Innovation in Small Businesses: towards an Owner-Centered Approach to Innovation

We adopt social cognitive theory to understand innovative activities in small businesses. We draw on Schumpeter’s work to understand how owners may develop innovations and how an owner-centered approach to innovation should take form.

Design/methodology/approach:

We conducted a multiple case study in small businesses from different traditional sectors. We conducted in-depth semi-structured interviews with the participants and we accessed data from social networks such as the Facebook and Instagram fan pages of the businesses.

Findings:

The results explain what drives business owners towards innovation and what affects the innovation structure of their businesses. These results are expressed through the antecedents of innovation that emerged from the field and may help in explaining the differences between innovative small businesses and non-innovative small businesses.

Research Practical & Social implications:

We developed an approach designed for studying innovation within the context and reality of small businesses. In order to contribute to the development of innovations in forgotten businesses, we have listed some recommendations for supporting agencies, government bodies, and researchers alike.

Originality/value:

Small business innovation is influenced by the owner’s propensity to recognize and act on opportunities. Therefore, the owner can guide the innovation activity in a small business and this needs to be considered by researchers.

Keywords:
Innovation; Model; Small Business; Owner

	Case A	Case B	Case C	Case D	Case E
Name of the Owner	Owner A	Owner B	Owner C	Owner D	Owners E1 & E2
Age of the Owner	31 years	53 years	59 years	55 years	53 years and 29 years
Business area	Barbershop	Pastry maker	Bakery	Carpentry	Coffeehouse
Business sector	Service	Commerce	Industry	Industry	Commerce
Time in operation	Since 2015	Since 2008	Since 1998	Since 1992	Since 2014
Number of employees	07 employees,	26 employees	17 employees	27 employees	12 employees
Number of employees	High turnover	High turnover	Low turnover	Low turnover	Low turnover
Main products/services/processes	Products: beard and hair balms	Products: pastries and sugarcane juice	Products: bread	Products: closets and wardrobes	Products: coffee, tea, cakes, and sweets
	Services: haircuts and bear trimming	Services: events	Services: breakfast and lunch	Services: maintenance. Process: section, bonding, machining, assembly	Services: events
	Process: “alignment”	Process: food making	Process: bread making and freezing		Process: food making
Main customers	Well-defined profile	Well-defined profile	Well-defined profile	Well-defined profile	Well-defined profile
Main customers	Local customers: men and children	Local customers and tourists	Local customers and tourists	Local customers and tourists	Local customers
Main competitors	There is no cooperation	There is no cooperation	There is cooperation with other bakeries	There is cooperation between carpentries	There is no cooperation
Main competitors	Two other local barbershops with a similar concept	Local snack bars and restaurants	Local restaurants	Freelancers	Local cafeterias
Main suppliers	There is cooperation	There is cooperation	There is cooperation	There is cooperation	There is cooperation
Main suppliers	Local supplier	Local supplier	Local supplier	Local supplier	Local supplier
Main threats	Employees. In this trade they are volatile and move from one barbershop to another	Reduction in the customers’ purchasing power because of the crisis	Reduction in the customers’ purchasing power because of the crisis	Reduction in the customers’ purchasing power because of the crisis. Freelancers and “garage businesses”	Reduction in the customers’ purchasing power because of the crisis
Main innovations	Pioneer in value proposition; “alignment of haircuts;” new haircuts and styles	Pioneer in value proposition; redefining processes and menu; event services	Pioneer in value proposition; bread freezing process; event services	Pioneer in value proposition; carpentry process control; photo engraving on wood	Pioneer in value proposition; constantly redefining the menu; event services
Major awards	Banco do Nordeste’s Innovative Featured Company (2016)	SEBRAE’s Small Business Competitiveness Award (2014)	SEBRAE’s Small Business Competitiveness Award (2015)	Banco do Nordeste’s Innovative Featured Company (2017)	Banco do Nordeste’s Innovative Featured Company (2017)

	Case A	Case B	Case C	Case D	Case E
Personal characteristics
Educational level	High school	College	College	College	High school/College
Business management education	No	Yes	No	No	No/Yes
Previous experience	Since a child/hobby	Since a child/hobby	Since a child/hobby	Since a child/hobby	Since a child/hobby
Motivation	Wants more	Wants more	Wants more	Wants more	Wants more
Leadership	Leads the team	Leads the team	Leads the team	Leads the team	Leads the team
Will to change	Change-oriented	Change-oriented	Change-oriented	Change-oriented	Change-oriented
Well-being	Enterprise is his life	Enterprise is her life	Enterprise is her life	Enterprise is his life	Enterprise is their lives
Enterprise characteristics
Savings, plan, time for innovation	No	No	No	No	No
Process optimization	Everything is optimized	Everything is optimized	Everything is optimized	Everything is optimized	Everything is optimized
Culture of innovation	Owner-centered	Owner-centered	Owner-centered	Owner-centered	Owner-centered
Institutional support	SEBRAE, BNB	SEBRAE, BNB	SEBRAE, BNB	SEBRAE, SESI, BNB	SEBRAE, SENAI, BNB
Cooperation	Only with suppliers	Only with suppliers	There is cooperation	There is cooperation	Only with suppliers
Internal flexibility	Strong flexibility	Strong flexibility	Strong flexibility	Strong flexibility	Strong flexibility
Training programs	Internal and external	Internal and external	Internal and external	Internal and external	Internal and external
Will and ability
Concept of innovation	“Do not settle, never settle down”	“Never stay the same, try to surprise”	“To update oneself, to always be better”	“To do something in a different way”	“To do what is good for your and surprise others”
Introduction or improvement of products, services, processes	Constant. Contact with national fairs and barbershops from other states and countries	Constant. Contact with national fairs	Constant. Contact with national fairs and bakeries from other states	Constant. Contact with national fairs and carpentries from other states	Constant. Contact with fairs and national and international coffeehouses
Difficulties in introducing or improving products, services, processes	Know-how Financial	Know-how Financial	Know-how Financial	Know-how Financial	Know-how
Changes resulting from the introduction or improvement of products, services, processes	Quality, market dominance, growth	Quality, market dominance, growth	Quality, market dominance, growth	Quality, market dominance, growth	Quality, market dominance, growth
Changes still to occur	To enlarge the barbershop and invest in the customer experience	To enlarge the pastry maker and invest in the customer experience	To enlarge the bakery and start exporting bread	To enlarge the carpentry and start working with alternative materials	To invest even more in the customer experience

Characteristics of the Owner
Factors	Empirical Evidence
Previous experience in the business	“The kitchen fascinates me, the smells, the seasonings…. And I am [used to] making my own pastries at home, every Sunday! I fry a bowl of pastries for my nephews and friends, because people love pastries. [That is] my destiny! It has taken over my life” (Owner B)
Strategic vision	“I saw that this old carpentry model was dead already. You cannot depend on the woodworker... I noticed that. I had to do something. I had to modernize [my business]. My competitors did not have the courage, they thought it was a very big leap” (Owner D)
Leadership	“I always say that I am a catalyst. What does the catalyst do? Without the catalyst the photosynthesis cannot happen... I do a little bit of everything. I have those old [employees], and each of them perform their own roles” (Owner C)
Change-oriented vision	“When I get here I’m already feeling nervous... Many people say: ‘This barbershop is beautiful!’ or ‘What is this [object]!?’… But I’m already feeling saturated. When I innovate, when I put something new here, [it fills] my spirit… It gives me much more energy. It feels like I always have the need to start over, you know?” (Owner A)
Characteristics of the Enterprise
Factors	Empirical Evidence
Process optimization	“We could not map everything [in the bread making, cake baking, and other product processes], but we mapped almost everything! It’s a challenge! We are always trying to improve. It helps to standardize [the product] and also offer something new. […] With this [course] they are teaching us a methodology of bakery management. That makes all the difference!” (Owner C)
Internal flexibility	“The first marriage ceremony was not our idea, the customer asked us to do it. The person said she was getting married and wanted to have the party here. We had never done it before, so it was like ‘Let’s develop this idea together!’… Then that was when we started creating the wedding format in the coffeehouse” (Owner E2)
Training programs	“There are suppliers of materials and machines who give us training courses paid by their own companies. They bring a mini lab over here... And I paid for courses and events for the employees. We have an agreement with SESI. It is important for me” (Owner D)
External institutional support	“The trajectory of the business itself has to do with SEBRAE. I sought SEBRAE to get licenses, to know how to work perfectly. I followed everything! I attended many courses there, financial management, entrepreneurship… I was a ‘quarrelsome’ student and kept arguing with the teachers [laughs]” (Owner B)
Will and Ability to Innovate
Factors	Empirical Evidences
Resilience	“Need made me seek an alternative. I saw a friend working at the fair and I decided to buy a pastry stall. I used R$ 20,000 from my credit card, and it took me eight months to get it paid... But the people there did not understand that if they took proper care of the fair things would improve. They did not want me there! But then I had the audacity to start here [current headquarters] even without having the money. My house is here, R$ 700,000 from my mortgage!” (Owner B)
Personal up-to-dateness	“I have always attended fairs, congresses… A turning point in our lives was a congress, a speech, some 16 years ago, a course on baking with monthly modules... When it was over I was like crazy: ‘I need to take this to my hometown!’” (Owner C)
Growth orientation	“I really respect what each person wants for their own life. It’s not that the person is not good, sometimes it’s what the person wants for his or her own life, it’s what makes him or her feel happy, what he or she pictured for himself/herself... I pictured something else for myself. This business is the project of my life, it is [part of] my personality” (Owner A)
Cosmopolitan behavior	“We did not have this concept of barbershop here in the city… It came from São Paulo, it was a European trend. And if you are a barber, you’re always following the social networks of other barbers. And I was like: ‘Look, the men’s salon is modernizing! Now it’s going to have a more masculine footprint… It has beer, it has a pool table!’” (Owner A)

Fundação Escola de Comércio Álvares Penteado Fundação Escola de Comércio Álvares Penteado, Av. da Liberdade, 532, 01.502-001 , São Paulo, SP, Brasil , (+55 11) 3272-2340 , (+55 11) 3272-2302, (+55 11) 3272-2302 - São Paulo - SP - Brazil
E-mail: rbgn@fecap.br

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[1] Responsible Editor:

Prof. Dr. José Liébana