Developing a Business Innovation Framework for SMEs with a focus to IT-enabled Digital Business Services

Abstract

Contemporary studies on business innovation and business transformation exhibit diverse approaches and recommendations, yet lack a clear framework for practical application and quantifiable measurement of business innovation. With no clear constructs and measures to gauge this study focus on developing a practical framework in terms of innovation leadership, innovation enablement, and innovation orchestration. Based on insights from previous studies, we conflated an integrated view of business innovation and their constructs in three hierarchical dimensions. We present these dimensions as the first AMPEE framework and second-order VIDE framework of business innovation and transformation. Then we proceed to hypothesize a theoretical third-order framework integrating innovation leadership, innovation enablement, and innovation orchestration as they lead to business innovation.  Resulting constructs are tested using empirical data collected by a quantitative survey from professionals of Indian small and medium enterprises (SMEs) providing IT-enabled services and business services. First, we used exploratory factor analysis to deduce key innovation constructs as measurement instruments based on contemporary theoretical studies as they relate to first and second-order dimensions. We then applied confirmatory factor analysis (CFA) to test the construct measures and establish that significant positive impact of business innovation constructs on business performance. The size of the SME and its strategic focus also largely influencing innovation capabilities. Results of Structured Equation Modelling (SEM) were also extended to examine the impact of organization size on innovation constructs. The findings of this study and the suggested business innovation framework model may draw the attention of business practitioners and academicians for further development of fine-grained measures of business innovation, especially for SMEs with a focus on IT-enabled digital business services. We believe such a hierarchical conceptualization of business innovation measures will surely contribute to the current comprehensions of business leaders and academic researchers for identifying and filling the right gaps for further improvement.