Does innovation lead to performance? An empirical study of SMEs in Taiwan

Purpose This study attempts to probe within a multi‐dimensional perspective the nature and type of daily innovation practices of small‐ and medium‐sized enterprises (SMEs) located in Taiwan. The relationship between innovation and organizational performance will also be explored. Design/methodology/approach Data of interest were collected through a telephone survey. From the 2000 Directory of Manufacturing and Service Industries in Northern Part of Taiwan, companies with a total employee number less than 200 (the definition of an SME in Taiwan) were the population. Telephone calls to 877 firms were successfully completed with a response rate of 87 per cent. Findings Eighty per cent of the surveyed companies conducted some sort of innovation, the two major types of innovations were technological and marketing innovations. Innovation has a weak link with company sales. Administrative innovations have surfaced to be the most crucial factor in explaining sales rather than technological innovations. Practical implications Creating a successful innovation platform to serve as a base for non‐technology‐related innovations may prove to be the most critical catalyst to capitalize on innovation efforts. The research results also provide some insights for companies that are not sure how to integrate innovation into their business operations. Originality/value This study unveils the innovation practices of this novel economy and particularly focuses on the less explored SMEs in an Asian context.