Innovation capability building through intermediary organizations: cases of manufacturing small- and medium-sized enterprises from China's Zhejiang province

Abstract

Along with a continued expansion of the innovation landscape, collaboration with external partners becomes an increasingly critical strategy for organizations to acquire necessary resources from the outside when building their innovation capability. Based on three representative manufacturing small- and medium-sized enterprises (SMEs) in China's Zhejiang province, this study explores the evolution of the SMEs' unique organizational forms in response to such external collaboration. In particular, these organizational forms begin with a functional-level ‘technology department’ that subsequently evolves into a strategic-level ‘research centre’ that acts as a ‘quasi-intermediary organization’ within an existing organizational boundary and eventually becomes an independent professional ‘technology company’. Although, in general, the collaboration with universities and research institutes facilitates both exploratory and exploitative types of innovation capability building, this study further finds that such collaboration via a ‘technology department’ is the least effective. Furthermore, collaboration via a ‘research centre’ strengthens (weakens) the effect on the exploratory (exploitative) type of innovation capability building. Meanwhile, the collaboration via a wholly owned ‘technology company’ strengthens (weakens) the effects on the exploitative (exploratory) type of innovation capability building. Importantly, the collaboration via a joint-venture ‘technology company’ with universities and research institutes facilitates the ambidextrous exploratory and exploitative type of innovation capability building.

Keywords:

• innovation capability
• intermediary organizations
• organizational forms
• SMEs
• China

Acknowledgements

This study is supported by the Canada International Development Research Centre (IDRC, Project No. 106341-001) and the Zhejiang Provincial Natural Science Foundation of China (Project No. LY12G02011).