Exploring innovation in regional manufacturing SMEs

Continuous change and increased business complexity pose unique challenges to Small and Medium Enterprises (SMEs) to develop and sustain competitive advantage. These challenges are even more pronounced for SMEs in isolated regional areas, especially those that operate in the declining manufacturing industry. This paper explores key factors that regional SMEs draw on in their quest to survive and innovate in a changing business environment. Based on a qualitative interpretive research design, empirical evidence was gathered through personal interviews with business owners/managers of 19 regional Australian manufacturing SMEs. Three interrelated innovation factors were identified: (i) an emphasis on developing knowledge; (ii) openness to continuous learning; and (iii) engagement in social networking with various stakeholders. In addition, information technology plays an enabling and supportive role in strengthening regional manufacturing SMEs' ability to be more innovative. Based on these findings, four propositions are suggested indicating how SMEs can use knowledge to foster innovation in a challenging and competitive business environment.