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This research explores innovation of traditional SMEs that do not actively invest in innovation. Elements of open innovation have been identified in these firms in their effort to build social capital which they perceive as pertinent to their businesses. The result of the research shows that instead of using social capital as means for innovation, the unintentional practice of open innovation has contributed to the development of social capital, which further opens up potential for globalization. As a result, a model of open innovation as means of developing social capital for enhancing globalization potential for SMEs was developed.
INTRODUCTION
In the highly competitive global market, ability of small-to-medium enterprises (SMEs) to innovate new products is seen to be of strong influence to the nation's economic development (Xie, Zheng, and Tam, 2010). At the organizational level, more than the creation of new products, other forms of innovation as identified by Schumpeter (1934), including new ways of production; opening up new market; sourcing new supplies or developing a new organization of industry, are pertinent to the growth and survival of enterprises (Schumpeter, 1934). Therefore, innovation in any form within the organization is an important element in the successful performance of enterprises and the major contribution to competitive advantages (Anderson, Potocnik and Zhou, 2014).While innovation is highly valued by entrepreneurial enterprises, and the pressure from competition and globalization has made innovation impetus to their survival (Birchall, Chañaron and Soderquist, 1996), the case studies in this paper show that there are long sustaining traditional SMEs in Macao that are not proactively seeking to innovate, nor see the need for innovation. Although these SMEs admit that innovation is important to compete in the modem business world, they do not perceive as much importance in innovation as they do building social capital.
However, this research discovers that these traditional SMEs have been practicing open innovation unintentionally, achieving product innovation in the form of product refinement, and process innovation over the years, and have thus enhanced their social capital, in the form of trust, extended network and social reputation, which they perceived as their competitive advantage.
Extensive research has been conducted in studying the internationalization of SMEs (Ruzzier, Hisrich & Antoncic, 2006). There has also been a number of research on...