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The Feature Analysis of Capacity for Technological Innovation of
Small and Medium-sized Enterprises in the Financial Crisis Situation
SHEN Xiaogang
School of Henan University of Technology, P.R.China, 450015
[email protected]
Abstract: Capacity for technological innovation of enterprise cluster reflects the quality and level of
national economy in a large part. Nowadays modern science and technology are developing quickly with
time, economic globalization across world is accelerating than ever before and competition among
enterprises becomes increasingly fierce. In this economic situation, it is very important that one
enterprise carry on analysis of current situation and capability of technological innovation, find out
disparity, remove hindrance, and then improve capacity for technological innovation of enterprise, speed
up technical progress of enterprise, strengthen market competition, promote social sustainable
development.
The article employs inductive method as research philosophy. Introducing the effect of financial crisis
on US’s enterprise, the author structures an analysis frame for technological innovation capability, and
points out how to improve enterprise’s technological innovation capability.
Keywords: Small and medium-sized enterprises, Financial crisis, Capacity for technological innovation,
Feature analysis
1 Introduction
At present, this financial crisis from American financial market not only resulting in business failures of
the enterprises in Native American, but also exert serious impact on Asian financial market, even
bringing a series of difficulties to production operation of the enterprise in our country. One enterprise’s
development and expansion must rely on its own technological innovation, which depends on safe
health financial support. To improve the capacity to deal with effect of financial crisis through
technological innovation should be a strategic issue needed to be contemplated during the process of
enterprise development. For capacity for technological innovation of enterprise, there will be some
directed effects on evaluating itself and forging clear development strategies in different stages.
At present, there are many difference understanding on enterprise’s technological innovation capability.
Six major viewpoint were held by different people, and people lack of an Authoritative analysis frame to
study enterprise’s technological innovation capability. However, a new trend of study enterprise’s
technological innovation capability is approaching, which using data mining intelligent systems to
support study and employing capability building mechanism as research theory.
2 Technological Innovation of Enterprise
To an enterprise, technological innovation is the energy source to achieve sustainable development. And
also, it is the key determinant to for an enterprise to get bigger and make expansion.
2.1 Overview of technological innovation
In the decision to strengthen technological innovation, to develop high technology and to realize
industrialization publicized by The Central Committee of Communist Party of China and The State
Council, technological innovation is defined as: "technological innovation is that enterprise applies new
knowledge, technique and process of innovation, adopt new mode of production and operation and
management to improve the quality of products, develop and produce new products, provide new
service, occupy market and realize market value. This definition expresses the meaning of technological
innovation in depth, clearly explains that technological innovation is a process of science & technology
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and economy integration, emphasizes that the ultimate purpose of technological innovation is that
commercial application of knowledge & technology and market success of new product. The definition
of technological innovation is defined by professor Fu Jiaji as: technological innovation is that
entrepreneur seize the latent profit opportunity to gain commercial interest, reorganize production
conditions and agents to build up production operation system more effective, efficient and low cost,
thereby launches new products, manufacturing (technique) method, develops new markets, gains supply
source for new raw materials or semi-finished products or establishes new organization of enterprise. It
is a combined process of a series of activities concerning science and technology, organization,
commerce and finance etc.
2.2 The features of technological innovation of enterprise
2.2.1 Double-edged property
Technological innovation is a double-edged sword: first, it has high riskiness, which is the inherent
quality of technological innovation. Technological innovation activity is tentative, each phase and link
contains so many factors of instability, and thus technological innovation activity demonstrates
high-riskiness. Secondly, it has high rate of return. In economic activity, the higher the risk is, the higher
the return is. They exist simultaneously. Relevant data shows that if there is 20% success ratio of
technological innovation activity, then could regain the whole investment of technological innovation,
but without profits. The reason is application of new technique will form the technical superiority to
competitors, and then form technical monopoly for a period of time. The economical meaning of this
kind of superiority or monopoly is represented as High Yield, thus it yields high monopoly profit after
deducting the cost of technological innovation.
2.2.2 Assets property
Technological innovation is a cross practical activity concerning science & technology development and
production and management activity. Regardless of its scale, a certain amount of fund investment is
needed, being used for adding and renovating equipment and facility, purchasing raw materials etc.
Otherwise, it is hard to achieve the preset target. In this respect, technological innovation has assets
property.
2.2.3 Systematicness
Technological innovation is a series of synthesized activities that involve research & development,
manufacture, management and market etc., also is system engineering. technological innovation is not
equal to that create something new and original, which should originate from market analysis also
regard more economic benefit and market share as ultimate objective which is unabridged systems
engineering.
2.2.4 Periodicity
Periodicity of technological innovation is very significant, there are transformation period from
invention or creation to technological innovation, development period from innovative idea to
commercialization, lifecycle from technological innovation be in the market to withdraw from the
market, proliferation period of extensive use and imitation of technological innovation. It can clearly be
seen that technological innovation process is one developing in chained circles. After all the links from
invention to market realization, the technological innovation will bring forth new revision of innovation
and form upward spiral innovation according to market demand.
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innovation level
Evolutionary innovation,
structure innovation,
integration nnovation
technology
caprice
：
Turmoil
period
Mainstream
design
Technology
caprice
time
：
Figure 1 Lifecycle of technological innovation
(source of data Shi Chunlin Innovation Space and technical management of enterprise [M],Tsinghua University
Press)
2.2.5 Great compatibility
Technological innovation not only involves inner research, development, operation, sale, but also social
condition, market situation and so many policy factors, which complex systematic procedure including
technique, economy and society, thus, technological innovation activity has great compatibility among
technological innovation behavior and quality of innovator, internal state of enterprise and external
interrelated environment.
3 Financial Crisis has Influences on Technological Innovation of Enterprise
Financial industry shoulders the responsibility of financing the real economy, which is vividly compared
to blood of creature system, once there is problem in blood, the development of real economy will be
inevitable upheaval even fall-back.
3.1 The genesis of this economic crisis
Financial crisis, which spreads from American financial market, has its unique reason. Globalization
allowed the US to suck up the savings of the rest of the world and consume more than it produced.
American deficit of current account is 6.2% of its GDP in 2006. Through marketing more and more
intricate products and more bounteous condition, financial market encourages consumer lending. Since
1980, regulations have been progressively relaxed until they have practically lost all binding force. As a
result of subprime crisis, the financial institutions in developed nations have to reassess risk and
reallocate assets, causing their fund to flow out from the emerging markets to strengthen their stability.
Therefore, this will result in severe shrinkage of equities, currency devaluation, scaling down of
investment, economic growth slow-down even recession across emerging entities.
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3.2 The enterprise must handle financial crisis correctly
This new financial crisis will exert great pressure on growth of the Chinese economy, with the most
direct impact being market shrinkage and lack of consumption confidence. But when the enterprise
cluster is in the face of financial crisis, they are not at a loss what to do. Under the background of
financial crises, we have still witnessed a lot of cases in which many enterprises have rised by
technological innovation. For instance, in 1873, over-investment in railway sector leaded to lather
collapse, the economic crisis of the world started. Founded in that time, General Electric Co. Limited,
by technological innovation, not only get through the crises successfully, but also drove the 2nd
Industrial Revolution, and kept up "the world biggest market capitalization corporation" for almost a
century. When the Great Depression hit the US in 1929, bank failure, stock market crash, but American
Broadcast Record Company raised the effort in research and development, produced high-quality radio,
record and TV and lifted another Industrial Revolution. At present, the enterprise cluster is facing the
challenge of financial crisis. Meanwhile, they meet unprecedented developent opportunity of industry
upgrade that is advocated and supported by government.
4 The Characteristics of Capacity for Technological Innovation of Enterprise
As technological innovation is based on consuming a lot of resources of enterprise (funds and talents
etc.) and has a great risk of failure, capacity for technological innovation will become a powerful tool to
prevent risk; Many enterprises are keeping their eyes on exploring and pursuing positively how to
culture and improve capacity for technological innovation.
4.1 Technological innovation products continue entering in market
Through several years even longer training of technological innovation, the enterprise not only formed
steady innovation mechanism and technical team, it is outstanding that technological innovation
achievements are marketed from one generation to another. Innovative product is the bond that connects
enterprise and the majority of users, the customers could understand enterprises through this bond, the
enterprise also will get more and more satisfaction and loyalty from customers, and know well the
customers and market through this bond, carry on effective and real-time monitoring to the market, and
feedback information to R&D of technological innovation, thus the new technological innovation
achievement will be formed.
4.2 Enterprise relies on continuous expansion of new products
According to the market analysis, enterprise produce innovative product to fill in a gap of market
demand, which is called "seize market opportunity". For continual technological innovation, continue
relying on innovative product to lead the future development trend of market, which is called "make
opportunity of market". "Seize market opportunity" could maintain competitive advantage of enterprise,
and gain high economic benefits. For the enterprise pursuing sustainable development, it can not realize
the expanding dream only relay on once opportunity. So following the development of enterprise,
technological innovation of enterprise also adjust the relevant strategy, not only need adjust innovative
consciousness and innovative team, but also innovative direction and innovative mechanism etc. thus,
this kind of innovative strategy will match the development strategy of the whole enterprise.
4.3 Hold the leadership of innovative technology of product
Innovative technology is the foundation of technological innovation, innovation talent and team is the
idea bank of innovative technology, the advance of bank of innovative technology will directly influence
the efficiency of technological innovation of enterprise. In reality, there is a certain closure of each
enterprise’ idea bank, which gives little cause for criticism from angle of intellectual property protection.
But it also will have an adverse effect on the efficiency and development of idea bank. Information
technology and the development of Internet require the enterprise to complete and improve the function
and efficiency of the idea bank. It is the wise choice to add the degree of openness and external
cooperation, the support of government and good external development environment play a role of
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maintaining the leading position of innovative technology in a certain degree.
4.4 The continued ascent of brand influence of enterprise
Brand influence means that exploit market, occupy market, and benefits obtained capacity with brand.
The capacity for technological innovation of enterprise is the summation of the resources about
techniques innovation and R&D of products, such as insider, information, equipment and organization
etc., which reflects the intrinsic potential of enterprise. The enterprise will push this kind of potential as
far as it could go, and change into the brand influence of enterprise, it could be realized continuously,
must set the new product developed by technological innovation as carrier. So the update of product is
the interrelated and interactional carrier between capacity for technological innovation and brand
influence.
Though brand influence lies on internal integration capability of enterprise, once the brand influence
formed, it will have relative independence, and promptly react up on capacity for technological
innovation of enterprise. The brand influence in harmony with capacity for technological innovation will
provide the powerful support of technique and funds and vice versa.
5 Conclusion
Through feature analysis under the condition of financial crisis of capacity for technological innovation,
we will clearly see that it not only impact the market position of products, but also competitive
advantage and brand recognition. There are powerful relatedness among these characteristics and
remarkable stages, which could guide the enterprise to formulate specific technological innovation
strategy in different development stage, form the core competitive advantage with the help of capacity
for technological innovation, and then continue to realize sustainable development, culture and improve
the capability to resist every kind of risk such as financial crisis etc.
The article focuses on characteristics of enterprise’s technological innovation capability when financial
crisis coming. Through there are many factors influencing enterprise’s technological innovation
capability, fully analyzing those factor will become the future study tasks.
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