Innovation and networking amongst small manufacturing firms in Cyprus

Abstract

The practice of innovation management in Cyprus is investigated via case studies of innovative small manufacturing firms. The analysis concentrates on how Cypriot firms develop networks (or avoid them!) and the effects of network relationships on innovation performance. The behaviour of firms is related to two contrasting models of network development: First, the “local strategic network model” where firms intentionally develop and maintain a network of long‐term relationships based on trust, cooperation and mutual benefit, with a view to obtaining the necessary resources and knowledge for innovation. Second, the “local self sufficiency model” where firms obtain any required resources from other local firms through ‘arms length’ market based transactions and any technical knowledge primarily from foreign suppliers. Such firms follow an insular pattern of behaviour in order to protect their independence and innovative activities. The possible association between performance (in terms of profitability, sales growth) and innovation strategies of Cypriot firms is examined and the implications for business managers and for Government support programmes are drawn out.