1.1 Background: The Problematic Situation
The point of departure of this study is that innovations, either in a form of a new product, process or service, are an important factor in providing and sustaining competitive advantages for businesses, in particular for small firms. It is clear that the policy makers in the UK see an important link between innovation, business and economic growth. Similarly, academia has also devoted a great level of interests in understanding innovation activities in SMEs (Birch, 1989; Cosh & Hughes, 2000; Oliver et al., 2000; Henderson, 2002). On the one hand, the importance of SMEs as drivers of economic growth and their implications for policy issues in national economies have been commonly investigated (Birch, 1989; Sullivan & Kang, 1999; Henderson, 2002; Fisher & Reuber, 2003); on the other hand, various determinants of innovation activities and their impacts on firms’ performance were explored and examined, both theoretically and empirically (Storey & Easingwood, 1998; Simon et al., 2002). Despite significant work having been done previously on innovations in SMEs, many of these studies relate to the effect that innovations in SMEs have on performance and economic growth (Oke et al., 2007). There is a dearth of studies relating to the issues of how and why SMEs actually undertake the process of developing new products or services or managing innovation activities, which need to be empirically investigated. Hence, gaining insight into micro-firm’s managing innovation processes would represent a clear contribution to the literature investigating innovation in SMEs and entrepreneurship – a topic that has harvested insufficient attention so far (Koellinger, 2008).
Moreover, according to the EC (2005), micro firms have been found to represent 91 percent of European businesses, which suggests the prevalent position that these firms have in business landscapes. However, irrespective of multiple calls to study micro-firms in their own right (Matlay, 1999; Roberts & Wood, 2001; Devin et al., 2005), academic research focusing specifically on the micro-firm, has historically been rare (Kelliher & Reinl, 2009). The few studies conducted so far that have drawn their attentions on micro-firms have suggested that micro-firms are intrinsically different. Hence the dissimilar organisational characteristics might to a certain extent, contribute to their decisions and approaches to business problems (Beaver & Jennings, 2005). Specifically, Whaley (2003) and Kelliher and Henderson (2006) argue that management processes within a micro-firm are unique and differ fundamentally from those of larger firms. Furthermore, studies on the determinants that affect owner-manager’s decisions in adopting innovation and the process that SMEs pursue have been largely ignored in the literature. Therefore, by investigating the various factors, their inter-relationships and interactions that might impact on owner managers’ decisions and process in implementing innovation would signify a contribution to the literature in small firms’, in particular, micro-firms’ management practice.
Furthermore, new communication technologies have broadened the opportunities for the Internet and mobile phone to grow significantly during the past decades. This significant role that the Internet has played utilising marketing communication has been noticeable from the beginning of its conception. Distinctively, the Internet media has changed the pattern and functionality of the traditional mass media in marketing communication. In particular, new media, comprising online, mobile, and social media are emerging as the growth areas for advertising for manufacturers and retailers (Ailawadi et al., 2009), since it can fill in the shortcomings of the traditional mass media and is often the only process for certain formats of information (Hongcharu & Eiamkanchanlai, 2009). Therefore, as a medium of communication, the web is also a marketing channel, which can lead to specific innovative opportunities that can be exploited to organise and address the needs and wants of the marketplaces (Zwass, 2003). However, studies in this field that focus on small firms are still scarce, further research is needed to extend the understanding in this field.
Therefore, the objective of this study is to empirically identify the determinants of the evolution of innovative activities in a micro firm’s setting, in particular, how the firm’s marketing activities and practices evolved taking advantage of the new digital media (NDM); these are to be explored and examined. Hence, these research objectives translate into the following research questions:
Q1: What factors can influence small firms’ innovative activities, e.g. marketing practice?
Q2: How a small firm could use new digital media to improve their marketing practice?
Furthermore, Creswell (1994) identifies a qualitative approach to research as the most appropriate one when the objective of the research is to develop a new theory, technique or process. Given the objectives described above, it seems that action research (AR) is the most appropriate choice in this case.