEs working in manufacturing

sector the increase in the degree of novelty is more important than the state whereby they

need to decide whether to innovate or not to innovate. The non-innovative SMEs quickly

loose the competitive advantage they have over other and thus end up losing the

customers too. All innovative firms do not have the same performance as per as the level

of novelty is concerned. Some manufacturing SMEs may bring minor while other bring

major changes to the products so it’s important to judge the difference in the

performances of the SMEs in terms of their degree of novelty.

40

SMEs can assimilate and utilize the knowledge they accumulate from the external

environment to improve the learning abilities to add to their novelty and through learning

SMEs improve their product and process innovations. The higher the firm’s learning

ability, the more the innovation and novelty. Learning helps in improving innovation and

adds to the degree of its novelty and for this particular reason managers increase their

investment through learning by training, learning by doing and learning by searching.

The importance of innovation is attributed more often to the firm performance

improvement but the overwhelming failures of new product neutralize the tendency to

innovate. The results of America alone suggest a 85% failure in the 17000 new products

that were launched in the early 90s.Firms introducing new products to market face many

challenges first and foremost being what type of innovation to be carried out where. The

success of incremental or radical innovation in advanced countries cannot be generalized

in developing economies. The monetary success from Innovation is related closely to the

adequate market size and the investments in supply chain.

Several features effect the innovations. These are either uncontrollable like contextual

factors of infrastructure, economic development path, business culture and market size.

As well as controllable factors like types of innovation, new product development

strategies, new commercialization strategies like promotion, distribution, supply chain

development and strategic control. Incremental innovation is favorable for emerging

countries as compared developed countries(Iyer, LaPlaca, & Sharma, 2006). Irrespective

the type and nature of technology, importantly, the technology should be the one which

suits the market SME caters and the environment, skills of innovation practitioners and

41

infrastructure. Continuing to improve the traditional technologies and introduce new

technologies is the succession mode of innovation. The chase mode technological

innovation concept means that the firms sees and follows the innovators and try to

develop new products before others do so(Yao, 2008).

2.7. Innovation or Imitation Strategies: Pros and Cons

Firms sometimes face the risk of its research and development work being copied

through imitations. The copyrights regulations in this regard help firms to certain extent.

The copyrights vary from region to region. In the weaker propriety rights observing states

the theft is much greater. Imitation is much cheaper than the innovation itself. The growth

and investment of firms, which are protected through copyrights is better(Fan, Gillan, &

Yu, 2013).

The intellectual property rights level has a bearing on innovation. The economic

development also has a relationship with the Innovation. The intellectual property right

has a far more complex effect on the Innovation. However a single globally recognized

Intellectual Property Rights model is sub-optimal (Hudson & Minea, 2013).

The developing countries contribute about 2/5th to the world’s research and spend around

one quarter on R&D yet their inventions are claimed to be imitative (Lorenczik &

Newiak, 2012). However some researchers noticed a 47% failure of innovators as

compared to only 8% failure rate for late entrants. How an economy progress focuses to

imitate technological advances to those who carry internal innovation. As formerly

believed, only as little as 13% of economic progress is associated with capital intensity

whereas now it is believed that technical progress or total technical productivity (TTP)

42

holds a key in economic growth.

Also, the technological advancement is an endogenous factor which is a response to the

stimulus of profit maximization. Innovation is the creation of novel products and

processes internally whereas imitation is the adaptation of technologies of the advanced

countries through the utilization of global trade channels. The major contribution is made

by developed countries as a huge percentage of R&D activities for development are

based in developed countries and the developing countries make very little contributions.

Entrepreneurs hold central roles in economy for their talent to make decisions to innovate

.They are required to have certain skills which are central to make innovation and not

imitations. The more a country develops, the better its innovation ability becomes. Thus

these countries limit their dependence on other countries for their technology and the

paradigm is shifted from imitation to innovation(Yong & Ho, 2006).

An innovation strategy yields new product performance better than an imitation strategy.

Due to the intense competition, demand uncertainty and variations in technology use

innovation is preferred over imitation. The introduction of new innovative products

before the competitors helps firms in economic and other important factors like

behavioral factors.

The effectiveness of innovation can be compared with imitation by focusing on the

performances of pioneers and followers but the external players like market trends and

internal factors like organizational resources must be considered too. A firm however

superior maybe, lags behind the one which enters market innovatively. Thus investing in

R&D is vitally important for sustainable success. However some researchers noticed a

43

47% failure of innovators as compared to only 8% failure rate for late entrants. The

performance of pioneers and followers firms depends on the cultural aspects and may

differ from continent to continent.

Overall, there is hardly an innovator in the market and imitation sweeps the market often.

The degree of imitation varies from cloning to be creative in adding features to the

existing products. So product development can vary from being truly innovative to pure

imitation.

The innovative firms which introduce prior to its competitors can have many advantages

such as economy of scale and experience, can have advantage like occupying the most

attractive space and utilizing scarce resources. Due the risk involved with innovation,

firms sometimes avoid pioneering although they may know about the potential benefits

about innovating(Zheng , 2006). Imitation is bringing the intellectual secrets of leading

innovators. Imitation of innovation is owned by those firms which have little skilled

people, shortage of finances and low experimental equipment’s. These however have the

advantage to face low risks and low investments(Yao, 2008).

2.8. Invention, Innovation, and Discovery

An invention is a new device or process initiated for the first time by humans. Any new

physical product, novel software and biological life form may be categorized as an

invention however it should meet the standards for being able to testify its originality and

then be patentable. The patenting of such innovations does not necessarily qualify to

assure in any way as to be profitable as well. Of the many inventions that have been

introduced each year, very little very few have met the status for being profitable and that

44

is why most firms focus on to improve their processes and products incrementally.

Innovation can simply be defined as the better ways of doing something for achieving the

individual or institutional goals to meet a standard criterion set forth to measure

performances either subjectively or objectively (States, n.d.).

There are four major factors/sources which can be attributed to the promotion of

innovation other than the intellectual property rights. First and foremost is socially

sufficient amount of funding for innovation-related research work. Appropriate financing

facilities can help improve the discoveries by covering two grounds, one, they can help

decision makers to try out the untried alternatives in the wake of their selection and

forecasting of consequences. Two, Following these line of discoveries, innovation in

incentives, organization, decision-making and production can be introduced.

Secondly, concrete and proper conflict resolution mechanism for observing secrecy,

privacy and property rights. Although not enough if focused alone, the scientific

information innovation policy can be helpful to balance the needs for property rights,

secrecy and privacy. As in almost all empirical researches of these kinds, the practitioners

do not perform outright experiment rather follow the alternatives based on the political

and economic agents.

Thirdly, the goal orientations and goal directed attitude of firms is essential so that they

can find out the alternative course of actions. Diversity in policy making on individual,

firm level and government levels is necessary in the sense that if each of these

organizations follow the same policies, the workability of all other alternatives and their

45

performance cannot be ensured.

Fourth and finally, the strategic planning for executing innovation; unless and until the

risk of improvisation is taken; theory alone cannot lead to a good innovation

performance. A plant installation cannot be predicted as to how much it will profit unless

it is planted and the production process of this frequently checked for long time. The

Spatial location of invention can diffuse in a substantial way in a short span of time and

the spatial locality can become innovation hubs and clusters in no time(Kerr, 2010).The

drivers , speed and adjustments for such movements are hard to spot out. The increased

patenting of some of the big cities of the world can be attributed to work done by the

Scientists and Engineers (SEs), who have recently migrated to these cities. Some

empirical studies represent that the high tech industries relocate more than the low tech

industries and that these movements and relocations need much higher R&D budget and

for the development of Scientists and Engineers then those consumed by the low

tech(Kerr, 2010).

The scientific inventions of breakthrough nature are created by and embodied in response

to addressing the incentives and special needs of organization in particular localities by

particular inventors. To understand the diffusion and commercialization of these

inventions, the work of these elite scientists has to be kept in focus which is primarily

done in universities and are moved to the firms through the collaborations of these

scientists on demand.

The capacity of different inventors and scientists is not the same and it cannot be

generalized that their inventions will benefit always more than the costs incurred during

46

the generations of these inventions. This could be as simply put as the difference of

guiding and making high level productive students by some scientists/professors than

others. The potential of such leading inventor is best known by the number of citation

their research work gets.

Those scientists who have successfully related discoveries and patents to industry are

believed to have been cited as frequently as nine times more than their peers who do not

have industry affiliations and do not discover inventions. In most cases the discoveries

and inventions vanish quickly, especially if there is no intellectual property rights

incorporated because the information of such inventions diffuses quickly. However it

depends on the nature of the invention as well. for instance if the nature of the invention

is such that there is some tacit knowledge and techniques used, then the replication of

such inventions is not simple rather anybody who wants to do so would first acquaint

himself with a hands on experience . The knowledge which is required for invention and

discoveries embody only in particular scientists yielding an extensive income for these

intellectual human capitals. So the science based industry can only be achieved and

distributed in all geographies if the scientists who initiate these inventions with their

specialized knowledge is equally distributed. The diffusion of invention is limited

through the boundary spanning between the producing organizations (inventors) and

those collaborators who may need to transfer these to their organizations(Zucker &

Darby, 1996).

Recent literature show that there is no single innovation system, contrary to this, it is the

exchange of actors between different sectors as innovation projects are diversity based,

47

interlinking different social systems. Innovation is an evolutionary, interactive and no-

linear process. It is neither as was put by Schumpeter, the process which relied hugely on

internal R&D, nor it is a process following the linear route from research to production

(Kline and Rosenberg, 1986; Dosi et al., 1988; Malecki, 1997). Non-linearity means that

the innovation follows stimuli of internal and external sources and actors of information.

Interactivity means that the firms must interact between different wings internally as well

externally to factors like customers, suppliers, educational institutions. This will help firm

innovate. The concept of innovation systems has been introduced to remove the doubts

on "innovation". These innovation systems were applied to the national level wherein the

fact can be seen that each country has a different innovation system. However, later on

different regional innovation systems were also spotlighted(Lundvall, 1992a; Edquist ,

1997).The innovation system is comprised of factors and relationship networks such as

production, diffusion, utilizing new and useful knowledge .The innovative system is also

termed as the combined set of institutions whose interactions guide the innovation

performance of firms (Nelson and Rosenberg, 1993, p. 4) .The national innovation

system can better be conceptualized on the dichotomy of system/environment than

element/relation dichotomy. A self-referential social theory can be quoted, the theme of

which says that social systems are autonomous. The social system theory restricts the

response to the internal players and not to external factors. An important query is that

how the system maintain its individuality and how it link up with the environment.

Luhmann (1991,1996) , introduced the auto poetic model of social system, in which he

held that how the social systems separate from environment by establishing boundary

between the surrounding world and its own entity. These social systems maintain

48

elements which work for this type of social system only, the communication standards of

such social systems. Through a system medium, the relevant information is separated

from irrelevant information.

The lack of a single Innovation System which has common sets of interpretations,

common decision rules and identical kind of communication systems to meet the need of

common objectives make the work more difficult for Innovation researchers and

practitioners alike. Over doing Border- crossing, a phenomenon whereby Systems

interact with each other so much so that they influence each other, has a consequence of

costing novelty and gets the process more routines. Routine interactions do not guarantee

to innovate(Kaufmann & Tödtling, 2001).

2.9. Innovation and firm performance

Innovation can be said to have substantial amount of impact on firm effectiveness but

empirical effect on performance is always hard to represent. However investing more in

R&D can guarantee competitive advantage over firms having lesser competencies in

R&D. Innovation and internationalization are two vital factors for firm growth. The

investment in R&D for new idea generation and exploitation are considered important for

success in modern economies.

Although difficult phenomenon to establish, but the innovation performance link can be

checked through two methods, firstly, looking for indicators available in the public

domain such as R&D investments, number of patents and new products launched.

Secondly, designing survey which looks for a variety of indicators like skilled personnel

and the amount of sales profit over the last three to five years(Vollenhoven & Buys,

49

2010). In a changing business environment, Innovation is believed to have a far reaching,

surviving effect on the firm through many attributes like, drawing competitive advantage,

bringing product and process betterments and continuously fast growing, efficient and

more profit orienting firms.

The research conducted through a survey on an innovative supplier industry in Turkey

suggests that there is a positive relationship between the firm performance and

technological innovations such as the product and process innovation whereas the there is

no evidence found f as to whether the non-technological innovation such as

organizational or marketing innovation has a positive relationship with firm performance

as well (Atalay, Anafarta, & Sarvan, 2013) .So it is not a mere coincidences that countries

like USA , Japan and some other countries of Europe are good carrying out R&D

activities and capturing patent rights.

The firms which introduce innovative products cash on the lesser number of competitors

and generate more profits but with the passage of time these profit margins decrease as

other competitors also enter in the same industry and imitate (Sharma and Lacey, 2004).

The innovation capacity of any firm is associated to the human capital and the utilization

of their knowledge resources. The product and process innovation encompasses

knowledge (Stewart, 1997). According to strategic management theories of the current

time, the competitive advantages of firms can help them in monetary terms by raising

funds through rents. The resources and capabilities of firms do add to the sustainable

development and competitiveness, though these resources and qualities are not easily

transferable and replicable. The management of the firms utilize the resources that are

50

available and help enhance the chances to develop more capacities for future venturing

(Grant, 1996a ;Argote et al.,2003; Eisenhardt and Martin 2000)

As the top most important tool for creating competitive advantage, Innovation capacity of

the enterprise is identification of the intrinsic opportunities to make new products,

provide services and/ or carry management practices. The innovation rates of the firms

define their destiny for future performance (Banbury and Mitchell, 1995; Damanpour,

1991).The more the efficiency of the firms in products, processes and services, the more

it meet demands of the firms and can even create the opportunity for firms to enter new

markets (Brown and Eisenhardt, 1995; Burgelman, 1991). The simultaneous and co-

occurring product and process innovation has far reaching effect on the firm

performance(Damanpour and Gopalakrishnan,2001).However, the small firms should

involve separate and simultaneous efforts to engage the selected group of employees in

product or process innovation so that they draw more efficient performance(Andries &

Czarnitzki, n.d.).

2.10. Effect of SMEs size and Characteristics on Nature and type of Innovation

Some existing theories show that small firms carry R&D activates in product

development while larger firms do so in process. Similarly small firms enter into new

markets and may ultimately dominate. If the standard Carnot theory is taken in

consideration in this regard, the firm will grow only if it is efficient. So in such a case the

efficiency can either be its product or process R&D. Large firms invest more in process

R&D while small invest more in product R&D. However it is flawed if checked

empirically. The process and product innovation can be mistaken as in case of product

51

innovation, there are two types, improvement over an existing product or developing a

brand new product, which can be categorized as "process".

Another problem is that of generalizability. When the study of Scherer (1991) which does

not include any small firms, is replicated by (Fritsch and Meschede, 2001) in large firms,

no significant difference is realized. Another important but seemingly abstract issue

might be the fact that the small SMEs under-state its R&D expenses. The large firms

however cannot do it conveniently for the fact that they employee scientists and

professionals with more precise job descriptions ,their salaries can count for R&D

expenditures(Plehn-Dujowich, 2009).

According to Schmutzler (1995), a monopolistic firm can reduce the cost of production

by investing in monopoly and increase future opportunities. This study suggests that

product and process innovation is complementary. Mantovanis (2006) suggests that in

monopoly, firms do invest in product and process simultaneously so that the high

profitability is achieved.

Eswaraan and Gallini (1996) held the view that since product innovation is the

manufacturing of an entirely new product which serve different customers, the process

innovation becomes complimentary and substitute each other(Plehn-Dujowich, 2009). In

essence, large firms have greater opportunities to invest in product and process R&D.

Practically, there is lesser return to R&D irrespective of the use or not innovation counts

to measure the innovation output. So if small firms use more product R&D, larger

enterprises gain more product innovation per dollar of R&D , however this is

insignificant practically(Plehn-Dujowich, 2009).

52

2.11 Not just Innovation but Persistent Innovation!

The empirical outcomes of research carried out has emphasized on the fact that if an

organization remains innovative for a longer period of time, there are likely chances that

it persist with its competitive advantage for longer (Le Bas and Scellato, 2014). Being

persistently innovative means that a firm can have a far reaching impact on the

innovation fields incorporating in economics, can leave its mark on the firm long term

strategic management and above all the public policy concentrated innovation(Peters,

2009). If the firm persistence is substantiated, it would second the Endogenous Growth

theory which relates the persistent and long run economic growth to be a function of the

firm attainment of technological knowledge. Romer’s model in this regard suggests that

innovation persistency is checked at the firm level and that overall knowledge outburst

are the fundamental sources for innovation leading to economic growth (Romer, 1990).

The strategic management point of view of innovation unveils the fact that if the

innovation is maintained consistently , it suggests a persistent loop of innovation and this

will make the firm standout and will give the firm a competitive advantage beside an

inter firm performance sustainability(Ganter and Hecker, 2013).

When innovation is such that it leads to further innovation, it has more far reaching effect

on the firm performance, ultimately taking innovation to other horizons. True innovation

persistency relates to the presence of inter-generational and inter-temporal spillovers

which can help in the assessment of programs which are worked out for the stimulation

of innovation. The persistence of innovation, if it is a result of other underlying

characteristics, these characteristics is rather triggered by innovation policy makers.

Innovation persistence is a complex topic and cannot be placed simply .However the

53

combination of learning that comes from innovation process and a feedback mechanism

between knowledge accumulation and innovation process will generate dynamic scale

economies (Geroski et al, 1997). Knowledge can be an input as well as an output of the

knowledge production process. This has an implication on either type of innovation

persistence (David, 1993). The firms that are generally good enough to create new

knowledge sources do so by utilizing their existing knowledge reservoirs. The better side

of this practice is that those firms which use their own data sources can innovate at lower

costs as opposed its competing firms. This type of knowledge creation and knowledge

generation is important for all types of innovation, technological or non-technological as

any of such innovation needs knowledge to be novel in some degrees. The innovating

firms find new ideas while operating in innovative passion. Those firms which have done

innovation to any level in the past finds it convenient to recombine their past innovation

experience and create new knowledge sources be it in bits and pieces (Weitzman, 1998).

Furthermore, the capacity of firms to absorb knowledge is correlated with the capacity of

the human capital of the firms. If the employees have accumulated good enough

knowledge in one particular time, they can capitalize on that in future time as well

(Cohen and Levinthal, 1990).

2.12 Theories of organizational Innovations

Schumtper (1950) saw that organizational and technological innovations are interlinked

as organizational changes occur with new product and processes and new markets

emerge. The diverse literature on organizational innovation can be categorized broadly

into three categories and streams.

54

2.12.1 Organizational Design theories

These theories largely focus on the relationship of structure and innovation. The aim is to

see what the main structural properties of the innovative organizations are and to find the

influence that the structural variables have on the process and product innovations. There

are more than one possible way of structuring organization innovation diffusion and

adoption if the socio-technical make up and structure of the organization is organic than

mechanical, the rate of innovation is higher(Burns and Stalker, 1961. The more the

organic is the nature, the better it fits for small scale organizations. The mechanical

structure of organization renders to the simpler work of large-scale organizations(Hull &

Hage, 2017). The change in the structures of organization is due to their transactions with

environment and the coordination of their activities for the same purpose (Lawrence and

Lorsch, 1969). The organizations can be reengineered by the managers by bringing

improvement into processes (Liker, 2004).

2.12.2 Organizational Cognition and learning theories

These theories relate the organizational innovation of firms to the knowledge and

learning creation of the firms. A narrow and more specific focus is on how the new

knowledge creation and learning processes are exploited to carry on innovative activities

in organization. Adapting the framework of Riessman(1993), Bartel,(2011)attributes the

prevailing unusual and unexpected experiences of organizations to their learning.

However the learning through narratives development can be through the scientific

approach where the generalizations produce further learning or through the experiential

approach wherein the learning is generated from a stimulus response mechanism. Glynn,

(1996) and Bartel and Garud, (2009) work signifies the importance of new knowledge

55

creation and learning process towards the organizational innovation.

2.12.3 The organizational Change and Adaptation theories

These theorists focus on how the organizations are compatible to the radical

environmental shifts and technological changes. Hence this school of thought sees

organizational innovation to as the capacity of these organizations to the changes that

happen in the external environment which influence and shape the firms. The firms

change due to the adaptations and utilizing the dynamic capabilities to make use of its

external and internal resources (Burgleman, 1991; 2002; Teece, 2007). The smaller firms

have somehow the inability in terms of technology and organizational capacities to

explore and exploit opportunities on regular basis(Teece, 2012).

2.12.4. Cultural theory at work in Innovations and Inventions

According to Schumpeter, innovation is the successful implementation of a new sign and

creation, and innovation is the broader social acceptance of the components of a sign. In

a cultural context innovation is the well suited utterance signifying a pairing of a

signified and signifier which pervade through the social fabric and itself becomes a

believable concept(Mast, 2013). According to Mast, (2006) an innovation is an event that

indicates a change or rupture in the routine exercises of things which is then configured

accordingly. Innovation does not represent itself and are likely to be interpreted. Since

interpretation is a part of a symbolic process in a complicated cultural outfit, the

associated elements are the constituents of the sense making and sense giving processes.

The literature available on Innovation studies show that innovation is a burning issue for

56

academics and practitioners for the fact that innovation holds a central place in the

development and competitiveness of corporations as well as nations at large. The very

frequently used term "Innovation" has made it looks like a routine exercise and a rather

mundane phenomenon. Inventions and Innovations are as much cultural phenomenon as

much they are economic and technical ones and taking it as such will help the researchers

to put meaningful theories to explanations. As from high to low tech, from food to

clothing’s and costumes and the artifacts like computers, all such things are derived from

cultures and hence any innovation in such areas be treated as pertinent to culture as

well(Mast, 2013).The organizations of today face a serious challenge as compared to the

last two decades; that is organizations need to find ways and means of creativity and

innovation. Organization has to pay attention to its environment and culture in such a way

that it becomes innovation friendly. For organizations to not only survive but retaining a

future oriented and long lasting success, it needs to develop a sustainable innovative

culture. Such innovative culture will help these enterprises in developing capacities

which will enable the firms for present as well as for future too. Because when innovation

becomes the integral part of the firm, it enables them to gain and maintain competitive

advantage (Voelpel et al, 2005).

There has been an increase in the rate at which the society moves and hence organizations

also undergo a transformation which is both stressing as well as uncertain forcing

changes in organization. Due to the dynamism in organizations there occur rapid

technological changes, internationalization and the shrinkage in the product life spans. In

such a fast changing globalized economy, there has been an urge creativity and

innovation than ever before, for competing , growing as well as successfully

57

leading(Gunusluoglu,2009 ; Vazifeh ,2011).

Innovation is a way forward for maintaining a better performance promise of an

enterprise and for more future related successes. Although innovation is an overriding

responsibility, it is mainly a duty of top and middles level managers to think of ways to

motivate the employees to take risks and try innovation (Krause, 2004). It has been

suggested by many researchers that organizational culture is a vital player in affecting the

organizational innovation through creating an innovative environment in the

organizations. Organizational culture is a collective set of values, norms and beliefs that

the employees of the organization share and is exhibited in the overall processes and

goals (Khazanchi, 2007).

There are certain managerial practices which can influence the organizational cultures

these are recruitment and selection of competent employees, planning strategically,

deploying employees, compensation and reward, idea generating and screening support

and teams building for multiple tasks which suit innovative behavior. For some

organizations such as those working in information a computer sectors, innovation

culture is not a feature but a necessity. The availability of innovation cultures work as a

significant factor in high-tech organizations and without innovation they will simply

perish (McGourty, 1996; Angel, 2006). Due to its uncertain and unpredictable nature,

innovation can flourish and be monitored by formal settings in organizations rather it

requires creative problem solving from the employees of the organization, especially in

its initializing and implementing phases (Russell, 1988). Many researchers show that the

innovation is infused by the firms in their cultures especially by the highly technical

58

firms. Not only the creative ideas make the innovation culture but also the successful

implementation of those ideas make the firms culture as one of the most innovative one.

However, the adaptive cultures help in nourishing creativity in ideas generation and

implementation (Dennison, 1996; Lee and Yu, 2004; Flynn and Chatman, 2001). These

organizations need to stimulate the employees through the provision of different kind of

incentives such as providing the employees the requisite resources, support and rewards

besides accepting their feedback. Sensing these encouragements in the creativity projects,

employees offer themselves well to contribute to the innovation. The creativity of these

employees will be enhanced with such support as they start believing in themselves as the

risk aversion related to innovation is minimized (Ramus, 2001; Zhou and Jennier, 2001).

The ready availability of resources will motivate the employees of the organizations to

undertake innovation. Those organizations which lag behind in resources do not normally

do well to provoke the thought processes of the employees and hence do not innovate in

its product developments and processes. There is a feeling that the organization where

open-mindedness prevails and where there is a more terrain working environment, the

employees tend to have great performance in terms of their creativity and innovation. The

characteristics of the organizational environment affect the organizational innovation

capability as the OE is correlated positively to OI (Amabile, 1997; Mumford and

Simonton, 1997).

2.13. Organizational Innovation

It is a difficult task to define Innovation. The newness and novelty aspect is common to

literally all definitions of innovation. Innovation definitions vary across disciplines and

applications. The difficulty remain in drawing a definition of innovation because specific

59

researchers use specific applicability contexts while implementing innovation

(Burgelman and Sayles, 1986).There are various authors who define organizational

innovation variably. A table of these definitions based on how these authors have defined

from various angels is given below;

Authors Theme Contextual Definitions

(Mintzberg,1979;Teece ,1999) Organizational structure Some researchers attribute

the organizational

structure of organizations

and its effect on the

product and technical

process innovation to

ORGANIZATIONAL

INNOVATION

( Hannan and Freeman,1984 ;

Levy and Merry,1986)

Organizational change

from inertia

This school of thought

associates the

organizational innovation

to the organizational

change and development.

The model of how

organizational change

occurs and the level of

organizational changes

60

from evolutionary to

revolutionary type.

The underpinning concept

is to know the resistance of

organizations to change

how organizational comes

out of an inertial frame of

mind to adapt the

changing environments

and technologies.

(Duncan and Weiss,1979 ;

Amabile,1988)

Organizational Innovation

starts from within small

portions of Organization.

Organizational creativity

There are other

researchers who have

attributed the emergence

of organizational

innovation at the micro

level within organization

and to organizational

creativity.

Damanpour,1987 Newness in managerial

Practices

Organizational Innovation

is the utilization of new

managerial practices and

61

working concepts.

Whenorganizational

innovation is seen to be the

implementation of

concepts new to the

organizations, it also

indicates how the

organizational practices

diffuse intra-firm.

(Coriat,2001 ; Wengel et

al.,2000)

Organizational Innovation

can be a change in the

Structure or Procedures of

organization.

The structural

organizational innovation

encompasses the change

from organizational

functional structures to

customer orientation,

product orientation,

segmentation and

separating business

portfolios.

Procedural

organizational innovation

means the implementation

62

of new ideas and

operations in the daily

routine procedures and

processes of the

organization. This will

help speed up the

production and/or improve

the quality of the products.

Pleschak and Sabich,1996 Structural and procedural

redesign and

improvement

The redesign of the

structure and procedures

of the firm to bring

improvement to the firm is

called organizational

innovation

Mikl-Horke,2004 New practices as well

new philosophies diffused

to Organizations.

Organizational innovation

can signify to new

practices, new principles,

new managerial

philosophies, changed

organization designs and

63

advanced theories of

leadership. However,

diffusion of managerial

philosophy is perfectly

different from

organizational design or

practice.

Oslo Manual, OCDE,2005 Applying new methods

and designing new

networks

Organizational Innovation

is the incorporation of new

methods in the procedures

and routines of the firm,

the delegation of authority

and decision making and

establishing new networks

with the outside

organization.

Tigre,2006 Structural changes in

overall departments of

organizations in order to

take advantage of

technological

innovations.

Organizational Innovation

is that type of innovation

which happens when there

occurs a change in the

managerial structure of the

firm between different

wings of the firms in line

64

with the employee’s

specialties, the firm’s

relationship with its

customers and suppliers

and the different stratifies

that they own while

organizing various

business processes. In a

nutshell, it’s the type of

innovation which is to fit

in the context of the

organization in order to

exploit for technological

innovations.

Pettigrew,2003 Changing processes,

structures and boundaries.

The changes in the process

of organizations like inter

firm interactions, an

integrated information

technology, the structural

change like

decentralization and

delegation of authority, as

well as the boundary

65

changing strategies

adoption like alliances and

outsourcing are the key

hallmarks of innovative

organizations.

Utterback,1994;Dougherty

and Hardy,1996

New competition, adapt

technology, Expansion in

Market.

Organizational innovation

is referred to as the

application of mechanism

to adapt to the ever

changing competition,

advancement in technology

and expansion in market

shares by introducing new

products, techniques as

well as system.

2.13.1. Operational definition of organizational innovation for the current study

For this study in light of the above mentioned literature, organizational innovation is

defined as “Organizational innovation is the change in the structure from an inertial

66

state through Creativity within small portions of organization, bringing newness in the

managerial practices and procedures based on new philosophies diffused, while new

methods are applied to design new networks, adopting new technologies to meet

competition and market expansion for growth and competitive advantage.”

2.14 The Technological, Organizational, and Environmental Factors Effecting SMEs

An enterprise can only survive if it adopts the capability of technological innovation.

Technological (factor) transfer or sharing, comparing the compatibility of existing and

new technologies, the paradigm of technology and cumulative nature of technology will

have a strong impact on the technological innovation. Beside, those firms which have

historical background in the applying or adopting technologies have higher potential in

technological innovation. Hence explicitness and accumulation of technology has an

impact on firm innovation(Lin, 2006).

Some researchers of organizational innovation have found that there are certain intra-

organizational factors which are responsible for the adoption of innovation in the

enterprises. Among these factors are structure, climate, culture and encouragement to

innovation, Managerial practices and skills, informal interaction of employees, the

leadership behavior, educated and skilled human capital and availability of resources are

the key organizational players for innovation (Ambile, 1988, Kimberly &Evanisko, 1981;

Tornatzky& Fleischer, 1990).

The external environment where the enterprise operates has also an important impact on

the Innovation capacity of the firm. The higher the instabilities in the environment, the

67

more will be the innovation appeal. Similarly, more uncertain environments will

positively affect the organizational structure and innovation. The government role, be that

is regulatory or supporting, can either encourage or discourage the firm innovation policy.

By providing financial support and relaxation through breaking tax, the governments can

make the environment conducive for innovation adoption whereas it can derail the

innovation strategy of firms by strictly regulating them(Damanpour,1991 ;King and

Anderson,1995 ;Toranatzky and Fleischer , 1990 ; Scupola,2003).

2.15. Determinants of successful organizational Innovation: A review of current Research

The globalized business firms facing sever competitions needs some competitive

advantage for income generation and survival. Organizations find it useful to be dynamic

and iterate the creation and modification of products, processes, services, structures and

policies in the organizations, called organizational innovation. The organization which

adopts the organizational innovation policies fit in itself in competitive advantage

(Zhuang 1995: Nohria and Gulati 1996). An innovation is a useful exercise having

practical applicability, a distinguishing feature of innovation from invention. Innovation

practically contributes to the performance of the enterprise (Gronhung and Kaufman

1988; Padmore, Schetze and Gibson, 1997; Cooper, 1998).When innovation is studied; it

becomes an issue as to decide whether innovation is a process or an outcome. Logically,

the monitoring of innovation progress and stages as organizational process, it signifies a

process. On the other hand, studying the time frame within which a firm is considered to

be innovative makes it more like an end result and outcome. Similarly, the definition of

innovation becomes difficult due to the fact that in an industry what is the timing of the

68

introduction of innovation by an enterprise? To some researchers, enterprise need to be

first mover whereas other say that they must be x% of the adopters enterprises (Rodgers,

1983; Midgley and Dowling, 1993).

The innovation can be classified into three types, the product vs. process innovations, the

incremental vs radical innovation and the technical or technological vs. administrative

innovation (Gopala Krishnan and Damanpour, 1997; Cooper, 1998). Innovation can

complete in two distinct stages; Innovation Generation which includes the idea creation

for finding solutions to problem solving in process and product solution, and Innovation

adoption which includes the acquisition and practical implementation of innovation

(Gopala Krishnan and Damanpour, 1997).

Currently there does not exist a generally agreed upon theory of innovation. As

innovation researchers belong from different academic disciplines, study few dimensions

of innovation and there is inconsistency in the results of these researches, it is practically

impossible to rely on a single innovation theory presently (Wolfe, 1994; Abramson, 1991;

Eve land 1991). An innovation is a useful exercise having practical applicability, a

distinguishing feature of innovation from invention. Innovations practically contribute to

the performance of the enterprise (Gronning and Kaufman 1988; Padmore, Schetze and

Gibson, 1997; Cooper, 1998).

A number of innovation process models have been developed ranging from a very simple

linear one to a process or stage model (Tang, 1998, Cooper, 1998; Padmore et al, 1997).

A stage model as an extended version of linear models which include the feedback loops.

Feedback loop means the information regarding an already completed stage so that

69

corrections and modifications are made for future control (Cummings and Worley 1997;

Millett, 1998; Padmore et al 1998; Tang, 1998).The open system model depicts an

organization as a system that affects the external environment and is also affected by

external environment. This model consists of inputs in the form of raw resources and

knowledge databases, processing/transformations and the outputs such as the products,

services and the ideas. However this system model also includes a feedback loop as an

important component as well. This feedback loop add sustainability to the model as

compare to the previous models as it receives a consistent feedback from external

environment which can be used in future ventures(Briggs,1992).

Damanpour,(1991) found that the effect of organizational innovation are not stable and

are generalizable as supported by other researchers and that the development of a theory

is not far from a possibility. He also found that organization type and the scope of

innovation are primary variables whereas the type of innovation and the stage of adoption

are secondary variables.

An organization is like a sponge in as much as the absorption of knowledge sources and

its further processing towards the output yield is concerned. Like a sponge, organizations

release outputs in accordance to the accumulated knowledge inputs (Fiol, 1996). The

managers running the organization and innovation must know about the different aspects

and contexts of the organizational variables so that the required awareness of the

complexity of innovation properly reached at (Tang, 1998). Innovation is a multi-

dimensional concept and sometimes it is one-dimensional or may be a bi-dimensional.

There are possibly many types and dimensions of innovations if thoroughly studied as in

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the case of multi-dimensional approach (Cooper, 1998). Most of the innovation study

researchers put their weight behind management support to create an innovative culture

and consider this as a determinant which occurs most frequently (Yamin et al, 1999).The

determinants are classified into two main sets as, the management and resource factors

(Spivey et al, 1997).

The performance improvement link with innovation has been discovered only by a

handful number of researchers. This is mainly due to three apparent reasons, 1)

Measuring is difficult ;2)it is difficult to separate those determinants of innovation which

has an effect on performance from other variables ;3)Innovation may not always

necessarily lead to improved performance.

Also, there is the reason that innovation is comparatively new discipline of research.

However some research studies have shown that there is a marked improvement in the

performance of firms and the innovation efforts carried out by that firm. The

measurement of innovation is difficult, however research continues to make the concept

of innovation clear .Therefore, researchers must direct more organizational resources and

attention to make innovation more fruitful(Read,2007).

2.16 Idea Generation in Small Companies

The idea generation for a service development phase is an unstructured and informal

activities(Schulze and Hoegl,2008).Despite the fact that some studies like that of

Iwamura and Jog(1999), backing up the service development innovation as the end result

of some planned processes, there are other people who put their weight behind the

philosophy that idea generation especially in service development is mainly due to the

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random organizational activates carried out by different

stakeholders(Easinwood,1986;Bowers 1988,1989; Sundbo 1997; Dofsma ,2004).

As a matter of fact, in today’s world it is highly unlikely for firms to develop new

products or innovate through a single individual, rather a huge number of people and

stakeholders are interactively involved and often it’s a network end result (Sorensen et

al.2010). The SMEs also do not follow a structured form while generating new product

ideas and innovating. Since almost all SMEs and small firms are led by one individual,

the firms exhibit the personal characteristics of those individual as the outcome of their

personal decisions rather than a structured decision process for innovation and idea

generation. It may also because of the fact that the small firms have an informal and

flexible interactive behavior among its stakeholders than those of the larger

firms(Hoffman,Sweeney,1987; Burns ,1996;Storey and Sykes ,1996; Rothwell,1983).

While it is largely believed that new idea comes from intuitions and suddenness, a deep

insight into the issue reveals that ideas do not come up spontaneously rather are the result

of a complex and a variety of overt and covert processes(Schulz and Hoegl, 2008).Many

new ideas exist because of a dialogue carried out by individuals through their social

interaction in quest of developing new products , rendering new services and carrying on

new organizational processes(Leonard and Sensiper,1998 ;Brown and Duguid,1998 ).

Though the vitality of networking for idea generations is an accepted fact, the importance

of motivated individuals for finding answers to some disparate questions cannot be

ignored. In this context customers and firm own personnel are identified to be important.

However there are researchers who claim that seldom are ideas generated by the

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networking of Customers and Personnel rather innovative ideas are yielded by the overall

internal complex processes of the firms and the activities of the competitors (Edvardson

et al .2000; Sundbo 1997; Easingwood,1986).

As per as the sources of innovative ideas are concerned they may come from many

sources like: Demanding and competent customers, with whom the dialogue brings ideas

as they have the vision to share their experience competently. Meeting the customers

demand can always help the firm’s managers to brainstorm and produce innovative ideas

(Kristensson et al. 2004). Some competent employees of organization can also produce

innovative ideas although their proportion is not considered to be huge because of two

main reasons, their preoccupation with daily operations and their context bounded

information in a rather fragmentary and sketchy manner (Nonaka and Takeuchi,

1995).Sometimes the lack of processes which are idea generating friendly in the firms,

create obstacle in the ways of employees to put forward their suggestions for innovative

services and ideas (Evardsson et al., 2000).

2.17 The external network and collaborations for innovation

Since 1940s as Schumpeter put forward, innovation is one of the core consideration

whenever competitiveness, rent generation and technological and novel organizational

processes are studied. The phenomenon of open innovation leads the window towards the

external business partnering. The ideas of new products and processes come from

business partners, clients and suppliers. The impact of external network size and its

diversity on innovation can also not be ignored. Large firm sizes mean more human

capital which can be used to bring concrete information and unique knowledge base for

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innovation whereas the diversity can bring diversity in the knowledge base, information

and resources.

The impact of network starts playing its role in innovation when the firm gains

knowledge from the partner when it cannot create such knowledge itself. The firm then

translates such theoretical knowledge into practical application, using the practices of

learning frequently assures an increase in the firm innovation output. The Institutional

network partners such as universities provide more technological knowledge base to

partners. The technological knowledge is often tangible as it can be provided as in the

shape of product prototype or computer software. Market knowledge on the contrary

relates to the non-technical market knowledge of customers desirability and current

production processes. The market knowledge base cannot be codified as such. Business

group network operate in a multiple industry, the knowledge base of Business Group

roots itself in diversified knowledge.

The knowledge relatedness also varies across networks .Knowledge relatedness refers to

the overlap or similarity of existing and newly acquired knowledge. Market Partners

possess similar knowledge because of its industry similarity. Due to their common culture

and control system in the same business group, the firms have the gained more pertinent

knowledge across the same business group.

The extent to which the partners will act opportunistically to exploit the opportunities of

the partnering firms is called appropriation. So the firms in the same group may not share

all the information as the information is bone of contention in such case. Having said this,

the firms that are opportunistic, will risk it for not getting all the required information.

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However, Institutional partners are less opportunistic than the market partners as the later

compete for profit maximization in the same industry(Kim & Lui, 2015).

Chapter 3: Conceptual Framework, Research Methods and Design, Analysis Techniques

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3.1. Introduction

The researcher first discusses the conceptual framework followed by the methodology

and the research design for the current research. The researcher intends to justify the

research methodology. The methodology is associated with the research problems,

research questions, research objectives and the review of literature. A multiple case study

was adopted to meet the objectives of this research as it aims theoretical replication

across the case study enterprises and literal replication within pharmaceutical sectors

(Yin, 2006). For this research the researcher selected eight local pharmaceuticals firms.

The construct validity, internal validity, external validity, and reliability issues related

with qualitative methodology are tackled in the data collection process. Two sources of

information were used: Semi-structured interviews and researcher observation. Also in

this chapter the criteria for selecting the pharmaceutical companies are recognized. To

add to this, the criterion for identifying the respondents and their departments is

established based on the literature review and realism of the situation. Furthermore the

criterion of selecting the respondents is also established here; i.e., non-probability

sampling is justified based on this study’s objective, resources available, and the

complexity involved and from the literature review on methodology. A total of eight (8)

pharmaceutical companies from the local origins were selected. The details of some of

these firms were obtained from SMEDA website while some other were selected based

on references from some friends who already work in this field. Among these

pharmaceuticals, some had official websites and official Facebook pages. An effort was

made to conduct three interviews with different managers of these factories. However, in

some of the Pharmaceuticals only two managers were available and willing to participate.

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In doing so, a total of 20 interviews were conducted. The interviews were conducted

following a carefully designed Interview protocol. The chapter provides specific

elaboration of the data collection process; offer a detail note of how the interviews were

transcribed and also how the data was coded.

The last part of this chapter presents a note about emergent themes and which themes

were dropped from the list of the descriptive themes identified from the literature review.

3.2. The Conceptual Framework

As discussed in the literature review, there are special characteristics that either make the

adoption and diffusion of innovation convenient or become barrier in the process. The

entrepreneurial and innovative culture and structure of organizations coupled with the

adequacy of size both in terms of the suitable number of employees and the production

units also help in the process. Beside the structure and culture there are other internal

sources like the vision of the CEO/Director, the internal processes, employees, R&D,

marketing research and external sources like customers, competitors, suppliers,

knowledge sharing, collaborations and networking which play vital role as sources of

innovation for organizations. Another important factor reviewed in the literature which is

important for the diffusion and adoption of organization innovation is the internal and

external conditions. These conditions include the Technological factors like internet

revolution, automated machines, the laboratories, some organizational factors like the

processes, managerial practices, marketing practices and R&D process. However, there

are also some environmental conditions which also play a role either positively or

negatively. These include government regulations, role of agencies like SMEDA and role

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of banks for financing. This leads to the growth of SMEs. The conceptual framework

based on the literature review and keeping the specific needs for the current research

study is given in Figure 3.2 below;

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Figure: Conceptual Framework

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3.3. The Study, the Methodology, and the Methodological Considerations

The research was carried in the local pharmaceutical companies in two clusters of

Khyberpakhtunkhwa, the Hayatabad cluster in Peshawar and the Risalpur cluster in

Nowshera ; shown on maps below.

Industrial Estate Hayatabad: courtesy Google maps

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Risalpur Industrial State, Nowshera: Courtesy Google maps

There were two factors behind selecting these SMEs in the two listed cities; Firstly, the

researcher has access to both these cities alike. Secondly, since all the areas are not the

same as per as the cultures and economic conditions are concerned in Pakistan, the focus

was on these two clusters of these areas which are almost the same as compare to other

industrial clusters in different provinces of Pakistan. Peshawar is one of those cities

which had a drug company at the time of Independence ,Frontier Chemical Works

Peshawar ,only one other in Lahore at that time; the B-1 Drug Company Lahore (Cluster

& Godavari, 2011).

A multiple case study research design was utilized where eight pharmaceuticals were

picked from these two clusters. The qualitative approach for data collection and analysis

is adopted which reflects the Constructionist position on the ontological considerations

and the interpretivist stand on the broader epistemological paradigm (Bryman and Bell,

2009). However, on the practical front the choice of case studies is reasonable as there are

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a total of 62 pharmaceutical firms in this sector as per the available information on the

Pakistan Pharmacist Association (PPA) and SMEDA websites. Most of these

Pharmaceuticals are clustered in the Industrial estate and Small industrial estate Jamrud

Road ,Hayatabad Peshawar(Cluster & Godavari, 2011). The Risalpur cluster is in the

industrial area Risalpur in Nowshera. The units cannot all be visited physically due to the

lack of time and resources. In addition, conducting surveys is not a feasible option. The

reason for this is that the postal service is not that much reliable and delivery of survey

questionnaires cannot be guaranteed. In addition to this, the workload of the employees is

extensive so even if the questionnaire reached them too, they will not be prompted to fill

it out and return it in due course on priority basis. Therefore conducting in person

interviews will ensure the desired response and hence carrying out case studies is the

doable option. In addition to the above, the research problem of this study is such that it

warrants a qualitative case study approach. The current study proposes to study the

Diffusion of organizational Innovation in Small and Medium Enterprises of KPK by

adopting the qualitative research strategy to its investigation. One of the reasons for this

is that most of the studies in this discipline have been carried out in developed countries

like US of America, United Kingdom, and Australia and thus far no such research has

been conducted in Pakistan. Therefore it is the first of its kind in the context of Pakistan

as is shown in the literature review, hence will be significantly influenced by the

Pakistani country context as well as the unique and contrasting contexts of local

Pharmaceuticals as opposed to Multi-National pharmaceuticals. In fact, studying the

diffusion and adoption of innovation in local small and medium enterprises in Pakistan’s

context is one of the main contributions of this research to this field. Hence, Context is of

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vital importance to this study.

As a contrast to a quantitative research, Qualitative study design according to its nature

and assumptions fits well in context based study (Creswell, 2009; Bryman and Bell,

2009; Bryman, 1988). On top of that, the phenomenon of the innovation diffusion and its

relevance with growth of SMEs is to be studied by knowing how the CEOs and the

Management of the SMEs view about it; i.e., the event will be viewed through the eyes of

the people who practice it in their daily routine, which fundamentally leads towards a

qualitative stance in terms of research design (Bryman and Bell, 2009).Furthermore, the

researcher aims to explore the phenomenon from the viewpoint of the individuals and

how they interpret it based on their experiences bounded by the contexts of these local

pharmaceuticals. In addition, the main research question is a How type rather than What,

Where, Who type, where the investigator does not have control over the actual behavioral

events and nor is such a control required, and it focuses on contemporary events.

According to Yin (2009) if the above three points are characteristics of a study then the

case study research design should be applied. A case study is defined as “an empirical

inquiry that investigates a contemporary phenomenon in-depth and with its real-life

context when the boundaries between the context and the phenomenon are not clearly

evident” (Yin, 2003, p.13).

Therefore, taking the above into consideration the research design applied here is to be a

multiple case study design. This methodology has however some problems linked to it.

The qualitative research paradigm generally but more so the case study design are

criticized by some academics; mainly those who advocate a quantitative research

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paradigm over the qualitative paradigm. The qualitative research strategy has been

criticized on the basis of its lack of rigorous systematic procedures which leads to

predisposition of interpreting the data on the part of the investigator, so contaminating the

course of the findings and ultimately the conclusion (Yin, 2009) for which at least some

alternate conclusion maybe available but has been overlooked due to the researchers

preconception (Bryman,1988).Contrary to this, Quantitative research specifies rigorous

statistical procedures to counter such biases. Another problem is that of generalization of

findings to a greater population (Bryman, 1988). Quantitative research through statistical

techniques of sampling from a population where the sample is an unbiased representation

of the greater population allows for the generalization of the findings from the sample to

the population, but qualitative research is criticized for its lack of such techniques. These

problems (others as well) and solutions are discussed as broad categories of problems like

construct validity, internal validity, external validity, and reliability from the perspective

of case studies.

Construct Validity:

Case studies have been criticized as lacking an operational set of procedures for the event

under observation because of this; they are viewed as using prejudiced judgments to

collect data (Yin, 2009). A number of tactics can be used to counter these concerns and to

categorize the correct operational tools and procedures for the contextual study (construct

validity) (Yin, 2009). First this study will establish a sequence of proofs in data collection

process to illustrate the logical flow of the evidence. Secondly, the draft of the responses

transcribed verbatim will be presented to the key respondents for cross checking and

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verification to assess whether it reflects what the intended to convey during their

responses.

Internal Validity:

The significance of internal validity increases many folds when the case study is of

Causal nature, i.e. an explanatory one, in which some events lead to some other events.

In such particular case, instead of observing the event in a direct manner, an inference is

drawn. Internal validity aims at making it sure that causal relationships and inferences

drawn are correct as well as accurate (Yin, 2009). For the current study to keep the

internal validity intact, the researcher will apply: pattern matching and explanation

building.

External Validity:

It is concerned with the generalization of the case study findings and results elsewhere

(Yin, 2009). This issue of generalization arises out of the quantitative measures (such as

surveys) to generalize from a statistical sample to a larger population which the sample

represents. This is the issue that is seemingly an outcome of some confusion as between

the statistical and analytical generalizations. The generalization in quantitative research

is based on the generalization from sample to population but in analytical generalizations

in qualitative studies, the findings of the case studies are generalized in wake of a broader

study which leads the foundation (Yin, 2009). But the issue is that one case study is

seldom enough even to draw analytical generalization. To cope with this situation, the

researcher applied the replication logic, applying the findings to other cases as the current

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study is mainly a multiple case study.

Replication can be of two types in terms of case studies (which forms the basis of

selecting the multiple case studies). Literal replication is where the multiple cases are

chosen on the basis that they predict to show similar results (Yin, 2009). The other is

theoretical replication where the cases (comparative) are chosen on the basis that they are

predicted to show contrasting results but for anticipatable reasons (Yin, 2009). This study

followed the theoretical replication logic where the case study pharmaceuticals are

predicted to provide contrasting results due to the differences in their structures, cultures

and other contextual factors and literal replication logic predicting the similarities within

the case responses.

Reliability

This signifies towards the fact whether the specific procedures and measures are taken

into account for data collection which could be used by any other researcher in similar

cases in future (Yin, 2009). Hence to ensure the reliability, the researcher developed a

case study database as well as following specific case study protocol.

3.4. Case Selection and Design

The cases were selected on the basis of a non-probability sampling called purposive

sampling. This is based on the assumption that one wants to discover, understand, gain

in-sight, therefore one needs to select a sample from which one can learn more(Merriam,

1988) or else, case which have rich information which are of immense importance to the

researcher(Patton,1990). For the current study, the Pharmaceutical sector was selected as

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this is a science based industry and it is presumed that these firms adopt innovations

frequently. The human resources of the pharmaceutical firms are mostly professionally

qualified and possess knowledge and expertise of latest research and technology. A

multiple benefit of the case study research is that it gives results and proofs of more

compelling nature and leads to a more vigorous study (Herriott and Firestone, 1983).

Yin (2009) is also of the opinion that if possible a multiple-case design is preferred over a

single case design and having at least two case studies should be the goal of a researcher

wishing to conduct a case study research. Therefore, this study tends to adopt an eight-

case design; five from the Peshawar cluster and the other three from the Risalpur,

Nowshera clusters of Khyberpakhtunkhwa, Pakistan. The case selection is made on the

theoretical and literal replication logic whereby the aim is to see dissimilarity in

responses regarding the factors for adoption and diffusion of innovation across different

case and similar within the same case. A multiple-case study requires somewhat more

structure to the research design in terms of instruments to be used for data collection

(Yin, 2009). This is because similar procedures have to be followed for the purposes of

investigation in all the cases otherwise there will be little room for comparison of the

multiple cases.

3.4.1. Sources of Information

Mainly two sources of information were utilized for data collection purposes: interviews

and non-participant observation beside the secondary data available on either the official

website or the facebook pages. Interviews were used to explore a phenomenon that we

cannot directly observe and it allows us to enter into the participant’s perspective

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assuming that people can explicitly demonstrate their understanding of the phenomenon

(Patton, 1990). There are three types of interview strategies: structured, semi-structured,

and unstructured. The sequence and exact wording of the structured interviews are

prepared in advance with specific categories for the respondents to choose from. This

allows for easy data analysis and comparison amongst respondents. However, a major

drawback of this type of interview is that it does not allow the respondents viewpoint to

emerge and hence prevents new and valuable information from surfacing. Structured

interviews are mostly used in quantitative studies for testing theories and generalizing

findings from a sample to a population. Unstructured interviews, also known as informal

interviews, are used when the inquirer has an implicit agenda and not a specific explicit

agenda (Yin, 2009). These types of interviews take the form of casual conversations

where the interviewer initiates the conversation by asking a broad question designed to

elicit the respondent’s viewpoint on the subject at hand. The conversation may then take

any direction where further probing is done by the interviewer based on the responses of

the respondent with the aim to extract as much information as possible. Such type of an

interview technique is mainly used in ethnographic or grounded theory studies where the

researcher does not have many preconceived ideas and is used for theory building rather

than theory testing. It is hard to compare across cases with this type of technique due to

its lack of structure.

Semi-structured interviews on the other hand are similar to structured interviews to the

extent that they have explicit agendas and that their questions are prepared and ordered in

advance but with the added benefit that these types of interviews also allow for the

respondents viewpoint to emerge during the interview. The interview is phrased with

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questions asked in open-ended method so that the perspective of the respondents may

come up but there are closed ended questions which gave the interview a formal structure

as so that comparison across cases can be made which will serve the researcher agenda.

To ensure similar procedures are followed for data collection in all the cases, semi-

structured interview technique is to be employed in this study. Semi-structured interviews

lie in the realms of qualitative research designs and still have sufficient structure as

compared to unstructured interviews so that to ensure that consistent instrumentation be

used in both cases (Creswell, 2009). Therefore using semi-structured interviews, the

study tends to exploit the benefits of both realms so as not to reduce the flexibility

associated with qualitative research, which is its main advantage, as well as give structure

to multiple case designs so that consistency of the questionnaire across cases can be

maintained. Hence, the benefit of semi-structured interviews is that it offers flexibility as

well as consistency to data that is to be collected. The interview guide was designed after

the initial themes were identified from the review of literature which led to the initial

conceptual framework. Since an important part of this research study is the type of

Enterprise whether the structure is entrepreneurial or not, and the nature of innovation,

therefore the first part of the interview guide is related to the questions about the history

and time towards evolution, current market place and the organizational processes of the

enterprises. The next section of the interview guide is about the questions related to the

diffusion of Innovation, developing innovations, the rate at which innovations are

diffused as compare to competing firms, the role of collaborations and networking in

Innovation diffusions, knowledge sharing and the values that collaboration can add to

these SMEs. A more interrelated and interconnected section to the previous one, in this

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part of the guide is focused at finding out the factors and sources that are required to the

diffusion and adoption of innovation. In this section emphasis is laid down on the sources

of innovation like the sources of idea generations, the impact of the staff expertise and

education for Innovation, role of customer’s feedback and supplier input in innovation

adoption and diffusion. This Section is followed by the section where the researcher has

tried to find the impact of the conditions on the diffusion of innovation, specifically the

technological, organizational and the environmental conditions, the marketing research

before making an innovative product or the test marketing of innovative products before

its commercialization, the role of government authorities in diffusion of Innovation and

the supportive or consultative role of agencies like SMEDA.

Furthermore, the next section is about the technical as well as the financial barriers that

may counter the SMEs in their effort to innovate. The penultimate section in the guide is

about questions which try to get information from the respondents as to how these

organizations may grow and gain competitive advantage by adopting Innovation. In the

ultimate part of the protocol there is an open section where the respondents are asked to

contribute to the interview guide in any way they felt is missing in the guide.

3.4.2. Interview Data Triangulation

As mentioned previously, interviews are the primary source of information gathering and

data collection. But interview data is not always relied upon and it should be preferably

verified through other sources, if available. This is known as data triangulation, which

serves as a crosscheck for validity of the results and conclusions. Triangulating primary

data through further sources of data gives more insight into a topic beside its function as a

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means of assessing the researcher’s interpretations and conclusions. For this reason the

researcher tried to gather secondary data about the organizations in this study and in this

connection the data was obtained from the firm’s official websites available online like

that of Stanley and Rock pharmaceuticals and about some other organizations from their

official facebook pages like the Hizat Pharmaceuticals. The interviews carried with

managers of different departments in the SMEs themselves triangulate the responses of

other participants. For example if a particular manager of a Pharmaceutical in an SME

holds specific views about a topic and talks about it in his interview and then another

manager of another department also says the same in their interview, then the second

interview serves to support the first interview. Similarly, if the rest of the respondents

hold similar views then they all support the first respondent’s views. On the other hand, if

the other respondent’s views do not support first respondent’s views then it casts a doubt

on the data collected. In addition to this, the non-participant observation is also used for

triangulating the data collected during interviews. If any of the respondents talked about

the process innovation and the technology use, the researcher visited the units where

productions were carried and observed the process. For example the researcher visited the

offices of Rock pharmaceutical and observed that there are computers in each office and

the mode of communication is the internet. Such kinds of observations were made for all

the SMEs and this eventually made part of the analysis.

3.4.3. Selection of Case Study SMEs

While the design stage of the case study research is reached, a decision is made by the

researcher whether to use a single or a multiple cases. The data instruments and the data

collection approaches are finalized. In case where a multiple case approach is decided,

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each case is treated individually. In this case the conclusion of the individual case can be

a part of the sum of the entire study but its individuality remains as it is. Those cases are

more authentic which are carefully selected and have been chosen with care from among

the available tools. This ensures the validity and can differentiate the case in such a way

that a boundary is created around the case.

An important note is to be made that the researcher in case study researches needs to

decide whether uniqueness or routines is to be favored. Also the selections of cases are

meant for the some specific geographic region or any other criterion is to be

followed .However it is important to note that the a repeated look at the research

questions is important as it maintains the focus on the purpose of the study find answers

to the questions put forth. The researcher for the current study followed the selection of

the case study SMEs on the basis of the rationale of studying specific geographic area

and interestingly the uniqueness in routines of these SMEs was a target to identify. So the

cases are selected on basis of specific geographic contexts and those which would offer

rich data about the phenomenon understudy for this research.

3.4.4. Identification of Respondents

There is a trend in the literature on diffusion of Innovation in SMEs that indicates various

internal and external sources of diffusion of innovation. The researcher of this study

focused more on the internal sources and even when the external sources were important

to be studied, they were studied through the lenses of the internal sources. As reviewed in

the literature, the employees of SMEs play a vital role in the adoption and diffusion of

Innovation in their organization. These employees include the top CEOs and Directors,

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the Management including Marketing Managers, technical people like product managers

and manager Research and development (R&D). During the pilot study, it was

experienced that the managers of these SMEs are more professionally qualified than the

business owners. The research observed that in the first two pilot study SMEs, the

Marketing Manager, Product Manager and the General Manager/Director responded

more appropriately in the context and knew the process of adoption and diffusion of

organizational innovation delicately. The researcher identified these professional

managers as the target respondents in next case study organizations.

3.4.5. Interview Protocol

Participants were invited to participate in the research through a preliminary meeting

requesting interviews, phone calls, and emails. The time duration for the interview to be

scheduled with each participant was approximately 60 minutes and prior to the interview,

the participants were provided a letter outlining the purpose of the study (Appendix C)

and a consent form known as a Study participant Release Agreement/information sheet

(Appendix D). In Appendix D, the participants were asked to grant permission to use

their name and company name in the thesis and subsequent publications. The participants

were presented with the following two options: 1. Permission is granted to use my full

name and that of the organization in the thesis and subsequent publications 2. Permission

is granted to use an alias only so as to disguise my name and that of the university in the

thesis and subsequent publication contains the interview guide. The same interview guide

for all the respondents/managers of different departments was served.

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3.5. Data Analysis Methods

Data analysis in qualitative research asks for some creativity from the researchers and

then categorizing the same in some meaningful sequence(Arnaout, 2015). At first all the

interviews were transcribed. The transcription was done according to how the interviews

were recorded and the order of the questions and answers were transcribed as they were

in the individual interviews. No rearrangement was done in this regard. Then I wrote up

each of the interviews for the individual cases using tables called the tabular summary

technique by Creswell (2009) and word tables by Yin (2008) whereas Eiesinhardt and

Graebner (2007) call it a construct table, while all the time allowing the flexibility for

uniqueness as it emerges (Miles and Huberman, 1994). The tables were ordered

according to the themes which emerged during data collection, then during transcription

and then during data analysis. This was an iterative process, going back and forth from

the transcriptions to the tables to the notes taken during data collection, all the time

keeping it open and allowing for the possibility of new themes to emerge during this

process. The themes, both the descriptive and the emerging themes were distinctively

presented in the tables by making the fonts bold and italic. As it is very important that

data is displayed and presented properly and carefully, it is a main avenue towards

qualitative data analysis (Miles and Huberman, 1994). Also during this time if any new

themes emerged in the progressive transcripts then the previously processed interview

transcripts would be reviewed in light of the new themes to see if they existed or not.

This was done for interviews individually as well as for the cases as a whole. The next

step was to do the actual coding. Indeed this is a very important stage for any research.

This was done by identifying repeated ideas and themes by closely reading and rereading

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the interview transcripts. In vivo, descriptive, and grounded coding techniques were

employed to identify different themes, code them and then categorize them by bringing

together similar themes and putting them into similar categories. This step is elaborated

upon in detail later on in the section dedicated to coding. After this, following the

procedure advocated by Miles and Huberman(1994), the researcher created a master

chart; where descriptive data from all the cases are brought together and put in one place

in standard format, based on the themes that emerged during the previous process. This

allows for all the data to be brought together in one place, giving it a broad overview, and

providing a very initial basis for comparison of the data both within and across cases. It

should be noted here that at this stage the partially ordered meta-matrix carries all the

information from all the cases in one place. It provides a huge amount of un-summarized

information making it virtually impossible to draw any meaningful cross-case

conclusions. Therefore all the descriptive data in the master chart had to be condensed to

a form which would allow for drawing cross-thematic and cross-case conclusions. The

procedure for this is discussed in detail in a section dedicated to it later on in the chapter.

From there the researcher started to conduct cross-case analysis where the researcher did

partitioning and clustering of similar data putting these themes into tables. Hence slowly

and gradually the huge descriptive data in the master chart is refined, summarized, and

reduced through partitioning and clustering accompanied with text clarification.

Following this I employed the mixed strategy approach advocated by Miles and

Huberman (1994) which employs both variable-oriented and case-oriented strategies.

Furthermore I symbolized the data in the tables for easy comparison but used the relative

quotes from the respondents during the explanation building. Then I compared the

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individual constructs with each other in non-summarized form as well as summarized

form and began drawing conclusions.

3.6. The 8 Case Study SMEs

The eight case study pharmaceuticals and their geographic location is shown in table 3.1

for their introduction to the readers only as the detail of these are given in next chapter

which is dedicated to within case analysis.

S.No Company Name Address and Geographic

Location

1 Hizat Pharmaceutical Industrial Estate Hayatabad

Peshawar Khyberpakhtunkhwa,

Pakistan

2 Wisdom Pharmaceutical Industrial Estate Hayatabad

Peshawar Khyberpakhtunkhwa,

Pakistan

3 Zinta Pharmaceutical Industrial Estate Hayatabad

Peshawar Khyberpakhtunkhwa,

Pakistan

4 Aries Pharmaceutical Industrial Estate Hayatabad

Peshawar Khyberpakhtunkhwa,

Pakistan

5 Stanley Pharmaceutical Industrial Estate Hayatabad

Peshawar Khyberpakhtunkhwa,

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Pakistan

6 Delta Pharmaceutical Risalpur Industrial Estate,

Nowshera, Khyberpakhtunkhwa,

Pakistan

7 Iceberg Pharmaceutical Risalpur Industrial Estate,

Nowshera, Khyberpakhtunkhwa,

Pakistan

8 Rock pharmaceutical Risalpur Industrial Estate,

Nowshera, Khyberpakhtunkhwa,

Pakistan

Table 3.1 Introduction of the case study SMEs

3.7. Data Coding: Developing Categories and Themes

For any research coding entails a vital stage of data analysis. It is the stage where ideas or

repeated, patterns are identified across the large corpus of unrefined data, which is then

interlinked with the other data and the literature to facilitate the phase of transition

between the raw data and the conceptual analysis on which further conclusions are based.

In general, the data analysis is determined by both the research objectives outlined by the

researcher. This is known as the deductive approach. Furthermore, the iterative readings

and interpretations arise from the raw data directly is known as the inductive approach

(Thomas, 2003). As mentioned before, this is a multiple case study research; therefore

semi-structured interviews were employed as the main data collection tool specifically

for the purpose of establishing a minimal structure across the different cases while at the

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same time for providing a leeway for new themes and ideas to emerge from the raw data

collected in the field. Hence it provides structure and flexibility to the data collection and

analysis of this study. There are two types of themes involved in this study, the

descriptive themes which the researcher identified form the review of the relevant

literature and the interview guide was formed from those themes and the emergent or

grounded themes, which were identified from the thorough and iterative reading and re-

reading of the data and looking for recurring ideas and patterns (Thomas, 2003). It should

however be noted that the descriptive themes from the literature review were in a broader

subject or topic and the content of it as codes came only after the iterative study of the

raw data similar to the case of the grounded themes. The process began, after the data is

gathered and transcribed into a common design and format, by closely reading the raw

data. Following this, specific codes were identified during multiple readings of the raw

data. This is known as in-vivo coding where the actual words and phrases of the

respondents are used to create coding categories (Glaser, 1978). This is also known as

lower level categorizing of codes which are then in turn further categorized into more

summarized codes called the upper level categories or themes (Thomas,2003).

3.7.1. Themes

The researcher went to the field by addressing some broad descriptive categories related

to the structure and culture of organization and the nature of innovation, the

technological, organizational and environmental conditions. It is viewed from both

aspects as whether their role is encouraging in diffusion and adoption of organization

innovation or it bears any potential barriers. These broad areas were included in an

interview protocol with follow up relevant probe sub themes and sub categories. The

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interview protocol was tested during the pilot study and the researcher did not find many

advisable changes after the respondent’s assessment. The pilot study was carried in Hizat

and Wisdom Pharmaceutical of Peshawar cluster where three managers from different

departments were served from each of the two SMEs. The aim of this initial study was to

check the suitability of the themes included in the interview guide to the real context of

the target cases. This interview protocol is attached as Appendix A.

The list of these descriptive themes is represented in table 3.2 below:

S. No Broad Areas/main

Themes

Specific Area/ sub themes

1. Characteristics of Firm Entrepreneurial in culture

Entrepreneurial in structure

Impact of Size

2. Sources/Drivers of

Innovation

Activities and processes of SMEs

Role of Staff and employees

Role of Customers

Role of Competitors Product

Role of Suppliers

Role of R&D research

3 Sources of Idea

generation

Internal Sources

Employees

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Research and Development department

Technical Staff

External sources

Market

Competitors Products

Suppliers input

4. Role of Collaborations in

Innovation Diffusion

Knowledge sharing

Value addition through collaboration and

networking.

5. Role of government Public Agencies role(SMEDA)

Funding and support

Technical and skill support

3.7.2. Additional emergent themes during data collection

In addition to the above descriptive categories, during the data collection and pilot study,

some other themes also emerged from the raw data. These themes which are called the

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emergent themes were then merged in the initial list of descriptive themes for the

collection of data from rest of the respondents in the other case SMEs. The list of these

emergent themes is given below as table 3.3:

S.

No

Emergent Theme Brief Description

1. CEO/ Director Vision The role of CEO or the Director as a key tool in

adoption and diffusion of Innovation in their

respective SMEs.

2. Consultants Hiring of consultants or experts for implementing

modern technology.

3. Niches Serving specific markets or Niches, Specific

Innovations are carried out.

4. Cyclic Nature of

Diffusion of Innovation

Process

The Process of Diffusion and adoption of

Innovation emerged as to be a cyclic process.

5. Collaborations, limited

trust on collaborators

Do collaborators trust fully is important emergent

theme as some knowledge related to sales may not

be shared.

6. Supplier as strategic

partner

The supplier can have as long lasting impact as

that of becoming the strategic partners and with

whom imports can be made.

7. Technological Revolution Technological revolution is reported as an

emergent theme for the adoption and diffusion of

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Innovation in SMEs.

8. Hierarchy; a barrier The structure of SME can be barrier if it has a

strict formal hierarchy.

9. Role of Government Role of Government as a barrier if its concern

ministries follow strict and long bureaucratic

norms.

3.8. Condensing the Data

During the first step, the data collected mainly through the semi structure interviews after

its description offered a huge amount and as such was hard to give some meaningful

directions for analysis. All individual interviews were transcribed and kept in the same

head for the same SME and in separate heads for other SME. The next step was to make

it easy so that the researcher could easily identify the responses about the main themes as

well as that of the emergent grounded themes. For this purpose, the interviews for each

firm which included different number of respondents were tabulated in a standard table.

The database/file used for these was titled tabulated data. It also provides a huge amount

of un-summarized information making it virtually impossible for making the analysis

easy. So after studying repetitively, the researcher changed the font size of the themes to

bold in these tables, which made it easy for next step. During, this step, the researcher

took all the bold themes to another standard table and titled it as condensed data, in

which the themes appeared in summarized form, themes were condensed to fewer case

typifying sentences, making sure all the while that the essence of the descriptions were

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preserved in these fewer case typified words and sentences (Miles and Huberman, 1994).

After this, researcher followed the first stage of analysis, the within case analysis. During

this process, the similarities and differences among the responses of all the respondents

were carefully marked and an aggregate of response was created based on how a

particular theme was viewed by how many respondents within the same organization.

The detail of this stage is presented in chapter 4. To do this the descriptive response of

each of the respondents for each of the themes were primarily dichotomized into positive

and negative responses for the purpose of illustrating whether the specific theme is

present or absent, or whether the respondents hold favorable or unfavorable views about

it and whether the response show a strong or weak agreement or disagreement. For the

cross case analysis, the data from the summarized or condensed form was further

condensed into only responses showing whether a specific theme is present strongly,

present, absent or strongly absent or whether the respondents had remained neutral to that

particular theme. This data when brought to the same table, presented a master table

which had the responses of all the participants coded in it. This is attached as Appendix

B.

Chapter 4 Case presentation and within case analysis

In this chapter the researcher introduced and presented all the case study pharmaceuticals.

The profiles pharmaceutical companies were discussed and then followed by a within

case analysis of the descriptive themes that the researcher had conceptualized from the

review of literature. In this Chapter the cases are presented with basic information and

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initial analysis for the subsequent cross case analysis in next chapter. The researcher

analyzed the responses of each respondent against the response of another respondent

from the same case study pharmaceutical. In this way all the descriptive themes were

analyzed. The triangulation of within case data was done on the basis of comparing the

responses of respondents as well as the researcher observation and the secondary data

sources like the official websites, the official facebook pages and other pamphlets

available from the case study pharmaceutical. During the interview process the researcher

also came up with some emergent themes which were also noted and discussed in the

next interviews in the same case or the other cases which were interviewed later. There

were mainly two themes which most of the respondents felt are either repetitive or

irrelevant. At the end of each case, the researcher has drawn a conclusion about the

agreement or disagreement of the respondents in the same case and also has shared the

observation made during this process.

Case 1: Hizat Pharmaceuticals

I. Profile of the case

Hizat Pharmaceutical is a private funded local pharmaceutical which was formed in

1992 and there were not many pharmaceuticals companies in Hayatabad, Peshawar. So it

is one of the pioneer enterprises in this sector. At that time there were hardly 3 or 4

pharmaceuticals so the infrastructure was not quite a sophisticated one. Hizat

pharmaceuticals started its operation at low scale but gradually increased production as

their infrastructure developed. Currently, there are different divisions operating in Hizat.

At the time of Hizat establishment, there were few pharmaceuticals in the Peshawar

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cluster of Khyberpakhtunkhwa. A marketer himself, the founding father was inspired by

the manufacturing units in Karachi to come to the practical production and hence set this

pharmaceutical here. Hizat started with 10 different syrups initially but with the passage

of time, the number of products increased to 140. This included a dry syrup section,

ointment and cream section as well as a capsule section. Recently the Nutraceuticals

division is added as well. The building of Hizat is developed and now it looked as a

sophisticated infrastructure. Now there are different parts like the production area, the

laboratories which test the products after production. This SME has added different

departments and divisions gradually.

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

The researcher asked questions to find out the type of Enterprise and the Nature of

Innovation in the first section so that a foundation for the other important variables is

established. The semi-structured questions were asked from the respondents and their

responses were heard without interruptions until it became inevitable. The themes are as

follow:

a. Entrepreneurship and Innovation in Culture and Structure

The attributes like Entrepreneurship and Innovation in culture and structure are important

for adoption and diffusion of organizational innovation of firms. The Hizat

pharmaceutical is structurally and culturally Entrepreneurial and Innovative. When asked

by the researcher whether your SME structurally Innovative and has an Entrepreneurial

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culture, one Manager responded like this;

Yes it is. If you are asking about the

organizational structure and culture, it is

very Innovative and Entrepreneurial in

nature. Risk taking is always associated

with our business as there is no certainty of

whether the steps taken will be successful or

not. As I said we have worked on around

140 products in our SME. Some of them

click but not all of them are active now.

Some of them have become obsolete and are

no more functional, so it is a risk taking

business in itself.

Since it’s a science based industry,

Innovation in medicines, new developments,

new are inevitable so we have to update

our system and ourselves. We have to

respond to the demand of the time. In this

connection we also keep an eye on other big

multinational companies how they launch

their products. As they are the ones who

head in production of new products,

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research based products and we also update

ourselves from that angle. We then apply for

those products in the concern ministry in

Islamabad, Pakistan for getting the

innovative products registered.

As I said there is always progress and

development in this sector like generations

of new antibiotics , new generation of

analgesic and pain killers always come and

doctors demand those products which have

less side effects and more good affects. So

we have to be more innovative if we don’t

want to have fewer shares the market.

When asked the same question the manager of another department responded with more

conviction and enthusiasm as follows;

Yes why not. Our SME is working in

pharmaceutical sector. There you need to be

innovative as there comes new molecules

and you have to adopt them. However, it’s

not that whatever comes in our heart and

mind, we would do that. The thing is that

when new molecules come, we apply for

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their registration, when we get permission

from the ministry, then we incorporate the

production. But we do carry on innovations

and new product launching. Sometimes, we

launch drugs which get outdated early but

we have to take these risks and be proactive

to keep pace with the market.

This SME is entrepreneurial and it developed gradually as it added various new

departments and product lines with the passage of time. One of a senior manager of Hizat

puts the progress in structure in this way;

During its early time it was a small firm but

gradually it evolved to this one. The

cosmetic side is now replaced by

nutraceuticals and we can say that this SME

has developed sufficiently since 1990s.

So the response to the question about the entrepreneurship and Innovation in Structure

and Culture, all the three Managers help positive and affirmative views. They

unanimously agreed that there is a striving for development and that their History shows

their Entrepreneurial and Innovative culture as how it evolved from being a single Unit to

multi-department SME.

The researcher also observed that there was an old and small unit in the middle of the

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organization where they had started this SME and now they have evolved into several

departments and sections.

b. Size of the SME and Innovation

Size of SME is another important theme studied in the literature. The size of SME and its

linkage with the diffusion and adoption of innovation has different results in different

studies. Some studies show that size of SME both with respect to the number of

employees as well as number unit for manufacturing and production is very important.

Still other studies suggest that there is not a very huge impact of the size on innovation.

To a question as how the size of your firm matters in Innovation, one Manager of Hizat

Pharma responded like this;

Size of the SME does not really matter. The

building and the number of employees does

not make difference. It is about the facilities

and the equipment availability. We have four

five managers and they always come with

new ideas, the marketing manager can

always come up with ideas and there are

employees inside the SME who can bring

new ideas. So the number does not really

matter, as it is more about the quality and

not the quantity.

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However, contrary to the low level of importance that this manager and the general

manager gave to the Size of SME because of the fact that they believe that facilities,

equipment and quality of the employees are important than their number, another Manger

has some other views and he thinks that Size is important;

If we talk about infrastructure, we can say

that the building was not built with some

plan. As I said that first there was only one

block. Then with earning and investing more

capital we did build some other blocks. So

we can say that the flow of the building is

not that much and hence can be a barrier to

the innovative processes in organization. If

we talk about number of employees, we can

say that since there is more market demand,

we can increase the number of employees

and as such it is required too. However, I

may say that the employees that we already

have are well equipped and make the

process of this organization more

innovative.

The response of this manager outlines an important theme which we did not study in

literature and as such can be termed as Grounded theme. This manager said that the

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organization needs to make the building with proper planning as it has a positive

relationship with the smooth running of organizational processes in an innovative

manner.

c. Organization Processes and Innovation

The processes of organization in all its departments and sections make it either innovation

friendly or inertial. The responding managers of Hizat pharmaceutical agreed strongly

and unanimously that the processes make the SME innovative. One manager responded

to the question, do you believe that the processes of your organization make it innovative

in this way;

Yes it depends upon the processes of the

organizations to make it innovative or

otherwise. Largely depends upon the

management as to how they utilize the

potential of the employees. Like for example

there are various divisions, there can be

account section, there is marketing section,

there is HR section and there is technical

staff. SO it depends on the overall structure

of the organization and its Management as

how they take ideas from the employees and

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from the market. How they utilize and

channelize it then to be more innovative as

per as the processes are concerned.

Similarly the Quality Control Manager also responded in agreement like this;

Yes, we do have automatic machinery and

state of the art laboratories. This makes it

convenient for the trained staff to carry out

the activities as burden is lessened on them.

So we can say that our processes which are

carried out through the latest technology

are innovative.

While the General Manager also associated the processes of the organization more to the

latest technology and the adaptability to it for carrying the processes in more innovative

ways. His response was like this;

We use new technology for making our

products. We make all the possible

adaptations so that our employees process

the activities in an innovative way.

d. What Makes the SME Innovative?

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In an effort to know the opinion of the Managers as to what they think makes this SME

Innovative, the researcher got response from Marketing Manger in these words;

Our SME is among the very few pioneers

SMEs established in Hayatabad, Peshawar.

Furthermore, currently we are producing

the ointments and creams which no other

pharmaceutical SME does. SO our product

innovation is more robust and frequent as

compare to the other competitors in this

sector. Especially in few products like the

ointments and the creams.

Adding to this, we have pro-technology

organization. We have state of the art

laboratories and equipment/tools that we

utilize. We have quality control department,

we have automatic machines. So in my

opinion this SME is overall an innovative

one.

While the Marketing manager related the Innovative nature more to the historical

entrepreneurial steps of the founding fathers of this SME, the Quality Control Manager

Strongly Agreed that the latest technology and educated staff make the SME innovative.

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The General Manager however made a more elaborate answer enumerating more factors

like the utilization of eBooks and manuals. He responded in this way;

Our processes are new, our technology is

up-to-date and we also take risks as per the

market requirement. We do use internet

technology and we have had our own

website too (although not maintained for

few months now, laughingly!). Also, the

products that we intend to launch are

registered with the ministry and we make

sure that the requirements are at par with

the manuals and e-books available.

As the General Manager also accepted, not maintaining an official Website is a little bit

of question mark as to how the SME will share the information with the target audience

in the market; the researcher was shown the official facebook page for the said purpose.

2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

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The marketing manager of Hizat pharmaceutical to the question, How are innovations

developed from infancy to marketing stage, told about the strong impact of the research

of Multinational companies as well as the internal processes like production as efficient

and effective factors for developing innovations from infancy to marketing stage. He

replied like this;

We follow multinational companies as they

first launch the products because they are

good in Research. It is more about the

processes inside the firms regarding the

development of new products. How efficient

your processes are in production of new

products, as to how to produce cost effective

products.

Our focus is on the Ps, how to get a good

quality raw material for our product, how to

set a reasonable price, how to make the

Packaging more attractive. So we look to

the market in this regard too. So these are

the things that we keep in mind while

developing innovative products and

marketing them.

While the marketing manager explained the process of developing of innovation from

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infancy in much detail, the Quality Control Manager strongly related the innovation

developing from infancy to Market , Methods applied to ensure timely production as

this ;

The ideas of new product mainly come from

the market but we do take care to follow the

proper methods and ensure timely

production.

The general Manager also told that the main factor in developing innovation from infancy

is Market, putting it this way;

Based on the marketing research, we try to

know about those products which are

demanded in the market. We then seek

registration for those products.

So all the three respondents in this SME collectively attributed Market itself as the

important factor.

b. Rate of Adoption of Innovation

The rate of adoption of innovation is one important theme that the researcher studied in

the literature which can be related to the diffusion of innovation to the firm. The

responses of the Mangers to the question, how do you rate your SME as one adopting

Innovation comparing to others though affirmed that the SME is fast adopter of any new

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innovation, the level of conviction of their claim varied from each other.

For example the marketing Manger sounded like he is agreed for the rate of adoption is

good but to him it is steady and gradual process as he said;

If we talk about the same industry, we need

to have a gradual shift towards innovation,

if not so, we would not be able to survive.

We have improved our products and

processes gradually but constantly. We have

worked on the promotions of product,

because if you do not do that survival

becomes difficult.

So Alhamd u Lillah, we have added more

sections and thus we have edge over other

SMEs. In this way we launch products and

other SMEs looking at our products and

they then adopt our strategies. As for

example we have added another division,

the Nutraceuticals division and the Herbal

division too. Now the other SMEs around us

are adopting our innovations and are now

adding these strengths to their SMEs as

well.

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The quality control Manager noticing the mandatory regulations of the concerned

ministry as a hindrance, he reiterated the internal system is much cooperative and open to

the adoption of innovation. He answered in these words;

In most cases we do follow the checks and

regulations of the ministry. However, when

we feel the need of brining the change to

our processes, we do change it. As per as

comparing with other SMEs, we certainly

have a culture which is more innovation

friendly and we accept change with open

hands.

However the general manager does not looked fully agreed to the statement of the other

managers in as much as their statement of internal openness, he reiterated that yes, the

firm is adopting innovations but the structure of the firm could be more of a barrier.

According to his statement the structure should be made more decentralized in order to

improve the rate of adoption of innovation. His answer to the question in this regard is

like this;

Yes our SME is the one which adopts the

Innovations more rapidly and quickly. But

there is something that is important as well,

like it depends more on the culture. In a

centralized culture, it’s more to the centre

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that people look for innovation adoption. In

our SME, we also have a centralized system.

So the innovative ideas come to the

Chairman, who adopts it or drops as he

deems appropriate. So for individuals it is

difficult to adopt innovations.

So the overall responses of the managers can be summed up as to agree to the faster rate

of adoption but adding that the rate of adoption can be improved and more individuals

can be involved in to this process.

c. Sharing Knowledge Sources

The researcher while studying the literature found that those firms which share both inter

and intra-organization knowledge sources, they adopt innovation well. The answers to

this theme showed that all the managers unanimously agree to the significance of Sharing

of knowledge sources. The Marketing manager response is transcribed in these words;

Yes, we share ideas like there can be various

issues during the processes and problems

during the processes. Our system is more

developed, we are sound in knowledge and

then if there are new SMEs which go

through any issues like we have already

gone through, we share our knowledge with

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them. So that kind of knowledge is always

shared with each other in the same industry.

Whereas the Marketing Manager related more the sharing of knowledge more to the

nature and knowledge soundness of the Hizat pharmaceutical, the Quality control

Manager associates it to the nature of the overall sector. The crux of his answer is that

due to the nature of the industry not many information can be kept as secret and that is

why it is good to collaborate for knowledge sharing. He reported that;

To be honest in our sector, we cannot

conceal any information and knowledge is

very porous in this way. If we speak about

production, all our production processes are

documented and there are even books

available. We do share with other SMEs

whenever there is some technical guidance

and knowledge sharing required. Similarly,

we also get knowledge from our

collaborators and networks.

The General Manager also strongly agreed by saying;

Yes we do share knowledge sources with

each other. For instance if we visit another

SME, we get ideas from there by getting

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information regarding their processes and

technologies. Also provide similar kind

information and knowledge whenever we

are asked. This helps in mutual innovation

diffusion and adoption.

Overall management seemed to have convinced with the fact that knowledge sharing is

an important factor in benefitting with adoption and diffusion of Innovation.

d. Collaborations and level of mutual trust

Collaboration for adoption and diffusion of innovation was found to be an important

theme from the answers of Managers of Hizat Pharmaceutical but the level of trust on the

collaborators is not fully agreed upon.

To the question, do you have collaboration with any other firm to carry out innovation

and what level do you trust your collaborators, the Marketing Manager said;

Well, we can trust on our sisters companies

fully but not in general, not always fully. We

do seek information from other companies

too, we have kind of brotherly environment

and we share information, collaborating

with each other. Sometimes their whole

processes can face hindrances and they are

in need of our technical staff, we do share

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our technical knowledge, we do share our

knowledge regarding the products. Since

medicine is a very sensitive area, you need

to be concerned about the health. So

sometimes products are developed but the

Quality Control do not pass it. Then we

apply different processes for the production

of the same product, an iterative approach.

So it could be presumed that the marketing Manager views as that the collaborations with

certain SMEs can be fully trusted and not generally all collaborator, however the

importance of collaborating is acknowledged as especially in this sector, medicine since it

is very sensitive field, you cannot experiment without knowing properly what you do.

The quality control manager looks to it this way;

Yes we have collaboration with two other

SMEs working in the same sector. Oh, yes

we do because there is no such harm us that

(after a long breath and huge pause).

General Manager’s response about the collaboration and level of trust was more or less

the same as the quality control manager as he said;

Yes we do collaborate. We trust our

collaborators but not entirely as after all we

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do have commercial purposes to meet too.

For that reason we decide on how much we

can share and how much we need to hold

back.

These responses can substantiate the response of Marketing Manager in a way as all are

agreed about the importance of collaboration and all think that there is certain limit

beyond which one cannot trust collaborators.

e. Value addition through collaboration

When asked, what values do these collaborations add to your innovation, the Marketing

was recorded saying that?

If you have knowledge and if you don’t share

it will not grow. When you share it, it grows

with the passage of time. When I help others

now, maybe they help me in future too. So in

long run it is helpful. So overall the

innovation process is growing in this

industry. I should say that with

collaborations, our SMEs also grow.

Particularly, the knowledge of the

processes, that kind of knowledge is shared.

So it can help improve the processes. In

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terms of sales, the collaborators normally

do not share knowledge.

So he termed it as something invested for future as well and it gives growth to the SME

too. The quality control manager concisely but objectively put it very simple and referred

to collaboration as something which helps both stakeholders, he said in this way;

It does help both sides, in a way its

mutualism.

The general manager attributes collaboration to more of a solution to the technical issues.

He said that;

Collaboration brings some positive

outcomes. For instance if we feel some

problem in our equipment, we seek the help

of our collaborators and this add to our

innovativeness.

So overall the management seemed convinced that Collaboration can help for future

ventures, can benefit all the collaborators as well as can be helpful especially in solving

problems of technical nature.

3. Drivers and sources of Innovation In organization

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

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a. Drivers and Sources of Innovation in SME

The marketing manager response to the question, what are the sources of innovation in

this SME was;

There are various sources of Innovations

from which we get idea, the market trend for

example. There are internal sources like the

employees, the technical staff. What issues

they see and how can they solve them.

When the same question was served to the Quality Control Manager, he was found

saying;

Market, R&D, other SMEs, the employees

are drivers of innovation.

The General Manager responded in this way;

We follow a formal way. We get ideas from

our employees, who are working in the

market. Also the R&D is a main source and

driver of innovation.

So in general there seemed agreement from all three managers that there are internal as

well as external Sources, however all three recorded that the Market itself, R&D

employees and other competitors are the drivers of innovation in this SME.

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b. Idea Sources for new products and services in SME

Where do the new product and service ideas come from is a great point of interest for the

researcher. The researcher tried to reiterate whether the drivers and the idea sources for

new products and services are the same. The researcher probed the managers and the

marketing manager response was this;

The ideas largely come from the Market.

Then there are employees and technical staff

who can always come up with new product

ideas. But mainly the market is the main

driver of innovation.

The quality control Manager replied;

The new product ideas mainly come from

market through our marketing staff.

And the General Manager replied with more conviction about the Market itself as the

source of new product and service ideas in this one line answer;

Market is the major driver of innovations.

So regarding this theme all the three Managers strongly agreed for Market, Marketing

Staff and the employees as major idea sources for new product and services.

c. Knowledge and training level of Staff of the SME

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The researcher tried to know whether the staff has the required knowledge and training

for innovations. The response of the Marketing Manager recorded as;

We have two kinds of employees, the

technical staff and the labors. For instance

if a new employee joins the firm, someone

senior to him/her in the Quality control

department will help in training them. So

they get training from the senior members

and after sometimes, when they reach at a

certain level, they start operating on their

own. So it’s kind of on the job training for

those who have the knowledge but not the

experience and requisite training.

Here it can be inferred that the seniors train on job whenever a new employee is hired to

reach to the required level.

The quality control Manager answer sounded like they are more strongly satisfied for the

education of the technical people and not the labor, however the level of training is

achieved on job, he said;

Yes some of the staff is highly educated and

expert. Some, like the laborers are not as

well educated but they get on job training.

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General Manager responded that;

Most of the times the people do have the

formal educational background like

Pharmacy and Chemistry degree, as these

people sitting with us(Signaling to the young

professional pharmacists). They however do

not have the required experience. When they

join us, we train them in our innovative

organizational culture and then they do get

the required experience as well.

So all the manager strongly agreed that the professional staff has the required level of

education to carry out the processes in innovative way and the little bit of lack in

experience is fulfilled by getting training from the seniors in the department.

d. Customers Input

The researcher tried to know whether the SME takes the input of customers for

innovations in organization. The first response that came from the Marketing Manager

stated;

Actually we are working with channels. We

work with franchises and we do not directly

get in touch with customers, rather the

customers purchase our products from the

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franchises. So these distributors and

franchises tell us about the results of the

products and whether they need any

improvement.

The Quality Control Manager responded;

Yes we do consider our system to be the one

taking feedback and input but we get it

through the doctors and distributors.

And the reply of the General Manager was also not different from the two other

respondents as he said;

Directly, no but indirectly they do give us

ideas through the doctors which our

marketing people take and then share with

us. So those are the ideas of the customers

which we then serve.

They all agreed that the customer input is important but they customers do not give them

input directly rather the franchises, distributors and the doctors provide the reviews of

customers to the SME.

e. Role of Suppliers in innovation diffusion and Adoption

The role of Supplier in the innovation of any organization is a vital factor. The provision

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of quality raw material in time is important in this regard. The responses of the managers

also agreed about the positive role of suppliers. The Marketing manager in his response

told;

Yes, they give ideas. If the processes go on

well, that’s fine, but they do give

suggestions. They tell us if we adopt that

kind of strategy, if we take that type of raw

or product. Our relationship is a long

lasting one with our suppliers and has

prevailed for many years so we do trust

each others. So we work for long terms and

not just for few days. So we work on their

suggestions at times and they work well.

The response of the Marketing Manager can be seen as of some immense vitality as it

gives a grounded theme to the research by identifying that Suppliers can be strategic

partners too.

When asked the same question, the Quality Control Manager also seconded the

marketing manager in this way;

Yes quite frequently we involve them in our

innovation processes.

The general Manager also appreciated the role of suppliers in saying that there are

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concerned more about the provision of good quality raw material; he put it this way;

They do have a substantial say in the

innovation process as they are more

concerned about providing the best raw

material.

f. Screening and evaluating Ideas

When probed about how the ideas are screened an evaluated the marketing manager

said;

There can be many ideas, right. But we do,

we discuss those ideas. From that we reach

to a conclusion. So in light of those

discussions we take some ideas and drop

other. We have to be very selective as there

can be too many ideas.

The Quality control Manger said;

We call our meetings of departments and

screen our ideas in that.

Whereas the general manager responded in more detail saying that;

Ideas are seen with the organizational

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perspective. We see which ideas match our

requirements and our resources. We try to

work on those only. We carry out technical

sessions and meeting of all the relevant

managers.

So all of them unanimously agreed that there are meetings in which all the relevant

departments participate and discuss the feasibilities and technicalities.

g. Central point for new ideas or focal person

The response of the Marketing Manager to this point was;

We have got the executive body as well the

chairman. It is normally in the hands of the

General Manager. So in this regard ideas

can come from many sources but Chairman

is the person to whom they all head and

then they decide what to do with which idea.

The response of the quality control manager and general manager both was that the

chairman or the Chief Executive General Manager was also the same as they said that

Chairman holds the key.

From this substantiates the earlier statement of General Manager about the more

centralized structure of the firm.

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4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

In the literature researcher studied that the marketing research is important for making

adoption and diffusion of innovation more swift. The respondents to the question of

whether the research this SME follow a formal Marketing research all agreed strong. The

Marketing Manager puts it this way;

Yes, we operate in a formal way. There is an

organizational structure. The marketing

people, do marketing research and part of

their job is to research in the market, finding

the gaps if any. They find out the market

requirements/gaps and coordinate as to how

it could be filled.

The quality control manager also agreed that they carry formal marketing research and

the role of marketing people is important in this regard. He said;

There is a formal structure of our SME and

hence a formal marketing research system

as well. The marketing people bring the

ideas from the market and forward it o their

concern managers. They then work it out

with the chairman.

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However the General Manager mentioned the role of the R&D people as well, he was

quoted saying;

Yes, we follow a formal research involving

R&D and marketing people.

All three managers strongly agreed that there is formal marketing research involving the

R&D and the marketing employees who try to figure out the opportunities in the market

and the organization makes the necessary adoptions.

b. Risk Calculation and test marketing

All the three respondents in Hizat Pharmaceutical agree that without proper risk

calculation and test marketing, the innovations of organization cannot be commercialized.

The marketing manager said;

We do calculate risk as we conduct market

research and after it conceptualization, we

just test market our products through

doctors mainly, before making it

commercial.

The quality control manager and the General Manager also agreed that they test market

their innovations before commercializing it.

General Manager said;

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Without proper risk calculation and test

marketing, the chances of innovations to be

successful remain very low.

In this way all the three managers of Hizat Pharmaceuticals agreed that they have proper

test marketing and risk calculations system.

5. Barriers to the Diffusion of Innovation

From the study of the literature, the researcher understood that there are barriers which

affect adoption and diffusion of innovation in the organization. This section will try to

find out whether themes are testified by the respondents in the case of their SME or they

point some additional themes.

a. Lack of expertise

The managers were asked whether they find it difficult to have sufficient expertise while

carrying out specific innovation type. The Marketing Manager asserted in positive as this;

Sometimes we do face it difficult. As I said

there are few divisions .At times the devices

that we use, need modern expertise and

knowledge. Since the machinery is state of

the art, there are times when we have to

have difficulty in carrying out innovations

types. So specifically, it’s the technology that

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we need more expertise in. When we bring

the latest machinery at first, there are

problems, as we lag behind from the world

in this field. So to reach to that level, is

always difficult.

While the Quality Control Manager agreed that there are chances sometimes to lag

behind in some expertise, the general Manager Disagree by saying that he did not see any

such problem.

b. Financial Barriers and role of banks loan

When asked do you find any financial constraints to carry out innovation (socially

sufficient amount of funding required carrying innovation-related research work) and

does your SME get financial aid from banks easily whenever needed? The Marketing

Manger said;

If our SMEs are asked about, we do not

borrow from bank.

The quality control Manager however added that they invest their own money;

We never have applied for any loans. We

invested our own capital thus far.

The General Manager said;

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We do not go for loans from banks. They

might give us loans but the issue is that the

long term benefits are lesser than the

demerits of bank loans.

There seemed to be an agreement that they do not have any such problems for financing

and they refrain from taking bank loans for the hidden strings attached to it.

c. Role of Government and its Agencies Like SMEDA

When the managers were probed to tell the researcher about the role of Government and

specially the SMEDA, their responses showed a clear disagreement about any supportive

role of the government. The Marketing manager said;

No. there is no support from either

government or its agencies like the SMEDA.

They never do any financial support, they

seldom gives ideas though. Government is

never supportive.

The quality control Manager sounded different in as much as he appreciated the advisory

role of SMEDA. He said;

No, did not get any support. We just get

ideas from SMEDA occasionally.

The General Manager also accepted that while the government has not given any

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substantial support SMEDA has helped, he told;

The government does not support in

anyway. However, SMEDA has given

technical support one odd time.

So the researcher analyzed that the government role is not supportive but SMEDA gave

technical and advisory help to this SME.

6. Impact of adoption of innovation on SME growth

The researcher tried to probe how the manager viewed the impact of innovation on the

SME growth. The researcher asked all the respondents the question, do you consider

innovation as any activity which improves competitiveness in your SME and why are the

innovative activities undertaken?

The marketing manager responded that;

Yes, it improves competitiveness; there is

always a need to be innovative so that you

can sustain your market share.

If we need to survive in the market we need

to be innovative. We can only stay in the

market if we innovate, we have to respond to

the market and be dynamic towards the

overall environment otherwise we would not

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survive.

While the quality control manager also agreed by saying;

Yes, it helps in making the SME competitive.

Basically all of it is carried for one sole

objective, to meet the market demands. My

work is related to production and we need

innovation to meet the demands timely.

Ensuring that, we increase sales and

resultantly our profits grow more.

The general manager agreed and answered in rather more technical way;

For instance if we are using new equipment

like using HPLC after we used UV, this

certainly help in bringing better

performance. This helps competitiveness

and improves the growth capability of the

firm. He added that; for growth and survival

SME needs innovation.

III. Conclusion

Hizat pharmaceutical is private local pharmaceutical SME. It is one of the pioneers in the

field because it was established in Hayatabad industrial state at a time when there was

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very small number of pharmaceuticals present. Although started in a small building with

only ten products, the SME has reached to a good market share. Enlightened by the

vision of the founder, who himself was a marketer and had an entrepreneurial personality,

the SME present an entrepreneurial and innovative culture and structure. The size of the

firm is sufficient enough to carry meet the demands of the market in an innovative way.

The organizational processes make this firm innovative and this is possible because of the

innovation potential of the employees, the availability of the state of the art labs and

usage of latest technology for production processes.

Although the pharmaceutical has educated staff, state of the art labs and robust product

innovation, the art of innovation diffusion is gradual. A more likely reason for this is the

more centralized structure. This Pharmaceutical collaborates and share knowledge with

different pharmaceuticals believing that this helps mutually and adds values to the firm.

The knowledge and skill level of the employees is good enough to identify the potential

opportunities in the market. This is largely a market oriented organization and innovates

to meet the current demands of the market. This pharmaceutical believes that the products

of the competitors are sources of innovation ideas and that is why it believes that there is

no serious challenge of idea stealing to them as they also get ideas from others. Hizat

pharmaceutical views the customer input very important in making organization more

innovative but they do not interact with them directly rather get their views from the

sources like doctors, distributors and the franchises. Suppliers also have a very important

role in their organizational innovativeness and they treat suppliers as their “strategic

partners”.

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Although the ideas that come from different sources are discussed in meetings and with

the concerned departments, the lead role in decision making still rests with the chairman

and this centralization sometimes makes the rate of the diffusion of innovation gradual

and steady. The marketing research for innovation adoption and diffusion is mostly

formal which involves the R&D employees and the marketing staff but the management

overall supervise it. The risk taking is calculated and the products get tested before its

commercialization.

There are no such barriers like lack of professional expertise on behalf of the employees

and neither Hizat face any financial problems. This pharmaceutical considers that there is

no support from government to help the firm and SMEDA sometimes just play the

advisory role in some technical issues.

This Pharmaceutical does not consider bank loans as an option even if they are offered by

banks because there are problems later on borrowing from banks. Hizat pharmaceutical

considers the adoption and diffusion of innovation to the firm as their competitive

advantage which helps in increasing the market shares and this adoption of innovation

gives growth to the firm.

Case 2: Wisdom Pharmaceuticals Industrial Estate Hayatabad Peshawar.

I. Profile of the case

Wisdom Pharmaceutical is situated in Hayatabad, Peshawar,Khayberpakhtunkhwa. This

is a young SME started in 2015. Wisdom pharmaceutical started its operations with

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manufacturing of 60 products and has still that number as it has not been given license for

increasing the number by any stretch. As a new firm it has not yet got too many products

and has little market share for this reason. The main process of Wisdom pharmaceutical is

formulation and it has not done much research to carry processes in an innovative way.

This pharmaceutical has not done any patents or any radical innovation. However, it uses

contemporary techniques in marketing and production. The human resources of Wisdom

pharmaceutical are qualified and possess the required experience.

ii. Analysis of Data

1. Type of Enterprise and Nature of innovation

a. Entrepreneurship and Innovation in Culture and Structure

The pharmaceutical is more of a formulation type of SME working in the formulation of

only basic molecules and does not take many risks for this purpose. The response of the

quality control manager in this regard was also not much encouraging;

I think the Culture is encouraging but you

cannot call it entrepreneurial as we do not

take many risks with our products and

processes. The vision of the CEO maters in

this regard and his view is that first we

should focus on the formulation of basic

products to get entry into the market.

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The views of the Marketing Manager also reiterated that the there is not much innovation

in this organization as they tend to focus more on the basic products to penetrate in to the

market.

b. Size of the SME and Innovation

The Director of the SME said that size of the SME is good as per as innovation capacity

on the basis of the number of employees is concerned. He said;

We have got around fifty people. We can

meet the current market demands and new

product development using these resources

so I think the size is sufficient as per as the

current market demands are concerned.

The marketing and quality control managers also agreed that the size of the organization

is sufficient to meet the current market demands but if we have to make this organization

more innovative, we need to human resources. The quality control manager said;

Yes the current market challenges can be

meet with this size and I think if we need to

innovate more, then we would need more

human resources.

The researcher observed that the size of the SME both employees wise as well as units of

production wise was sufficient for the current activities which are not highly innovative.

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c. Organization Processes and Innovation

The director of Wisdom pharmaceutical shares that they carry on contemporary practices

as other firms in this cluster do; he was recorded saying this;

Yes we follow the contemporary techniques

in the marketing and production and all

other routine processes of our organization.

We use the latest machinery as all other

companies are using here in this cluster.

The quality control manager also backed up the equipment and the staff of the

organization. He said;

Yes, I think we have got latest equipments

for our production and our staff has the best

skills. So we can say that we have got

potential for carrying out innovative

processes in our organization.

The Marketing manager also agreed for the organizational processes as being innovative.

He said;

I understand that the processes of the

organization are well in accordance with the

advances of today’s technological work.

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But their overall response to the researcher did not reveal that the processes of this

organization make it innovative. The researcher also observed that there were no properly

arranged office places and the communication system also looked like quite a routine

one. For instance, in the presence of the research, the director needed to consult with the

quality control manager and instead of using any intercom, he sent another staff member

to locate him. The researcher noted this in the diary purposely as he thought that for an

organization to carry the processes in an innovative way these days, there are present

proper communication systems.

d. What Makes the SME Innovative?

To the question that what makes this organization innovative, the Director said;

I think we have been using the same state of

the art lab equipment as most of the modern

Pharmaceuticals would do. We have

qualified staff that is second to none.

The quality Control Manger however said the same thing in a much brief manner;

The staff of our firm and the advance

machinery that we have makes our SME

innovative.

The marketing Manager said that whatever they do in this SME is for making it

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innovative, he said;

I think overall, what we do we are doing it

to make the firm more innovative as we

associate growth with organizational

innovation.

So the director and the managers agreed that the equipment and staff of make the

organizational processes more innovative.

2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

To the question, how are innovations developed from infancy to marketing stage? The

director said;

Our ideas mainly come from market and

then we have our own team who discuss the

ideas. We hold meetings regarding the

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development of new products and processes

in our organization.

The quality control manager also agreed that it all begins from the market but this is a

comprehensive process. He said;

It is basically a comprehensive process

starting with market demand and the

customers. The marketing people bring

those ideas here and we try to focus on

those which are practical and compatible to

our resources.

The marketing manager also declared Market as a starting point stating;

Marketing human force is the one who

comes off with ideas from the market and

then those ideas are discussed with the

director.

So all the respondents in their responses reported that the innovations start from market

and hence market is a starting point.

b. Rate of Adoption of Innovation

When the director was asked, how you rate your SME as one adopting Innovation

comparing to others, he responded that;

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We almost have the same rate with every

other SME here as we follow the same

procedures as themselves.

Although the director claimed that this SME has the same adoption rate as other, the

quality control manager response showed that they need improvement. He Said;

I think the CEO encourages people as to put

forward innovative ideas and we also adopt

innovation. I would say we can still be more

open and our culture can be more

entrepreneurial too.

The marketing manager also said that the organization needs more openness;

I think we can be more open and more

robust than what we are now.

While the director himself responded for good rate of adoption and diffusion of

innovation to the organization, the managers’ response was more to tell that they need

further improvement and openness so that they reach to good rate of adoption of

innovation.

c. Collaborations and level of mutual trust

The Director responded that they do collaborate when needed. He said;

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Yes we do collaborate with each other.

Whenever we need any help or guidance we

can consult with other pharmaceuticals.

The quality control manager also said;

Yes we collaborate with two other firms

which are older and experienced in this

field.

We do trust them and they trust us.

The marketing manager also said that since this is a new organization hence they need to

collaborate. He said;

As a new firm we need to seek support from

other established firms and for that we have

collaboration with Zinta and Hizat

Pharmaceuticals as we have trust in their

capabilities and progress. Yes we do trust

each other in this collaboration.

The responses suggest that Wisdom pharmaceutical tries to collaborate as it is a new

organization and it needs guidance and support from collaborators, so it’s more like for

gaining than giving.

d. Sharing Knowledge Sources

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When asked whether they share knowledge sources, the response of the director was;

Yes we do with few pharmaceuticals with

which we have collaborations.

Also the quality control manager said;

Yes why not, if we have to collaborate, we

need to share knowledge mutually.

And the response of the marketing manager was also in a positive. So the overall

responses of the managers of Wisdom pharmaceuticals about the knowledge sharing were

an agreement.

e. Value addition through collaboration

When asked, what values these collaborations add to your innovation, the director said;

When we are lacking something technical or

physical or logistic, we can put forward our

demands to the collaborating firms. When

they need any support in this regard, we

provide them too. Since we import the raw

material, it also happens at times that we

actually import together with which the

costs of shipping are shared.

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This again substantiates the argument that since Wisdom is a new pharmaceutical, the

collaborations are carried more for getting support from the already established

collaborators. The import with collaborators in this SME is an emergent theme for the

researcher as the researcher did not study it the review of literature and hence had not

added in the interview protocol.

The response of the quality control manager was;

To a certain degree yes! We get technical

and expert support from our collaborators.

And the marketing manager responded in more marketing perspective that;

Yes collaborations add values in production

of innovative product as well making the

marketing and organizational processes

innovative.

They all agreed that there are benefits to their firm from collaboration.

3. Drivers and sources of Innovation In organization

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

a. Drivers and Sources of Innovation in SME

When asked about the drivers and sources of innovation .The director replied;

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Our main source of information beside our

marketing staff and innovative ideas

generation is Internet technology. These

days it’s a huge advantage.

About the drivers of innovation, the quality control manager added;

The main driver’s of innovation in our firm

is the human resources. The skills of the

employees to use the latest technology help

us a great deal.

Whereas the quality control manager associated the skills of the technical employees as

the driving sources, the marketing manager said that the marketing people are the main

sources. He said;

Those employees who are working

especially in the market are the drivers of

innovation.

The researcher concluded that the main sources of innovation in this organization are the

marketing staff, the technical staff and the internet technology.

b. Idea Sources for new products and services in SME

About the idea sources for new products and services, the director said;

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The new product ideas also come from

internet research but the major source is the

market itself.

The quality control manager said;

We get new product and services ideas

through the marketing people and mostly

these people bring practical ideas.

The response of the marketing manager was;

The employees of the organization and the

market are main sources.

So they strongly and unanimously called the market, employees and the internet

technology as the idea sources for new products and services in Wisdom

Pharmaceuticals.

c. Knowledge and training level of Staff of the SME

When asked, do you think that the staff of your firm has the required knowledge and

training for innovation? The director response was;

We have qualified pharmacists as our

production and quality control manager.

The ministry used to ask for one year

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experience, then three years and now they

are asking for ten years experience for these

specialized positions. So a person with this

much experience has got the required

expertise to do any new experiment or

innovation.

The response of the quality control manager was;

Yes, we have got well educated and well

experienced people.

Similarly, the marketing manager also reported that;

The staff of our organization has the

required knowledge, education and the

requisite experience through which they can

carry innovation.

Therefore, the researcher found a strong agreement in the response that the level of

education and training of staff of Wisdom pharmaceutical is of a level which can help in

carrying innovation.

d. Customers Input

All the three respondents were agreed about taking the input of the customers indirectly

from doctors and pharmacy shops. The quality control manager said that they hold the

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key;

Yes, Customers holds the key. The most

important feedback is that of the customers

but in our case we bring the input of

Customer through our marketing staffs who

are informed from the customer input by the

doctors.

e. Role of Suppliers in innovation diffusion and Adoption

The response of director about the role the supplier was a straight and big No; however

the marketing manager justified this because he thinks since they do only basic products,

the raw material of that can be found with any suppliers. He said;

Well we do not make radical innovations

and we take the routine molecules with

which we are working for some time now. So

the role of the suppliers becomes of little

value.

So for Wisdom pharmaceutical the role of Suppliers is not important.

f. Screening and evaluating Ideas

When probed about how the ideas are screened and evaluated the director said;

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We normally get these ideas from the

marketing people. When they put forward

their ideas we check its compatibility to our

system and our organizational resources. We

also check the feasibility against the

regulation of the Ministry which grant

license. However, when the management is

convinced that the product is demanded and

has a value in the market, then we apply for

license.

The answer of the quality control manager was;

In light of recommendations of the

marketing people our Director decides what

the feasibility of the ideas is and how our

firm meets.

The quality control manager response can be attributed to a more centralized system for

evaluation and screening of new ideas.

The marketing manager also affirmed the response of the QCM as;

The director of the firm screens and

evaluates ideas.

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The aggregate of the responses can be summed up like this that there is feedback of

management based on market demands but still the final authority is the Director himself

whether to take or drop any idea.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

The director of wisdom pharmaceutical negated any chance of conducting formal

marketing research by saying;

No we do not carry any formal research. We

just respond to the findings of the marketing

people.

The quality control manager’s answer was not too different, said;

No there is no formal research rather we

rely on our marketing people for gap

identification.

While the marketing manager also told that part of the job of marketing people, they

conduct research but not formally. He said;

As part of the duty, my marketing team tries

to carry research and assess the

environmental conditions.

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So the researcher assumed that overall there is no R&D and the research to adopt

innovations in this organization is not formal.

b. Risk calculation and test marketing

The director of Wisdom pharmaceutical did not respond to this probe question positively

and the researcher found that they do not test market or calculate the risks.

5. Barriers to the Diffusion of Innovation

a. Lack of expertise

To the question whether they find it difficult to have sufficient expertise while carrying

out specific innovation type, the director disagreed by saying;

No we do not have any problems or lack of

expertise. We have been doing the

production of these products for a long time

now and we have somewhat become

specialized in it. The ministry has regulation

regarding these things. We have qualified

pharmacists as our production and quality

control manager. The ministry used to ask

for one year experience, then three years

and now they are asking for ten years

experience for these specialized positions.

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So a person with this much experience has

got the required expertise to do any new

experiment or innovation.

The quality control manager said;

The staff is well educated and they have

good amount of experience to carry on our

processes in an innovative way.

The marketing manager agreed for the qualification part but for the experience he thinks

there is still need of experienced people. So they agreed that the level of education and

experience of the staff is good.

b. Financial barriers and role of banks

The respondents strongly agreed about the financial problems but said that there is no

way they can consider bank loans as these are not on favorable interest rates.

b. Role of Government and its Agencies Like SMEDA

The researcher asked the respondents about the role of the government and agencies like

SMEDA and the response of the director was;

No, they never helped us in anyway.

The quality control manager went an extra yard and saying;

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SMEDA has done nothing as per my

knowledge and the government authorities

have shown no interest whatsoever.

The marketing manager also disagreed for any positive role of government rather term it

as unfriendly. He said;

Government is not business friendly

unfortunately. Also SMEDA which is

originated to help small businesses is also

not doing any favor.

So the story of the government non-friendly role and the inactiveness of SMEDA are

reported by the overall respondents.

6. Impact of adoption of innovation on SME growth

When asked about the impact of adoption of innovation on SME growth and why SMEs

innovate, the reply of the director was;

Yes indeed, it has an overall effect on the

competitiveness because the market share

and the sales can increase accordingly. The

increase in sale can increase the market

share and hence can help in growth of the

SME, which is why innovation can be

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related to growth

Also the quality control manager said;

Adopting innovation is aimed at growth of

the firms and that is the case in our firm too.

We assume that adopting more innovations

mean more market share and more growth.

To be stand out and unique and to maximize

profit, we need our organization to be

innovative.

And the marketing manager also shared that the impact of adoption of innovation has a

role in growth and performance, told;

Adopting innovation is aimed at growth of

the firms and that is the case in our firm too.

We assume that adopting more innovations

mean more market share and more growth.

SMEs innovate to beat competitors and

maximize market share.

So, overall the respondents of Wisdom pharmaceutical agreed that the impact of adoption

of innovation on organization growth and performance is positive and that they try to

innovate to get market share from the competing firms.

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III Conclusion

Wisdom Pharmaceutical is a private pharmaceutical SME established in 2015 and the

ministry issued license for 60 products. The pharmaceutical is in its evolutionary stage

and the culture, although is encouraging but not much innovative. Since the vision of the

director is more to established the basic products working on some basic molecules, the

SME risk taking equals zero and hence cannot be called entrepreneurial. The size of the

organization is enough to meet the current market demands and the education and

training of the existing staff is sufficient to carry organization processes with the help of

latest technology and labs in an innovative way.

The rate of adoption of innovation in the organization is fair and the innovations origin is

basically the market itself. Collaborations and knowledge sharing prevail in this

organization as they look to it more of an opportunity for themselves to get some

technical support from the other established collaborators like Hizat and Zinta

pharmaceutical. The main goal of the collaboration besides the technical support is to

import the raw material together sometimes. This is a new emergent theme for the

researcher. The drivers of innovation and the idea sources of new product and services in

wisdom are the employees, the technical staff who can handle the internet technology and

also the marketing people. The pharmaceutical gets inspiration and ideas from

competitor’s products and has the values the customer’s input too. However, due to a

more centralized structure the power rests with the director whether to drop or try an idea.

The nature of research to identify gaps for innovation is informal and the main

functionaries of this function are the marketing people. While there is no barrier as per as

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the expertise level of the employee is concerned, there however are financial barriers

sometimes. Although banks can help giving loans, due to the heavy rates of interest

Wisdom does not consider this option. Although the government role is somewhat

unfriendly for businesses and SMEDA role is also nominal, Wisdom still believes in

making innovation as it is a source of their growth and increase in market share.

Case 3: Zinta Pharmaceuticals

I. Profile of the case

Zinta Pharmaceutical was established in 2007. This SME is a fast growing innovative

organization and it has established itself very well in the local SMEs. The market

responsiveness and the employees’ standards are the core things in its evolution thus far.

Zinta pharmaceutical use promotional tools also like manufacturing promotional products

as clocks, pens and bags etc which carry the logos of the organization. So Zinta has

evolved accordingly with the passage of time.

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

a. Entrepreneurship and Innovation in Culture and Structure

The culture of Zinta pharmaceutical is entrepreneurial and the management is willing to

take calculated risks. For instance when there is a need to install a new machine or

equipment, the management gives it a try though they know the theoretical knowledge

about it but the practical knowledge is tested by doing. This is how risk taking prevails in

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this organization. There I also a strong market orientation in this SME and the competing

firms are observed closely so that the market opportunities can be explored fully. The fact

is that this organization like all other firms needs innovation to remain in the market. The

product manager related this fact in these words

If you keep looking the competing firms

introducing some molecules before you and

you do work out there comes a time that you

are literally out of the market. So practically

speaking, this organization is bound to be

entrepreneurially proactive as without we

cannot survive.

b. Size of the SME and Innovation

All the interviewed managers agreed that the size of organization is important in carrying

out innovation. Their stance is that if you need to make innovation happen you need an

increased number of technical employees sometimes who can be handy in carrying out

the specific innovations. The response of the quality control manger in this regard was;

Size maters, if we need to launch new

products we, need new molecules for that

and often need to increase the number of

technical staff and need right man for this

type of innovation.

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c. Organization Processes and Innovation

The organizational processes of Zinta pharmaceutical although make the SME

innovative, it needs further improvement. Some of the machinery used is not fully

automatic and cannot give the desired output, the output that can be achieved with the

latest ad state of the art machines. The quality control manager puts it this way;

Like as you can see this machine, this is like

a semi automatic machine, four people can

be involved working on it and can offer

errors too. However there are other

machines operating in the same sector

which are fully automatic and have more

capacity.

However the product manager viewed that there are best brains in the management and

the staff is excellent too. The supply chain management of this organization is more

innovative and the organization utilizes technology too.

d. What Makes the SME Innovative?

The quality control manager of Zinta pharmaceutical did not look convinced when asked

what makes the SME innovative. He said;

There is still room for improvement but then

again there are certain machines that we

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owned here in this pharmaceutical that only

very rare SMEs own in the cluster, besides

one cannot incorporate innovations

simultaneously in all sections but it’s a

steady process and we are doing just about

the same; said the quality control manager

of the firm. On the other hand the marketing

manger associated the innovativeness of the

SME with the human resource practices and

the state of the art laboratory.

So overall, the researcher got the feeling from the responses believe that the organization

still is in evolution phase towards becoming more innovative and the HR practices and

state of the art labs are contributing in this regard.

2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

The quality control manager of Zinta elaborated that;

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There is a huge amount of input involved

from market while the innovations are

developed from infancy to the marketing

stage. In the opinion of the quality control

manager it starts from research of market

for example, most of the products are being

produced keeping in view the specific

market requirements of specific places like

NamakMandi (which is a specific area in

Peshawar) .Instead of this approach when

we carry research and develop innovations

on the basis of that we can have more profit

and sale.

The researcher here presumed that Zinta pharmaceutical does bring

innovations for specific Niches. This is actually an emergent theme

as the researcher did not study it in literature. The product manager

also told the researcher that market is the starting and ending point

of any innovation in this organization. Whereas the marketing

manager came up with a new theme for the researcher saying that

the development of innovation from infancy is somewhat a ‘cyclic’

process.

As he stated;

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It is a cyclic process. As it starts as a result

of the finding of the marketing research on

customers’ feedback, competitors and

market trends and go back to market once

innovation is completed.

So the diagram of how the marketing manager stated regarding the development of

innovation from infancy this will look like this:

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Diagram: Cyclic Process of Innovation Development

b. Rate of Adoption of Innovation

The adoption and diffusion of innovation in Zinta pharmaceutical is comparatively well.

Although they did not adopt quite rapidly but as compare to quite few other firms, the

innovation adoption rate is high. The Product manger said;

There are machines which the other

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Marketing Research

MarketCustomersCompetitor

Market trend

Marketing Staff

SME R&D

Innovationdevelopment

pharmaceuticals do not have in the cluster.

There are machines like the HPLC which is

an automatic machine and some of the other

competing firms do not have it with them.

So the researcher felt that there is an agreement in the respondents that there is adoption

and diffusion of innovation with a faster speed.

c. Sharing Knowledge Sources

Zinta Pharmaceutical has knowledge sources shared with the firms that they have

collaborations with. The knowledge sharing with networks has mutual beneficial effect

on all the participating firms. The quality control manager of Zinta pharmaceutical put it

this way;

Knowledge is an ocean and you need to

share it as it increases. We benefit by

sharing knowledge with our networks.

All the other managers also agreed that they share knowledge with firms that have

collaborations with them.

d. Collaborations and level of mutual trust

Hizat pharmaceutical has established collaborations and they do trust their collaborators

to a certain degree. The quality control manager said that;

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They do not normally trust blindly on

collaborators but there are defined areas

where we do and there are other areas

where we just try to restrict. For instance,

one of the colleagues from another

pharmaceutical came here and he needed

some help in a particular test. I conducted

that test here on our own equipment and the

results were good. Now when he went to his

pharma, he will try it there and will not only

take the accuracy of our equipment and test

for granted.

The marketing manager also suggested that;

They collaborate with two sister

pharmaceutical and they have mutual trust

The product manager also said that they

have collaborations with two other firms

especially where we trust each other in

some technical areas trust and not beyond

that level.

Product manager of Zinta pharmaceutical also suggested that as for as the technical

collaboration is concerned, that is good but we do not actually do trust on collaborations

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in marketing as there occur the commercial clash then. He said;

To certain degree we do trust but not beyond

that. For instance in some technical areas

we seek each other support but in terms of

our sales and customers, we cannot.

So the overall management of Zinta pharmaceutical viewed collaboration as something

that has mutual benefits and that is why they collaborate but they trust collaborating firms

to certain degrees of technical nature and not for marketing or sales.

e. Value addition through collaboration

About a question what values collaborations add, the quality control manager

spontaneously said;

That yes it does add values in terms of

knowledge and experience. He added that

when they find it difficult to run a particular

test due to lack of technical knowledge or

experience, it worth to call upon a

collaborator because it can save a lot of

time by involving an expert of the relevant

field.

The product manager said that the collaborations are important and they can help in

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making solid networks. He viewed that;

We carry collaboration with firms in the

same industry, with academia and with

suppliers.

The marketing Manager of Zinta pharmaceutical also strongly agreed that collaborations

add value.

So overall the three managers strongly agreed that collaborations can add values in terms

of saving time.

3. Drivers and sources of Innovation In organization

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

a. Drivers and Sources of Innovation in SME

The sources of innovation in this organization can be the Internet technology, the experts

on the field. If for instance there is a need of making new products for which new

molecules are required, the quality control manager suggested that the use the Internet

technology as well as seeking support from some expert in the field. While the marketing

manager reported Management of the firm, R&D , Employees working in the market as

the sources of Innovation in the SME, the product manager straight away his weight

behind the internet technology in as driver of innovation. He put it this way;

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I think the technological revolution is the

first and foremost important driver of

organization innovation. As with the advent

of Information technology, nothing has been

difficult and we believe that this has made

research about new molecules easy.

b. Idea Sources for new products and services in SME

When the quality control manager was asked about the idea sources he said that;

Employees with insight, market and

competitors as sources of new products and

services in Zinta pharmaceutical are

sources for new products and services.

The product manager also counted for more or less the same idea sources for new

products and service like Market, Customers, Competitors, Suppliers and Collaborators.

The marketing manager also strongly agrees for Market, Competitors products, R&D.

So, overall the researcher found an agreement in the responses of the respondents on the

value of market, competitors, customers and the R&D employees of the firm as the idea

sources for new product and services.

c. Knowledge and training level of Staff of the SME

The quality control manager said that;

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There are slight issues sometimes regarding

lack of specific experience or training but

that is sorted out through the support of

collaborators.

The product manager also said that;

There can be small issues of technical

nature and the staff may not be able to fix it

up but the management then consults the

collaborators or some expert from the

market to train the staff.

The marketing manager however reported that the knowledge and training of the staff is

sufficient. The researcher presumed from the slight difference in the views of marketing

manager from the other two managers that, the marketing manager is satisfied with the

training and knowledge level of the marketing staff whereas the other two managers look

for more improvement in the technical training and knowledge of the staff.

d. Customers Input

There is proper segmentation and departmentalization in the Zinta pharmaceutical and

every segment and department has to play it role. The quality control manager said that

the marketing department is there and they take feedback from the sale force regarding

the views of the customers about our products. The product manager said that the key to

modern day innovations is the customer; he said it this way;

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Customer has become the central point and

can be termed as a king.

Also the marketing manager strongly agreed with the customers input and he said that in

any sector customer feedback is important and it’s their input which can tell about the

desired changes which prompt innovations in organizations. So the three respondents of

Zinta pharmaceutical strongly agreed that the role of customer in innovation adoption and

diffusion in any organization is of central importance.

e. Role of Suppliers in innovation diffusion and Adoption

There is regular contact with the suppliers regarding the quality of raw material. We do

have good contact with them and all of the internal and external players. The marketing

manager said that

The whole dynamics of the organization

depends on the internal and external players

and the Suppliers are one among them.

f. Screening and evaluating Ideas

When probed about how the ideas are screened and evaluated the quality control manager

said that;

There are different departments and all of

them have their input in the idea screening

and evaluation.

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The product manager responded that;

The managers get ideas themselves and

from their teams. These ideas are then

forwarded either formally or most often

informally to the CEO. The CEO calls a

meeting and decides the future of the ideas

after through discussions with all the

concerned departments or managers.

The marketing manager also said that;

The decision of idea screening lies with the

CEO although sources can be different.

The researcher deduced that there is no board of director meeting for idea screening and

evaluation and the organization CEO is all in all whether to take or to drop any of the

ideas brought to him. The structure thus is more centralized.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

According to the quality control manager of Zinta pharmaceutical, there is a formal

marketing research for identifying the gaps and the opportunities in the market and it is

important that there must be proper formal research, he added further that;

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It is through the formal research that the

right fit between the gaps and the resources

can be established.

The marketing manager added that;

They have predefined roles and plans for all

departments and they identify the gaps

through that.

However, when the researcher asked about the way they carry their formal research, the

respondents refrained as they feel that is one of their business secrets.

b. Risk calculation and test marketing

About the question whether they calculate risk and test market before commercialization.

The quality control manager told;

The researcher that there is a proper

calculation of risk and we do test marketing

too. Without this it is not possible for us to

carry on innovations. The innovations that

Zinta are carrying or has carried thus far

are based on risk calculations otherwise

there will be likely chances of it being

failed.

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5. Barriers to the Diffusion of Innovation

a. Lack of expertise

The researcher found that all the responding managers were strongly disagreed about any

lack of expertise. The quality control manager said that;

He is particularly certain about his team

and that they do not have any problem or

lack of expertise as such.

The product managers also disagreed about any lack of expertise and they said that there

is no such barrier to us in Zinta pharmaceutical.

b. Role of Government and its Agencies Like SMEDA

There is a strong disagreement among the respondents about any possible government

help or support. They unanimously and strongly disagreed about any positive role of

government or any of its subsidiaries in making organization innovative or helping it

becomes innovative. The quality control manager rather with a very balanced view told

that;

SMEDA role as a helping hand is also a

question mark and none of the respondent

said anything noteworthy about SMEDA.

6. Adoption of innovation and SME growth

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a. Why SMEs innovate

The quality control manager believes that their marketing channels are innovatively

operating. The procedures are mostly carried through latest technologies. Internet is

followed as source of communication in and out of the firm. This is all done to make this

organization as stand out and prominent one in the market. The product manager of Zinta

responded more objectively by saying that;

It earns competitive advantage and for

organizations to earn more prolifically, their

processes and their technology has to be

more innovative.

b. Impact of adoption of innovation on SME growth

This is a key theme of the current study. The researcher made an effort to find out the

relationship of SME growth and innovation adoption. Different managers put forward

their views. The quality control managers said that;

There is certainly improvement of

competitiveness in SMEs when they are

organized innovatively. The local market

follows the British and the American

pharmacopeia. When a research is carried

out by the multinational firms due to the

abundant resources they have, it becomes

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difficult for local firms to follow that.

However, we do believe that when these

local organizations are operated

innovatively, they certainly have competitive

advantage over other.

The product manager also agreed that SME grow because of the innovations he said;

The investments that the organizations bring

in their technology and processes are all

directed towards growth of firm.

The marketing manager also agreed that when SME follow any specific innovation, it is

aimed at the growth of the SME.

III. Conclusion

Zinta is a pharmaceutical in Hayatabad Peshawar which is risk taking, proactive and has

an encouraging culture for innovation and entrepreneurship. Zinta is market oriented and

serves the market demands by adopting innovative practices in the organization. Zinta has

got latest machinery is aiming to be more advanced as per as the equipment is concerned.

The responsible managers of Zinta all believe that the size of SME means when it comes

to making the SME more innovative and entrepreneurial , both ways, number of

employees and the units for manufacturing as sometimes to make new products you need

more technical people to make the innovation possible. Although Zinta pharmaceutical is

one where all the machines are not entirely automatic and there is room for further

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improvement but the skills of the people managing the organization, the quality control

and the production departments make its processes innovative. For Zinta, development of

innovation from infancy to marketing stage is like a cyclic process which starts from the

market as it has a market orientation and it ends up carrying the innovations processes or

market. Although it cannot be termed as the either the innovator firm, it is an early

adopter and has machines of high quality which only few firms in the cluster have. Zinta

pharmaceutical has the belief that collaborations add valves like it can save time and can

solve some technical issues it does not trust the collaborators blindly.

Beside the market and the employees of the pharmaceutical itself, among the other

important sources of innovation and ideas generation, Internet is rated very highly by the

managers. They also take inspiration from the products of the competitors and the

training level of the staff members is satisfactory. Along with this, customers are also

important. The marketing research to carry any innovation in the organization is formal

but the final authority is the CEO and hence the structure is more centralized. Although it

feels that the impact of innovation on the growth of organization is immense and that it

gives growth and competitive advantage, the management is disagreed about any positive

or supportive role of Government or its agencies like SMEDA.

Case 4: Aries Pharmaceuticals

I. Profile of the case

Aries Pharmaceuticals is a leading provider of medicines to fight infectious diseases,

cardiovascular and metabolic disorders, pain management and serious mental illness. It

was started in 2004, but historically medicine is the family business of the owners and

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they have been in this business for the last 50 years. Earlier the owners were in marketing

and distribution. They imported from china and few other countries. Now they are in

manufacturing for the past 12 years, during this time we have recorded subsequent

growth and progress. Aries started up with marketing of around 20 products and right it is

manufacturing about 90 products. Another 110 products are in the pipelines for the last

two years and by the mid of this year they will be ready as Aries planning and minutes of

the meetings showed their work towards setting up new sections now.

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

a. Entrepreneurship and Innovation in Culture and Structure

The official website of Aries has its mission statement which reads like this;

“Realizing our mission and excelling as a

company requires us to make every effort to

build a diverse and motivated work force

composed of leaders at all levels across the

organization. To encourage our employees

to achieve their fullest potential, we are

committed to developing their leadership

and professional skills as well as helping

them maintain an appropriate balance

between their personal and professional

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lives. Our culture is entrepreneurial in

which we encourage innovative people”. 

This shows that this firm is willing to motivate the employees for innovative activities

across the organization. The director of Aries explained that our family business was not

manufacturing, it was distribution and marketing. Then he took a step by introducing the

manufacturing side along with the existing marketing and distribution practices. Now

they focus on the supply chain management and have also ventured into production

which they intend to expand as well. So, Aries is a pharmaceutical SME in the Hayatabad

industrial state which offers an entrepreneurial culture and innovative structure for the

employees to excel their skills and maintain a balance between their personal and

professional lives.

b. Size of the SME and Innovation

The director of Aries pharmaceutical is of the opinion that

Size of the organization does play in a

positive way. Innovation starts from small

steps and it always go up. The organization

builds up upon your human resources and

as you go along your production capacity

and your capabilities and the number of

human resources increase and thus the

expansion of the organization always seeks

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innovation in structure and functions.

So to the management of Aries pharmaceutical, the size is also an indication of the

expansion and growth.

c. Organization Processes and Innovation

The CEO of Aries Pharma views to the mission statement as a one important hallmark of

Aries in the sense that it is market driven. He said that

Our processes are market driven and

customer oriented all the times.

The Director of Aries elaborated this point about how the organization processes make it

innovative, he said that a lot of our efforts go into the R&D sector. We also keep

ourselves well informed about the current marketing practices being practiced abroad and

the standards followed therein. This ultimately affects the quality which in the long run

helps you grow your reputation as a quality manufacturer. Furthermore, he revealed that;

We try to incorporate new technologies and

for that we hire consultants. Who come and

tell us about our quality and our production.

This is a new emergent theme for the researcher as the researcher did not study the role of

Consultants in the diffusion of innovation in SMEs.

d. What Makes the SME Innovative?

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The director said that they are not like the run of the middle kind of firm. He rather likes

comparing this organization with the local pharmaceuticals of KPK. Most of them just

manufacture syrups and they sell them, but that’s an old technology. He said that;

We are manufacturing dry injection powder

and have come up with infusions and new

products which are innovative and new

thoughts which are used all over the world.

He added that so far we have had success in these and this has become our strength and

that is why look for new products and provide them to our clients or doctors. The same

were the statements of the CEO and he said

Diversification in the product line is what

can be attributed to the innovativeness of

this pharmaceutical.

The researcher therefore gathered that the management of Aries especially the director

has intentions of working on different product lines and has added diversification which

makes the organization innovative.

2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

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regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

The director of Aries offered a comprehensive response to the question how the

innovations are developed from infancy to marketing stage. He said

It all starts with your vision, if you have a

vision and you have a strong commitment

towards it, because it is always difficult, it is

expensive, it is time-consuming and it is

risky as well. So it all comes up with vision

followed up by your will. If these both are

present, then you start up innovating.

However, nowadays it has become easier to

be innovative with the advent of these

technologies like the internet as it is just a

click away. Sometime you can use the

Google and YouTube to learn innovation as

compared to the old days. Even our elders

in this business used to go to as far as

china, Korea, Germany to see a machine

and how it works and makes a decision .So

it was way too expensive then. But not now

and things have moved on in this regard.

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So the director of Aries related the innovation in firm to the vision of its CEO and the

marketing trends.

The CEO also had nearly the same views and the same is shared on the official website in

this way:

It all depends on the vision of the

organization head, a visionary person

always backs up his team to carry on

innovative activities. I encourage people

coming up with ideas; we do discuss those

ideas in meeting of board of directors. After

the feasibility is checked, the ideas are

conceived accordingly.

So the researcher marked the vision of the CEO as an emergent and important theme

which was not originally included in the interview protocol.

b. Rate of Adoption of Innovation

Aries pharmaceutical is more open to innovation. The director stated that they are unlike

some of the other pharmaceuticals in the cluster who use old technologies and machines.

Most of the firms here follow the same old

practices. Those firms do not take new

technology or machines as they think these

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are too expensive but in our company we

invest in new technology, we invest in

human resources, we do not cut edges from

finances allocated to consultative processes.

The CEO also told that they believe we are more open to innovation diffusion than any

other firm here. He further added that;

We take consultancy, we take new machines

and we invest to get the best human

resources.

The researcher observed that the offices were well furnished and had latest computers in

them. The office places were separated and they did not sound noisy rather looked a

professional outfit. The manufacturing area and the offices were separate from each other

and there was a harmony in the environment of the firm.

c. Sharing Knowledge Sources

The director of Aries said that they share knowledge. He said that;

Sometimes we seek help where others have

new machinery and we need to know about

that. It’s not that you can be stand alone and

still survive, you still have to be connected

no matter how much resources you may

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have. That’s how we share knowledge as

some other day they might need to know

something from us.

So to the management of Aries, it is not quite possible to work in industry alone.

d. Collaborations and level of mutual trust

The Director and CEO of Aries told the researcher that they collaborate and they do trust

the collaborators all but vigilantly. They said;

We have close linkages with Departments of

Pharmacy; have close collaboration with

PCSIR as we sometimes need their expertise

in conducting tests which we otherwise

cannot do here.

So in real term, they have more linkages with academia and have double helix kind of

model as both the organization, University of Peshawar department of Pharmacy and

PCSIR that the respondents mentioned in their answers are research based.

e. Value addition through collaboration

The director and CEO of Aries pharmaceutical agreed that there are benefits from

collaborations and it can help make the organization more efficient. The director said

that;

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Networking and collaborations can make

the production efficient and result into more

value added products.

3. Drivers and sources of Innovation In organization

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

a. Drivers and Sources of Innovation in SME

The Director of Aries pharmaceutical rated the customer feedback and the market very

high as drivers and sources of Innovation in this SME. He said

For me the customer feedback is the

backbone because it is their feedback which

tells you what the customers need from us

and what ideas do they have about these

products which they share with the doctors.

A part from this, we do market research and

data collection to see who sells what and at

what price, in what volume etc. So market

feedback, your employee’s feedback and the

customers are the main sources of

innovation.

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So this SME has a wholesome system of dealing with the market by taking a feedback

from customers and valuing it in one place and conducting research about the products of

the customers though the employees.

b. Idea Sources for new products and services in SME

The Director of Aries pharmaceutical while responding about the idea sources for new

Products and services in his SME explained that;

In Pakistan we are all generic

manufacturers so our products are not

radically innovative. In this sector we

mostly go and visit the United States

pharmacopeia or the British pharmacopeia

or the European pharmacopeia. Also, we

follow those 12 reference countries which

have been nominated by the Drug

Regulatory Authority of Pakistan. We can

easily look into the food and drug

administration (FDA) which grant licenses.

So the researcher could list that in Aries

pharmaceutical the idea sources for new

products and services are US and British

Pharmacopeia and the reference countries

nominated by DRA.

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c. Knowledge and training level of Staff of the SME

The director of Aries agreed that;

The staff members who are with them for a

longer period of time now are well equipped

with the required knowledge and training.

They do possess ideas and skills how to

carry on innovation.

d. Customers Input

Aries pharmaceutical is different from some of the participating cases in taking the input

of customers too. The make use of the internet technology and the social media. As the

Director of Aries put it;

We have the email on our product labels

and also we have our whatsapp, they also

can give us feedback on our official face

book page.

Our marketing people makes it absolutely sure that the product serves the needs and

wants of the customers. In this regard their feedback is crucial, said the CEO.

e. Role of Suppliers in innovation diffusion and Adoption

When asked about the role of the suppliers, the director of Aries agreed that we always

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ask the people who work in the raw materials as to what trends are going on in the

market.

We do ask them which raw material is

purchased in bulk quantity. We take their

input in spotting out the market trends as

well and they believe that the long term

relationship with our suppliers and the

supply chain is vital in diffusion of

innovation in firm.

f. Screening and evaluating Ideas

While elaborating the idea screening and evaluation process, the director of Aries said

that sometimes some ideas are very good but they require huge financial means. So we sit

and our board of directors weighs different options, comparing them to our financial

position.

For all ideas you need to see its economic

position and feasibility. There are ideas

which look very bright but they are not

pragmatic. We do encourage our clients and

all other stakeholders for idea generation

and even criticism is taken positively too.

We know that this can improve us. So the

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board of Directors after the meeting decides

about which molecule and product can be

approved and is feasible.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

When asked whether they have a formal or an informal marketing research, the response

showed that they follow both formal and informal research. The director said;

Most often it’s not the formal research that

we follow; rather the customer’s feedback

sets the tone to find the gaps in the market.

But some other times, we also go for the

marketing research where we feel that the

customer’s feedback is not substantially

sufficient.

b. Risk calculation and test marketing

About the risk calculation and test marketing the director of Aries said that;

They do calculate the risk associated with

the products, they have the R&D and have

the procedures related to the test marketing

as well.

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So in many cases they do test market before going into commercialization of our

products. The practice in Aries is that they go progressively about and introduce little

quantity first and then commercial their products based on the testing of prototype or

sample you can say.

5. Barriers to the Diffusion of Innovation

a. Lack of expertise

The director and CEO said that they have sufficient human resources to carry on our

innovations both in production and processes. The director said that internally they have

the requisite resources and human expertise but externally we are facing problems.

Especially;

External players like the government

agencies make it difficult.

b. Financial barriers

Since Khyberpakhtunkhwa is marked as a red zone, it’s hard to mark financers for

businesses as compared to other parts of the country. But we do not take loans from

banks. Aries director said;

Although financial problems come in our

way when we discuss innovations in our

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organization but we never opt for bank

loans as they become burden then.

c. Role of Government and its Agencies Like SMEDA

There are huge barriers as the government authorities’ keeps you engaged in very

unproductive and long sessions. There always is the red tapes’ of bureaucracy that keeps

you stuck up into pity issues. Looking into the available research, Pakistan is not an

investment friendly country. There is no ease of doing business in Pakistan. At times you

have to keep on struggling even for your smallest right.

Our pharma sector is suffering a lot from

the policies which the governments have

adopted from time to time in the name of

regulation. They mostly are

counterproductive.

However the director also added that, SMEDA has supported partially as part of their up

gradation effort for industrial units. He added;

Today even they [SMEDA Representatives]

were here as they wanted to show this unit

to some of the consultants. They did so as

they feel that the donors have mistrust and

feel that there are no economic activities in

here. Other than this, they can’t have much

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to offer, the research they have is mostly

obsolete and they cannot guide us much in

this regard.

6. Impact of adoption of innovation on SME growth

a. Why SMEs innovate

The director of Aries said that;

This is a core belief that without innovation,

there can’t be any growth.

b. Impact of adoption of innovation on SME growth

The director of Aries said that;

For business growth, you have to be

different, you need be innovative, without

being innovative and you will be like all

other people laying in the same lot, said the

director of Aries.

III. Conclusion

Aries pharmaceutical started production in 2004 but the owners were associated with

medicine field before as well. The culture is entrepreneurial and innovative people get a

motivation in this regard. Aries focus on its R&D activities and the marketing activities

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which help Aries for the long run. A unique attribute of Aries Pharmaceutical is hiring

consultants when they need help in incorporating new technologies. Another hallmark of

Aries pharmaceutical is its focus on making their product line more diversified, making it

more innovative. The CEO of Aries pharmaceutical is visionary and in this way he

encourage employees for innovation activities although innovation is expensive, time

consuming and difficult to execute. Aries pharmaceutical believes in making full use of

technology and has its facebook, whatsapp groups through which they can interact with

the people concerned. Aries also support knowledge sharing and collaborations more so

with the academic institutions. Aries do follow the products of multi-national

pharmaceuticals but they do that in line with the ethical practices. The new product and

service ideas are discussed in the board of director meetings and a proper procedure is

followed. The firm has sufficient human resources to carry its innovations both in

production and in processes. However, there are hurdles to Aries from the public

bureaucracy as it can unnecessarily delay procedures. Although financing can be a

problem sometimes but the bank loans are not considered by Aries as they become

burden. The core belief of Aries pharmaceutical is that without innovation, firm cannot

really grow.

Case 5: Stanley Pharmaceuticals

I. Profile of the case

Stanley Pharmaceuticals was established in 1995 as a private company registered with the

government of Pakistan. This pharmaceutical was established as family enterprise in

1995, one of the first few established in the industrial state Hayatabad, Peshawar. Since

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its establishment, Stanley has been a very dynamic and entrepreneurial firm. It has

produced medicine which is used by patients with trust. Because of the high demands of

the products, Stanley has evolved very well and has established its reputation. Stanley has

established its footings in a very short period of time and has received awards such as the

ISO 9002 certificate back in 2000, an appreciation and motivation at a very young age.

Beside this award, the market has always responded well and in a way Stanley has

produced goods which are highly demanded. For future plans, the management looks

forward to the infrastructure improvement and setting up a new Syrup facility which they

deem to be sufficient to meet the national demands. The quality control laboratory is well

equipped and has all the desired equipments for testing the raw material both in process

and finish products. The Company has a production and Quality Control Staff which is

highly qualified and has 20 to 30 years of experiences in reputed National and multi

National firms.

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

a. Entrepreneurship and Innovation in Culture and Structure

The group product manager of Stanley told that it is a structurally centralized

organization. He explained that;

Our General Manager/Chief Executive

makes most of the decisions which shape the

structure of our organization. However the

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administration does encourage new ideas

and the culture in that regard is

entrepreneurial. The general Manager said

that we promote the innovative culture and

we have been quite supportive in this

regard. Our employees share ideas and are

proactive in this regard, however to

maintain the unity of command, this office

decides about the future of which idea is

workable and which is not.

So it can be inferred that the organizational structure of Stanley is centralized yet it

encourages the staff idea generation and as such the centralized structure does not bother

the innovation processes in the organization too much.

b. Size of the SME and Innovation

The group Manager of Stanley said that the company is scattered over an area of 3 Acres.

It has manufacturing units for Syrups, Drops, Tablets, Dry Syrups and Capsules. So the

size of the company is readily fit for organizational innovation both infrastructure wise as

well as human resources wise. An antibiotic unit is also under the construction and this

will also fill the demands from the market. He added that;

I would not say that these things are leading

to radical innovations but certainly to the

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incremental innovations.

The Management of Stanley viewed size of the firm as something directly associated to

the innovation capacity of the firm.

c. Organization Processes and Innovation

Stanley is operated in a unique and modern way. It has a computer culture and internet

accessibility is to every department and section. Although for record keeping, lettering is

still an option but more than this, for immediate actions follow the official emails and the

official chat rooms for the office bearers. This does not waste much time which is the

case with formal letter writing for communication. The group product manager added that

they are probably the 5th or 6th company as per as sales are concerned. They sell their

products not only in other provinces but also to other countries like Afghanistan. He

further told;

Our Innovative management practices make

us to make good deals with distributors and

thus we can export well.

d. What Makes the SME Innovative?

The group Product Manager and General Manager attributed their innovativeness more to

their internal sources. The group product manager told that;

The managerial practices and the employees’ education and skills make us innovative.

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2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

When asked about the development of innovations from infancy, the group product

manager briefly answered that;

This process starts when the marketing

department brings ideas and we decide if

the ideas are workable then we develop

those innovations.

b. Rate of Adoption of Innovation

The management of Stanley said that they are among the early adopters and they think

that they have the capacity to adopt both human resource wise and space wise.

The group Product Manager said that we are competing well. I think we have done well

in this front so far all though we work in prescription products and not in the specialty

products.

We have the belief that we ought to follow

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ethical procedures and that’s why we do not

go into specialty products as most of them

follow the unethical trends.

However, we follow the most updated channel management procedures. We are

comfortable even with our products like paracetamol. The main focus of Stanley is on

process innovation and organizational innovation than the radical product innovation.

c. Sharing Knowledge Sources

The management of Stanley agreed that they are in touch with academic institutions. In

this regard the product manager held the view that;

They share knowledge sources with

academic institutions like Khyber girls

medical college, the pharmacy faculty and

Rehman Medical Institute.

d. Collaborations and level of mutual trust

Although they do not have collaborations with partners in the industry, they have

collaborations with the medical colleges and universities and academia they do have

links. The group product Manager said in this connection that we have collaboration with

faculty of pharmacy, Khyber Girls medical college and Rehman Medical Complex

people, they all regularly visit us. With other SMEs we do not have any collaboration.

The group product manager said that;

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They believe that they should be

independent from any such firms and should

focus on own strengths. Beside this, they

have long terms collaborations with

suppliers too.

e. Value addition through collaboration

The Group Product Manager of Stanley said that;

Collaboration with academic institutions

such as the medical colleges enhances our

theoretical understanding and broadens our

vision in this regard. It helps mutually as

we benefit from their theoretical knowledge

and they get exposure to our practical

laboratories and equipments. Similarly

collaborations with suppliers help in finding

information about the market situation and

we prepare ourselves accordingly then.

3. Drivers and sources of Innovation In organization

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

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a. Drivers and Sources of Innovation in SME

According to the General Manager of Stanley the drivers and forces of innovation for our

firm are the employee, the market environment and the customers. We also attribute the

collaborators like the academic institutions and the suppliers as the sources of innovation

for ourselves. The Product Manager however looking to another aspect replied that;

We have drivers and players for innovation.

I am also a driver for innovation, so to

speak but we are not like those defined

drivers as are there in Multi-national

companies. Like I cannot say that there is a

specific market research officer. They do

that research but that is not their main job.

So we cannot say that there are specified

roles.

b. Idea Sources for new products and services in SME

The answer of the group product manager Stanley regarding the idea sources for new

products and services was more technical in nature and he tried to explain by putting the

example of a multi-national, he said that;

New product and service ideas come to the

surface through sources like the market

trends, the employees, the customers and the

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internet searches. The idea mainly comes

from market. For instance we have had our

products like Panadol and Paracetamol. A

multi-national company (GSK) produced

panadol forte which was very much

controversial and the results were also not

good. So we believe that these are the main

eye openers and measures. We see the

behavior of the products and then we see

how to work it out.

c. Knowledge and training level of Staff of the SME

We are very satisfied with the level of knowledge and experience of the staff. It’s the

emphasis of our Human Resource Management department to find the right man for the

right job and that is why we are satisfied. Also, since our firm is an established firm, we

also do not have an overwhelming issue of employees switching from Stanley to other

firms.

The quality control laboratory is fully equipped with all the required equipments for

testing of Raw Material, in process and finish products. Stanley has state of the art

machinery for manufacturing of pharmaceutical products. The group product manager

said that;

The production and Quality Control Staff is

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highly qualified having 20-30 years of

experiences in Multinational and National

Companies. There must be employees who

are lesser in education but they do have the

experience and exposure.

d. Customers Input

The customers give us ideas. That may be direct or indirect when the doctors tell us the

feedback of customers .The group product manager reiterated that;

The central point of importance is the

customer and yes we take their input. In

some cases the feedback come from big

customers like the distributors and in some

cases come from doctors who prescribe our

products.

e. Role of Suppliers in innovation diffusion and Adoption

For the management of Stanley, suppliers are important in the process of adoption of

innovation. The group product manager explained this in detail as;

Suppliers hold a vital role and if they are

not supplying the best quality of molecules

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or supply is late, the other competitors can

buy these raw materials before you and can

hence market the product before you. We

believe that the organizational innovation is

possible only by the procurement of high

quality raw material because we believe

that “QUALITY INPUTS RESULT IN

QUALITY OUTPUTS”. Aiming this, we are

taking the highest quality raw material from

quality sources and suppliers based in

countries like USA, Germany, Italy, Japan,

France and UK. So in order to be innovative

you got to have good links with your

suppliers. So it is important to keep good

and long lasting collaborations with

suppliers.

f. Screening and evaluating Ideas

Our organization follow the hierarchy and we normally do not break the protocols hence

when there come ideas to some junior management people, they do not come to this

office rather pass the ideas on to the senior people in their concerned department. They

then bring the ideas forward in meeting which can be screened and evaluated. The group

product manager said that;

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We have a system of idea screening; we get

ideas from different wings. We have 6 area

sales managers. However, we do not get

ideas from junior management level directly.

They give their ideas to immediate seniors

and managers who forward those ideas

then.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

It is kind of mixed approach. We follow the formal as well as the informal approach. The

group product manager said that;

We do research but for that we do not have

designated people around. In our cluster, I

can say that the rest are only manufacturers

but we try our best towards research as

well. That is probably the reason that we

have our operations in the whole Punjab,

interior Sindh and also Quetta.

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b. Risk calculation and test marketing

The Management of Stanley agreed that they do take their test marketing before

commercializing products. The general manager emphasized on the importance of risk

calculations and test marketing as

Without calculating the risks and test

marketing, it is quite unwise to launch

products.

5. Barriers to the Diffusion of Innovation

a. Lack of expertise

The group product manager response when asked whether there is any lack of expertise

in the organization said that;

The staff working in the production section

and the quality control section has an

intensive experience of around 20to 30

years. However, I must say that there must

be employees who are lesser in education

but they do have the experience and

exposure.

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b. Financial Barriers

While responding about financial barriers and the role of banks, the management of

Stanley were found saying that they do not have any such problems. They agreed that;

The banks do give good support and quite

generous in as much as the company profile

is strong but they have not taken any loans

as yet.

c. Role of Government and its Agencies Like SMEDA

The responding product and general managers of Stanley said that;

The governments do not support businesses

in anyway and SMEDA has not yet

performed to the satisfaction of business

fraternity at all.

6. Impact of adoption of innovation on SME growth

a. Why SMEs innovate

The managers of Stanley said that the SMEs do differently with innovations and this

earns them a competitive advantage, differentiating them from other firms. An affirmative

way, the group manager said;

With innovation, we can increase our sales,

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our market share and hence it can improve

and ensure growth.

b. Impact of adoption of innovation on SME growth

A very important part of the current research is to know what impact adoption of

innovation can have on growth of the case study SMEs. The general manager said that;

The SMEs adopt organizational innovation

so that it can grow and maximize its profits.

It helps in giving competitive advantage.

III. Conclusion

Stanley Pharmaceutical is a private family business at Hayatabad industrial estate

established in 1995. Although the structure and hierarchy is more centralized, Stanley has

reached to a high level of reputation in the market and this has been recognized by

awards such as the ISO 9002 certificate back in 2000.The human resources, the

managerial practices and the knowledge and skill level of the employees make Stanley an

innovative pharmaceutical. The firm follows the latest market trends in developing

innovations and adopts organizational and process innovation at a high rate. Instead of

collaborating with firms in the same sector Stanley utilizes it linkages with the academia

and considers the collaborations with medical colleges of more mutual value. However,

Stanley has established long lasting collaborations with suppliers without the cooperation

of whom the innovation in the organization may not be possible for Stanley, as they

provide quality raw material timely. The management of Stanley is agreed for the

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required qualification of the employees but believes a little more could be desired for the

amount of experience for carrying the innovation processes. While customers input plays

an important role in the innovation processes of Stanley, their feedback can either be

direct or indirect through the distributors and doctors. Although ideas generally come

through very formal protocols and only the immediate managers can be given ideas, there

is a proper system of idea screening and evaluation afterward involving the board of

directors. To identify and utilize the market opportunities, Stanley conducts a mix of both

formal and informal research. Even though Stanley is agreed that the government and its

agencies like SMEDA has not supported in anyways, Stanley does not face any barriers

either financial or Expertise. The management of Stanley believes that brining innovation

to the organization helps in differentiating it from competitors and gives competitive

advantage, through increased sales can maximize profits and can increase market share

thus ensuring growth.

Case 6: Delta Pharmaceuticals Risalpur

I. Profile of the case

This pharmaceutical was established in 1995 with the collaboration of the department of

Pharmacy university of Peshawar. This pharmaceutical can be attributed as the pioneer

firm in this cluster as there were no pharmaceuticals from national or regional origin here

but there were multi-national Pharmaceuticals.

Before coming to this sector and this business, the owner and the CEO of Delta

Pharmaceutical was a banker, a credit chief, and had implemented projects successfully

with the SMEs. When the nuclear experiments were planned, the government had the fear

214

that there will be sanctions of different sorts. Most other sanctions could have been

afforded but not the medicine or life saving drugs. At that time, the main contribution in

this sector was the multi-national pharmaceuticals and their percentage was around 80%

while there were lesser pharmaceuticals from national origin.

The CEO of Delta was assigned the task by the provincial government to establish the

pharmaceutical sector in this province where there is no industry; it was a big challenge

though. On top of this, the CEO had worked with other sectors during his work as banker

but not specifically with the pharmaceutical one. The CEO discussed the idea with the

then vice chancellor, university of Peshawar, who was amazed and said, whether these

people will be competent enough to carry on this project! On the permission of the VC,

the CEO contacted the pharmacy department of university of Peshawar and where they

interviewed the ten PhD scholars there in the Department of Pharmacy working there at

that time. While talking to the interviewees, the CEO had developed the Concept that

since they have to carry this project in such a way that they can compete the outside

world, they need to focus and induct those people who have foreign academic

background. Since UK research portfolio in this area was good and USA was far, they

selected two Doctors following a very strict merit; one person who had done PhD from

UK in quality control and another who had done his PhD from university of Karachi. The

CEO did whatever those two PhDs suggested and never refused taking their suggestions.

They visited all the multi nationals through the support of ministry of health accompanied

by two drug officers. They took inspiration from their methods. During this project

design they found that the best area for medicine production is province of KPK as it is

215

temperate. Because the environmental conditions like the humidity, temperature etc

matters in medicine production.

So one of findings of the CEO was that, the expenses of controlling the weather and the

humidity required for a company in Karachi is actually sufficient to set a pharmaceutical

here in KPK.

This is the unique contribution of delta pharmaceutical and the companies that followed

this system, actually gives the country economy around 1 billion PKRs annually. The

demand of Pharmacy graduates has increased substantially and there are many public and

private universities which produce pharmacists annually who are given jobs in this sector

which is comprised of at least 90 functional Pharmaceuticals in the entire province.

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

a. Entrepreneurship and Innovation in Culture and Structure

Entrepreneurship is deeply rooted because this has come out as an organization because

of the entrepreneurial mindset of the CEO. The culture encourages innovative ideas and

the CEO often says in meetings that “idea is money”. This encourages the employees to

bring ideas to the forum openly as they know the values of their ideas.

The CEO himself put it this way that;

We do have an encouraging and

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entrepreneurial culture. I can claim that

almost every unit in this cluster will have

people who worked and got trained with us.

In our culture, I have always followed the

protocols and treated officers and managers

accordingly, sometimes I have been harmed

by over trusting as well but I kept the system

open and I believed in the expertise of these

people. I have in fact invested the entire

money and time on the innovative ideas of

professional people which makes this

culture more entrepreneurial.

b. Size of the SME and Innovation

The size of the SME in terms of its number of employees and the manufacturing units is

an important theme for the current study. The researcher has probed this theme in Delta

pharmaceutical and the response of the CEO was recorded as:

The size of the SME matters no doubt. For

instance, I would not share name but one of

my counterpart in Peshawar opened a unit

in Peshawar and asked me to visit that.

When I visited that unit, I observed that he

had a very big unit area and buildings were

217

also big but the production area was

considerably small. I told him that it like

fitting the stomach of an ant in a big

elephant. So I think overall, the size has to

be according to the demand of the

production.

c. Organization Processes and Innovation

The processes of organization determine whether the particular organization is a

innovative or not. The author probed this theme from the marketing manager and the

CEO. Although the marketing manager told that the processes of their firm are

innovative, the response of the CEO was more explicit and is recorded as;

Our organizational processes are innovative

and we follow the latest patterns in both the

production and processing. Yes off course,

there is innovation everywhere in our SME,

the machines, the formulation, the SOPs.

This is a fact that the pharmaceuticals will

remain till the age of mankind and this

presses and forces Pharmaceuticals to

follow innovation time and again. If I give

you an example of the product innovation in

this organization, we actually converted the

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film coated Brufen to Sugar coated one so

that patients can take it easily. Also, one

main fact about the pharmaceutical industry

is that there has to be proper dissolution of

chemicals in the desired proportions.

d. What Makes the SME Innovative?

To the question as what makes the SME innovative, the CEO of Delta pharmaceutical put

his weight behind the collaborations with academia. He responded as;

The CEO told that they followed the

collaborations with academia and that

helped them in long run. The Marketing

manager of Delta said that the

professionalism of the CEO and the way he

invited academics of high repute to give

their insight has practically helped in

making the firm Innovative.

2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

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a. Developing Innovations from infancy to Marketing stage

The process of innovation development from infancy through its commercialization is a

complex process. The CEO related this process to the partnership of marketing

department and R&D. He responded as;

Ideas come from market and are routed to

the R&D department. After the feasibility is

checked there, ideas are practically

implemented.

b. Rate of Adoption of Innovation

The CEO of Delta believes that the establishment of this pharmaceutical in itself is an

innovation. He associated his survival for 24 years on the basis of innovation.

Had he had not been innovative; he would

not have been able to compete for such a

long time, he further added.

The management of Delta also claimed that we are not adopters rather we are the

innovators. The CEO said that;

We have introduced many products which

are not introduced by any other firm in at

least this very cluster. Our rate of

innovation adoption is high and we are open

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to the ideas that we can see being

implemented in the multinational firms

abroad.

So overall the researcher observed that the cluster was led by Delta and almost all the

other managers from other firms responded positively about the innovativeness of this

firm when asked by the researcher.

c. Sharing Knowledge Sources

The management of Delta pharmaceutical agreed about sharing knowledge sources. Their

claim reflected that mostly they share knowledge sources as this is a pioneer

pharmaceutical in the area. He told;

We do share knowledge. We do tell to the

collaborators regarding the different

innovation in formulation.

d. Collaborations and level of mutual trust

To the questions whether they have collaborations and if there are any, do they trust the

collaborators, they researcher found the response of the CEO as;

Yes we do trust the collaborations entirely

and we are convinced that this helps all the

stake holders in diffusing the innovative

practices. Our pharmacists meet each other

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frequently in this cluster as well as other

clusters in the province and in the country.

We do trust each other in collaborations as

without trusting each other we cannot lead

to successful results.

e. Value addition through collaboration

To the question about the value additions from collaborations, the marketing manager

said that;

Collaborations normally are carried as they

are needed for making successful

innovations. So yes they definitely add

values to the collaborating firms.

The CEO also responded positively and said that;

Collaborations help in many ways, in fact if

I put it this way that it is the collaborations

which trigger innovations, I would not be

wrong. These innovations then curtail your

costs and increase your profits.

3. Drivers and sources of Innovation in organization

In this section the researcher tried to find out the various sources and drivers of

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innovation in organization. Different questions probed this theme as under:

a. Drivers and Sources of Innovation in SME

While the marketing manager said that the vision of the CEO, the R&D, the employees

are the sources of innovation the CEO said that;

The main sources and drivers of innovation

in our SME are the market itself and our

collaborations with the educational

institutes.

b. Idea Sources for new products and services in SME

The management of delta said that for new products and services there are many sources

which can be used for ideas generation but the major source without any doubt is Market

itself. He said that;

We can say the customers, the suppliers and

even the competitors are key players.

c. Knowledge and training level of Staff of the SME

The focus of the management is to find people who are well educated in the relevant field

as well as have the required training. In some cases the management provides them the

required training. It’s a perpetual process. He emphasized on the fact that;

Unless you have the required knowledge

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and training, you cannot survive. This is

why I believe that we have well educated

staff and we train them accordingly.

d. Challenges of Idea stealing

To the question whether idea stealing is a challenge the CEO said that I am hundred

percent agreed to this question. To add to this, I must say that if you have something

precious with you, you are supposed to have the worry of it being stolen.

To be honest in this field, if there are

stealers, this means that you have to take

extra care, in this sense, you create more

and more innovation in your organization,

more frequently

e. Inspiration from Competitors Products

The extant literature shows that competitor’s products are important inspirations for

innovations. The CEO of Delta pharmaceutical said that they do take ideas from market.

He said;

Before and during the marketing research

process, we do consider the products of our

competitors.

f. Customers Input

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Customers input are an important factor in innovation. All the innovations of the firm

make aims customer satisfaction. The CEO of Delta pharmaceutical agreed that

customers input is necessary and he put it this way;

The real origin of idea generation is the

customer.

g. Role of Suppliers in innovation diffusion and Adoption

The role of supplier is also important as reviewed in the extant literature. The quality raw

material makes their role important for most of the product innovations. The marketing

manager of Delta said that;

If we follow the demand and the supply

formula, the process starts from suppliers

and ends with customers.

Suppliers Producers Customer

h. Screening and evaluating Ideas

When probed about how the ideas are screened and evaluated the CEO and the

marketing manager said that the ideas are discussed by the board of directors once they

come from the different sources. The CEO said that;

If your idea is sellable, that is something

that will help your organization. The board

of directors decides what to take and what

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to leave apart.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

The marketing and R&D department of our firm carry on research to identify the

potential gap in the market and try to respond accordingly. The CEO explained this as;

The demand of the national and regional

pharmaceuticals arouse actually from the

fact that we needed to get rid of the multi-

national companies. This warrants a

thorough research process so the marketing

and R&D of our firm take this

responsibility.

b. Risk calculation and test marketing

We do test marketing and the samples are given to doctors and practitioners. It’s their

feedback that guides us to launch the products commercially or to make certain changes.

The CEO added objectively that;

It is very important. You have to calculate

the risks before commercializing your

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innovative products.

5. Barriers to the Diffusion of Innovation

a. Lack of expertise

The marketing manager and the CEO of Delta disagreed about any lack of expertise for

innovation.

We keep ourselves in line with the required

expertise for spreading the innovation

throughout this organization.

They claimed that their marketing process is unique and innovative; production is

innovative as well the management practices are innovative.

b. Financial Barriers

A lot of the times we have the problems of financings. We never took any loan from any

bank. We believe in research oriented innovation in this organization. The fact is that;

Banks do not give loans to everyone, they

grant loans to those firms which are

somewhat attached to the mafia which is the

biggest barrier in way of industrialization.

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c. Role of Government and its Agencies Like SMEDA

The CEO of Delta pharmaceutical looked unimpressed with the role of government and

its authorities like SMEDA. He said that;

SMEDA and other agencies like these are

good for nothing. If I say that these are

developed just to provide employment

opportunities to the off springs of the

privileged class, it would not be wrong.

SMEDA has given only one million PKRs to

one firm in Risalpur in the past 11 years.

You can imagine how they are committed!

On top of this, there are many authorities

who just come and go and waste the time of

the entrepreneurs, doing no good but trying

to exploit somehow for money making. They

never give any facility like the social

security or medical support etc.

6. Impact of adoption of innovation on SME growth

a. Why SMEs innovate

The CEO of delta said that with innovation grows the organizations, indeed. He said that;

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Even in the bad situations of the industry

overall, the main reason for the growth of

my Pharmaceutical company is the

consistency with which we innovate in our

processes and productions. Adopting

innovation or carrying out innovations

altogether means that you stand out as a

distinct firm as compared to your

competitors and hence can make more

profits.

b. Impact of adoption of innovation on SME growth

The management of Delta pharmaceuticals associates the survival of their firm to the

consistent innovation policies. He said that

For SME to survive, they need consistency

in innovations as that is the only way.

III. Conclusion

Delta pharmaceutical was established as a result of some kind of Double Helix model

work in 1995 when the owner of the firm was assigned the work of developing a

pharmaceutical cluster by the provincial government. A banker prior to that and having

worked with small business in grant section enabled him to move forward in this regard.

However, that was not enough, he did what an entrepreneur need to do, and he went to

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involve academia in this venture. The department of pharmacy, University of Peshawar

was chosen for this purpose and after getting permission from the then Vice chancellor of

the university, the owner through a lengthy process and detail interviews selected two

PhD academics, one had is degree from UK and the other had his PhD from University of

Karachi. The selection was made very transparent and no approaches were entertained

because the owner wanted to establish the footings of firm and industry on meritorious

ground otherwise the system will not last longer, he felt. The logic behind selecting the

academic with PhD degree from UK was that he had a fair bit of knowledge of UK

advance industries and since we had in our mind that we had to compete with multi-

nationals and aim to export as well. The expenses of controlling the weather and the

humidity required for a company in Karachi is actually sufficient to set a pharmaceutical

here in KPKThis is the unique contribution of delta pharmaceutical and the companies

that followed our system, actually gives the country economy around 1 billion PKRs

annually. The other side of setting this and similar other firms is the provisions of

employment opportunities. The demand of Pharmacy graduates has increased

substantially and there are many public and private universities which produce

pharmacists annually who are given jobs in this sector which is comprised of at least 90

functional Pharmaceuticals in the entire province.

The processes of Delta pharma are in real sense Innovative which make the organization

overall an innovative one, for instance it converted the film coated Brufen to Sugar

coated one so that patients can take it easily. In delta pharmaceutical an emphasis is laid

on the fact that there is proper dissolution of chemicals in the desired proportions. The

CEO of this firm has a strong conviction in collaborations, especially with the Academia,

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the suppliers and weighs the customer input as something very highly. To explore about

the environmental conditions and the opportunities, the management of Delta follow a

formal research involving the marketing staff and the R&D and yet the ideas screening

process is formal again involving meeting of the board of Directors. There are no internal

barriers like the lack of expertise of staff but there are financial barriers and neither the

government agencies like SMEDA nor the Banks support in this regard. The banks

normally have strong lobbies which they favor and not every small business.

Case 7: Iceberg Pharmaceuticals

I. Profile of the case

Iceberg started its operations at Risalpur, Nowshera Cluster of Khyberpakhtunkhwa in

2016 and hence it is a young and nascent enterprise. It started up with a small number of

products but now has a substantial growth. This firm is still in its evolution stage as it

started up last year but the market value and demand has substantially increased. A

hallmark of this firm is the qualified employees. Iceberg’s management focus on hiring

qualified people.

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

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a. Entrepreneurship and Innovation in Culture and Structure

About the entrepreneurship and innovation in culture and structure the Product manager

of Iceberg said that

In our organization we have got the

encouragement from the owners and they

support us. They also take risks but in a

calculated manner specially when financing

is concerned.

The quality Control Manager and Market Managers also said that this is an

entrepreneurial culture. Our owners fully trust us and they encourage innovations.

b. Size of the SME and Innovation

The Product Manager said that size does matter in innovation. He said that;

If we have more capable employees and

more units for production, we can operate in

more innovative manner.

The Quality Control Manager however highlighted the Size in terms of units and said;

Off course the more is the number of

machines and the laboratories space, the

better is the result.

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The Marketing Manager also agreed that Size is important and he said that;

In marketing processes especially, if I say,

the number of employees is very important.

We can carry on organizational activities in

more innovative ways if we have got the

adequate number of employees. That’s how

we can design and depute marketing teams

to work more innovatively.

c. Organization Processes and Innovation

The operations of a firm’s process in an innovative way make the overall culture

innovative. When probed whether the processes of the organization are innovative the

product manager said that;

We are a market oriented enterprise. We

believe in the fact that if our processes are

aimed at meeting the needs of the market,

we will be successful and this to me makes

the organization an innovative one.

Again the Quality control manager pointed out that;

For carrying on the production and

marketing processes we use latest

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technology and mechanisms respectively.

The interest that we have in maintaining the

highest quality forces us to make our

organizational processes innovative and

novel. So the management believes that

market orientation, use of latest technology

and mechanism are the key factor to make

the processes of the organization innovative.

d. What Makes the SME Innovative?

During the data collection interviews, the researcher found that different organizations

have different contributors for their innovativeness. Hence when the same theme was

probed in this firm, The Quality control manager said that;

The state of the art labs, the quality of work

force, the market orientation and the CEO

encouragement.

The Product Manager said that;

Our SME is market oriented and we follow

the latest trends in the field of

pharmaceuticals. This makes the SME

innovative.

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2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

The Quality Control Manager said that the initiatives always come from market when the

marketing people or the R&D team realizes some gap in the market. However, all the

wings and department are involved in the development of innovations from infancy till its

completion. The Product Manager also said that

Our marketing team brings ideas from the

market. We discuss those molecules in our

board meetings and pick the right ideas

towards practical implementation. So again,

market is the starting point.

So the Management of Iceberg unanimously agrees that the ideas come from market but

there is a co-ordination between different departments to complete the process.

b. Rate of Adoption of Innovation

Following the base theory of this research, the diffusion of innovation theory guided the

researcher towards finding that at what rate innovation are adopted. The quality Control

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Manager of Iceberg said that;

Although it’s a newly established firm, we

can say that the rate of adoption of

innovation is very high. Our strength in this

connection is the capable staff and

management who are aware of the

importance of innovation in organizations.

The product Manager also agreed that we are fast adopters of innovation. He attributed

this to the latest international research. He said;

We read latest international research and try

to implement, that’s the reason we can say

we initiated certain products which the

other pharmaceuticals do not have in this

cluster .The rate of adoption is high due to

the research orientation and following of

latest research in international journal.

c. Sharing Knowledge Sources

The product Manager of Iceberg told that in this cluster here, it’s quite an open system.

We do share knowledge with each other and

we do not normally refrain from sharing

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expertise with each other.

The quality control Manager also agreed and said that we do share knowledge with each

other especially with those firms we have collaborations with. The marketing manager

also agreed that knowledge sharing is mostly with the collaborating firms.

So, overall this SME does not feel anything wrong when sharing knowledge sources,

especially with the collaborators.

d. Collaborations and level of mutual trust

The quality control manager said that they carry collaboration with delta pharmaceutical,

a pioneer pharmacy of this cluster. He also pointed out that their collaborations are based

on certain policy;

We stick to our organizational policy but we

do believe and trust our collaborators as

they tend to give us benefits too.

The product manager also revealed that they have collaborations with a firm here in the

same cluster. We do consult with each other to make organizational processes more

innovative. However, when asked about the trust level, he said that it depends actually

what can be shared and what cannot be. We share that information which falls in the

technical category, however those information which are related to the sales and market

values, we do not normally share them with firms as eventually we become competitors.

So the trust on collaborators is mainly limited to the technical support and when it comes

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to the market or the sales information, the firm refrains collaborating.

e. Value addition through collaboration

The product manager of Iceberg said that collaborations do add value as for example they

can save time.

If for instance they know something

technical which we do not know, it’s a

benefit to learn it from them so that time and

processes are saved, vice versa.

The quality control manager said that;

The experience of collaborators can be

utilized in the way that if we want to acquire

a new machine or new techniques which

have not been used before, we may face

difficulties. In such cases it is always good

to find the collaborations with someone who

have practiced the same technique before.

The marketing manager also said that the basic theme behind collaboration is that it can

certainly benefit the stakeholders. He exemplified this as;

In our collaboration with Delta

pharmaceutical, we get the value as they are

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more experienced and we can learn from

that experience to carry on the

organizational processes in more innovative

ways.

So, the overall responses of the managers reflect that the collaborations add values by

time saving, learning from the experience of the collaborating firms and it renders mutual

benefits.

3. Drivers and sources of Innovation In organization

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

a. Drivers and Sources of Innovation in SME

The product Manager of Iceberg said that in this firm everybody plays a role in

innovation. The R&D, all the marketing people and the technical people specially holds

the key to innovation. The quality control manager explained that

Our employees, the research in academia

and industry, the marketing factors like

customers, competitors and the suppliers all

contribute towards innovation.

The marketing manager of Iceberg termed market as the main driver by saying that;

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Market comes at the very top but indeed the

importance of employees cannot be negated

as they are the ones who can see the gaps in

the market.

b. Idea Sources for new products and services in SME

To the question about considering the different idea sources for new products and

services, the product manager said that;

Most important origin for new product idea

is the market itself and the ideas normally

come from the customers through the

marketing people.

The quality control manager said that

We have quality staff; we get ideas from

customers, the competitors and the market

trends as sources of ideas.

c. Knowledge and training level of Staff of the SME

About the knowledge and training the product manager said that the people working with

us are generally educated as the demand of the job asks them to be so. The Quality

control manager He further added that;

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They do have the requisite knowledge but

sometimes they need more training and

expertise. At the same level, they need a bit

of exposure into more innovative firms as

well to become more proficient in making

the enterprise innovative.

The quality control manager said that;

I think this is our main strength. Our

management tries to make sure the people

they recruit make the best employees in the

long run and can bring innovation in the

organization. As per the training is

concerned, we do make certain training

arrangements.

The marketing manager added that I have full confidence in my team. Their training and

understanding is according to the latest standards. So the management of Iceberg agreed

that the level of training and education of the staff of the SME is up to the desired level

and expectations.

d. Customers Input

The product Manager of Iceberg responded that sometimes we do get ideas from our

customers who in this case are the doctors and practitioners. Also, we have contacts with

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some of our customers like for example if we produced ten thousand units of a product

and we do not get the orders for 4 months or more, we start contacting with our

customers and the doctors so they review our products. However the quality control

manager explained that;

In this sector we do not directly get ideas

from the customers but when the doctors

review our products as per their application

on the patients/customers, we go for the

improvements accordingly(Yes customers

are taken into account).

So the researcher felt that since the customer input is important, the process of taking

input is indirect most of the times.

e. Role of Suppliers in innovation diffusion and Adoption

The product manager of Iceberg told that we do get suppliers feedback and they tell us

what molecules are in the market mostly. But the answer of the Quality control manager

elaborated it in this way that the suppliers are important in the entire process. He said;

Actually their role define your processes to

be innovative are not. If they provide you the

latest molecule for which you have

researched, it definitely gives your

innovation a boost.

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So the role of supplier in making Icebergs, processes innovative is admitted by the

managers.

f. Screening and evaluating Ideas

When probed about how the ideas are screened and evaluated the quality control

manager of Iceberg said that;

The Board of Directors after the meeting

decides about which molecule and product

can be approved and is feasible.

The product manager offered a more explicit answer in this regard that;

We discuss ideas in meeting. We go about

the marketing input. For instance if we

consider new molecules, it’s a very technical

process. We evaluate the ideas against its

feasibility. We compare our sources as well

as the benefits that the products in

consideration will render.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

The quality control Manager said that;

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The marketing research is not formal but we

believe that our marketing people are

competent to identify the gaps with the

market. We calculate the risks in a way that

we produce the initial products on low

scale. Then we get feedback from doctors

and if the results are good, we do carry on

also if any modifications are suggested we

implement those in the commercial products

then.

The product manager explained it further that;

Technically speaking we are in no position

to go about an altogether new product or

molecule. We have our restrictions; the

regulatory authorities provide guidelines to

produce the products. Hence we often work

on those products that have been produced

by other multinational pharmaceuticals.

b. Risk calculation and test marketing

Risk calculation and test marketing are important themes as per as the innovation of

organization is concerned. The product manager added about the test marketing that;

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Initially we produce the trial batches and the low scale production is required to be

launched. So we do our calculations and once we get the review about it, then we

produce it on the commercial basis.

5. Barriers to the Diffusion of Innovation

a. Lack of expertise

The product manager agreed that sometimes we have the issue of finding the technical

expertise in our workers. But we try to fix the shortage through networking and

clustering.

The quality control Manager agreed and said that this is a field where new molecules

come each day. He said that;

We need to be up-to-date all the times. That

is why we take help in technical issues from

those professionals who are working with

other firms for long times.

b. Financial Barriers

The quality control manager agreed about the fact that financial barriers are always there.

He responded that;

We need finances sometimes which are not

available. Banks can be a source but their

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procedures and the strings attached to their

loans are not easily digestible so we in this

SME try to proceed according to our

budgets.

The product manager responded that For instance, we wanted to have a new machine

which we thought would give us good output too but our financial position did not allow

us to buy that. He said that;

Yes. Since it is a fast growing industry, we

always have the opportunity to get loan

from banks easily.

c. Role of Government and its Agencies Like SMEDA

The role of governments in the spread of innovations and the development of innovation

systems is an important factor. When the researcher probed this theme, the quality control

manager said that;

There is no support from any government

authorities rather they curtail and hinder

the processes by their overly interruptions in

the affairs of the firm sometimes can cause

delay in carrying out innovation.

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The Product Manager also agreed that we do not have any support from government

agencies and authorities in any ways. However, we get support from other firms and that

is a mutual process.

6. Impact of adoption of innovation on SME growth

a. Why SMEs innovate

The adoption of innovation in SMEs has an important impact role as reviewed in the

literature. The product manager said that;

By innovating, our exports can increase as

well as we can have increased market share,

said the product manager.

The quality control manager said that we carry innovative processes in our organization

that we become a prominent organization in market and attract more customers.

b. Impact of adoption of innovation on SME growth

The product manager said that we can have many benefits from innovation. We can start

up research products which can end up giving us advantage over other firms. Whereas the

quality control manager said that;

Being innovative organization means being

competitive. We can certainly have good

advantage over our competitors.

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In a more direct way, the Marketing Manager said that the impact of innovation in

organizations is positive and related to the growth. In fact the reason why organization

considers innovations is to grow.

III. Conclusion

Iceberg is a newly established pharmaceutical in Risalpur, Khyberpakhtunkhwa. During

the little time span it has emerged as one of the better pharmaceutical. The culture is

entrepreneurial and innovative and calculated risks are taken in different ventures. The

Management of Iceberg considers size of the organization important in the diffusion and

adoption of innovation as bigger size means more capable employees as well as more

units of manufacturing. Due to the use of latest machines and the market orientation and

the encouragement of CEO, the organization processes of Iceberg make it more

innovative. The development of innovation starts when the marketing team along with the

R&D identifies the gaps in the market, the concept development comes through the

Board of Directors decisions. The research orientation and dependence has improved the

rate of adoption of innovation and for some products, Iceberg has initiated even, taking

the lead role. Due to the open culture of the organization in particular and the cluster in

general, knowledge sharing has been an easy and routine practice. The management of

iceberg believes that collaborations add value and that is why we collaborate and trust the

collaborator as well. The collaborations can help in saving time as well in learning

technicalities. The idea sources are staff, customers, competitors and the market trends

for Iceberg. The management of Iceberg agrees as there is inspiration from the

competitor’s products and supplier’s role in the diffusion and adoption process is

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important. The market input plays a vital role in idea screening and evaluation as it helps

in comparing the sources and resource. The Marketing research is formal and the

marketing Department along with the R&D Department conducts the research, however,

care is taken in following the regulations from different bodies. The Management feels

that there are still some barriers in the technical sides, and they need to overcome through

the help of networking and collaboration. The financial barriers can pose issues to carry

on innovations but the banks options are not feasible although they may grant loans

easily. The government agencies and SMEDA role has not been visible in making this

sector a profitable one. The management views adoption of innovation as something

which adds competitive advantage and it helps in making research oriented products. The

SME can also increase its exports as innovation gives prominence and customer

orientation, leading to the overall growth of the SME.

Case 8: Rock Pharmaceuticals

I. Profile of the case

Rock is a pharmaceutical company which is technology oriented. Established in 2011, it

manufactures and markets medicine innovative and high quality medicine for prevention,

alleviation and cure of diseases. The products are manufactured for various diseases and

the focus is on those product conditions which can help save millions of people around

the world. Rock Pharmaceutical has collaborated with different firms of good repute and

has gradually manufactured and marketed products based on those license agreement

beside its own brand. Rock Pharmaceutical steer its R&D efforts with a motto of carving

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a healthier tomorrow. Customer support by offering them latest medicine at affordable

process is a core value of Rock. As it adds 20-30 products to its product line annually,

Rock pharmaceutical is one of the fastest growing pharmaceutical firms of the country.

Rock Pharmaceutical has export partnering with Mazhar brothers since 2004 and has an

annual Turn Over around 8 million US$, paying around 5 million US$ taxis to

Government of Pakistan. Rock pharmaceutical has its export to Srilanka, UAE, Uganda,

Nigeria, Bangkok, India, Afghanistan, Ghana, Uganda, and Uzbekistan (Source,

http://www.rockpharma.com.pk/index.html).

II. Analysis of Data

1. Type of Enterprise and Nature of innovation

a. Entrepreneurship and Innovation in Culture and Structure

The director of Rock pharmaceutical responded about the innovative culture and structure

of that The way we started our business in this sector, it itself is an entrepreneurship

because when we talk about the pharmaceutical sector, there are huge number of multi-

national companies operating already, to make your place in this sector is a daunting task

and huge risk in itself.

People normally have more trust in multi-

national companies and their products. That

is why it’s difficult for SMEs to find its

footings.

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The director administration also told that we have an entrepreneurial culture and we

follow an innovative structure. We have the latest technology for both production and

operations of the process. Our offices have computers and internet facilities. We believe

in the speedy and faster communication and use email concept for this too.

b. Size of the SME and Innovation

The admin director upon answering whether the size of the SME is sufficient for

Innovation told that

The size of our firm is sufficient. We have to

understand that the real emphasis is on the

quality of your work force.

The Director of rock pharmaceutical also held more or less same views as he said size

does not necessarily matter in the same that if you have limited number of employees but

if they are of good quality and has the ability to be innovative; their number does not

really make a problem. The same goes for the infrastructure as well.

c. Organization Processes and Innovation

When asked how the processes of the organization make it innovative, the admin director

told that our processes are technology oriented. As I said before, we have an internet

culture and we communicate through email. We also have a very detailed and interactive

official website of our firm. The director responded that;

We do improve our processes by bringing

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technological innovations as well

organizational innovation. Each day we

think what can be done new and novel that

can improve our organizational growth and

market share.

The researcher observed the information on the official website of rock pharmaceutical

and the technology orientation is one core competency as they have mentioned on the

website.

d. What Makes the SME Innovative?

When asked what makes the SME innovative, the director said that;

We actually follow the US pharmacopeia for

producing new items. So we keep an eye on

the advancements that they bring in their

production. We further our updating

according to their up gradation.

The Admin director also said that;

The research orientation and the use of

technology in processes and production

make this firm innovative.

The emphasis here again is on the technology and research.

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2. Diffusion and adoption of innovation

Diffusion and Adoption of innovation in SMEs is one very important theme of this thesis

and the researcher is focused to find out the various aspects of Diffusion of Innovation

and its impact on the growth of SME. The researcher asked semi structured questions

regarding this theme as follow:

a. Developing Innovations from infancy to Marketing stage

To the question as to how innovation is developed from infancy, the Admin Director said

that we develop innovation by bringing the insight from market; the demand of market

actually guides us as to what to produce. The Director answered the same question by

saying that;

This is the age of technology, the internet

has revolutionized everything. Whatever

comes in the market in one part of the world

that becomes visible to the other part the

next day? So in my opinion, innovation

actually starts from market itself.

The management of Rock associated the development of Innovation to the market and its

trends.

b. Rate of Adoption of Innovation

The Director of Rock pharmaceutical said that in our cluster here in Risalpur, we have

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got eight enterprises which work in this sector. We are at the top of all in terms of

employee capability, chain management, installation of latest units and the sales. So in

my opinion we are more open to adopting innovation as compare to all other firms. The

Admin Director said that if you have visited the cluster here in Risalpur, you may have

seen that our firm stands very distinct as compare to the other firms in al regards. He said

that;

We have the latest technology and the best

human resources which enable yes to adopt

innovation in a more robust and faster

manner.

The official website of the firm also reflects that there are latest technologies and

machines but the people behind those machines are very important too.

c. Sharing Knowledge Sources

Although knowledge sharing is viewed by most of the participant managers of this study

to be important for innovation diffusion and adoption, the director of Rock said that;

We do not believe in sharing knowledge with

any other firm in the same sector rather we

think that our own competence will pay for

us more.

The director admin also said that we get knowledge from within our own sources. We do

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not believe in relying on any other firm here in this cluster. So there is no knowledge

share with anyone in this cluster.

d. Collaborations and level of mutual trust

When asked about the collaborations and mutual trust, the Director of Rock said that;

We do not have collaboration with any other

firm in this cluster but we have

collaboration with another firm in Karachi,

Mazhar brothers. The reason of not

collaborating with the firms in the same

cluster is the lack of trust.

The Admin director also said that there is collaboration with a firm outside this cluster

but not in the Risalpur Cluster here.

e. Value addition through collaboration

To the question what values do collaborations add, the director said that;

He would rather like to be neutral because

yes there are benefits from it but there are

problems as well, like your business secrets

can be at stakes too.

3. Drivers and sources of Innovation In organization

255

In this section the researcher tried to find out the various sources and drivers of

innovation in organization. Different questions probed this theme as under:

a. Drivers and Sources of Innovation in SME

The admin director told that the major drivers are market, customers, competing firms

and the people working in our firm. The response of the Director also substantiated as he

said;

Market is the main source. Similarly

employees and sometimes the other firms

can also be good sources of innovation.

So for the management of Rock, the drivers and sources of innovation are the market, the

customers, competitors and the employees.

b. Idea Sources for new products and services in SME

The idea sources for products and services are different. The director of Rock told that;

For us the main source is market and the

customers. The marketing people get ideas

from the customers and we then forward the

ideas to the concerned quarters to check for

its feasibility.

The admin director also said that same as are the drivers like the customers, our

256

marketing force and the Research and development people.

c. Knowledge and training level of Staff of the SME

The Admin director replied that at times we feel the need of further improvement and that

we do through training when particularly when some new machines are installed. The

director of the firm also agreed that sometimes there can be a lack of expertise but that is

overcome through training. He said;

Sometimes they lag behind in a particular

technique for which they are trained

through specialized people hired for

training.

d. Inspiration for Competitor’s Products

The director of Rock agreed that they get inspired from competitors products .He told we

do get ideas from the market and that is how you carry research over your competitor’s

products too. The admin director said that;

We believe that this is an open system. You

got to get something and give something

too.

e. Customers Input

The director said that we do not take customer input directly though but the doctors who

257

prescribe our products are actually those who give us ideas about products and its

development. The response of the director Admin was more or less the same saying that;

The firm does not work as a retailer where

we can get feedback from the customers

though but the fact is that the medical

practitioners do tell our marketing staff

what has to be done as per the needs of the

customers.

f. Role of Suppliers in innovation diffusion and Adoption

During the interviews process, the participating managers were found to have great value

for suppliers. When the same question was probed from the director of Rock

pharmaceutical, he reported that;

The respondents agreed that suppliers do

tell us what is demanded in bulk and also

about the market trends too.

g. Screening and evaluating Ideas

When probed about how the ideas are screened an evaluated the Director elaborated that;

Ideas are routed to the immediate reporting

officer. We believe that there is a proper

organizational structure. For instance the

258

marketing people like the medical

representative or sales executive share their

ideas with Regional Sales manager and then

they discuss it with the business manager

who takes the feasible ideas to finance

manager and this is how we work it out.

The director admin also said that we have a formal structure and we follow that hierarchy

while screening and evaluating those ideas.

4. Role of Marketing Research in finding the Environmental Conditions

a. Market Research: Formal or Ad hoc

The admin director said that with the advent of the internet, the ideas are readily available

and we follow the trends that we see on the internet. Also our marketing staff and R&D

carry on research to make the products more innovative and organization more

entrepreneurial. The Director said that they depend more on the secondary data. He

explained;

We more depend on the secondary data and

we feel that the marketing force does not

have the capability to identify the gaps or

carry out marketing research.

b. Risk calculation and test marketing

259

The director of Rock in response to whether they calculate risks and whether they test

market before commercialization said that;

When we get permission for a specific

product, we are instructed that within a

period of six months, we should prepare the

first batch of the product and testify it before

commercializing it.

The director admin said that we do follow the risk calculations and test marketing

concept. You cannot blindly go into the market launching your new product.

5. Barriers to the Diffusion of Innovation

a. Lack of expertise

When the director of Rock pharmaceutical was asked whether they have any barrier like

lack of expertise, he explained that;

When we introduce a new product, we invite

the product manager of firm like Merck

pharmaceutical unofficially. He ran initial

few batches for us. He looked after the

entire testing, manufacturing and quality

testing for us( so in this way seek

collaboration).This is how we basically

260

calculate or minimize the risk and later on

we follow those procedures.

The director admin also agreed for the lack of expertise and said that;

Medicine is a field where everyday there come new molecules. You do not have always

the capacity to work on each of the molecule. Sometimes we do face hindrances in this

regard and then we get the support from experts from other multinational firms. So yes,

sometimes we lag behind in expertise.

b. Financial Barriers

When probed about any financial barriers, the accounts director said that;

Since I am also looking after the accounts, I

have never applied for nay bank loan. We

rather plan to carry on new product and

processes development in accordance with

our resources.

The director also said that by the grace of Allah we never have taken any loan or fell

short of financing at any stage neither we have any partnership with anyone. We never

need to consult any bank for loan.

c. Role of Government and its Agencies Like SMEDA

They never come here. Not even in idea or concept development. The government

261

agencies and the regulatory authorities actually make it difficult for us most often. Some

time they delay the files for a long time. For instance if we apply today for a specific

molecule and the drug regulatory authorities or the ministry delay it for a longer time ,

who knows the product demand will be the same after that much delay. The director also

agreed that the role of government authorities and SMEDA is not encouraging at all. He

said that;

We do not have any support from them as

per now and we do not see if they will

support not only this firm but any other firm

in future.

6. Impact of adoption of innovation on SME growth

a. Why SMEs innovate

When probed as to why innovations are carried, the director said that;

We believe that if we do not innovate our

products will become obsolete and we will

lose our market share. In order to have

maximum market share, you need to

innovate only then your organization can

grow. It helps in growth of our organization

as well as gives us edge over our

competitors.

262

b. Impact of adoption of innovation on SME growth

The admin director said that Being innovative means being different and that is how a

firm can get competitive edge over other competitors. While the director said that;

Innovation definitely helps to improve our

competitive advantage.

III. Conclusion

Rock pharmaceutical is established in 2011; it manufactures and market innovative and

high quality medicine for prevention, alleviation and cure of diseases. The Management

of the firm regards the size of the employees and the manufacturing least important but

the quality of both is valued more in the organization. The Processes of Rock

pharmaceuticals are based on technological and organizational innovations. The Firm

follows USA pharmacopeia as the guide and benchmark. The rate of adoption of

innovation is speedy and there are latest machines like HPLC installed in the laboratories

and the employees are willing to utilize them. Rock pharmaceutical has got collaboration

only with Mazhar brothers, a firm in Karachi and has no collaborations here in this

cluster. Rock pharmaceutical does not value collaborations too much as it doubts that

with collaborations most of your business secrets are out. The drivers and sources of

innovations and idea sources for new products and services are market, customers,

competitors, employees and R&D. The employees of the firm or trained for whatever

skill they may lack. The role of competitors’ products, suppliers and customers is

important in the diffusion of innovation process for Rock pharmaceutical. There is proper

263

risk calculation and proper structure of carrying marketing research. Although there are

no financial issues and banks loan are not considered in Rock pharmaceuticals, there may

sometimes be the lack of expertise for which training sessions are conducted. The

government and its agencies like SMEDA have never helped this pharmaceutical in any

manner so far. However, Rock pharmaceutical innovate for maximizing its market share

and competitive advantage so that it survive for longer.

Chapter 5 Cross Case Analysis

5.1 Introduction

In this chapter the researcher discusses and analyzes the themes across all the cases. The

researcher discusses the findings aligned with the relevant literature and the research

questions and research objectives set forth in the previous chapters. The researcher tries

to keep the sequence of the themes as it is followed during the data collection stage while

administering the interview protocol.

264

5.1.1 The structure and Culture of SMEs

The literature shows that the structure and culture of organizations have a bearing on the

adoption and diffusion of Innovation. It has been studied by many researchers that

organizational culture is a vital player in affecting the organizational innovation through

creating an innovative environment in the organizations. Organizational culture is a

collective set of values, norms and beliefs that the employees of the organization share

and is exhibited in the overall processes and goals (Khazanchi, 2007). The respondents of

all the case study SMEs, except those of the Wisdom pharmaceutical, expressed that their

SMEs are entrepreneurial in nature and have a culture which promotes the adoption of

new ideas and innovations. The SMEs working in pharmaceutical sector have a tendency

of risk taking and going about new creative products and services as it is a science based

industry and they cannot stick to the same products for years as they can become

obsolete. So they need the flexibility in its structure and culture as to adopt innovations

and avoid inertia. The SMEs are generally known for its flexibility and acceptance to the

external changes. Any SME which do not get trapped to competence is when in the wake

of new technologies the existing professionals become redundant, firing old ones is not

feasible due to regulations/law and hiring new one is not available because of the

newness of the skills required. Therefore some SMEs end up as unable to exploit future

opportunities(Taipale-Erävala, Lampela, & Heilmann, 2015). However, the respondents

of the case study SMEs agreed that they tend to go for the uncertain and risky ventures as

the nature of the industry demands. As one of the respondents from the case study SME

said that;

Since it’s a science based industry,

265

Innovation in medicines, new developments,

new creations are inevitable so we have to

update our system and ourselves.

Not only the SMEs but the high tech organizations also need Innovative cultures. The

availability of innovation cultures work as a significant factor in high-tech organizations

and without innovation they will simply perish (McGourty, 1996; Angel, 2006). The

infusion of innovation in its culture should not be only restricted to idea generation but

also be implemented so that the firms can reap the fruits in true essence.

Although the views of the respondents of Wisdom Pharmaceutical reveal that they do not

tend to take many risks and are not willing to make changes to the culture and structure

because they mainly produce basic and not radical research based products, other

counterparts of the remaining seven SMEs unanimously accept the importance of being

adaptive and ready to change. As researchers have found that the adaptive cultures help in

nourishing creativity in ideas generation and implementation (Dennison,1996; Lee and

Yu,2004 ; Flynn and Chatman,2001). The researcher observed that there is some kind of

difference in the views of the respondents about the adoption and diffusion of innovation

and risk taking even in the same organization. This is quite cognizant with the extant

literature as studies show that even in the same firm different innovation approaches are

used. The logic behind this phenomenon is that different contexts need different

processes, which is better as context based innovation yields good results. Selecting the

best innovation for the specific situation is the best ploy (Griffin, 1997). However, the

aggregate of the responses, the researcher observation, and the available secondary

266

sources like the official websites and facebook pages suggest that the case study SMEs

working in pharmaceutical sector have entrepreneurial structure and culture.

The responses regarding the descriptive theme, the structure and Culture role in adoption

and diffusion of innovation in SME can be summarized in table 5.1 as below:

The

me

Hizat Wisdom Zinta Aries Stanley Delta Iceber

g

Rock

The

struct

ure

and

Cultu

re

Strongl

y

Agreed

as all

the

respon

dents

agreed.

Strongly

Disagree

as none

of the

responde

nts told

that the

culture

and

structure

is

entrepren

eurial.

Strongly

Agree.

Unanimo

usly said

the

culture

and

structure

is

entrepren

eurial

and

innovativ

e.

Stron

gly

Agre

e. All

repli

ed in

positi

ve.

Strongly

Agree.

Entrepren

eurial &

Innovativ

e

orientatio

n claimed

by all

responde

nts.

Strongly

Agree.

All

respond

ers

agreed

unanim

ously.

Strongl

y

Agree.

All

respon

ders.

Stron

gly

Agre

e.

Table 5.1

267

So except for the wisdom pharmaceutical all the other participating SMEs have an

Entrepreneurial and Innovative culture and Structure.

5.1.2 The role of Size in Adoption and Diffusion of Innovation

The extant literature about the firm size and its ability to adopt innovation has varying

views, and lacks an agreement about whether the smaller or larger size of the firm is

innovation friendly. Some existing theories show that small firms carry R&D activates in

product development while larger firms do so in process. Similarly small firms enter into

new markets and may ultimately dominate. Large firms invest more in process R&D

while small invest more in product R&D. Another important but seemingly abstract issue

might be the fact that the small SMEs understate its R&D expenses. The large firms

however cannot do it conveniently for the fact that they employee scientists and

professionals with more precise job descriptions ,their salaries can count for R&D

expenditures(Plehn-Dujowich, 2009).

However in the study of Scherer (1991) who did not include any small firms and was

replicated by Fritsch and Meschede(2001) in large firms, no significant difference is

realized. The researcher checked empirically whether the participating organizations

relate the size of the firm in their race towards adopting and diffusing innovation for their

growth. The respondents from Hizat pharmaceutical told that the size is not a big deal as

they believe more in the quality of the infrastructure and the employees than the size of

both these. They believe that the facilities and the equipment means. The Director of the

Rock pharmaceutical similarly disagreed about the importance of the size as he said that

it’s not their number and same is the case of infrastructure. He said;

268

To me size does not necessarily matter in the

same that if you have limited number of

employees but if they are of good quality

and has the ability to be innovative, their

number does not really make a problem. The

same goes for the infrastructure as well.

So two out of the eight participating organization disagreed about the importance of size

of the firm in the adoption and diffusion of innovation for its growth. However a

majority, six out of the eight participating SMEs unanimously agreed that the size of the

firm both on the basis of the infrastructure and number of employees matter in the

adoption and diffusion of organizational innovation. The size of the firms may not

necessarily lead to the radical innovations but it assists in the incremental innovations in

the organizations. As the group product manager of Stanley said that

Company is scattered over an area of 3

Acres. It has manufacturing units for

Syrups, drops, tablets, dry Syrups and

Capsules. So the size of the company is

readily fit for organizational innovation

both infrastructures wise as well as human

resources wise. An antibiotic unit is also

under the construction and this will also fill

the demands from the market. I would not

269

say that these things are leading to radical

innovations but certainly to the incremental

innovations.

The respondents of Delta Pharmaceutical also strongly backed the size of the

organization as parameter and catalyst in adoption and diffusion of innovation for its

growth. His response showed that not only the area of the firm but the production area

should also be substantially sufficient for making the organizational processes innovative,

else it would be like fitting the stomach of the an ant in an elephant. The majority of the

participating organizations showed unanimity in agreement with the fact that the Size of

organization matters in carrying the innovativeness. This is mainly cognizant with the

argument of Amara, Landry, Becheikh, & Ouimet, (2008)who believes that the Size

matters. They put their weight behind Size by saying that grown up SMEs have more

technical and financial capacity to meet the cost requirements needed to raise the novelty

and innovation level. As the majority of the respondents strongly agree that the Size of

the SMEs matter in their innovation adoption capacity and growth, it can be asserted that

the number of employees and units of manufacturing both needs to be sufficient so that

the SME adopt organizational innovation for its growth and performance. The responses

regarding the impact of SME Size on the adoption and diffusion of Innovation theme in

the organization is given in table 5.1.2

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Icebe

rg

Roc

k

Role of Strongly Agree. Strongl Strong Agree. Stron Stron Stro

270

Size of

SME in

innovatio

n

adoption

and

growth

Disagreed

.All

claimed

that size

does not

matter

All

respond

ed that

size

matter.

y

Agree.

Unanim

ously

said

that

size

matter.

ly

Agree.

gly

Agree

.

gly

Agree

..

ngly

Disa

gree

d.

Table 5.1.2

5.1.3 Organizational processes making the firm innovative

The organizational processes define the nature of the firms as to be either

entrepreneurially innovative or change resistant. Those firms which are carrying their

processes in an innovative way mould the fortune by capturing profits and market share.

The researchers who work on institutions have submitted that the ideas, norms and values

and beliefs in an institution shape up the routine organizational processes of these

institutions. Organizations must place in itself expectations as a hope for survival, though

these expectations may have very little to do with the actual realization of the

performance (Scott, 1987; D Aunno, Sutton and Price, 1991; DiMaggio and Powel,

1991). This pursuit of hope and expectations toward improving the performance of the

firms influence the organizations to bring innovations and carry their processes in such a

way that they perform well. However, the behavior of an organization is not merely a

reaction to the market pressures but also the internal pressure such as the regulatory

271

authority pressure, the pressure of meeting expectations of institutions(Greenwood and

Hinings, 1996). During the current study, an effort has been made to target and analyze

those SMEs/firms which have the capacity of adopting and diffusing innovation rather

than those which are resistant to change and are inertial in nature and behavior. The

researchers tried to investigate if the processes of these organizations make them

innovative. The participating SMEs agreed collectively that their organizational processes

are making them innovative. However not all have the same ways to carry their processes

in an innovative way. They have their own strengths while carrying the processes. For

instance the Hizat pharmaceutical firm associates the Managerial processes as something

which make the organizational processes innovative. As one respondent said that;

It depends upon the processes of the

organizations to make it innovative or

otherwise. It largely depends upon the

management as to how they utilize the

potential of the employees. Like for example

there are various divisions, there can be

account section, there is marketing section,

there is HR section and there is technical

staff. So it depends on the overall structure

of the organization and its management as

how they take ideas from the employees and

from the market. How they utilize and

channelize it then to be more innovative as

272

per as the processes are concerned.

Similarly a respondent from Stanley organization also said that the management

processes are the key towards making the overall organization processes innovative. He

relates the increase in sale both within the country as well as abroad to the innovative

processes of the firm initiated by the management. Another respondent of Stanley implies

that the processes are made innovative by the utilization of the latest technology in the

state of the art labs that they have.

Being Innovative in its processes is the necessity of the pharmaceutical firms as the

importance of medicine cannot decrease till the age of the mankind. The CEO of Delta

pharmaceutical said that although there is innovation in almost all parts of the

organization, their emphasis is on making the product more innovative and bring quality

while making it more consumers friendly and low cost. He exemplified the product

innovation in his organization by saying that;

We actually converted the film coated

Brufen to Sugar coated one so that patients

can take it easily. Also, one main fact about

the pharmaceutical industry is the fact that

there has to be proper dissolution of

chemicals in the desired proportions.

The Director of Aries pharmaceutical associates the innovation in its processes to their

R&D activities and their ability to keep up the pace with the innovations taking place

273

abroad. One unique attribute which is also marked as an emergent theme by the

researcher is the involvement of the consultants for making the use of the latest

technology in Aries pharmaceuticals. Similarly the aggregate of the responses of Rock

Pharmaceutical is also in agreement with the fact that they try to bring the latest

technology and machines to make their organizational processes more innovative.

Although the quality control manager of Zinta pharmaceutical believes that there is a

further need of bringing more latest machines which are fully automatic, he agreed with

the fact that the processes of their organization make it innovative as they still have

machines and technology which is better than most of their counterparts in the same

cluster. Another important aspect was added by the Product Manager of Iceberg

Pharmaceutical who said that when the market orientation is the aim, the processes of the

firm tend to make the firm innovative. He put it very simple as;

We believe in the fact that if our processes

are aimed at meeting the needs of the

market, we will be successful and this to me

makes the organization an innovative one.

So in general all the respondents of the eight participating firms agreed that the processes

make them innovative and they all had some different means and ways to support their

argument. The summary can be shown in table 5.1.3 as below

Theme Hizat Wisdo

m

Zinta Aries Stanley Delt

a

Icebe

rg

Roc

k

Organization Strong Strongl Strong Strong Agree. Stro Stron Agre

274

al Processes

making the

firms

innovative

ly

Disagr

eed.

y

Agree.

ly

Agree.

ly

Agree.

ngly

Agre

e.

gly

Agree

.

e.

Table 5.1.3

5.1.4 What makes the SMEs innovative

The researcher put this probe question to help the respondents explain their stance as to

how and what can they attribute to the SMEs innovativeness. This helped the researcher

to get explicit answers and most of the respondents came up with different factors which

can make the participating SMEs innovative. The respondents of Hizat pharmaceutical

associates that their nature as a pro-technology SME makes its product innovation more

robust as compare to other firms in the cluster. The quality control department and state

of the art labs help in this regard. This helps adding other product line as the ointment and

Nutraceuticals to this SME which can give competitive advantage. Similarly, the director

of Aries pharmaceutical response reflects that the diversification makes the SME

innovative as unlike most of the other Pharmaceuticals in this sector Aries does not

produce only syrups but dry syrup powders and other diversified products. Further, the

respondents from Stanley put their weight behind the managerial practices and the quality

of their employees both educations as well as skill wise for their organizational

innovativeness. The CEO of Delta pharmaceutical strongly believed that the

275

collaborations with academia like their joint venture with Peshawar University are

something that has helped making this an innovative organization. However, the

marketing manager of Delta pharmaceutical emphasized on the fact that the Vision of the

CEO is something that has helped in making the Pharmaceutical as an innovative one.

The researcher marked this as an emergent theme as it was not reviewed in the literature

whether the vision of the CEO or owner has a bearing on organizational innovation. The

quality control manager of Zinta pharmaceutical agreed that although there is a room for

improvement, their machines are of good quality and give good results to make the

process more innovative in this regard. The respondents of Iceberg pharmaceutical also

agreed that the encouragement and support that they get from their CEO help them make

the organization innovative. The respondents, especially the director of Wisdom

pharmaceutical were not very much convinced while answering to the question what

make their SME innovative but felt that the qualified staff and the state of the art

laboratories make it innovative. The respondents of rock pharmaceutical attributed their

organizational innovativeness to the US pharmacopeia as they follow it and update their

organization accordingly. So overall, the researcher presumed that there are different

kinds of players which make the participating organizations innovative. The table 5.1.4

shows these players for ease of readers as:

Theme Hizat Wisdom Zinta Aries Stanley Delta Iceber

g

Rock

what

makes

the

Stron

gly

agree

Agree

for

Agree

for

Strong

ly

Agree

Strongly

Agree for

Strongl

y Agree

Strong

ly

Agree

for

276

firms

innovat

ive

d for

*Rob

ust

and

frequ

ent

produ

ct

Innov

ation.

*Aut

omati

c

Mach

ines.

*Stat

e of

the

Art

labor

atoria

*Quality

Of Staff

and

State of

the art

laborato

ries.

*Qual

ity of

Mach

ines

which

give

accur

ate

result

s.

for

*Prod

uct

Divers

ificatio

n.

*Manage

rial

Practices.

*Quality

of

educated

and

Skilled

Employe

es.

for

*Vision

of the

CEO

(emergi

ng

theme))

.

*Collab

orations

with

the

Acade

mic

instituti

ons.

Agree

For

*Mark

et

Orient

ation.

*CEO

encour

ageme

nt.

*Follo

wing

USA

pharma

copeia

and

updatin

g the

organiz

ation

accordi

ngly.

277

l.

*Effi

cient

Quali

ty

Contr

ol

Syste

m.

5.2 Diffusion and adoption of Innovation

In this section the researcher tried to get to know how the innovation is diffused and

adopted in the participating SMEs from infancy to development stage and at what rate the

innovation is diffused as compared to the counterpart in the cluster. The researcher has

taken the insight from the Diffusion of innovation theory of Rogers which is a base for

this thesis along with other theories. Do they share knowledge sources, and whether

collaborations are carried with mutual trust or not and what values do these collaboration

278

add to these SMEs.

The Diffusion of Innovation (DOI) theory is an exponent of how, why and at what rate

new concepts and technology extend through cultures at both the individual and firm

level. DOI theory focuses on communication of innovation through certain

media/channels over time and within a social system (Rogers, 1995).He defined diffusion

as "the process by which an innovation is communicated through certain channels over

time among the members of a social system" (p. 35). He attributed an innovation as any

new idea, practice or object considered fresh to an individual (Rogers, 1995). Rogers

(1995) primarily discussed technological innovations. He explained that a technology is a

design for instrumental action that reduces the uncertainty in the cause-effect

relationships involved in achieving a desired outcome (Rogers, 1995). He made it clear

that a technology is information, not just equipment. Most technologies have hardware

and software components (Rogers, 1995). The hardware aspect consists of the tool that

embodies the technology as a material or physical object, and the software aspect consists

of the information base for the tool (Rogers, 1995).

Section 5.2.1 titled as how innovations are developed, section 5.2.2 titled as rate of

adoption of innovation, section 5.2.3 titled as sharing knowledge sources, section 5.2.4

titled as collaborations and level of mutual trust and in section 5.2.5 titled as value

addition through collaborations, the researcher has explained the how the diffusion of

innovation theory worked for the case study SMEs.

5.2.1. How Innovations are developed from Infancy?

The researcher tried to investigate the process of innovations development in the

279

organization from infancy to the marketing stage. The intention was to know what are the

factors which are involved in this processes and where does it initiate from. Another aim

was to find out whether there are any identifiable stages of the Innovation developments

which could then be used as a guide as to where it starts from and where it ends. To the

researcher, these mark the points and players which are important in the adoption and

development of innovation process. The important variable that was found while

addressing this process was the involvement of marketing as one of the most important

players. Although all the eight participating SMEs had different ways of carrying the

development of Innovations from infancy, the most common variable however is market,

an important driving force. For example, the respondents of Hizat pharmaceutical told

that they follow the multi-national firms when they opt for developing innovative

products as the formers follow research oriented products. However they believe that it

depends entirely on how the internal processes are efficient and cost effective. They

develop their innovations keeping in view the 4 Ps of marketing, i.e. the product, place,

price and promotion. So Hizat follow the market when it tends to develop innovation

from infancy based on their research about the latest products launched by the multi-

nationals working in the same sector. Similarly, the respondents of Wisdom

pharmaceutical calling it a comprehensive process revealed that the marketing people get

the creative ideas about developing innovations and they bring them to the firm. Once the

ideas are discussed in the meeting, the feasible ideas are taken to initiate the innovation

process.

The quality control manager explained the process of the innovation development from

infancy with a relative reservation that their innovations development is mostly for some

280

targeted areas. His point of view was that instead of producing for a specific Niche the

best ploy could be to make research oriented products which could be catered for a larger

target audience. The Niche concept is an emergent theme for the researcher. The Product

manager giving his insight to the innovation development process from the infancy

related it to be a cyclic process. He told that

This is complicated and cyclic process

which starts from the market and ends with

the market. The marketing people bring the

ideas from the market either from the

customers, the pharmacy shops/retailers or

the doctors. These ideas are discussed in

detail and then if found feasible, there

comes the stage of innovation development

from infancy.

This cyclic nature of Innovation is yet again a grounded or emerging theme for the

researcher as the literature review had not has anything about this phenomenon. So

largely, the respondents from Zinta Pharmaceutical relate that the starting and ending

point of the innovation development is the market itself. The Director of Aries

pharmaceuticals told that it’s an expensive, risk and time consuming process which

cannot be carried unless and until there is the vision and will. The CEO of Aries has the

same view as given on the official website of the firm. He viewed it as

Vision of the organization head, a visionary

281

person always backs up his team to carry on

innovative activities. I encourage people

coming up with ideas; we do discuss those

ideas in meeting of board of directors. After

the feasibility is checked, the ideas are

conceived accordingly.

(Source: http://www.ariespharma.com.pk/index.html).

The process of innovation development in Aries starts up with the vision of CEO and is

actualized as the people are encouraged who come up with creative and novel ideas.

The Stanley pharmaceutical attribute the development of innovations to the managerial

practices while the Delta pharmaceutical consider their collaborations with the academic

institutions to be something that can help in development of innovations. However the

Iceberg viewed their collaborations with business partners like Delta as something which

help in innovation development. Although the Rock pharmaceutical has no collaborations

for innovations development, the employees of Rock play vital role in this context.

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delta Iceb

erg

Rock

How

Innovati

ons are

develope

Strongl

y Agree

for

market

Strongl

y Agree

for

Marketi

Strongly

Agree

for

market

Strongl

y Agree

for

CEO

Strong

ly

agree

for

Strong

ly

Agree

d for

Stro

ngly

Agre

e for

Strong

ly

Agree

for

282

d from

Infancy?

input as

stimuli

when

develop

ing

innovat

ions.

ng staff

role.

role and

orientati

on

which

makes

the

process

a cyclic

one

vision

in

innovat

ion

develop

ment.

manag

erial

practic

es in

develo

ping

innova

tions.

educat

ional

and

researc

h

institut

ions.

busi

ness

partn

ers

like

Delt

a.

emplo

yees’

role.

Table 5.2.1

5.2.2. The rate of adoption of innovation

The researcher tried to test and correlate the Diffusion of Innovation theory of Rogers,

one of the base theories for this thesis in this section. DOI was a famous theory of Rogers

through which he categorized the organizations and individuals as innovators, early

adopters, early majority, late majority and laggards. The researcher used this descriptive

theme to know how the participating SMEs can be categorized to which specific category

as put forth by Roger in his famous theory. The responses of participating managers

and/or directors are different from each other to certain extent however almost all of them

agreed that the rate of diffusion and adoption of innovation is comparatively better. One

of the respondents of Hizat pharmaceutical though told that the structure of the

organization can be a slight hindrance, the other told that the rate of adoption and

diffusion of innovation is good. The respondents agreed for steady and gradual shifts but

283

they told that their approach is constant that is why organization is becoming innovative

since it is established. The respondents also told that they follow the regulations of the

ministry which cannot be overturned but our culture is comparatively innovative and that

is how we have a better rate of adoption and diffusion of innovation. The researcher also

observed that the Pharmaceutical was started from a basic building in the center, which

looked older and different from the other state of the art laboratories constructed off late.

The respondents of Wisdom pharmaceutical also agreed that they follow the latest trends

and are as good in adopting innovation as other counterparts but the researcher observed

that most of their workplace was manually administered and that the offices looked more

routine than innovative in that regard. In the main office there was one computer against

three officer’s chairs. Also, the director told in responses to a probe question that they

follow the formulation of more generic products and do not go for a research of market in

that regard. As for as the Zinta pharmaceutical is concerned, the respondents unanimously

agreed that their organization has a fairly decent and faster rate for adoption of innovation

as some of the machines in their organizations are advanced and the other pharmaceutical

may not have them for instance the HPLC, which give good results. Similarly, the

respondents of Aries pharmaceutical has a strong agreement for their faster rate of

adoption of innovation as they believe that unlike other pharmaceuticals in the cluster,

they do not term bringing new and advance machines as something expensive , rather

they term this as their investment. They also believe investing in their human resources

by arranging trainings for them as well as hire consultants for carrying certain latest

procedures in the organization. The Aries pharmaceutical has a functional and

comprehensive website that has made all the available information for the stakeholders.

284

The respondents of Stanley also agreed that they are accepting innovations

wholeheartedly and are open to it. They do not go into specialty products because they

think that sometimes to get your feet established there, you may need to follow a bit of

unethical practice. However, they do believe in adopting the organizational and process

innovation more rapidly than the radical innovations. The respondents of Delta

pharmaceutical especially the director very convincingly told that the initiation of this

firm at a time when there was no pharmaceutical here in this cluster itself is an

entrepreneurial and innovative act and it suggests that Delta is not actually adopter but

Innovator itself. Also, the survival of the firm for the past 24 years is associated with the

faster adoption of latest and innovative procedures on the basis of the collaborations with

the academic institutions. The respondents of Iceberg strongly agreed that their firm is a

fast adopter of innovation and the means they use for adoption is the international

research in latest journals of high repute. This has paid off for their early adoption of

innovation so much so that they have manufactured products successfully following the

research which have not been produced by any other firm in the cluster. The researcher

observed that the firm has added a good number of products to its line although the firm

is not very old. The researcher also observed that there are state of the art laboratories and

computer systems in all the offices. Although Iceberg does not have an official website as

yet, it has an official facebook. The respondents of the Rock pharmaceutical strongly

agreed that the rate of adoption of innovation in their organization is faster and they

respond quickly to innovations. Our ability to adopt quickly is due to the fact that we are

at the top of all in terms of employee capability, chain management, installation of latest

units and the sales. The researcher also observed computerization and internet facilities in

285

all the offices beside the functional and detailed official website of Rock pharmaceutical.

Therefore the researcher can assess that except for Wisdom pharmaceutical which work

only in formulation and has no intention for innovation or even proper computerization

and can be termed as a late majority if not laggards, the other participating

pharmaceutical are early adopters of innovation and Delta pharmaceutical can also be

termed as the innovator in Nowshera cluster as it follows strong collaborations with

academic institutions in light of which it produce research based products earlier than

most of the participating pharmaceuticals. The findings about the rate of adoption of

innovation are given in table 5.2.2

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Icebe

rg

Rock

Rate of

Adoptio

n of

Innovat

ion

Early

adopter.

Late

adopte

rs.

Early

majorit

y.

Early

adopte

rs.

Early

adopters

.

Innovato

rs.

Early

Adop

ters.

Early

Adop

ters.

5.2.3 Sharing Knowledge Sources

As discussed in the literature review, learning of knowledge and its sharing is highly

important. The sustainable economic development can be ensured by the collaboration

carried for knowledge sharing (Singe and Scharmer, 2001). Knowledge is a compact

286

body of facts that are accumulated by humans and any new knowledge creation is largely

based on the recombination of the knowledge that already exists in the firms. But so far

as innovation is concerned, the type of knowledge that is resulted due to the

reconfiguration of existing knowledge, the SMEs often makes trends towards incremental

innovation only. This trend can be changed however if a ploy of external networking is

incorporated through knowledge spillover (Yang et. al, 2010; Kostov, 2010).The

knowledge gained from outside is well distributed in SMEs inner clusters by interaction.

SMEs depend more on the tacit knowledge as these SMEs lack the potential to acquire

more codified and quantifiable knowledge that is more scientific in nature (Bougrain and

Haudeville, 2002). The researcher investigated whether the participating SMEs have

practiced sharing their knowledge sources with each other. The responding the managers

unanimously agree to the significance of Sharing of knowledge sources. Since it is one of

the oldest firm, the system is more developed than some of the nascent organization here,

the Hizat pharmaceutical believe in sharing knowledge sources. As this is a knowledge

based and more porous industry, the knowledge sources cannot be kept hidden as well, so

more often technical knowledge sources are shared mutually. The respondents of Wisdom

pharmaceutical were also found to be appreciating the importance of knowledge sharing

but they restrict this only to the collaborating firms. The majority of the respondents from

Zinta Pharmaceutical also unanimously agreed that they share knowledge sources as they

believed that it gives mutual benefits. The quality control manager of Zinta

pharmaceutical rather believed that it increases with sharing as he said that;

Knowledge is an ocean and you need to

share it as it increases. We benefit by

287

sharing knowledge with our networks.

Similarly the respondents of Aries also agreed that they share knowledge sources and not

always give rather than sometimes they also get knowledge from other firms especially

when the new processes and technology demand surface in our firm. They also agreed

that it is hard to work alone in the same industry and not sharing knowledge sources. An

important fact about Stanley pharmaceutical is however that they share knowledge

sources with academic institutions specialized for medicine study like the Khyber Girls

medical college and Rehman Medical Institute. The Delta pharmaceutical also strongly

believe in sharing knowledge particularly with the collaborators. This was substantiated

by the responses of Iceberg pharmaceutical respondents who strongly agreed that they do

share knowledge especially from collaborators like Delta pharmaceutical in the Nowshera

cluster wherein they get technical knowledge from Delta but they often keep the

information related to the sales and market values private. Unlike all the other

participating pharmaceuticals, Rock pharmaceutical did not agree about knowledge

sharing as they do not think it is worth doing because most of the knowledge is taken

from internal sources and sharing it externally will leave your organization privacy at

stake. They believe that the internal sources are sufficient for innovation instead of going

to the external sources. However, the researcher observed that Rock Pharmaceutical is

somewhat trapped by its competence. As it prefers the known skills experienced more

frequently in the yester years and do not look for new competence either due to the lack

of its availability or by the regulations making its implementation harder for

them(Taipale-Erävala et al., 2015). So there is found an agreement about the significance

of sharing knowledge sources in seven out of the eight participating firms. The aggregate

288

responses can be coded and summarized in table 5.2.2

The

me

Hizat Wisdom Zint

a

Aries Stanle

y

Delta Icebe

rg

Rock

Shar

ing

kno

wled

ge

Sour

ces

Stro

ngly

Agre

e

Strongl

y Agree

Stro

ngly

Agre

e.

Strongl

y

Agree

Strong

ly

agree.

Strongl

y agree

Stron

gly

Agre

e.

Disagre

e.

5.2.4 Collaborations and level of mutual trust

In this section the researcher discuss the cross case responses of the participating

organizations regarding the Collaborations and level of mutual trust they have on their

collaboration. The literature has revealed that collaboration is of immense importance

although there are varying concepts of authors whether collaborating with the educational

institutions is better or with services. The later is supported as (Tödtling and Kaufmann,

2009) said that establishing relationship with service organization than with educational

organizations help in innovation as it requires practical knowledge, however he also

signified the importance of educational institutions by giving the view that in order to

stimulate more advanced kind of innovation and using large size, firms interact with

universities for requisite knowledge accumulation(Tödtling et al., 2009).However a more

289

contrasting view is that the firms that are opportunistic, will risk it for not getting all the

required information. However, Institutional partners are lesser opportunistic than the

market partners as the later compete for profit maximization in the same industry(Kim

and Lui, 2015). The respondents from the participating SMEs also had the mixed views

about whether they prefer to collaborate generally or with specific institutions and

whether they trust fully or hold back in some specific areas. The respondents of the Hizat

pharmaceutical agreed that they do collaborate and do trust their sister organizations

specifically but not generally with other pharmaceuticals as they have the same

commercial benefits attached to certain innovations. As the quality control manager said

it simply that;

Yes we do collaborate. We trust our

collaborators but not entirely as after all we

do have commercial purposes to meet too.

For that reason we decide on how much we

can share and how much we need to hold

back.

The respondents of Wisdom pharmaceutical and the Zinta pharmaceutical also

substantiated this view by mentioning their collaboration with Hizat pharmaceutical as

this is a pioneer pharmaceutical in this cluster and the sisters firms like Wisdom and Zinta

take the input from them. Most importantly as the Wisdom pharmaceutical shared that

sometime they do carry these collaborations for importing raw material with their

collaborators too. This was mark as an emergent theme by the researcher as this was not

290

reviewed in the literature. Zinta pharmaceutical also reiterates the fact that they do trust

to certain level and not beyond that as one respondent said that

To certain degree we do trust but not beyond

that. For instance in some technical areas

we seek each other support but in terms of

our sales and customers, we cannot.

The respondents of Aries agreed about the importance of collaborations and they also

collaborate with the business firms and the institutions to carry innovations. They

collaborate with PCSIR where they conduct some tests which are otherwise difficult to do

in-house. Their collaboration presents a double helix model where they mostly interact

and collaborate with the academia. They respondents of Stanley were also convinced

about the importance of collaborations with academic institutions like medical colleges to

operate innovatively. They however added a new facet to it by saying that they have

collaborations with Suppliers as they make it a more strategic partnership. The delta

pharmaceutical in Nowshera Cluster also strongly agreed that the diffusion of innovation

is made prompt by collaborations and they added that they trust their collaborators fully

as it benefits all the stakeholders. The respondents of Iceberg pharmaceutical also agreed

that they have collaboration with Delta pharmaceutical and they do trust each other

although there is clear policy about the level to which can go in collaborations. They

collaborate for technical support mostly. The Rock pharmaceutical although did not agree

for collaborating with the firms in the cluster they did agree about their collaboration with

a firm in Karachi which is their export partner as well. So overall, the participating SMEs

291

agreed about the importance of collaborations in the innovation of their organizations

although their collaborations are different in ways and means from each other. The

summary of this theme is given in table 5.2.4

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Icebe

rg

Rock

Collaboratio

ns and level

of mutual

trust

Agree

d

Strong

ly

Agree

d

Strongl

y

Agreed

Strong

ly

Agree.

Strongl

y

Agreed.

Stron

gly

Agree

d.

Stron

gly

Agree

d.

Agree

d.

5.2.5 Value addition through collaborations

The researcher tried a probe question to reinforce the finding about the collaboration

theme. The respondent of the participating strongly agreed in unanimity about the

importance and value additions of collaborations to their respective organization whereas

Rock pharmaceutical was the only one which remained neutral , as they have more trust

in their own R&D and do not go to collaborations for innovations. Whereas some

strongly believed that it adds values to the extent that sometimes it triggers innovation in

the firm. The most important values that the respondents stated are the time saving,

technical guidance, cost cutting, profit maximization, provision of insight into market

situation, more value added products can manufactured, broadens the knowledge base as

well as it can help in imports and exports. So the overall responses of the participating

292

firms showed a strong agreement over the questions of adding values to their firms

through collaboration except the Rock pharmaceutical which remained neutral. The

responses are given in the table 5.2.5 below

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Iceb

erg

Roc

k

Value

addition

through

collaboration

s

Strong

ly

Agree

d

Strong

ly

Agree

d

Strongl

y

Agreed

Strongl

y

Agree.

Strongl

y

Agreed.

Stron

gly

Agree

d.

Stro

ngly

Agre

ed.

Neut

ral.

5.3.1 Drivers and sources of Innovation

An important part of the current study was to identify the various sources and drivers of

innovation in the participating firms. The researcher identified this theme from the review

of literature and believed that it will help recognize the various sources which help the

innovations in the participating firms in particular and the clusters in general. The sources

which set the SME innovation base can be broadly categorized as the internal and

external sources however the researcher used this theme to draw collective responses

from the respondents about both internal and external sources. The internal R&D has

been a traditional source of new product innovation and has been considered as one of the

best asset, giving edge over the competing firms and rivals. This makes a close

293

innovation model labeled by the discovery; development and commercialization of

technology (Teece, 1986; Chesbrough, 2003).However there are researchers who put

their weight behind the importance of external sources and open system for more robust

and frequent innovation. They relate that the cooperation mode of SMEs signifies that for

their innovation these SMEs seek cooperation from external world either vertically by

setting up relations with educational and research organizations or/and laterally through

linking up other SMEs(Yao, 2008). The respondents from Hizat Pharmaceutical

unanimously agreed about the internal and external sources of innovation as driving their

innovation process. The internal sources are like the R&D, the employees specially the

technical staff and the most important external driver for Hizat is the Market itself.

Similarly, the respondents from Wisdom pharmaceutical relate the human resources,

especially those who work in the market, the internet technology used in the firm for

doing research as their internal sources and market trends as their external source for

making innovation happen in their organization. The Zinta pharmaceutical respondents

unanimously agreed for the employees, the R&D and the internet technology present in

their firm as internal sources whereas the experts from outside the firm as the external

sources and drivers of Innovation. Although Aries has a comprehensive system for

organizational innovation, the respondents strongly agree that the market research,

market intelligence about who sells what and above all the customers are the main

sources of innovation. The Stanley respondents identified the employees, the market

environment, customers and the collaborators as their important innovation drivers. Delta

pharmaceutical respondents state the employees, the vision of the CEO, R&D and the

educational institutions as the drivers of Innovations. Whereas the Iceberg respondents

294

stated that there are internal sources like the R&D, the technical staff and the external

sources like the customers, competitors, the suppliers and at the very top, the market

itself. Similarly for Rock pharmaceutical internal driver of innovation is the employees

whereas externally it looks to the market, customers and competitors for innovation. This

showed that the most dominant drivers of innovation in the participating organizations

are market, the employees, R&D, customers and the internet technology as these are

mentioned by most of the respondents as the sources of innovation in their organization.

The summary of these drivers is given in table 5.3.1 as below

Theme Hizat Wisdom Zinta Aries Stanley Delt

a

Iceb

erg

Roc

k

Drivers and

Sources of

Innovation

in SME

R&D,

employ

ees ,tec

hnical

staff,

Market

Marketi

ng staff.

Internet

technolo

gy.

Market

trends.

Employ

ees,

R&D,

the

internet

technolo

gy,

External

Experts

of the

field

Marke

t

researc

h,

Marke

t

Intelli

gence,

custo

mers.

Employ

ees.

Market

Environ

ment.

Custome

rs.

Collabor

ators.

CEO

Visi

on,

R&

D.

Educ

ation

al

instit

ution

s.

R&

D.

Tech

nical

staff.

Cust

omer

s,

Com

petit

ors,

Supp

Emp

loye

es.

Mar

ket.

Cust

omer

s.

Com

petit

ors.

295

liers.

Mar

ket.

5.3.2 Idea Sources for new products and services

This sub theme was researched through a probe question in all the participating SMEs so

that the researcher can come up with more detail responses from the respondents in

substantiation of the previous main theme. The ideas for new products and services can

come from various sources. The extant literature suggests that there are internal as well

external resources. Sometimes a more demanding customer can help provide the base for

new product and service. Meeting the customers demand can always help the firm’s

managers to brainstorm and produce innovative ideas (Kristensson et al. 204). Lead

customer innovation is an example where these customers are business clients who are

keenly interested in some kind of specific innovation. These clients are those who

participate in risk taking experiments and innovations in their organizations (Von Hipel,

1986). Some researchers also believe that the human resources are sources of new

product or service innovation in the organization(Cohen and Levinthal, 1990; Rose et al.,

2009; Henard and McFadyen, 2012) however their number cannot be too large as mostly

a large number of employees are preoccupied by the daily routine activities of their

organizations(Nonaka and Takeuchi, 1995). A more dynamic marketing strategy owned

by firms can get ideas from the market through it marketing process (Knight et al.,

1995;Hill, 2001).There are views in the extant literature that networks are of great use to

296

meet the specific needs of organizations to fill up the gap of specific knowledge

deficiency(Gomes-Casseres, 1997). In the current study, the respondents of Hizat

pharmaceutical enumerated market, marketing staff and the technical staff as their idea

sources. The respondents of Wisdom put their weight behind the market, marketing staff

and other employees of the organization for providing ideas for new products and

services. Zinta pharmaceutical termed market, competitors, customers and the R&D

employees as the sources of new product and service ideas. The respondents of Aries

looked more towards the pharmacopeia of advanced countries like USA or UK and the

reference countries nominated by DRA, drug regulatory authority. The respondents of

Stanley strongly agreed for the market trends, the employees, the customers, the internet

searches and market as their innovative product or services sources. The researcher found

the respondents of delta Pharmaceutical convinced about the Market, the customers, the

suppliers and even the competitors as the key sources of new products and service ideas.

Further, the iceberg respondents unanimously agreed about market, customers, marketing

people, and market trends as sources of ideas. The most dominant responses of these

respondents are given in table 5.3.2

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Iceb

erg

Rock

Idea

Sources for

new

products

and

Market,

Marketi

ng

staff.

Technic

Marke

t,

Marke

ting

Staff,

Market,

Competit

ors,

Customer

US

and

British

Pharm

acopei

Market

trends.

Employ

ees.

Mark

et,

Custo

mers,

suppli

Mar

ket.

Cust

omer

Mark

et.

Custo

mers.

Mark

297

services al staff. Emplo

yees

s.

R&D

employee

.

a. The

referen

ce

countri

es

nomin

ated

by

DRA.

Custom

ers .inte

rnet

searche

s.

Market.

ers.

Comp

etitor

s.

s.

Mar

ketin

g

peop

le.

Staff

,

cust

omer

s.

Com

petit

ors.

Mar

ket

trend

s.

eting

Peopl

e.

R&D

Table 5.3.2

5.3.3 Knowledge and training level of Staff of the SME

In order to make the organization innovative and keep pace with the contemporary trends,

298

the organizations need to have the best staff equipped with requisite knowledge and

training. As some researchers have viewed that a good pool of skilled and educated

human resources can add to the innovativeness of firms as they adopt technological

advances and meet the labor demand, collect new ideas and absorb these ideas within the

firms (Cohen and Levinthal, 1990; Rose et al., 2009; Henard and McFadyen, 2012). In

the current study this theme is checked mainly to know respondents views of how the

employees are important players for innovation and whether they have the desired

knowledge and training level to carry innovations in their organizations. All the

concerned managers and CEOs from all the participating organizations responded that

they strongly believe in the importance of knowledge and training level of the staff for

making the organization innovative. The respondents of Hizat pharma strongly agreed

that the professional staff has the required level of education to carry out the processes in

innovative ways and the little bit of lack in experience is fulfilled by getting training from

the seniors in the department. The unanimous agreement of Wisdom respondents was that

the level of education and training of staff of Wisdom pharmaceutical is of an extent to

which they can help in carrying innovation. Although there was not a unanimity of views

regarding the knowledge and training level of the respondents of Zinta pharmaceutical,

the researcher presumed an agreement about thus theme, not strong though . The

respondents of Aries pharmaceutical strongly agreed that the staffs who are working with

them for a long time now have the requisite knowledge and training for carrying

innovation. Stanley respondents giving credit to the human resource management

department for selecting and retaining the best human capital strongly agreed that their

employees possess the knowledge and training for carrying innovation in the

299

organization. Although the respondents of Delta believed that the employee development

is a perpetual process, they agreed that the employees posses the required knowledge and

training and wherever they feel their staff need to be trained, they arrange training for

them. The iceberg respondents agreed about the potential knowledge and training of the

employees for innovation however they also seemed convinced that there is a need of

further training in some areas. Similarly the respondents of Rock pharmaceutical also felt

that sometimes there is further training required, especially when they bring new

machines. In that case they hire trainers for the employees who get trained through those

specialized people.

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delta Icebe

rg

Roc

k

Knowledge

and training

level of Staff

of the SME.

Agreed.

Need

improv

ement

in

training

level.

Strong

ly

Agree

d.

Agreed.

Need

improve

ment in

training

level.

Stron

gly

Agree

d.

Strong

ly

Agree

d.

Strong

ly

Agree

d.

Agree

d.

Need

impro

veme

nt in

traini

ng

level.

Agr

eed.

Nee

d

imp

rov

eme

nt

in

trai

nin

g

300

leve

l.

5.3.4 Challenge of idea stealing/ copyright

The researcher tried to investigate this theme because in the extant literature it was

reviewed that there are problems like this which does not help the innovation process in

the long run. The original works of the firms are sometimes imitated by the other firms

and hence take the advantage as the imitations are much cheaper than innovating. The

copyrights law and rules vary from region to region and hence in those states which do

not observe high copyrights it is better to protect the firms innovation from being theft so

that the investments of firms for growth are protected(Fan, Gillan, & Yu, 2013).The

developing countries contribute about 2/5th to the world’s research and spend around one

quarter on R&D yet their inventions are claimed to be imitative (Lorenczik & Newiak,

2012). However some researchers noticed a 47% failure of innovators as compared to

only 8% failure rate for late entrants. Imitation of innovation is owned by those firms

which have little skilled people, shortage of finances and low experimental equipment’s.

These are however followed by the imitating firms mainly for the advantages to face low

risks and low investments(Yao, 2008).

In the current study the researcher probed as to how the participating firms look to this

issue. The Hizat pharmaceutical responded in agreement that this indeed is a challenge to

protect the innovative ideas. Their main concern was the leaving employees who join

other firms for better salaries. When they leave, they take the ideas regarding the

organizational innovation and that is how the idea stealing becomes a challenge. However

301

the respondents of Wisdom strongly disagreed about the issue of idea stealing claiming

that this is an open industry and the scientific base of this sector does not help protect

much of what we have or what other firms have. Because mostly all these relevant

information are readily available on the internet. The respondents of Zinta pharmaceutical

also did not consider it to be a serious threat. Similarly the respondents from Aries and

Stanley also did not view it as a potential threat. So the researcher found that the

Peshawar cluster has not viewed the copyrights problems as to be something very serious.

In the Nowshera cluster, Delta pharmaceutical considered the idea stealing as threat as

well as an opportunity as the CEO/Director said that;

To be honest in this field, if there are

stealers, this means that you have to take

extra care, in this sense, you create more

and more innovation in your organization,

more frequently.

However the other firms in the same sector like the Iceberg and Rock pharmaceutical also

did not view it as a threat. Overall, only two firms, Hizat and Delta pharmaceuticals

viewed it as a challenge and the researcher found one thing in common in both these

pharmaceuticals, both of them are pioneers in their respective firms in as much as the

participating firm’s ages are taken into account. This gave the substantiation to the

theoretical/ literature claim that the risk involved with innovating firms sometimes avoid

pioneering although they may know about the potential benefits about innovating(Zheng ,

2006).

302

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delta Iceb

erg

Rock

Challenge of

idea stealing/

copyright

Strong

ly

Agree

d.

Strongl

y

disagre

ed.

Disagr

eed.

Disagr

eed.

Disagr

eed

Strongl

y

Agreed.

Disa

gree

d.

Disag

reed.

Table 5.3.4

5.3.5 Inspiration from Competitors Products

A somewhat relevant to the previous theme, the researcher wanted to triangulate the

findings of the previous theme by probing whether the respondents agree or not about

getting inspiration from the competitors product. Also, there was the intention to see if

competitor can also play the role of driver of innovation. The respondents from nearly all

the participating organizations disagreed. Only the Delta pharmaceutical and Rock

pharmaceutical in the Nowshera cluster agreed about the fact that they get ideas from the

market and hence need to look into the competitor’s products. Therefore the researcher

found this theme to be the one which can be discarded as the respondents from the

majority of the participating firms think it to be covered in previous themes.

5.3.6 Customers Input as driver of Innovation

During the review of literature, the researcher found that the customers are an important

player of innovation. It is one of the most important external players. As Kristensson et

303

al. (2004) suggested that the competent customers having a vision can trigger the

management to brainstorm and innovate. Customer’s involvement is a good way to bring

information to the innovation processes of an organization. This works on the basis of the

fact that customers know their needs best and when they have a chance, they can best

tailor the products according to their needs, better than any other producer does. Most of

the customers are well versed about the market prevailing situations (Gassmann, 2006;

Von Hippel, 2005). In the current study all the participating firms have agreed that

customer is a very important factor in the innovation process but there are industry

specific conditions to this fact. The majority of the participating organizations asserted

the importance but told that there is no direct contact with the customers rather some

middlemen or firms play the role of a bridge in this connection. In case of Hizat

pharmaceutical, this feedback and reviews of customers/patients come through

franchises, distributors and the doctors. The respondents of Wisdom pharmaceutical

agreed outright about the importance of customer feedback in the innovation process and

they consider the marketing people as the players who get these ideas through doctors.

Similarly, the respondents of Zinta pharmaceuticals also termed the customer feedback as

the central point of importance and their marketing people share the feedback they get

from market with the production and quality control department. Aries pharmaceutical go

an extra yard as per as the customer feedback is concerned as they do not merely get the

feedback through market team rather they use the innovations of social media as

whatsapp and facebook to interact with the customers, so much is customer feedback

crucial for them. Stanley pharmaceutical get customer feedback both directly from their

bigger customers like the distributors and individual customers like the patients through

304

doctors. Delta pharmaceutical associates the customers as the origin of innovation.

Iceberg pharmaceutical also agreed about the fact that customer feedback is important but

they also think that they get the feedback through doctors who review the products in

light of patient’s responses. Rock pharmaceutical value the inputs of the customer too but

they too take the feedback from the medical practitioners through the marketing staff and

not directly from the customers.

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delta Iceber

g

Roc

k

Customers

Input (as

driver of

Innovation)

Strong

ly

agreed

.

Strong

ly

agreed

.

Strongl

y

agreed.

Strongl

y

agreed.

Agree

d.

Strong

ly

Agree

d.

Agree

d.

Agr

eed.

Table 5.3.5

5.3.6 Role of Suppliers in innovation diffusion and Adoption

Gäre and Melin( 2011) put the suppliers role right up there with customers as an

important factor for organization to innovate.Similarly authors like De Winne and

Sels(2010) also suggested that the role of suppliers is important in the innovation process.

Suppliers role in innovation is highly rated as more than 70 percent SMEs rate it from 4

305

to 5 on likert scale. As the ups and downs in the supply of raw material can become a big

external barrier for innovation in organization(Saigosoom, 2012). The extant literature

suggest that this is an important factor for firms to innovate and that is the fact that the

researcher wanted to check whether it plays any role in the diffusion and adoption of

innovation in the participating firms. The respondents of the Hizat pharmaceutical argued

about the vitality of the suppliers in their innovation process so much so that they

consider it to be a strategic partner for long run. Since this was not reviewed in any

academic literature during the review which gives the feeling of it being a grounded or

emergent theme to the researcher. The respondents of the Wisdom pharmaceutical did not

consider it as an important factor as they formulate only the basic generic products and

for that the raw can be acquired from any suppliers easily. Zinta pharmaceutical also

found suppliers as an important external player in the dynamics of the innovation process.

Aries pharmaceutical also strongly agreed about the fact that since suppliers can help in

identifying the current market trends, their role in the adoption and diffusion of

innovation is highly important, that is why they establish long term relationship with

them. However Stanley pharmaceutical terms it as one very important factor as its

respondents agreed that the organizational innovation process is possible only because of

the timely procurement of quality raw as their slogan is “QUALITY INPUTS RESULT

IN QUALITY OUTPUTS”. The respondents of Delta pharmaceutical overall agreed very

strongly about the role of the suppliers in their innovation process and the CEO collected

his thoughts by saying that if the demand and supply phenomenon is taken into account,

process of our product innovation starts up with the customers and completed by the

producers upon the provision of the quality raw material by the suppliers. Similarly, the

306

respondents of Iceberg strongly agreed about the importance of suppliers role in the their

innovation process and they even went to the extent that the suppliers actually define the

process to be either innovative or otherwise because if they do not provide you the best

raw material for those molecules which they have researched, the process of innovative

products cannot be completed in time. Rock pharmaceutical also agreed that suppliers

share the information about what is the trend and what is bought in bulk. So overall all

the participating organizations agreed about the fact that suppliers play a decisive role in

the adoption and diffusion of innovation process except for Wisdom pharmaceutical. The

responses are summed up in table 5.3.6

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delta Icebe

rg

Roc

k

Role of

Suppliers in

innovation

diffusion

and

Adoption

Strong

ly

agreed

.

Disagre

ed.

Strongl

y

agreed.

Strong

ly

agreed

.

Agree

d.

Strong

ly

Agree

d.

Agree

d.

Agr

eed.

5.3.7 Screening and evaluating Ideas

After knowing about the factors which can play a role as drivers of innovation in the

participating organization, the researcher tried to probe how the ideas are screened and

307

evaluated. This is important especially as it can give an insight about the organizational

structure, culture and behavior towards the innovative and creative ideas. Because in

some closed and strict organizational structures, ideas cannot groom as the high ups

follow their own methods and do not intake from any of the middle managers or

supervisory level managers. The Hizat pharmaceutical respondents added in this

connection that they connect in formal meetings of all concerned departments and their

ideas are discussed there in technical terms. Wisdom pharmaceutical respondents to the

question regarding this question showed that the director of the firm holds the key in

making the decision whether to take or drop any idea. So here it showed that the system

does not consider the ideas and inputs of others although it takes the feedback but

decision making power lies with the director. The researcher probed this question from

Zinta pharmaceutical. The aggregate of the responses can be summed up like this that

there is feedback of management based on market demands but still the final authority is

the Director himself whether to take or drop any idea. The respondents of Aries

unanimously agreed about the fact that all the stakeholders give ideas and even criticism

is also taken positively but in the end the board of director in its meeting decides which

idea is to be taken and which one has to be dropped. On the contrary, Stanley

pharmaceuticals is not all that open to junior level management as per as the idea

evaluation and screening is concerned. They follow hierarchy and protocol while the

decision about ideas pick and drop lies with the top management only. In Delta

pharmaceutical, idea screening and evaluation is done by the board of directors who see

the commercial value of the ideas. Similarly, Delta pharmaceutical also get the ideas

screened through the board of directors meetings. However, the idea screening and

308

evaluation of Rock pharmaceutical follows the structural formalities and it comes from

the bottom to top through the immediate manager. The aggregate responses of all

participating firms are summarized in table 5.3.7

Theme Hizat Wisdom Zinta Aries Stanley Delta Iceb

erg

Roc

k

Screenin

g and

evaluatin

g Ideas

Forma

l

Meetin

gs.

Director

picks or

drops

ideas.

CEO

makes

decisio

n on

feedbac

k of

manage

rs. No

board

meeting

.

Board

of

director

s

decides

. Ideas

are

taken

from all

stakeho

lders.

Top

Manage

ment

screen

ideas.

Board

of

directo

r

evalua

te if

the

ideas

are

sellabl

e.

Boar

d of

Dire

ctors

eval

uates

the

ideas

.

Hier

arch

y

and

Stru

cture

is

follo

wed.

5.4 Role of Marketing Research in finding the Environmental Conditions

This section of the interview guide helped the researcher to probe about the role of

marketing research, the importance of R&D and the environmental conditions which

either promote or hinder the adoption and diffusion of innovation in the participating

309

firms. The researcher also believes that an important outcome of this section of the

interview guide, specially the probe question regarding the marketing research

triangulates the previous findings like how the ideas are screened and evaluated. New

ideas exist because of a dialogue carried out by individuals through their social

interaction in quest of developing new products , rendering new services and carrying on

new organizational processes(Leonard andSensiper,1998 ;Brown and Duguid,1998).A

deep insight into the issue reveals that ideas do not come up spontaneously rather are the

result of a complex and a variety of overt and covert processes(Schulz and Hoegl,

2008).The firms in quest of this target, deploy a strict marketing intelligence system

through innovating, creating opportunity-ability which helps in floor setting for market

responsiveness, market externalities and flexibility (Sambamurthy et al, 2003). The

researcher of the current study tried to investigate the theme by asking about the nature of

marketing research. The theme was probed through (1) whether there is formal or ad hoc

research (2) is risk calculated and test marketing done prior to commercialization of new

products.

5.4.1. Market Research: Formal or Ad hoc

The extant literature revealed that those firms which have stronger R&Ds are more into

innovative products than those which do not invest in R&D. Although the small firms are

not normally considered much for R&D activities, the researcher tried to investigate the

phenomenon in the participating SMEs. The unanimous response from all the

respondents of Hizat pharmaceutical showed a strong agreement that there is formal

marketing research involving the R&D and the marketing employees who try to figure

310

out the opportunities in the market and the organization makes the necessary adoptions.

The researcher found a strong disagreement about Wisdom pharmaceutical that there is

no R&D and the research to adopt innovations in this organization is not formal. On the

contrary to Wisdom pharmaceutical, Zinta pharmaceutical practice a formal research for

identifying gaps to work out innovatively, the respondents mark there formal research as

a business secret and did not share how they carry it. A rather unique way is adopted by

Aries and Stanley to have a mix mode where it follows a predominantly informal

research based on customer feedback but at some other time follow the formal research

where it follows a formal research involving it R&D. The latter happens specifically

when the customer feedback is not substantial. In delta pharmaceutical research is formal

through R&D whereas the Iceberg pharmaceutical in the same cluster at Nowshera

conducts research through the marketing people without having designated procedures in

an informal way. The Rock pharmaceutical also has a mix research method for market

gaps identification as it follows both formal R&D research and informal research. Hence

only Wisdom pharmaceutical among all the participating firms is the one which does not

have a proper marketing research or not even the ad hoc research for bringing the

innovative productions or processes as it operates in a more routine method. The

responses are summarized in table 5.4.1

Theme Hizat Wisdom Zinta Aries Stanley Delt

a

Iceber

g

Roc

k

311

MarketR

esearch:

Formal

or Ad hoc

Strongly

Agree

for

formal

research

by

R&D.

Strongly

Disagree

d.

Strongl

y

agreed

for

R&D

researc

h.

Mix

mode

, both

forma

l and

infor

mal.

Mix

mode,

both

formal

and

informa

l.

For

mal

Rese

arch.

Con

duct

ed

by

R&

D.

Inform

al

Resear

ch

carried

by

Marke

ting

people

.

Mix

ed

mod

e of

resea

rch.

Table 5.4.1

5.4.2 Risk calculation and test marketing

The researcher tried to probe whether there is some mechanism of calculating the risk

attached to making any innovations in the participating firms. The respondents of Hizat

Pharmaceutical strongly agreed that without proper risk calculation and test marketing,

the innovations of organization cannot be commercialized. However the respondents of

Wisdom pharmaceutical did not respond to this probe question positively and the

researcher found that they d not test market or calculate the risks. All the respondents of

Zinta pharmaceutical strongly agreed that there is proper test marketing and risk

calculation procedures for each innovation to take place otherwise it will not be possible

to make these innovations a success. In Aries pharmaceutical, R&D works for assessing

the risk associated with any innovative product before its commercialization. The Stanley

312

management also agreed for test marketing before commercialization and termed it rather

unwise to commercialize without test marketing. Delta pharmaceutical respondents also

agreed explicitly about the importance of test marketing and risk calculations of their

innovative products prior to commercialization. The respondents of Iceberg unanimously

agreed about the test marketing and risk calculation and added that they produce on low

scale the initial batches of their innovative products and until they get reviews from the

doctors and practitioners, they do not commercialize. However the respondents of Rock

pharmaceutical added that it is actually a regulatory act too. When they get permission

from the concerned ministry, they are directed to prepare the initial batch which is tested

before commercialization. Again, the aggregate of the responses showed that only in

Wisdom pharmaceutical, there is no test marketing and risk calculation whereas all the

other have considered it very important. The Wisdom pharmaceutical produce more of

the routine products than the innovative products therefore they may not test them or

calculate risk attached to it. The findings are summed in table 5.4.2

313

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Ice

ber

g

Roc

k

Risk

calculation

and test

marketing

Strongly

Agree

for risk

calculati

on and

test

marketin

g.

Strong

ly

Disagr

eed.

Strongl

y

agreed

for risk

calculat

ion and

test

marketi

ng.

Strong

ly

Agree

for

risk

calcula

tions

and

test

market

ing.

Strongl

y Agree

for risk

calculat

ions

and test

marketi

ng.

Strong

ly

Agree

for

risk

calcula

tions

and

test

market

ing.

Str

on

gly

Ag

ree

for

ris

k

cal

cul

ati

on

s

an

d

tes

t

Stro

ngly

Agre

e for

risk

calc

ulati

ons

and

test

mark

eting

as it

is a

regul

atory

requi

314

ma

rke

tin

g.

reme

nt

too.

Table 5.4.2

5.5 Barriers to the Spread of Innovation

During any process of change and knowledge flow, there are often resistances among

which sometimes, there are some which take positive corrective measures to define and

implement innovation (Maurer, 1996; De Jager, 2001). Resistance to the diffusion of

innovation is different from inertia in organization. While resistance is a state of re-action

to change, inertial state of organization is the state of inactiveness over a long period of

time. Firms do not normally want to innovate and change according to the external

modifications and changes having the difficulties and lack of administrative potential. In

economic terms, inertia is the state of a firm where it lacks a plasticity to capitalize on the

persistence of forms and functions (Rumelt, 1995; Bazerman, 2005).The inertial state of

firm is related to the routine exercises of firm which are non-deliberate, repetitive,

contextual and process related. Employees in an enterprise where routine is prevalent

saves time and less consummate them as they can get away with mental stress and

tiredness. They make use of the scarce information. However if this kind of routine work

stops the organization to undertake any innovation, this situation is a real alarm (Egidi,

1996).

As a matter of fact, the research has found some techniques and strategies to solve the

315

issue of inertia but the exact solution is still an open challenge for the reason that the

cultural inertia adds to the fragility conventional operative approaches based on technical,

sectoral and financial players. This form of inertia presents serious hurdles to the

diffusion of innovation even in advanced economies. In some organizations and fields

imitational behavior and the launching of a positive word of mouth process may help to

inculcate a creative behavior and positive conditions to establish contact channels,

channels of information , relationship with research centers and clusters and hence induce

an innovation based developmental policy. Sometimes, however, based on some

important operational problems and lack of proper diagnosis of inertia, firms prefer to be

an Inertial than active (Cannarella and Piccioni, 2007). The barrier to the adoption and

implementation of innovation is an important topic but it is studied in developed and

industrialized countries more than in less and developing countries (Bell and Pavitt,

1992).Barriers to innovations (as oppose to facilitators which motivate innovation) are

those factors which can hamper innovation in any way. It is important to find out the

impact of the barriers on innovation processes; however it is difficult to measure the

consequences of the barriers on the innovation. The barriers of innovation can be

categorized as exogenous or external and endogenous or internal barriers. The external

barriers include obstacles to supply, demands and environmental barriers. The difficulties

in receiving the raw, financing and technological knowledge are included in supply

related barriers. The market constraints, customer’s needs meeting and perception of risk

in innovation processes are demand oriented barriers. The government regulations, policy

implications and anti-trust measures are categorized as environmental barriers. Whereas

internal barriers can be placed into firstly, resource based such as; lack of funds,

316

technical skills, and lack of management time. Secondly, into culture and system

oriented, out dated accountancy system. Thirdly, behavioral barriers like the top

managers fear of risk and employees resistance to accept change and innovation (Rush

and Beassant,1992).Common sense will tell that the relationship of barriers to innovation

is negatively associated with firm performance however another facet makes this

assumption more complicated, if the barriers act as stimuli to innovation rather than

obstacles and hurdles. As the SMEs lag behind in internal resources and expertise, it

needs technology and resources from external networks and collaborators to overcome

the barriers. More barriers mean more networking needed.

As a matter of fact, SMEs everywhere face more challenges and inhibitors as compare to

large firms but in developing and less developed countries the insufficient technology and

policy infrastructure are more threatening. The lack of education and on job training can

be a constraint and barrier. Also the financing of banks for innovation activities is another

barrier. Further, the cultural and norms control effect on the manufacturing of new

products can be one other important barrier(Hadjimanolis, 1999).

The researcher wanted to study the barriers to diffusion of innovation across the

participating firms. The researcher identified two types of barriers for the diffusion of

innovation during the review of literature which are (1) lack of expertise or skill barrier

and (2) financial barriers and tried to test these in the participating firms in the current

study. The aggregate of responses are discussed in the sub themes below.

5.5.1 Lack of expertise

During the current study the researcher probed whether the participating firms find it

317

difficult to have the expertise for the adoption and diffusion of innovation. Two out of

three respondents from Hizat pharmaceuticals agreed that there is a lack of expertise for

certain specific innovations to diffuse in the organizations more so because of the fact

that the state of the art laboratories need to be operated by people skilled with latest

technical expertise. Wisdom pharmaceutical disagreed for lack of any expertise as they

are satisfied with the level of education and skill of the employees. Zinta pharmaceutical

also disagreed strongly for lack of expertise and skills as a barrier. The respondents from

Aries pharmaceutical added that internally they are satisfied with the expertise of the

employees but externally they face overwhelming problems from the government

agencies. This is an emergent theme for the study as government agencies are barriers to

the adoption and diffusion of innovation in the organization. The respondents of Stanley

also agreed that this is a barrier and there are problems especially in the level of

education of the employees which may not help in innovation adoption process although

there maybe experience. The respondents of Delta pharmaceutical strongly disagreed

about any lack of expertise as a barrier to the adoption and diffusion of innovation rather

they asserted that all their process like the marketing process is unique and innovative;

production is innovative as well the management practices are innovative. The

respondents of Iceberg termed the lack of expertise as an important barrier and they also

faced it as sometimes they need to update the expertise level as per the changes and

advancements occurring in technology and may not be able to do so however they

counter with it by seeking help from experts working in other organizations for long time.

Hence, networking is utilized. Similarly, the respondents of Rock pharmaceutical also

considered lack of expertise as a barrier but they also take help from expert managers

318

working with multinational firms like Merck. This is done specially when they produce

some new molecules and they also try to overcome this barrier through networking. The

researcher found that all the participating firms consider the lack of expertise for

innovation as an important barrier, however some of the firms overcome through

establishing networking and collaborations.

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Iceb

erg

Roc

k

Lack of

expertise

as a

barrier

Strongl

y Agree

Strongl

y

Disagre

ed.

Strongl

y

disagre

ed.

Strongly

disagree.

Strongl

y

Agree.

Disagre

e.

Agr

ee.

Agre

e.

Table 5.5.1

5.5.2 Financial Barriers and role of banks

One of the most important internal barriers can be lack of funds and financing to the

SMEs (Pietier, 1984; Rush and Beassant, 1992). The lack of financing has a massive

impact during the implementation stage of innovation process in the SMEs (Tidd et al.,

1997). During the current study the researcher tested this barrier by probing the

319

participants from all the case study SMEs. The responding participants viewed this

problem differently and it was noted that this is a case to case barrier. There seemed to be

a strong disagreement that financing is a problem for them and also they refrain from

taking bank loans for the hidden strings attached to it. The respondents of Wisdom

strongly agreed that they face financial problems but they also did not want to borrow

from banks as they term it not worthy due to the high interest rates. Zinta pharmaceutical

also disagreed about the financial problems and they also preferred not to consider loans

from banks for carrying out innovations. Aries pharmaceutical considered financial

problems as a barrier to innovation but they also not opt for bank loans. Stanley neither

considers it as a problem nor does it make loans an option. To Delta pharmaceutical

financing is a barrier for innovation process and getting bank loans is not easy either

because banks lend loans to firms attached to certain lobbies. This is also marked as a

unique emergent barrier. The iceberg pharmaceutical also considers financing as a

problem but it does not considers bank loans as they believe there are always strings

attached to it. However, Rock pharmaceutical does not have finance as a barrier to their

innovations neither does it borrow from banks as they have socially sufficient funds

available to them. The researcher found that most of the participating firms do face

financial problems but the bank loans system is either very tricky or very heavily rated

for the high interest rates. That is why even if these firms feel the need for borrowing,

they try to manage from other sources but not go to the bank loans. There is a balance as

4 out 8 participating firm considered financing as a barrier to carry innovation and the

remaining 4 voted against this as a barrier. However, a unique unanimity is found in all

the responses for not considering bank loans to overcome the financial barriers. This is an

320

indication of the fact that there is either lack of trust on banks for incurring hidden

charges or the lengthy procedures. The summary is given in table 5.2.2

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delta Iceb

erg

Roc

k

321

Financial

Barriersand

role of

banks

Strongl

y

disagre

e

Strong

ly

Agree

d for

financi

al

barrier

s but

banks

are not

an

option.

Strongl

y

disagre

ed.

Agree

for

financia

l

barriers

but

loan is

not a

solution

.

Disagr

ee as

we do

not

have

financi

al

barrier

.

Strong

ly

Agree

for

financi

al

issue

but

banks

are not

suppor

tive.

Agre

e.

But

bank

loan

s

have

strin

ged

attac

hed

to it

so

we

do

not

cons

ider

that.

Dis

agre

e

for

fina

ncia

l

barr

iers

and

do

not

con

side

r

ban

k

loan

s.

Table 5.2.2

5. 6 Role of Government authorities like SMEDA

One of the most important environmental factors reviewed in literature is the government

322

role. The role of governments becomes more important as they need to steer innovation

by making the conditions innovation friendly through introducing social capital

frameworks, cooperation and reciprocity for learning(DePropris, 2002). On the contrary,

some studies rate the government policies and regulations as a potent barrier as much as

the financial barriers and lack of skills in the workforce (Hadjimanolis, 1999). The

government role, be that is regulatory or supporting, can either encourage or discourage

the firm innovation policy. By providing financial support and relaxation through

breaking tax, the governments can make the environment conducive for innovation

adoption whereas it can derail the innovation strategy of firms by strictly regulating

them(Damanpour,1991 ;King and Anderson,1995 ;Toranatzky and Fleischer , 1990 ;

Scupola,2003).The participating firms in the current study unanimously and strongly

agreed that there is no support from the government and the role of SMEDA, an agency

specifically made for supporting the small and medium enterprises is also not worth

mentioning. Hizat, Wisdom and Zinta pharmaceutical is found to be critical about the

government in general and SMEDA in particular for not playing its due role. Aries

termed these two as barriers straight away although SMEDA officials at times visit just to

show them as doing something. While Stanley considered government and SMEDA as

non supportive, Delta went extra yards by considering them as trouble makers for the

business community through their unnecessary regulations and policies. Iceberg and

Rock also considered the role of government to be discouraging and that of SMEDA as

the one which cannot be called encouraging either as Rock pharmaceutical held the view

that SMEDA does not even help in the concept development and the ministry cause delay

due to which the demanded new products cannot be supplied in time. So it is observed

323

that the government and its concerned agencies are not working in favor of the business

development rather have become barriers by the overwhelmingly no supportive business

policies. The aggregate answers of respondents from all the participating SMEs are given

in table 5.3 as;

Theme Hizat Wisdo

m

Zinta Aries Stanley Delta Ice

ber

g

Rock

Role of

Government

authorities

like SMEDA

Strong

ly

disagr

eed for

any

positiv

e role

of

govern

ment

Strong

ly

disagr

eed for

any

positiv

e role

of

govern

ment

Strongl

y

disagre

ed for

any

positive

role of

govern

ment

Disagre

ed for

any

positive

role of

govern

ment.

Strongl

y

disagre

ed for

any

positive

role of

govern

ment

Strong

ly

disagr

eed for

any

positiv

e role

of

govern

ment

Str

on

gly

dis

agr

ee

d

for

an

y

po

siti

ve

Stron

gly

disagr

eed

for

any

positi

ve

role

of

gover

nmen

324

rol

e

of

go

ver

nm

ent

.

t

Table 5.3

5.7. Impact of adoption of innovation on SME Growth

Innovation can be said to have substantial amount of impact on firm effectiveness but

empirical effect on performance is always hard to represent. However investing more in

R&D can guarantee competitive advantage over firms having less competencies in

R&D(Vollenhoven and Buys, 2010).The empirical outcomes of research carried out has

emphasized on the fact that if an organization remains innovative for a longer period of

time, there are likely chances that it persist with its competitive advantage for longer(Le

Bas and Scellato, 2014).Being persistently innovative means that a firm can have a far

reaching impact on the innovation fields incorporating in economics, can leave its mark

on the firm long term strategic management and above all the public policy concentrated

325

innovation(Peters, 2009). If the firm persistence is substantiated, it would second the

Endogenous Growth theory which relates the persistent and long run economic growth to

be a function of the firm attainment of technological knowledge(Romer, 1990).The

strategic management point of view also suggests a persistent loop of innovation and this

will make the firm standout and will give the firm a competitive advantage beside inter-

firm performance sustainability(Ganter and Hecker, 2013). The innovation rate of the

firms defines their destiny for future performance (Banbury and Mitchell, 1995;

Damanpour, 1991). The more the efficiency of the firm in products processes and

services, the more it meets demands of the firms and can even create the opportunity for

firms to enter new markets (Brown and Eisenhardt, 1995; Burgelman, 1991). Literature

also suggests that the SMEs face a very important challenge of the prominent changes in

its environment. These uncertainties leave the entrepreneurs with no other option but to

think as to how to get a competitive advantage over the rivals firms operating in

knowledge based economy (Damanpour and Evan, 1984).An enterprise can only survive

if it adopts the capability of technological innovation. A competitive advantage can be

gained with the acts of innovation in the very broader sense; adopting new technology as

well as adopting new methods for doing things (Porter, 1990).Theorists consider

innovation more distinct from invention as innovation is a useful exercise having

practical applicability, a distinguishing feature of innovation from invention. Innovation

practically contributes to the performance of the enterprise (Schetze and Gibson, 1997;

Cooper, 1998).

All the participating SMEs consider innovation has an impact on the performance and

growth of the firm. Hizat pharmaceutical associated its importance to the amount of

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competitive advantage it brings to the firm resultantly the market share is increased. The

market demand can be met by being innovative. Wisdom pharmaceutical consider

diffusion and adoption of innovation important as it improves the firm performance

overall leading to an increased profits and market shares as it adds uniqueness. Zinta

pharmaceutical also viewed that the adoption and diffusion of innovation make the

organizations grow. Aries pharmaceutical also suggest that since adopting innovation

improves the market share, it increases the growth of the firm. Stanley added that the

reason why SMEs adopt innovation is that they want to grow. Delta pharmaceutical

strongly emphasized that not only can we associate the growth of SMEs with innovation;

they are the only sources for the survival of these SMEs. The Iceberg pharmaceutical said

that being innovative means being competitive and thus growth is ensured. Similarly,

Rock pharmaceutical also agreed with the fact that innovation gives firm competitive

advantage over other firms. So there is a strong unanimity among all the eight

participating organizations about the importance of innovation for growth of the SMEs.

So, all the cases strongly agreed that the adoption of innovation is important for

organization growth and is positively related to growth.

Theme Hizat Wisdo

m

Zinta Aries Stanle

y

Delt

a

Icebe

rg

Roc

k

Impact of

adoption of

innovation

on SME

Growth

Strong

ly

Agree

d that

innova

Strong

ly

Agree

d that

innova

Strong

ly

Agree

d that

innova

Strongly

Agreed

that

innovatio

n has

Strong

ly

Agree

d that

innova

Stro

ngly

Agre

ed

that

Stron

gly

Agree

d that

innov

Stro

ngly

Agre

ed

that

327

tion

has

positiv

e

impact

on

growth

.

tion

has

positiv

e

impact

on

growth

.

tion

has

positiv

e

impact

on

growth

.

positive

impact on

growth.

tion

has

positiv

e

impact

on

growth

.

inno

vatio

n has

posit

ive

impa

ct on

grow

th.

ation

has

positi

ve

impac

t on

growt

h.

inno

vatio

n has

posit

ive

impa

ct on

grow

th.

Table 5.4

5.8 Conclusion

This chapter made an integral part of the thesis because in this chapter the researcher

tried to bring together the responses of all the case SMEs. During this cross case analysis,

the research found that all the participating SMEs except wisdom tend have an

entrepreneurial culture and structure. The sizes of the SME in terms of infrastructure and

the numbers of human resources have impact on the adoption and diffusion of innovation.

All the case study SMEs approved their processes for making their SMEs innovative

although they have different procedures. All the case SMEs have different players for

making their SMEs innovative. The development of innovations from infancy to

marketing is associated with the market role, the collaborations with the academia and

business partners, vision of CEO and the employee skills/education. The diffusion of

innovation theory of Rogers entails the rate of innovation diffusion as an important

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characteristic which defines the whether the organization is an innovator or a follower. In

the current study, the researcher found that Delta pharmaceutical can be categorized as an

innovator for its role of setting up the firm at a time when there was no other firm

especially in the specific cluster in which it is operating. The other cases including Hizat,

Zinta, Aries, Stanley, iceberg and Rock are early adopters whereas Wisdom is a late

adopter which relies only on formulation and the rate of innovation adoption is

comparatively slow. The case study firms agree with the fact that they share knowledge

sources so that they can make the firm more innovative but Rock is an exception.

Similarly all the case study SMEs value collaborations as important for making their

SMEs innovative however the nature of collaboration and the level of mutual trust therein

are different. As per the drivers of innovation is concerned, the market, the employees,

R&D, customers and the internet technology are viewed as vital in the participating

cases. Although the cases seem to have faith in the fact that there is always room for

improvement, they are convinced that the training and expertise level of the employees is

sufficient for current ventures. The is a disagreement for the idea stealing as majority of

the cases reported that this is an open market and system and that is why idea stealing is

not a barrier rather it is a stimulus for persistent innovation. The participating firms all

except wisdom agreed for a positive role of suppliers in innovation diffusion. While

making the innovative products, the role of test marketing and market research is

considered by seven participating cases as against one, Wisdom pharmaceuticals. The

participating SMEs consider lack of financing as a barrier but they do not consider

borrowing from banks as the interest rate is high. The cases consider the government role

as to be negative in making the innovation diffusion process effective. However, it is

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concluded from the case study SMEs that innovation helps in their growth as it ensures

competitive advantage.

Chapter 6: Discussion and Conclusion

This chapter discusses the key findings of the current research in connection with the

main research question where the researcher intended to find whether the diffusion of

innovation in organizations has a role to play in the growth and performance of the case

study SMEs. The findings and conclusions about the research propositions and themes

are discussed in the opening section of this chapter. Also, the themes which are identified

in the main literature review are discussed in line with the research objectives. This also

discusses the implications for theory and practice/policy as well as the implications for

methodology.

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6.1 Conclusions about research propositions and themes

In this section the researcher discussed the findings substantiating the research

propositions.

6.1.1. The nature of organization and type/s of innovation related to the adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan.

The conclusions are drawn for first proposition and a link is established between the

nature of organizations and type/s of innovation under consideration related to the

adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan. In

section 5.1.1 of previous chapter, it is shown that the participating SMEs consider the

nature and structure of organization as important for carrying specific innovation types.

The more entrepreneurial the nature of organization, the more is chance for adoption and

diffusion of innovation. The entrepreneurial nature of organization also depends on the

type of industry or sector the firm works in. The pharmaceutical industry is more research

oriented and knowledge based, so there are more chances of innovation diffusion and risk

taking. The culture of firms in the case study SMEs is flexible enough to change

according to the needs of the industry but all SMEs are not always adoptive to changes

and the degree of change acceptance is even different in different wings/departments of

the same organization. However, this is consistent with the extant literature as

Griffin(1997) suggests this is due to the fact that different situations and contexts need

different processes which result in more robust innovations. However it is also implicit

that structure of an organization is a double edged sword. At the same time it can make

the firm adaptive to innovation or un-adaptive, if it is more centralized and has more rigid

hierarchal structures, marked as an emergent theme from the response of a participant

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from Hizat pharma, the structure sometimes can be a barrier in the adoption of

innovation. Hence, it is observed from the participants views and the researcher own

observation that the SMEs which have more entrepreneurial and innovative in nature and

structures tend to be more open to adoption and diffusion of innovation which help them

grow more faster than those which have rigid and un-entrepreneurial structures.

6.1.2 The role of technological organizational and environmental conditions for the diffusion of innovation in SMEs of Khyber-Pakhtunkhwa, Pakistan.

The conclusion for second proposition related to the role of technological, organizational

and environmental conditions and their link with adoption and diffusion of innovation is

discussed in this section. These conditions are outcome of the researcher findings from

the respondents in the case study firms and are shown in different sections of previous

chapter. As mentioned in section 5.3.1 of the previous chapter technological conditions

and factors are some of the most dominant players for the SMEs to adopt innovation.

Some firms like Zinta actually termed the technological revolution of the recent years as

the most important stimulus of organizational innovation. There are other firms which

also consider that their organizational processes are innovative only because of the

technology they use for their production in the state of the art laboratories. As discussed

in section 5.2.4 of chapter 5, the firms can add values through collaborations and it

largely is steered by the technical or technological need of the firms that they collaborate

within the cluster or outside the cluster. The technical staff is one of the important

internal drivers of innovation as responded by the case study SMEs in section 5.3.1. This

is thoroughly cognizant with the extant literature and in fact the firms which are

persistently growing they do so by acquiring the technological knowledge for economic

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growth (Romer, 1990). Similarly significant are the organizational conditions for the

adoption and diffusion of innovation itself. The internal R&D, the employees, the

organization structure and the culture, the vision of the CEO and owner are all the

organizational conditions and forces which work either to encourage the adoption and

diffusion of innovation or discourage it depending on how these conditions operate.

Although R&D is not as developed in all the case study organizations and is not an

integral part of their innovation activities, employees make the most integral part of

innovation process as exhibited in table 5.3.1. There is a common belief in all the

participating organizations that if there are more employees with technical knowledge

and creative ideas, there will be more innovation in the organization. This belief is

substantiated by the fact that some of the firms do not want greater number of employees

rather they prefer to have more quality employees than huge quantity lacking quality.

This is discussed in section 5.1.2 of previous chapter. Along with the R&D and

employees, the organizational structure and culture is also important organizational

condition/factor for adoption and diffusions of innovation. The structure of SMEs tends

to be more flexible as compare to the big firms. The more the entrepreneurial is the

structure and culture; the more are the chances of survival of SMEs. The case study

SMEs in the current study mostly have entrepreneurial culture and flexible structure for

taking calculated risks and making the processes innovative. There is unanimity in all

except one case study SME that organizational structure is an internal factor for adoption

and diffusion of innovation. As discussed in section 5.1.1 of previous chapter the culture

of organization is a collective set of norms and values and it represents the overall

processes and goals of the organization involving the employees (Khazanchi, 2007).

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Marked as an emergent theme during the data collection, the vision of CEO is another

important internal condition for adoption of innovation in SME. The Visionary CEOs can

sense the importance of different factors both internal like selecting the best human

capital who know the innovations and external factors like collaborations and networking

with business partners as well academic institutions.

Apart from the aforementioned organizational conditions, there are environmental

conditions which were also found as significant for the adoption and diffusion of

innovation in the organization. Among these conditions are the market trends, customers,

competitors, suppliers, collaborations and networking and the government intermediaries.

These environmental conditions have influenced the case study firms either way. The

market and its trends have been observed as one of the most dominant condition for

triggering innovation in these case study firms. As evident from section 5.3.1 and 5.3.2

nearly all the participating SMEs have noticed market, market trends and marketing

intelligence as the main sources for both, new product and service idea generation as well

as making these SMEs innovative. This external player is important to be considered as

cited by authors who wrote that this helps the paradigm shift in firms from imitation to

innovation (Yong & Ho, 2006). Customer is also an important external player which is

considered as a prime partner in the overall innovation process. Contrary to the findings

of some authors like Edvardson et al (2000); (Sundbo), 1997; Easingwood, (1986), this

research found that the customers make a good source of idea generation. As discussed in

section 5.3.1 and 5.3.2 of previous chapter, six out of the eight case study SMEs have

associated the new idea generation for product and service to the feedback of customers,

either direct or indirect. As mentioned in 5.3.6, the competent customers are the ones who

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stimulate the innovation process of the organization. In most cases the feedback of

customers come through to these SMEs indirectly from franchises, distributors and

doctors but in some cases the firms do interact with customers through their websites and

social media apps like facebook and whatsapp. The customers also participate in the

innovation process as their demands which force the management of firms to innovate.

Another external environmental factor which was discussed with the respondents in the

current research is competitors role in driving innovation process but since only two

participating SMEs out of the eight considered it important as they thought since they

study market, they study competitors products too, but they also did not consider

competitors as something directly influencing the innovation process, this was discarded

as a theme as discussed in 5.3.5 of previous chapter. Another environmental condition,

which is marked important in the literature as something right up there along with the

customer, the supplier’s role is highly vital. Consistent with the extant literature the

current study also found that supplier’s role is vital for carrying innovations in the case

study SMEs. Marked as an emergent theme in section 5.3.6, this environmental condition

is said to have an important role as it can be strategic partner for long term. Apart from

only one participating firm, the rest of the participants consider the timely completion of

innovation process only and only when the suppliers provide quality raw material timely.

Furthermore, collaborations and networking where the SMEs share knowledge sources

and expertise also trigger innovations and most often these collaborations are carried out

for getting technical knowledge. As discussed in 5.2.3 and 5.2.4, these collaborations are

carried either between other businesses or with academic institutions. The participating

SMEs substantiated the extant literature by agreeing strongly about the positive role of

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collaboration in diffusion and adoption of innovations. The role of government and its

agencies is identified as an important condition in the extant literature considered

embarking the economy of a country on track. Although some of the previous studies like

that of De Propris( 2002) presents the positive role of the government in making the

business environment more investment friendly and innovation friendly, the findings of

the current study falls more nearer with that of the study of Hadjimanolis(1999) who

considered the excessive regulations of the government as big a barrier as that of the

financial and skill barriers for innovation. The government role theoretically is positive as

suggested by extant literature for making the necessary financial arrangements on one

hand and by making the tax burden lesser on the other hand; the current study practically

observed that the participating firms are dissatisfied with the role of the government.

They consider that the government has caused several problems by being a watchdog and

not a facilitator. The specific governmental agencies established to support small

businesses like SMEDA has also not played its role, not even in a smaller capacity of

concept development and guidance for the participating case study SMEs. As discussed

in section 5.3.3 of the last chapter, these government agencies visit the participating firms

once in a while but not for their betterment just to get some rewards from them. The

participating firms also mentioned that the relevant ministries have somehow curtailed

and hindered their innovation processes by delaying their requests for licensing and

permissions for new molecules. This external environmental condition has brought the

local businesses at stake and because of the non supportive role of these public

organizations; the local small businesses did not flourish.

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6.1.3. The adoption of innovation and growth of SMEs in Khyber-Pakhtunkhwa, Pakistan has a positive relationship with the availability of internal and external sources of innovation

The conclusions are drawn for the third proposition in this section. First it is discussed

that the adoption of innovation is influenced by the internal and external sources of

innovation and then this adoption of innovation leads to the growth of the SMEs. During

the review of literature for the current study, few drivers and sources were identified for

the adoption and diffusion of innovation in SMEs. Then the researcher asked about these

sources from the respondents whether these have the same impact in these case study

SMEs as shown in the extant literature. These sources are internal as well as external. As

discussed in section 6.1.2 of this chapter, these drivers can be technological,

organizational and/or environmental. These drivers include the market, employees,

customers, competitors, suppliers, networking and collaborations and the government

intermediaries. As discussed in section 6.1.2, only two drivers have not a substantially

positive role for innovation adoption and these two external drivers are the competitors

and government agencies. The rest of the drivers play a vital role in promoting diffusion

and adoption of innovation in the case study firms. The important part however is

whether these innovations after being diffused to the participating SMEs plays a role in

growth of SMEs or not and why the efforts are made by the SMEs to be innovative. The

answer to this research question is addressed in more detail in section 6 of chapter 4.

Consistent with the previous work of Rormer (1990), Vollenhoven and Buys (2010), Le

Bas and Scellato (2014), Peters (2009), the current research also found that the

participating SMEs consider persistence in innovation as the way forward for long run

competitive advantage over the competing firms. The researcher observed the conviction

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of participants that when they operate organization innovatively, this helps the firms an

increased share of market which ultimately ensure growth. The researcher found that

these participating SMEs not only innovate for current market demands but innovations

are aimed largely at finding the long range strategic growth and survival for longer period

of years. Also, the nature of pharmaceutical industry is of a kind that if the firms do not

innovate, their molecules will become obsolete and will have an adverse effect on their

sales. Some of the participating firms also believe that the more innovatively they operate

the organizations, the better are their chances for unique products which help increase

their export which ultimately help in firms growth. Thus theoretically it has been

established from the responses of the participating managers and CEOs that with

innovation their organizations grow.

6.2. Implications for Theory

The focus of this research study was to study among other theories, the diffusion of

innovation theory of Rogers and its application in the Pharmaceutical sector of

Khyberpakhtunkhwa, Pakistan. The intention was to see whether the diffusion of

innovation theory can be tested in the context of Pakistan and its province

Khyberpakhtunkhwa which pose a unique, different as well as challenging context for

businesses. The study was successful in finding that organizational innovation diffused

and adopted in the case study organizations has helped these organizations to grow their

size both in terms of number of employees and infrastructure on one hand and market

share and profits maximization on the other hand. This study is unique in the sense that

the diffusion of innovation theory was not tested in the pharmaceutical sector of

Khyberpakhtunkhwa before and since this study was qualitative in nature, it provided

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deep rich data about the case study Pharmaceuticals. This study elaborated the

environmental, cultural, structural and contextual impediments posing challenges for the

case study Pharmaceutical SMEs which may be addressed for better business growth of

this sector in particular and other small business in general. An enabling contribution for

body of knowledge is the finding of this particular study that unlike the western world

and developed economies where the government organizations help promote the

innovations establishing National and Regional Innovation systems, the situation in

Khyberpakhtunkhwa is different. The government agencies are more a threat for being

overly bureaucratic in their approach and not encouraging. The government neither

provides funding to the business community for introducing more innovative products

and service nor does its policy help in smoothing the flow of work for these individual

SMEs.

This study also explored that there are financial barriers in the way of adoption of

innovation and hence the growth of the case study SMEs, these firms however do not go

for loans from the commercial banks even if they are easily granted to them. The reason

for such a refrain is mainly the high interest rates charged by the banks on the business

loans they lend to these SMEs. There is a need of the state/central bank to intervene in

this situation both by making a uniform strategy nationwide and by instructing the

commercial banks to provide soft loans especially to the small businesses which are

nascent. Resultantly these firms will operate innovatively and hence would play a

positive role in economic development of the country.

This study also explored that the vision of the CEO or owner is very important in making

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the SMEs entrepreneurial and innovative although all level of employees play their role

in the process. There are case studies SMEs in this particular research where the vision of

the SME led to a successful implementation resulting in an entirely entrepreneurial setup

although the environmental conditions for the business were not supporting. This suggest

that without a visionary leadership, the adoption and diffusion of organizational

innovation would not have been realized in some of the case studies SMEs as there were

quite a few challenges to be addressed in the beginning. The research also tested the

cultural theory and found that the organizational culture is vital to the diffusion and

adoption of innovation in these SMEs. This is particularly articulated by the fact that

there are managerial practices which make the environment more innovation friendly and

help the workforce for making innovation an integral part of the organization culture.

This study also added a dimension to the existing patterns of adoption and diffusion of

innovation from the firm’s perspective that in order to incorporate technological

innovation in organizations, the firms can best serve their cause by outsourcing part of

their projects to consultants who are credible in the specific field. Another very important

addition to the theoretical knowledge is the exploration of the fact that the various types

of innovations in organizations are influenced by specific market places or niches. Based

on this finding, the organizations can focus on specific geographic areas which demand

specific product types. This study also explored that the process of adoption and diffusion

of Innovation in organization is somehow a cyclic process which starts the loop from

market leading to the producers and completes the loop by commercialization to the very

markets. Although this process involves many other stakeholders like the R&D, the

marketing staff, the product and production department but eventually it meets the market

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which is starting point in most cases. There are instances in this particular study that

highlights the role of the suppliers as important and that it can work as a strategic partner

for the small and medium enterprises in as much as becoming a strategic partner for long

run for importing raw material with these SMEs. This is a contribution of this study to the

existing body of knowledge. An interesting aspect about these local SMEs is that they

normally share knowledge sources with each other in technical ways but when it comes

to the knowledge and information about the sales and market share, they refrain. This is

also a finding of this study about these local SMEs and may serve as a guide for future

research whether it will be better for these sources or not to continue doing so. This study

also introduced that although the government role overall is a question mark, there are

cases where a little push from the government has proved to be a huge boost for these

SMEs. This is marked as triple helix model as in one SME the role of government and

academic institutions have met a high degree of success and has resulted in long term

benefits for the SME on one hand and the society on the other hand. This highlights the

importance of the government role and it can be anticipated that should there be more

encouragement and support from the government, the small business fraternity can groom

further. Last but not the least, this study has developed an operational definition of

Organizational Innovation in light of the literature reviewed in detail. This definition can

help and facilitate the future research of this nature and context.

6.3. Implication for Policy and Practice of Future Trends

This study upholds some policy and practice implications for the case study SMEs. The

study has the following implications for these SMEs and government.

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1. This study highlighted that although the government role overall is a question mark,

there are cases where a little push from the government has proved to be a huge boost for

these SMEs. This is marked as triple helix model , a government pulled triple helix

model( Etzkowitz and Zhou, 2007) as in one SME(Delta pharmaceutical) the role of

government and academic institutions have met a high degree of success and has resulted

in long term benefits for the SME on one hand and the society on the other hand. This

highlights the importance of the government role and it can be anticipated that should

there be more encouragement and support from the government, the small business

fraternity can groom further. The government needs to be more proactive in this regard

and should make the departments like SMEDA more functional so that they should

establish with these SMEs in their innovative ventures from concept development to

commercialization phase.

2. The government can make the concerned ministries more innovative by making

internet technology more prevalent to decrease the adverse role of filing of documents

from the SMEs to these ministries which takes a whole lot of time and as such is a

potential barrier in making the smooth adoption and diffusion of innovation. This will

help in minimizing the time span taken by the concerned ministries for the

documentation. Resultantly, the SMEs will be able to introduce their innovations timely

and there will be no grievances on their part.

3. The practitioners can also improve their organizational innovation by making the

culture more research oriented and making the research work of the developed world

regarding similar kinds of SMEs readily available to the R&D and employees. The

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research orientation can help diffusion of latest innovation to the SMEs and can help the

practitioners to exploit the latest research before the competitors.

4. The management of the SMEs can make the structure of the organization more open

and decentralized which may help in nurturing more innovative ideas resulting the

organization to be more innovative. For example, while making the decision for

innovations in the organization, they may take the personnel who can have any relevance

with the innovation idea in question rather than restricting the process only to top

management.

5. The management may hire people who are well versed and up-to-date with modern

technology and research so that there is no skill barrier for adoption of innovation in their

organization. The innovative and skilled workers can help organizations to gain

competitive advantage over the competitors.

6.4 Limitations of the study

This is a study of a unique nature in the sense that no prior qualitative research on the

diffusion and adoption of Organizational Innovation in the Pharmaceutical Sector SMEs

was conducted in the Khyberpakhtunkhwa province of Pakistan. Since it was a

qualitative case study research the researcher found some real life contextual findings

from this study which other studies could not do as most of these kinds of studies are

conducted in the developed world but not in developing world. Furthermore, if there are

343

efforts made in this regard the studies were not all that wholesome as they did not focus

on the diffusion of innovation and SMEs growth from such broad perspective. Some of

the researchers did study but only the barriers to innovation in SMEs. Examples are that

of (Hadjimanolis, 1999) who studied barriers in Cyprus SMEs and that (Saigosoom,

2012) who study the barrier and opportunities in Taiwanese SMEs . The current study

however tried to present a wholesome perspective in terms of making the contextual,

cultural, organizational, technological, environmental accounts of the local SMEs and

relate their role with the diffusion of innovation theory. This brings new and

comprehensive perspectives to the trend of Innovation studies in SMEs.

However this study also has some minor demerits and limitations. Although an effort was

made to get the detail knowledge of the phenomenon under study in as much detail as

possible, the study is still more for a cross- sectional than a longitudinal data. This could

not guarantee an in-depth knowledge and understanding of the diffusion and adoption of

organizational Innovation in these case study SMEs. However it must be added here that

this limitation does not have a serious impact on the findings of the study as the overall

research objective is achieved which was to see how innovation is adopted and diffused

in the SMEs and whether it gives growth to these SMEs. This objective has been

achieved by this Study.

This study lack the statistical generalizability because the methodology used for this

study is qualitative in nature and that is the reason that the researcher studied the in-depth

responses of the participants in the specified contexts in a limited audience. All these

conditions restricted the statistical generalizability and instead this study aimed at the

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analytical generalizability.

Another limitation of this study is the fact that the researcher could not triangulate most

of the information by cross checking with secondary data because there were quite less

number of managers who were willing to share the office record and files. Also, the data

available on the websites of some of the case study firms was more generic in nature and

this could not very well interpret or measure the level of growth these firms could

achieve while adopting innovations. However, this limitation has been addressed by

asking the same level of questions from different managerial groups in separate offices.

This helped the researcher to triangulate the responses as described in detail in chapter 4.

Nevertheless , these limitations did not impede the study in much greater extent rather

these show the direction towards other future research studies and this study has achieved

the research objectives of this research.

6.5 Implication for Methodology

The methodology adopted for the current study also offered some implications beside

some of the qualities attached to this methodology. The first and most prominent issue

was getting to the respondents. This offered much hurdles as mostly people do not share

their time for research studies in our society for many reasons; firstly, they think it will

disclose some of their business secrets. Secondly, mostly the business fraternities feel

that it takes much of their working time if they entertain the researchers and academicians

coming to them for research projects. Thirdly, they also feel that since these researches do

not have any value for making their businesses profitable, it is unwise to spare time to the

researcher especially for interviews. The researcher found it difficult to get time from the

345

respondents on his own as approaching them randomly, they often used to tell they were

busy for some meetings. The researcher then got help from friends and relations in this

regard who knew the people working for the pharmaceutical sector. In this regard, one of

the researcher relative who has worked in pharmaceutical sector for around 20 years

helped vitally. Since he has mostly worked in the multinational or national

pharmaceutical of good reputation he was welcomed mostly by the local pharmaceutical.

Beside this, a PhD classmate from Iqra National University who has his own

pharmaceutical company and has acquaintances in most of the local pharmaceuticals also

helped immensely. So had it not been them, the data collection through interviews would

not have been easy at all. However even with their support and help, it took more than

one visits to finally interview the target audience. The data collection phase due to the

above mentioned obstacles took more time than anticipated and the process was finalized

in three months instead of the scheduled 6 to 7 weeks time. After the interviews the

transcription was yet another hurdle. As only two interviews were conducted purely in

English language, the rest were either mixed or in Pashto. This made it difficult to

transcribe as the researcher repeatedly listen to each and every response so that no

important point is missed. Unlike the two interviewees whose interviews were just

listened and transcribed verbatim, all the remaining interviews had to be listened many

times word by word. Although the repetitive play and pausing made it very hard at the

beginning, at the end it all worked as there came many points and themes which could

have been missed if the interviews were listened only once. This actually began the

within case analysis for the researcher initially. Another remarkable issue was condensing

the collected data in a meaningful and organized manner so that the formal analysis could

346

be done. Although in qualitative research, there is no hard and fast rule as to how it could

be done; the researcher followed the broader suggestion of Miles and Huberman (1994)

and using the respondent’s feedback, the available secondary data in form of official

facebook or websites and the observation. The data was condensed by placing all the

answers of respondents from the same firm in an MS word table. The fonts of the

important points/themes were changed into bold and where there were emergent themes

into italic form. A detailed note of this is given in chapter 3.This is also a contribution of

sorts because this method has not been used in any research of local Pharmaceutical

sector in Khyberpakhtunkhwa, Pakistan.

6.6. Directions for Future Studies

This study offers few implications for researchers for future studies. The first futuristic

implication of this study is replication of this study in other regions of the same province

which have got clusters like the two clusters studied in Peshawar and Nowshera regions

of Khyberpakhtunkhwa. Also, the same can be done in other provinces and specially

those which have got populated clusters so that the impact of clustering, collaborations

and networking for adoption and diffusion of innovation can be studied in further detail.

This will also establish whether the cultural and context specific impediments have got

any bearing on the findings of the studies as the environment of this province is

somewhat different than the other provinces. This study can be further extended to other

sectors of small and medium business and not only the pharmaceutical sector which will

show the impact in other fields and offer a more comprehensive picture.

Furthermore, this research also offers a future implication for a positivist approach of the

347

same study so that the relationship of adoption and diffusion of innovation and growth of

SMEs can be studied statistically.

Another important future implication is to study the relationship of adoption and

diffusion of organizational innovation and SMEs growth as established in this cross

sectional case study research for a more specified period of time, making the study more

a longitudinal one. This will offer a further holistic picture of the phenomenon; however

more resources will be required for it.

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Appendix A: The interview protocol

Tell us something about the historic background of this SME?

Tell us something about the timeline and current market evolution of the SME?

Is your SME structurally Innovative and has an Entrepreneurial culture?

How does the size of your firm matter in innovation?

How do you believe that your organization processes make it Innovative?

What in your opinion makes the SME innovative?

How are innovations developed from infancy to marketing stage?

How do you rate your SME as one adopting Innovation comparing to others?

Do you have collaboration with any other firm to carry out innovation?

Do you share knowledge sources with other SMEs?

369

To what extent do you trust collaborators?

What values do these collaborations add to your innovation?

What are the sources (drivers) of innovation in SME?

Where do the new product or service ideas come from to your SME?

Do you think that the staff of your firm has the required knowledge and training for

innovation?

Does idea stealing create problem to your SMEs? Should be in barriers to innovations.

Do you take the customers input in innovation and new product development?

Does supplier in any way help you in innovation process?

What is the method of idea Screening and Evaluation in your SME?

To what extent your SME follow a proper formal market Research or Ad hoc research to

address the Gap in the market (Environmental Conditions).

Do you calculate the risks attached to your radical products before marketing or do you

test market your products first?

Do you find it difficult to have sufficient expertise while carrying out specific innovation

type?

Do you find any financial constraints to carry out innovation (socially sufficient amount

of funding required carrying innovation-related research work)?

Does your SME get financial aid from banks easily whenever needed?

To what extent you get support from government agencies, SMEDA if any?

Why are the innovative activities undertaken?

Do you consider innovation as any activity which improves competitiveness in your

SME?

370

Appendix B: Master Table

Theme

Ali Raza MM Hizat

Asif Raza PM Hizat

Imtiaza Hussain GM Hizat

Tahir ali shah Director

Arsheed Ali QCM Wisdom

Numan MMWisdom

Shabir hussain QCM Zinta

Navid PM Zinta

Mohammad Arif MM Zinta

Dr yousaf sarwar DirectorAri

Ghulam Sarwar Khan CE

Zahid Gul GrouPMStan

Riaz Khan GM

Ashfaq Paracha CEODelta

Shahzad Khan MMDelta

Kamran Iceberg

Haseeb ul haqQCM

MG Khan MM

Tahir Salim Director Rock

M Akram Noor DA

371

Wisdom

es O Aries

ley

3.Entrepreneurship and Innovation in structure and Culture

Agree

Agree

Strongly Agree

Disagree

Disagree

Disagree

Agree

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree

Agree

Strongly Agreed

Strongly Agreed

Strongly Agreed

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree,

4.Size

Disagree.

Disagree.

Disagree

Agree

Agree

Agree.

Strongly Agree

Strongly Agree

Strongly Agree.

Strongly Agree

Strongly Agree

Agree

Agree

Strongly agree.

Strongly agree.

S

t

r

o

n

g

l

y

A

g

r

e

e

Strongly Agree.

Strongly Agree.

Di

sa

gr

ee

.

Disagree ,

372

.

5.Organizational Processes

Strongly Agree.

Strongly Agree,

Agree.

Agree

Strongly Agree

Strongly Agree

Agree

Strongly Agree.

Strongly Agree.

Strongly Agree

Strongly Agree.

Stronglyagree

Strongly agree

Strongly agree

Strongly agree

Strongly Agree.

Strongly Agree.

Strongly Agree.

Agree.

Agree.

6.what makes it Innovative

Strongly Agree

Strongly Agree

Strongly Agree,

Agree

Agree

Agree.

Agree.

Agree.

Agree.

Strongly agree.

Strongly Agree.

Agree.

Agree

Strongly

Strongly agree.

Strongly Agree.

Strongly Agree.

Strongly Agree.

A

gr

ee

.

Agree

7.Development of Innovation from Infancy

Strongly Agree

Strongly Agree

Agree,.

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree (N

Strongly Agre

Strongly Agree for it as a

Strongly Agree.

Strongly Agree

Strongly .

Strongly agree

Strongly.

Strongly agree

Agree.

Agree.

Agree

Agree.

Agree.

373

. . ich).

e.

cyclic process.

.

8.Rate of adoption of Innovation

Agree.

Agree.

Agree (Structure is a barrier)

Agree.

Agree

Agree

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly Agree.

Agree.

Agree.

Strongly agree.

Strongly agree.

Strongly Agree.

Strongly Agree.

Strongly Agree

Strongly Agree

Strongly Agree.

9. Sharing knowledge Sources

Strongly Agree

Strongly Agree

Strongly Agree.

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree.

Strongly Agree.

Strongly Agree

Strongly Agree

Strongly agree.

Strongly agree.

Strongly agree

Strongly agree

Strongly Agree.

Strongly Agree.

Strongly Agree.

DisAgree.

DisAgree.

10.Coll

Ag

Ag

Ag

St

Str

St

Str

St

Stro

Str

St

St

St

Str

St

S

t

Str

St

A

gr

Agree.

374

oboration and trust on collaborators

ree.

ree

ree.

rongly Agree

ongly Agree

rongly Agree

ongly agree.

rongly Agree.

ngly Agree

ongly Agree

rongly Agree

rongly agree.

rongly Agree

ongly agree.

rongly Agree.

r

o

n

g

l

y

A

g

r

e

e

.

ongly Agree.

rongly Agree.

ee

.

11. Value addition through collaborations

Strongly Agree.

Agree.

Agree

Strongly Agree Sometimes we Impo

Agree as we get technical and expert sup

Agree .

Strongly Agree

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly agree.

Strongly Agree

Strongly agree.

Strongly Agree.

Strongly Agree.

Agree.

Strongly Agree.

Neutral.

Neutral.

375

rt together as well.

port.

12.Drivers and sources of Innovation

Strongly Agree

Strongly Agree.

Strongly Agree

Strongly Agree

Strongly agree

Strongly Agree.

Strongly Agree.

Strongly Agree for technologica

Strongly Agree

Strongly agree.

Strongly Agree.

Agree.

Strongly agree.

Agree

Agreed

Agree.

Strongly Agree.

Strongly Agree.

A

gr

ee

.

Agree.

376

l revolution.

13.Idea Sources for new products and services

Strongly Agree.

Strongly Agree

Strongly Agree

Strongly Agree

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly Agree

Agree

Agree.

Agree.

Strongly agree.

Agree.

Agree.

Agree.

S

t

r

o

n

g

l

y

A

g

r

e

e

.

Strongly Agree.

Strongly agree.

A

gr

ee

.

Agree.

14.Kno

Ag

Str

Agr

Str

Stro

Str

Agr

Ag

Agr

Stro

St

St

Str

Agr

Ag

Ag

Agr

Ag

A Agree.

377

wledge and Training level of Staff

ree.

ongly Agree.

ee.

ongly Agree

ngly Agree

ongly Agree

ee.

ree.

ee.

ngly Agree

rongly Agree

ronly Agree.

ongly Agree.

ee

ree.

ree.

ee.

ree.

gr

ee

15. Challenges of Idea stealing

Strongly Agree.

Strongly Agree.

Strongly Agree.

Disagree

Disagree

Disagree

Disagree.

Neutral,

Disagreed .

Disagreed

Disagreede

disagreed

Disagreed

Strongly Agree.

Strongly Agree.

disagreed.

disagree.

disagree.

di

sa

gr

e.

Disagree.

16. Inspiration for Competitior,s Products

Strongly Agree innovation

Agree

Strongly Agree.

Agree

Agree

Agree

Agree

Agree

Agree.

Agree

Agree

Agree.

Agree.

Agree.

Agree.

Agree.

Yes.

Yes.

378

17. Customers Input

Agree.

Agree.

Agree.

Agree

Agree

Agree

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly Agree.

Strongly Agree

Strongly Agree

Agree

Agree.

A

g

r

e

e

.

Agree

Agree.

A

gr

ee

.

Agree.

18. Role of Suppliers

Strongly Agree .strategic partner

Agree.

Agree

Disagree

Neutral

Disagree

Strongly Agree.

Agree

Agree.

Strongly Agree

Strongly Agree

Strongly agree.

Strongly Agree.

Strongly Agree.

Strongly Agree

Agree.

Strongly Agreed.

Agree.

Agree

Agree.

19.S A A A S St S A A A St S S S St S A A A A Agr

379

creening and evaluating Ideas

gree

gree.

gree

trongly Agree.

rongly Agree.

trongly Agree.

gree.

gree.

gree.

rongly Agree

trongly Agree.

trongly Agree.

trongly Agree.

rongly Agree.

trongly Agree.

gree

gree

gree.

gree.

ee.

20. Market Research: Formal or Adhoc (Envir Conds)

Strongly Agree.

Strongly Agree.

Strongly Agree

Disagree.

Disagree.

Disagree.

Agree

Agree

Agree

Agree

Agree

Agree.

Agree.

Agree

Strongly Agree.

A

g

r

e

e

.

Disagree.

Agree as marketing people do it.

N

eu

tra

l.

Neutral.

21.Risk Calculation and test

Strongly

Agree.

Agree.

Agree

Agree

Agree

Strongly Agr

Strongl

Strongl

Strongly

Strongly Agr

Strongly

A

g

r

e

Agree

Agree

Agree.

Agree.

380

Marketing

agree.

ee.

y Agree.

y Agree

Agree

ee.

Agree.

e

22.Barriers to the Spread of Innovation(Expertise)

Agree as sometimes the state of the art labs need

Agree as there maybe lack of expertise at times.

Disagree as I don’t see any such problems.

Disagree as we do nto have any barrier as per as t

Disagree as we do not have any lack in expertise.

Agree to certain extent as I think the qualificati

Disagree as I am satisfied about the expertise level.

Disagree.

Disagree.

Strongly Agree as Govt bureaucracy ,policies get you stuck.

Agree.

Agree that there are barriers as more e

Agree there is room for improvement.

Strongly Disagree.

Strongly Disagree.

Agree , we have the issue of finding the

Agree, day. We need to be up-to-date all the times. That is why

Agree.

Agree.

Agree that we have expertise issues sometimes.

381

technically experienced people.

he Expertise of Employees is concerned

on is always there but need more experience sometimes.

xpertise is required.

technical expertise in our workers. But we try to

we take help in technical issues from those professionals who are working with

382

fix the shortage through networking and clust

firms for long times.

383

ering.

23. Financial barriers and role of banks.

Disagree about financial problems and loans fro

Disagree

Disagree

Strongly Agree for financial barriers but and bank

Strongly Agree and because of this barrier we do not go into radical in

Strongly Agree as this is the main barrier. Bank loa

Disagree about the financial problems. We don’t have any suc

Disagree.

Disagree.

Agree but loan is not an option.

Agree but loan is not opted for.

Disagree

Strongly Disagree

Strongly Agree that financing is a problem and banks are not sup

Strongly Agree.

A

g

r

e

e

.

h

a

v

e

t

h

e

o

p

p

o

r

t

u

n

i

t

y

Agree.Financial barriers are always there. We need finances som

Agree. For a new SME like ours in order to find finan

B

y

th

e

gr

ac

e

of

Al

la

h

w

e

ne

ve

r

ha

ve

ta

ke

n

an

y

lo

an

or

fel

As I am also looking after the accounts, I have never applied for nay bank loan. We rather plan to carry on new product and processes

384

m banks.

s give money but with heavy interests rate

novations. Bank loan is not an option

n is not a viable answer.

h problems.

portive.

t

o

g

e

t

l

o

a

n

f

r

o

m

b

a

n

k

s

e

a

s

i

l

y

.

etimes which are not available.Banks can be a source but their procedures

cing is always a major challenge. Yes banks can give cre

l

sh

or

t

of

fi

na

nc

in

g

at

an

y

st

ag

e

ne

ith

er

w

e

ha

ve

an

y

pa

rt

ne

rs

hi

p

development in accordance with our resources.

385

and the strings attached to their loans are not easily digestible so we in this S

dit but the procedures are tiring as well as the interest is d

wi

th

an

yo

ne

.

We never need to consult any bank for loan.

386

ME try to proceed according to our budgets.

aunting.

24. Role of Governement authorities like SMEDA

Disagree for gover

Disagree that gove

Disagree for governeme

Strongly Disagree f

Strongly Disagree, they ha

Strongly Disagree a

Disagree for their suppor

Disagree for the

Disagree, neither SMEDA nor

Strongly Disagree they are m

Strongly Disagree

Strongly Agree t

Strongly Agree that

Strongly Agree that Govern

Strongly Agree that

Disagree for the

Disagree.There is no sup

Disagree as Unfortu

They never come here. Not even in

The role of government authorities and SMEDA is not enc

387

nment and SMEDA support

rnment and SMEDA supports

nt overall support ,however SMEDA has given technical support one od

or their positive or supportive role.

ve no interest. SMEDA has also done nothing

s govt role is not business friendly as well as SMEDA has d

t in any way. SMEDA role is also not worth mentioning

positive role of Governemnet and SMEDA

any other Agency has helped as yet.

ore of barriers than a support

, they hamper fluency towards Innovation

hat Government does not support.

Government and SMEDA does not support.

ment does not support.

Government and SMEDA does not support.

role .No. We do not have any support from governm

port from any government authorities rather they curtail and hinder the proces

nately no, government does not support these SMEs. We ha

idea or concept development. The government agencies and the regulatory authorities actually mak

ouraging at all. We do not have any support from them as per now and we do not see if they will support not only this firm but any other firm in futu

388

d times.

one no favour too.

ent agencies and authorities in any ways. However,

ses by their overly interruptions in the affairs of the firm sometimes can cause

ve not seen they come to support, they always come with mon

e it difficult for us most often. Some time they delay the files for a long time. For instance if we

re.

389

we get support from other firms and that is a mutual

delay in carrying out innovation.

itoring stick in their hand and in fact that sometimes has a ne

apply today for a specific molecule and the drug regulatory authorities or the ministry delay it for a

390

process.

gative impact on the organization to carry on innovation.

longer time , who knows the product demand will be the same after that much delay.

391

SMEDA has also not played a massive role.

25. Impact of adoption of innovation on

Strongly Agre

Strongly Agre

Strongly Agree as H

Strongly Agre

Strongly Agree that

Strongly Agre

Strongly Agree that

Strongly Ag

Agree that adoting spec

Strongly Agree as wit

Strongly Agr

Strongly Ag

Strongly Agre

Strongly Agree that

Strongly Agre

Yes, We can

Being innovative

The impact of

In

no

va

tio

n

de

fi

nit

Being innovative means being differe

392

SME growth

e as it improves competitiveness and market share.

ed

PLC is better than UV. Helps competitiveness and improves growth capabi

e that innovation has an overall impact on competitiveness

it plays role in the growth and more market share.

e for its role in growth.

by innovatively organization, the firm becomes more competitive.

ree as it brings growth

ific type of innovation make organization grow.

h adoption of innovation SMEs grow.

ee for Market share.

ree that it gives competitive advantage.

e that with innovation SME grow and maximize profits.

with innovation SME grow.

e that with innovation SME grow.

have many benefits from innovation. We can start

organization means being competitive. We can certainly have good adv

innovation in organizations is positive and related to th

el

y

he

lp

s

to

im

pr

ov

e

ou

r

co

m

pe

tit

iv

e

ad

va

nt

ag

e.

nt and that is how a firm can get competitive edge over other competitors.

393

lity of the firm.

up research products which can end up giving us

antage over our competitors.

e growth. In fact the reason why organization considers

394

advantage over other firms.

innovations is to grow.

26.Why SME Innovate

Strongly Agree as it is for s

Strongly Agree as it enable

Strongly Agree as with it SME grow a

Strogly Agree for Market S

Strongly Agree that it gives uniquen

Strongly Agree as with inno

Strongly Agree that SME.

Strongly Agree that wi

Strongly Agree that it maximizes profits and

Strongly agree as with this our firm gro

Strongly Agree as with Inn

Strongly Agree that SM

Strongly Agree that SME in

Strongly Agree that SME innovate fo

Strongly Agree that SME in

Strongly Agree, Our exp

Strongly Agree,We carry innovative

Strongly Agree ,Being inn

St

ro

ng

ly

A

gr

ee

,

W

e

ca

rr

y

on

Strongly Agree, We believe that if we do not innovate our products will

395

urvival in the market

s competitiveness which helps in meetin the market demand

nd survive.

hare increase and growth

ess and maximize profits

vation Competitors can be beaten and market share can be m

th innovation it earns competitive advantage and

also SME grow through the competitive advantage.

w.

ovation SMEs get competitive advantage.

E innovate for increasing sales, market share an

novate for competitive advantage and is differentiated fr

r competitive advantage and growth.

novate for competitive advantage and growth.

orts can increase as well as we can have increased

processes in our organization s that we become a prominent organization in mar

ovative means that you are never satisfied with your perfor

in

no

va

tio

n

as

it

he

lp

s

in

gr

o

wt

h

of

ou

r

or

ga

ni

za

tio

n

as

w

ell

as

gi

ve

us

become obsolete and we will lose our market share. In order to have maximum market share, you need to innovate only then your organization can gro

396

s in time.

aximized.

earn more profits

d ensures growth.

om others,

market share.

ket and attract more customers.

mance and that means that we have to consistently work ou

ed

ge

ov

er

ou

r

co

m

pe

tit

or

s.

w.

397

t ways and means, new to the firm and new to the market to

398

have edge over our competitors.

399

Appendix C: Letter to the participant

Dear Sir/Madam,

I am a Doctoral Research Student at Iqra national University, Department of Management

Sciences. The purpose of my research is to understand the diffusion of organizational

innovation and its role in the growth of Small and Medium Enterprises of Khyber-

Pakhtunkhwa, Pakistan. Although Innovation Diffusion is essential for SMEs, it is

unclear from literature how it plays its role in growth of SMEs in Khyber-Pakhtunkhwa. I

will contribute to explore this research gap better. In particular, my research focuses on:

1.Exploring the sources of Innovations, the Internal and external sources. 2. Examining

which Technological, organizational and environmental conditions are conducive for

Innovation diffusion and adoption.3. Exploring which type of SME favors which kind of

organizational innovation. 4. How the innovation is adopted by the SMEs and how this

innovation help these SMEs to grow.

My research findings will help inform the SME regulatory authorities of Pakistan in

better policy making and policy adoption for SMEs, increasing their entrepreneurial and

400

Innovation orientation. I intend to observe the firm and conduct the face to face

interviews with the top level Managers of the SMEs. The interviews will not be more

than 45-60 minutes. At the end of the research, I will send you a soft copy of the report if

requested.

I completely understand the issue of confidentiality for conducting this research to which

I will completely adhere. I will keep the name of the company and all those I interview

confidential (if requested) and I can also sign a confidentiality agreement (if required). I

would be grateful if you could arrange a time to be interviewed. Looking forward to

hearing from you.

Kind Regards,

Mohammad Daud Ali

Doctoral Research Scholar Management Sciences,

Iqra National University

Mobile: 0331-4422765 / 0314-9954847

E mail:daudalikhan725@gmail.com

401

Appendix D: Release form/ information sheet

Diffusion of Organizational Innovation and the growth of SMEs: Case study

evidence from Small and Medium Enterprises of Khyber-Pakhtunkhwa, Pakistan

Researcher(s) Introduction

I am Mohammad Daud Ali, currently a PhD candidate from Iqra National University,

Peshawar. I am conducting a research project for my PhD thesis on Diffusion of

Organizational Innovation and the growth of SMEs: Case study evidence from

Small and Medium Enterprises of Khyber-Pakhtunkhwa, Pakistan under supervision

of Dr. Syed Imad Shah of Institute of Management Studies, University of Peshawar.

Project Description and Invitation

The project aims to determine the role of Diffusion of organizational innovation in SMEs

growth. The research will follow a Qualitative research methods and will involve semi-

structured interviews with Top Managers of the case study Small and Medium

402

Enterprises of Peshawar Khyber Pakhtunkhwa in regard with the Sources of innovation,

Conditions for innovation and the barriers they face in the diffusion of organizational

innovation.

Participant Identification and Recruitment

This research project will focus on employees of Small and Medium Enterprises of

Peshawar in Pakistan. The research aims to designate top level managers from SMEs in

Peshawar, Pakistan for detail interviews. This number of participants is needed for the

methods of analysis selected for the project. Participants will be selected based on

personal contacts and their willingness to participate. The research will not seek any

personal information from the participants. The research will ask for information

regarding how organizational innovation is diffused in SMEs and does it help the SME

growth, what are the internal and external sources of innovation, what are the favorable

technological, organizational and environmental conditions for diffusion of innovation.

Whether there is a specific type of organizational innovation followed by certain type of

SME? Are there any barriers to the diffusion of innovation?

Research/data collection Procedures

For interview: I will use personal contacts and references, to make initial contact with

HR/Line managers to request for interview. Those who will agree I will take an

403

appointment for meeting to have an interview for 40-50 minutes.

Data Management

All data will be kept confidential and used only for the research project. The data will be

processed by me under supervision of my supervisor. The project findings will be

compiled for a PhD thesis which will be submitted for the final examination. There will

be no specific participant identity appearing in the thesis (if the respondent does not allow

to present their identities) and thus, confidentiality of identity will be preserved.

Participant’s choices

1. Permission is granted to use my full name and that of the organization in the thesis and

subsequent publications 2. Permission is granted to use an alias only so as to disguise my

name and that of the university in the thesis and subsequent publication contains the

interview guide.

Participant’s Rights

You are under no obligation to accept this invitation. If you decide to participate, you

have the right to:

- Decline to answer any particular question;

- Withdraw from the individual interview at any time as you wish, before

completion of the interview with you;

- Ask any questions about the study at any time during participation;

404

- Be provided with information on the understanding that your name will not be

used in the research;

- Be given access to a summary of the project findings when it is concluded.

- Ask for the recorder/ mobile phone recording to be turned off at any time during

the interview.

405

Researchers Contacts

Mohammad Daud Ali

PhD candidate

Department of Management

Sciences

Iqra National University

Peshawar.

T:+923314422765

E:daudalikhan725@gmail.com

Dr.Syed Imad Shah

Supervisor

Institute of

Management Studies

University

Of Peshawar.

T: +923339288420

E

:imad__shah@hotmail.com

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407