Incremental innovation and business performance: small and medium-size food enterprises in a concentrated industry environment.

Past studies have analyzed issues pertaining to the definition of innovation, methods of measuring innovation and the relationship between organizational characteristics and innovation orientation. Extant studies have adopted a large business or a technologically intense context of study. By

studying the adoption of new products, methods, systems, markets, and supply sources in small and medium-size seafood retail enterprises, this study reviews innovation and the adoption of innovation in a broader and novel context. Seafood retailers in this study operate in a concentrated industry environment where two large supermarket chains account for more than 70 percent of national food retail sales. The seafood retailers operate in a highly competitive environment, the industry is maturing, the firms are not very advanced technologically, and the sector has a disproportionately large number of firms owned and operated by persons of non-English speaking backgrounds. The results of the study indicate that incremental innovation offers substantial competitive advantages to small and medium-size firms, that incremental innovations can be adopted and operationalized rapidly by entrepreneurs with different cultural backgrounds and skills, and that small and medium-size firms that focus on sales and marketing innovations are profitable and are able to compete successfully with large businesses.

Introduction

Anecdotal evidence indicates that the increasing concentration of retail business (as a result of mergers and acquisitions) and the consequent non-competitiveness of small and medium-size firms because of scale-diseconomies and the supply chain power of large supermarkets have adversely impacted on the performance of small and medium-size food retailers. In Australia, the context of this study, two major supermarket chains account for more than 70 percent of food retail sales. The two large supermarket chains have increased their market share through many strategies including strengthening their position in marketing fresh fruits, vegetables, meats, and seafood products. The concerted expansion of large supermarkets into fresh foods has impacted on specialist retailers such as butchers and seafood retailers in much the same way that the growth of large supermarkets had previously impacted on the viability of neighborhood grocery shops. The threat to small and medium-size food retailers is also being accentuated by the global expansion of multinational food retailers such as Wal-Mart, Carrefour, and Ahold. The global expansion of multinational food retailers would further increase the concentration in food retailing and this would impact on the viability of small and medium-size food retailers. The growing consolidation of global food retailing is driven by cost imperatives (purchasing from the lowest cost sources from any part of the world according to stringent quality and hygiene standards set by these powerful companies) and marketing products worldwide through retail outlets owned by these large retail companies.