Innovation and Competitive Advantage in Small Businesses: Effects of Environments and Business Strategy


  • John C. Palmer University of Illinois at Springfield
  • Robert E. Wright University of Illinois at Springfield
  • Joshua B. Powers Indiana State University


Small businesses continually  attempt to achieve a sustainable competitive advantage over competitors. One possible source of competitive advantage may he through either product or process innovations. However, such innovations can be risky, with no guarantee of success. The success of an innovation may depend on both a firm 's business strategy and the environment  in which it operates. This paper provides a framework for evaluating the possible effects of environment and business strategy on the success of product and process innovations.


Download data is not yet available.


Ali, A., Krapfel, R., & Labahn, D. (1 995). Product innovativeness and entry strategy: Impact on cycle time and break-even time. The Journal of Product Innovation Management, 1 2, 54-69.

Ansoff, H. ( 1 979). Strategic management. New York: J. Wiley.

Bantel, K. ( 1998). Technology-based, "adolescent" firm configurations: Strategy identification, context, and performance. Journal of Business Venturing, 13, 205-230.

Bantel, K., & Jackson, S. (1989). Top management and innovations in banking: Does the composition of the top team make a difference? Strategic Management Journal, I 0, 107-124.

Burgleman, R., & Madique, M. (1988). Strategic Management of Technology and Innovation. Homewood, IL: Irwin.

Calantone, R., diBenedetto, C., & Bhoovaraghavan, S. (1 994). Examining the relationship between degree of innovation and new product success. Journal of Business Research, 30, 143-1 48.

Carpenter, G.S., & Nakamoto, K. (1989). Consumer preference formation and pioneering advantage. Journal of Marketing Research, 26, 285-298.

Chandler, G., & Hanks, S. (1994). Market attractiveness, resource-based capabilities, venture strategies, and venture performance. Journal of Business Venturing, 9, 331-350.

Chaganti, R., & Chaganti, R. (1983). A profile of profitable and not-so-profitable small businesses. Journal of Small Business Management, 21, 43-51.

Conner, K. (1995). Obtaining strategic advantage from being imitated: When can encouraging "clones" pay? Management Science, 41 , 209-225.

Covin, J. (1991). Entrepreneurial versus conservative firms: A comparison of Strategies and Performance. The Journal of Management Studies, 28, 439-462.

Covin, J., & Slevin, D. ( 1989). Strategic management of small !inns in hostile and benign environments. Strategic Management Journal, I O, 75-87.

Damanpour, F. (1991). Organizational innovation: A Meta-analysis of effects of determinants and moderators. Academy of Management Journal, 34, 555-590.

Dess, G., & Davis, P. ( 1984). Poner's (1980) generic strategies as determinants of strategic group membership and organizational performance. Academy of Management Journal, 27: 467- 488.

Dess, G., Lumpkin, G., and Covin, J. (1997). Entrepreneurial strategy making and firm performance: Tests of contingency and configuration models. Strategic Management Journal, I 8, 677-695.

Dickson, P.R. (1992). Toward a general theory of competitive rational ity. Journal of Market ing, 56, 16-83.

Drucker, P. (1985). Innovation and entrepreneurship: Practice and principles. New York: Harper and Rowe.

Flaheny, M. (1983). Market share, technology leadership, and competition in industrial semiconductor markets. In Technological Innovation, Managemen and Policy. R. Rosenbloom (ed.), London: JAi Press.

Friar, J. ( 1 995). Competitive advan tage through performance innovation in a competitive market. The Journal of Product Innovation Management, 12, 33-42.

Fry, F., Stoner, C. & Hartwick. R. (2001). Business: An integrative approach (2nd ed.). New York: I rwin/McGraw-Hill.

Hage, J. (1986). Responding to technological and competitive change: Organizational and industry factors. In Managing Technological I nnovation. D. Davis and Associates(eds.), San Francisco: Jossey-Bass.

Han, J., & Kim, N. (I998). Market orientation and organizational performance: ls innovation a missing link" Journal of Marketing, 62, 30-45.

Hax, A., & Wilde II, D. (1999). The Delta model: Adaptive management for a changing world. Sloan Management Review, 40, 2, I 1-28.

Hayes, R., & Abernathy, W. (1982). Managing our way to economic decline. In Readings in the Management of I nnovation. M. Tushman and W. Moore (eds.), Marshfield, M A: Pitman Publishing.

Hill, B., & Pappone,J. ( 1999, Sept. 0 I ). Rebel takes a Linux cue. The Ottawa Citizen, p. C l.

Hin, M., Hoskisson, R., Johnson, R., & Moesel, D. (1996). The market for corporate control and firm innovation. Academy of Management Journal, 39, I 084- I I I 9.

Hitt, M., & Ireland, R. (1985). Corporate distinctive competence, strategy, industry and petformance. Strategic Management Journal, 6, 273-293.

Horowitch, M., & Sakakibara, K. (1986). The changing strategy-technology relationship in technology-based industries: A comparison of the United States and Japan. In Research on Technological I nnovation, Management and Pol icy. R. Rosenbloom (ed.). London: JAi press.

Hubler, E. (1998). Bakery's failed recipe: Employee buyout. Inc., 21 , I , p. 27.

Jenn ings, D., & Seaman, S. (1994). High and low levels of organizational adaptation: An empirical analysis of strategy, structure, and performance. Strategic Management Journal, 15, 459-475.

Karlsson, C., & Olsson, 0. ( I 998). Product innovation in small and large enterprises. Small Business Economics, 10, 31 -46.

Khan, A., & Manopichetwattana, V. ( 1989). Models for dist ingu ishing innovative and non innovative small fi rms. Journal of Business Venturing, 4, 187-196.

Kimberly, J., & Evanisko, M. ( 1981 ). Organizational innovation: the influence of organizational and contextual factors on hospital adoption of technological and administrative innovations. Academy of Management Journal, 24, 689-713.

Leavitt, H.J. (1986). Corporate Pathfinders: Building vision and values into organizations. Homewood, I L: Dow Jones-Irwin.

Li, T., & Calantone, R. ( 1 998). The impact of market knowledge competence on new product advantage: Conceptual ization and empirical examination. Journal of Marketing, 62, 13-29.

Mascarendas, B. (1991). Adopt ion, d iscontinuation and retention of a capital good innovation. Journal of Management Studies, 28, 91-10 I .

Meredith, J. ( 1 987). The strategic advantages of new manufacturing technologies in small firms. Strategic Management Journa l, 8, 249-258.

Miller, D., & Frcisen, P. (1 986). Innovation in conservative and entrepreneurial firms: Two models of strategic momentum. Strategic Management Journal, 3, 1-25.

Miller, D., & Toulouse, J. (1 986). Strategy, structure, CEO personal ity, and performance in small firms. American Journal of Small Business, 10, 47-62.

O'Nei ll, H., & Drucker, J. (1986). Survival and failure in small businesses. Journal of Sma ll Business Management, 24, 30-37.

Porter, M. ( 1 980). Compet it ive strategy. New York: The Free Press.

Porter, M. ( 1988). The technological d imension of corporate strategy. In Strategic Management of Technology and I nnovat ion. R. Burgleman and M. Mad ique (eds.), Homewood, I L: Irwin.

Robertson, T.S., & Gat ignon, H. ( 1986). Competitive effects on technology diffusion. Journal of Marketing, 50, 1-1 2.

Rosenberg. R. ( 1996). ENOX gets award for product development. The Boston Globe, January 28, p. 80.

Rothwell, R., & Zegveld, W. ( 1 982). I nnovation and the small and medium sized firm. Boston: K luwer-Nijhoft:

Sa loner, G., Shepard, A., & Podolny, J. (2001 ). Strategic management. New York: John Wiley & Sons, Inc.

Scarborough, N., & Zimmerer, T. (2000). Effective small business management, 6th Edition. Upper Saddle River, New Jersey: Prentice-Hal l.

Sch midt, K. (1990). The innovat ive att itude of small and medium-sized enterprises. Journal of Sma ll Business Management, 28, 68-69.

Schnaars, S. P. (1991). Market ing strategy: A customer driven approach. New York: The Free Press.

Smith, G. D., A rnold, D. R., & Bizzell, B. G. (1991). Business strategy and policy. 3rd ed. Dallas: Houghton Mifflin.

Tether, B. ( 1 998). Small and large fi rms: Sources of unequal innovations. Research Policy, 27, 727-745.

Thom, N. ( 1 990). Innovation management in small and medium sized finns. Management lntemational Review, 30, 181-1 92.

Van de Ven, A. (1986). Central problems in the management of innovation. Management Science, 32, 590-607.

Watk in, D. ( 1 986). Toward a competitive advantage: A focus strategy for small retailers. Journal of Small Business Management, 24, 9-15. Zahara, S., & Covin, J. (1995) Contextual influences on the corporate entrepreneurship­ performance relationship: A longitud inal analysis. Journal of Business Venturing, 10, 43-58.



How to Cite

Palmer, J. C., Wright, R. E., & Powers, J. B. (2001). Innovation and Competitive Advantage in Small Businesses: Effects of Environments and Business Strategy. Journal of Small Business Strategy, 12(1), 30-41. Retrieved from