Are UK SMEs with active web sites more likely to achieve both innovation and growth?

Abstract

Purpose – This paper aims to examine the impact of developing more active web sites and increasing e-commerce on the relationship between innovation and growth performance in SMEs. Using the existing literature and empirical analysis the study seeks to consider the potential of engagement with the internet to achieve the often hard to attain ambition of both innovation and growth. Design/methodology/approach – In order to examine the relationship, data are drawn from the Federation of Small Businesses' Lifting the Barriers to Growth Survey. In order to establish whether the use of more sophisticated web sites are associated with being an innovative high performance business, while controlling for other firm and entrepreneurial characteristics, multivariate analysis in the form of multinominal logits and discriminant function analysis are utilised. Findings – The results suggest that although theoretically web sites with tools allowing interaction with customers or suppliers could benefit SMEs through a reduction in transaction costs and wider access to information, enabling them to jointly experience innovation and growth, in practice there is less evidence that this occurs. Those firms with active web sites are more likely to be innovative, but less likely to be both innovative and achieving growth. Research limitations/implications – The paper suggests a framework for analysing the impact of e-business at process level that can be used with other SME case studies. Practical implications – These results suggest that further work must be undertaken to establish whether SMEs should be encouraged to make such investments and if so what additional help is required to ensure that investments in this digital infrastructure achieves an appropriate return on investment. Originality/value – The results are of importance to both SMEs and policy makers providing insight into the nature of potential benefits from web site development using a large dataset. A clear need to investigate further how more innovative SMEs can benefit from company web sites and ecommerce to grow is identified.