Running head: IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs

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Impact of Entrepreneurship and Innovation in High-Tech SMEs

Anam Zahra

School of Accounting and Finance, Faculty of Management Studies, University of Central

Punjab, Lahore
Running head: IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs
IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 3

Abstract

The purpose of this paper is to examine the impact of entrepreneurship and innovation in high-

tech SMEs. Other studies have investigated the implication of small and medium –sized

enterprises SMEs. We draw a data from 2 high-tech Arfa Kareem tower and Shaheen complex in

Lahore ,Pakistan . Through questionnaire data was collected. Regression and correlation

analysis were used to find the relationship between these variables. These statically shows a

significant relationship between these variables. More efforts will contribute to further

theoretical development in the field of high tech SMEs to identify, measures and explore the

underlying processes associated with entrepreneurship and innovation.

IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 4

Introduction

This paper is developed to identify the impact of entrepreneurship and innovation in high

tech SMEs. A blooming high-technology sector is vital to support Pakistan success in the 21st

century. The new products, services, and business models that the high-tech sector generates

differentiate this nation’s output from that of the rest of the world and enable capital

accumulation, wage gains, and productivity growth (Jorgenson, Ho, & Stiroh, 2005) .

High-tech start-ups are founded by people who are able to recognize and exploit

entrepreneurial opportunities (Shane & Venkataraman). Highly skilled entrepreneurs are whether

resident or foreign, help a country to increase its economy to create new technologies and putting

them to innovative uses. The capacity to innovate allows the country to stand carefully in one

step ahead in global competition where processes have been organized because Process can

allow both efficiency and effectiveness gains and is a key source of long-term competitive

advantage (Frishammar, Kurkkio, Abrahamsson, & Lichtenthaler, 2012).

High level of entrepreneurship means the float of new business which make the high-

tech sector strong. High-tech entrepreneurs take more risks that existing high-tech businesses,

because they are afraid to catch and identify opportunities that they fail to spot ( Acs, Audretsch,

& Strom, 2009).

The receiving success in this atmosphere is clearly complex because involvement of

many factors, it’s not the matter what the atmosphere and conditions are the solution for standing

and fighting with these conditions is the new ideas which balanced firms or industry to meet with

its competitors. Such critical business functions can enable firm’s performance and it help to

bloom in that locations where markets or selling new products would otherwise be impossible

(Andjelkovic & Imaizumi, 2012).

IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 5

Innovation combines the development and implementation of new ideas, systems,

products, or technologies (Hung, et al., 2011).Innovation are strongly related with all the efforts

of renewing the routines, procedures, mechanisms, systems etc. to promote teamwork,

information sharing, coordination, collaboration, learning, and innovativeness (Gundaya, et al.,

2011).

Due to less innovation and entrepreneurship employee mobility become increase which

make a firm unsafe because a it may not only lose their competitive advantage but also allow to

transfer their human asset to establish competitors or entrepreneurial ventures which is created

by ex-employees (Campbell, Ganco, Franco , & Agarwal, 2012).

Pakistan is considered as one of the fastest growing countries in the market. Its potential

can never be doubted but Pakistan has facing many ups and downs in the field of technology. one

of the main reason that Pakistan lags behind in this struggle is less of innovation and new ideas.

we adopt that path which is chosen by our forerunner we usually discourage struggle (Narula,

2017).

The industries which are advance and success in the world and making progress because

of highly innovating and developing new ideas which give them a strong competitive advantage.

According to global competitive index Pakistan stands at a number 115 out a total of 138 nations

which indicates it is a clear back bencher (Schwab, 2017). Innovation is the engine of economic

growth in an increasingly knowledge – based global economy. It’s a pity that Pakistan was

ranked at 113 out of 127 countries in the 2017 report of the Global Innovation Index which

explores the impact of innovation-oriented policies on economic growth and development

(Global Innovation Index, 2017). Organizations are facing a rapidly changing environment
IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 6

and there is a greater need to understand new ideas demands and competitors' strategies for

the development of product.

Literature Review

Innovation is one of the basic process to enter into a new market, it helps to increase the

existing market share and provide the industry with a competitive edge (Therrien, Doloreux, &

Chamberlin, 2011). Innovation relates to changes in production , functions and processes

whereby industry seek to acquire and build upon their distinctive technological competence,

understood as the set of resources a firm possesses and the way in which these are transformed

by innovative capabilities (Atalay, et al., 2013).With the increasing competition in global

markets, companies have started to grasp the importance of innovation, since swiftly changing

technologies and severe global competition rapidly erode the value added of existing products

and services (Gundaya, et al., 2011).

Thus, innovation is necessary component of the corporate strategies for several reasons

such as to apply more productive manufacturing processes, to perform better in the market, to

seek positive reputation in customers’ perception and as a result to gain sustainable competitive

advantage (Halme, et al., 2012).

Innovation which is defined as the time elapsed between initial development, and

ultimate commercialization of a new product or services into the marketplace, reflects a firm’s

capability to accelerate activities and tasks for building a competitive advantage relative to its

competitors within industries with shortened product life cycles (Wanga, Zhining, Wang, &

Nianxin, 2012). Increasingly, durable goods manufacturers choose to innovate their offerings by
IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 7

providing services to accompany their existing products throughout the life cycle. This trend,

known as ‘servitization’, was first coined by Vander Merwe and Rada (1988) to delineate the

tendency of manufacturing firms to “offer fuller market packages or bundles of customer-

focused combinations of goods, services, support, self-service, and knowledge”. Moreover,

servitization can be seen as developing an organization’s innovation capabilities by effecting a

shift from products to product-service systems, thereby better satisfying customer needs and

escaping the commoditization trap (Chesbrough, rauf, & ali, 2010).

On the other hand, As the 21st century unfolds, entrepreneurship are viewed as critical

pathways to competitive advantage and improved performance. Entrepreneurship deals with the

creation of competitive advantage through the identification of new opportunities (Ireland, Hitt, &

Sirmon, 2003). Entrepreneurship is understood as the strategy-making processes, structures and behaviors

of firms characterized by creativeness, risk-taking, competitive aggressiveness and autonomy, facilitating

the pursuit of opportunities (Lechner & Leyronas, 2009).

Entrepreneurial actions are any newly fashioned behaviors through which companies

exploit opportunities others have not noticed or aggressively pursued (Kuratko, Ireland, &

Hornsby, 2001).Entrepreneurship starts out with potential entrepreneurs: those who may or may

not actually venture into this activity, but who have the beliefs and abilities to do so. Measures

include believing that one has the capabilities to start a business, seeing opportunities in one’s

area and feeling undeterred by fear of failure when seeing opportunities (Kelley, Singer, &

Herrington, 2012) .

Employee mobility puts firms in the precarious position of not only losing their

competitive advantage but also enabling their competition, given the transfer of the human assets

to either established competitors or to spin-outs entrepreneurial ventures created by ex-

IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 8

employees (Campbell, Ganco, Franco , & Agarwal, 2012).organization will be able to generate

and implement strategies that can adapt to the environment. Therefore, strategic flexibility will

greatly assist the company in the face of environmental changes. On the other hand,

entrepreneurship characterized as an organization that is flexible (Miller & Friesen, 1982).

Entrepreneurial actions originate in thoughts and beliefs that what one perceives and

understands about a particular situation to organize a new product or service which is

“worthwhile” and “feasible”. The entrepreneurial opportunities consist of situations that are

relevant for introducing new or improved products, services, or ways of doing business to better

serve the needs of consumers in one or more markets (Grégoire & Shepherd, 2011).

Resourced based theory was chosen as a theoretical lens for this review. Firm performance refers

to how well it attains its financial goals compared with their primary competitors (Li, et al., 2006). Firm is

regarded as a unit of resources so that a firm’s competitive advantage is determined by its ability to obtain

and defend resources and capabilities (Kaya, Nihat, Patton, & John, 2010) . In this view, knowledge is

considered to be one of key resources to obtain and transform other resources.

The resource-based view indicates that, firms with valuable, rare, and inimitable resources have

the potential of gaining competitive advantage. A sustainable competitive advantage can be described as

the development of a unique product by using resources and taking specific strategic decisions concerning

the business (Sijtsema & Postma, 2004). Researchers from knowledge-based view have criticized the

weakness and explain how knowledge is treated. In the knowledge-based view, the primary goal of the

firm is the application of existing knowledge to the production of goods and services.

Knowledge and skills give a firm competitive advantage which is able to innovate new products

and processes or improve existing ones more efficiently and or effectively so the impact of innovation on
IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 9

firm performance has been a matter of significant interest to economists and policy makers for decades

(Hashi & Stojčić, 2013).

Framework

Entrepreneursh

ip High tech

SMEs
Innovation

Figure 1 Proposed Framework

IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 10

Methodology

The current study tries to examine the relationship between innovation and entrepreneurship, in

high tech SMEs. Survey research method was used for this study. To test the hypotheses, a

survey targeting technology-based SMEs in the information technology (IT) sector in Pakistan

were selected. In Pakistan Lahore were chosen because in Lahore firms operate in an energetic

environment where innovative abilities are necessary for growth and survival.

All information technology companies in Lahore was the population, but we limited the

survey to avoid unnecessary “noise” due to industry factors (Parida, Westerberg, & Frishammar,

2012). We selected two IT companies, Shaheen complex and Arfa Kareem tower in Lahore .We

randomly selected a total of 80 Local research assistants who work there. Research assistants are

the unit of analysis. The data has been collected through the primary source. Seven points liker’s

interval scale was used for measurement. In the scale ‘1’ refers to strongly disagree and ‘7’

corresponds to strongly agree, whereas, ‘4’ refers to neutrality.

Data Analysis Techniques

Descriptive Statistics

Std. Deviation Mean

Statistic Statistic

Entrepreneurship 1.42 3.75

Innovation 1.29 3.17

SME 1.39 3.75

IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 11

Descriptive statistics was shows analysis of these three variables.

Correlations

Entrepreneurship Innovation High tech

SMEs

Entrepreneurship .542(.166) .495(.198)

1

1
Innovation .542(.166) .995**(.000)

1
High tech SMEs .495(.198) .995**(.000)

**. Correlation is significant at the 0.01 level (2-tailed).

The correlation coefficient was shown a strong relationship, between innovation and

entrepreneurship. The correlation coefficient was shown a strong relationship, r = 0.496 between

entrepreneurship and high-tech SMEs. Innovation also shows a strong relationship with high tech

SMEs, and High-tech SMEs also shows s strong relationship between innovation and

entrepreneurship.
IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 12

ANOVAa

Model Sum of Mean Square F Sig.

Squares

Regression 32589.950 16095.496 .970 .254a

1 Residual 34179.749 16789.934

Total 67561.699

Regression 1224976.706
1222976.706 238.115 .000b
2 Residual 16564.094 5188.031
Total 155640.800

a. Dependent Variable: SMEs

b. Predictors: (Constant), Entrepreneurship, Innovation

It is shown in the table of ANOVA that there was a significant correlation between dependent
variable and independent variables.

Conclusions

Exploring relationships between entrepreneurship and innovation is very timely, given

the competitive conditions faced by firms of all sizes in today's economy. Our goal has been to

build on prior theory and research in order to clarify the multidimensional nature. We encourage

research efforts directed at understanding the dimensionality of the innovation and

entrepreneurship in explaining its relationship to high tech SMEs. More efforts will contribute to

further theoretical development in the field of high tech SMEs to identify, measures and explore

the underlying processes associated with entrepreneurship and innovation.

IMPACT OF ENTREPRENEURSHIP AND INNOVATION IN HIGH-TECH SMEs 13

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