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Innovation Potential in German and Chinese SMEs: A Comparative Study

This study by Prof. Dr. Werner Fees and Amir H. Taherizadeh explores innovation management capabilities in German and Chinese SMEs. The research compares company-internal innovation processes, organizational structures, learning mechanisms, and strategic orientations. Discover key insights into innovation potential and competitiveness in both contexts.

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Innovation Potential in German and Chinese SMEs: A Comparative Study

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  1. Innovation Potentials in German and Chinese SMEs:The Matter of Competitiveness or Optimization? By Prof. Dr. Werner Fees Amir H. Taherizadeh, M.A., MBA 2008-2009

  2. Outline • Introduction 1.1 Authors’ Background 1.2 Where We Come From 1.3 Objectives 1.4 Innovation Context 2. Methodology 2.1 Measurement Concept 2.2 Database 3. Key Results 4. Overall Result 5. Wrap-Up www.ohm-university.eu

  3. 1. Introduction1.1 Authors’ Background • Prof. Dr. Werner Fees • Professor of Management • Director of Georg-Simon-Ohm Management Institute (MBA School) • Before: 10 years manager at Philips NL • Amir H. Taherizadeh • MBA St. • M.A. • Research Assistant • Before: 2 years managerial engagement in onshore/offshore oil & gas industry www.ohm-university.eu

  4. 1.3 Study Objectives • Focus of the Study • Company-Internal innovation management capabilities • Perspective of the Study • Analysis of the innovation management process from idea generation to commercial exploitation • Phase 1: Quantitative Study • Empirical investigation of the status-quo of innovation potentials in German and Chinese SMEs; what is the current status? • Drawing a comparison between Ger. & Ch. SMEs to find the gaps; Whatare the discrepancies & deficiencies? • Phase 2: Qualitative Study • Conducting interviews with Ger. & Ch. Managers to unlock the hidden issues; Why do these gaps exist? • Starting point for further research to invent improvement measures for increasing the innovation potentials www.ohm-university.eu

  5. Strategic Entrepreneurship Technological & Financial Potentials Organizational Processes Employee Qualification Networks 1.4 Innovation Context Local Demand & Rivalry National Competencies in Research & Production Corporate Governance: Judgment of Performance Market Place National Innovation System Competitiveness Corporate Innovation Potential Company-Internal Capabilities www.ohm-university.eu

  6. Strategy External Linkages Organizational Learning Innovative Organization Processes 2. Methodology • Phase 1 analysis is based on a questionnaire survey of 173 Chinese SMEs and 163 German SMEs; Phase 2 analysis is based on interviews with selected companies in Germany and China. • Innovation audit approach by Tidd et al.1 • Key areas for successful innovation management: • [1]Tidd, J., Bessant, J., and Pavitt, k. Managing Innovation. Integrating Technological, Market and Organisational Change (3d ed), John Wiley & Sons, Chichester, 2005. www.ohm-university.eu

  7. 2. Methodology2.1 Measurement Concept • The theoretical concept is based on the assumption that successful innovation... • ...is strategy-based, • ...depends on effective internal and external linkages, • ...requires enabling mechanisms (processes) for making change happen, • ...only happens within a supportive organisational context, • ...requires an organisational learning process for building and integrating key behaviours into effective routines. www.ohm-university.eu

  8. 2.2 Company Database • Total Number of Participants: 336 SMEs • Germany: 163 SMEs (14.6% Response Rate) • China: 173 SMEs (49,4% Response Rate) 2.2.1Split-Up According to Company Size www.ohm-university.eu

  9. 2.2 Company Database 2.2.2 Business Sector 2.2.3 Ownership Structure www.ohm-university.eu

  10. 3. Key Results3.1 Organizational Structure • Overall, Chinese SMEs have a rougher organizational structure with higher degree of centralization. To Be Continued…. www.ohm-university.eu

  11. 3. Key Results3.1 Organizational Structure • Overall, the element of employee empowerment is quite unimportant in the Chinese SMEs’ style of management. www.ohm-university.eu

  12. 3. Key Results3.1 Organisational Structure • In Chinese SMEs Communication is mainly top-down, and monologue! • In Chinese SMEs teamwork happens mainly within departments while in German SMEs it seems to be more cross functional. www.ohm-university.eu

  13. 3. Key Results3.2 Organisational Learning • In Chinese SMEs mainly managers are qualified while in German SMEs this seems to be spread out! • It seems that in Chinese SMEs the responsibility of knowledge development and further edu. is more on the employee’ shoulder! www.ohm-university.eu

  14. 3. Key Results3.3 Strategic Orientation • It seems that in Chinese SMEs the employees play a very marginal role in strategy formulation. • Also, they appear to be uninformed about the company overall strategy. • The Chinese SMEs seem to be more consultant oriented. • Also they are more active in continuously assessing their competitors! www.ohm-university.eu

  15. 3. Key Results3.4 External Linkages 3.4.1 Links to Suppliers • It seems that in German SMEs have better and stronger relationships with their suppliers. • It seems that in German SMEs are more customer oriented than the Chinese. 3.4.2 Links to Customers www.ohm-university.eu

  16. 3. Key Results3.4.2 Links to Research Institutes • Overall, Chinese SMEs have a marginally better relationship with research institute; however, both German and Chinese SMEs have a weak performance concerning this important issue! www.ohm-university.eu

  17. 3. Key Results3.5 Processes 3.5.1 Idea Generation Processes • German SMEs have stronger performance concerning systematic search for ideas and discussing them while the Chinese are better at selecting the ideas! • As it is clear, German SMEs are more involved in open innovation by taking into account the external sources of ideas! 3.5.2 Origin of New Ideas www.ohm-university.eu

  18. * *** *** 4. Overall Innovation Potential in German and Chinese SMEs (Ph. 1) www.ohm-university.eu

  19. 4.1 Aggregation: Average Total Innovation Potential www.ohm-university.eu

  20. 4.2 Overall Findings (Ph.1) • Strong innovation capabilities are more often available in German SMEs compared to Chinese firms. • Deficiencies in Chinese companies are mainly in three dimensions of innovation management: Innovative Organisation, Organisational Learning and Strategic Management. • Concerning the other two dimensions, Processes and Linkages, no significant differences exist, however results are weak • Based on these results, in-depth interviews with the Chinese SMEs were done to probe into the issue further and find the root causes of the deficiencies. • The in-depth interviews with German SMEs are still a work in process. www.ohm-university.eu

  21. Competitivenss does not equate optimization!!!A Hard Lesson To Learn • German SMEs need to first continously monitor and improve their • potentials to be able to keep their distance with their low-cost competitors ---Stay Competitive! • German SMEs need to use their potentials to the fullest! To do so, they should rethink their business models and their innovation drivers to earn an optimum position! This offers them • ---Stay Ahead and Plus + www.ohm-university.eu

  22. 5. Wrap-Up • German SMEs still have an advantage in innovation capabilities and therefore in being competitive. • The advantages of the German SMEs are mainly in the field of employee involvement, communication, organisational decentralisation, and employee qualification. • Our results also show that the differences between German and Chinese SMEs concerning their innovation potential is not as big as it is supposed to be! • So the challenge for German SMEs is to maintain and to optimize their innovation potential in order to survive in the global competition. www.ohm-university.eu

  23. The further considerations of our study are: • Further studies with explicit focus on EDI thru in-depth quantitative and qualitative analyses should be conducted. Objective: precision: “as is” information • Comparison with SMEs from other countries within the EU and outside the EU (benchmark) • Development of an improvement concept to optimize the innovation potential, mainly based upon EDI (“to be”) www.ohm-university.eu

  24. Thank You for Your Attention www.ohm-university.eu

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