ABSTRACT. This article explores the role of innovation in
small and medium sized firms, in relation to the firm’s success.
After a discussion of the relationship between success, inno-
vation and creativity, some possible backgrounds of creativity
and innovation are presented. For one part these are of a
personal nature, like the entrepreneur’s values, attitudes and
level of education. For another part they concern institutional
aspects of the firm.
After the development of a number of hypotheses these are
empirically checked with data from a survey among 200 entre-
preneurs in six countries. In the appendices some details of
the data and variables may be found.
I. Innovation and creativity as success factors
The chances of a small firm to survive and to be
successful are becoming ever more dependent on
innovation. Not only product innovation is impor-
tant to maintain a sufficient market share, but also
process innovation to produce below price level,
and social innovation to maintain a flexible and
Generally spoken, innovation is to be defined
as ‘the successful implementation of a creation’
(Heunks and Roos, 1992, p. 6). This innovation
seems to foster growth, profits and success
(Hyvärinen, 1990, p. 73). We define success of a
firm as ‘any sign of economic profitability, like
growth, increasing productivity and profits’.
* Hypothesis 1: The success of a small firm,
measured by its growth, increasing produc-
tivity and profits, depends on its innovation.
The entrepreneur-founder gradually becomes
burdened with management responsibilities
(Swayne and Tucker, 1973, pp. 13–16). The tasks
and mental outfit of the founders differ from those
of the later managers.
The founder of a firm nearly by definition is
an entrepreneur and innovator. In the beginning
(the birth- or start-up stage) innovation consists
mainly of the firm itself as a new product-market
combination. In this stage of uncertainty survival
is most important. In a new business there is room
for a craftsman-entrepreneur, confined to one idea.
In later stages an opportunistic entrepreneur is
needed to adapt the firm better to the environment
(Davidsson, 1989, p. 140). To strengthen the firm
and to pass through the stage of growth, the
emphasis has to shift to innovation within the firm
and its context. To qualify as an entrepreneur,
applying new ideas, the manager has to be oriented
towards, and actively pursue change (Davidsson,
1989, p. 6).
* Hypothesis 2: Younger firms are less inno-
vative than older ones.
According to West and Farr (1990, p. 252) inno-
vation is the conception of a new idea, trans-
formed into an invention, and exploited as much
as possible, whereas creativity is only the con-
ception of the idea. Ivancevich et al. (1994) and
Kao (1991, pp. V–VI) agree with this strict defi-
nition of creativity. Several others regard the
technical implementation of an idea also as a
matter of creativity. According to them innovation
is only the choice of a suitable organisational
and economical context in which to exploit the
invention (Swayne and Tucker, 1973, pp. 74–75;
Nyström, 1979, p. 1; Hyvärinen, 1990, p. 66;
Emory, 1968, p. 75). Of course, this is typically
the task of an entrepreneur, recognizing the
opportunity in an idea and translating it into an
Felix J. Heunks
Small Business Economics 10: 263–272, 1998.
1998 Kluwer Academic Publishers. Printed in the Netherlands.
Final version accepted on August 6, 1996
Faculty of Social and Behavioural Sciences,
P.O. Box 90153,