Managing Risk and Innovation: the Challenge for Smaller Businesses

Small and medium sized enterprises (SMEs) are caught in a double bind. As competitive pressures mount and customers press for higher quality standards, tighter cost control and faster response times from suppliers, SMEs find it increasingly vital to accelerate process and product innovation. At the same time, the attendant risks of innovation are higher for a small firm than a large one: usually, the smaller firm will have fewer technical and managerial competences, more limited finance, and more limited access to information than a larger organisation. The risk of getting it wrong comes into sharp focus for those firms where one major unsuccessful product or process development may threaten the survival of the enterprise and possibly the entrepreneur's personal assets. The consequence is a characteristic and understandable risk aversion.