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Perceived environmental uncertainty and innovation in small firms

Freel, M. (2005) Perceived environmental uncertainty and innovation in small firms. Small Business Economics, 25 (1). pp. 49-64.

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Abstract

Employing data, from a recent survey of Scottish and Northern English Small- and Medium-sized Enterprises (SMEs), the current paper provides new evidence of the extent to which perceptions of environmental uncertainty (dynamism, complexity and hostility), along a number of dimensions, discriminate between small firms engaged in various levels of product innovation. Drawing, broadly, upon an extended version of the classic Miles and Snow schema, novel innovators appear to be marked by perceptions of uncertainty in market and technological environments, but by perceptions of a relatively certain or benign competitive environment. Moreover, the paper observes some dissimilarities between manufacturing and service firms. For instance, higher levels of innovation in manufacturing firms are associated with higher perceptions of supplier uncertainty, whilst, higher levels of innovation in service firms are associated with higher perceptions of human resource uncertainty.