A theory of innovation in small knowledge-intensive professional service firms

Performance improvement in the construction industry is significantly influenced by the innovation performance of small construction knowledge-intensive professional service firms (SCKIPSFs). There is thus an urgent need to better understand the nature and process of innovation in such firms. The prevailing innovation literature is generally not appropriate for SCKIPSFs, as it tends to focus on large, manufacturing-based firms operating in 'non-project based' environments; rather than small, service-based firms operating in multiple, fluid 'project based' environments. A knowledge-based innovation model was developed from a review and synthesis of the relevant literature. This model is presented as a holistic, system-orientated framework to better investigate how SCKIPSFs create, manage and exploit innovation. The five variables in the conceptual model are: interaction environment; relationship capital; structure capital; human capital; and, knowledge capital. The conceptual model formed a gap analysis framework to interrogate the meta hypothesis and six sub-hypotheses. The model was investigated and developed through a longitudinal twenty-two month case study which consisted of an exploratory phase and an action research phase. Semi-structured interviews, company documentation and company workshop data collection techniques, and content analysis and cognitive mapping data analysis techniques, were used. The unit of analysis for this research was taken as the 'innovation activity.' In the exploratory phase of the case study, seven innovations were investigated, and key variables for successful and unsuccessful innovation identified. In the action research phase of the case study, an interim project review process innovation was developed and, in so doing, the interactions between the key variables identified in the exploratory phase were investigated. The empirical testing of hypotheses revealed two principal factors that stimulate successful knowledge-based innovation in SCKIPSFs: client requirements (synonymous with the market-based view of innovation) and the competences of knowledge workers (synonymous with the resource-based view of innovation). In developing and testing the conceptual model, the research contributed to innovation theory by: affirming that the prevailing innovation theory is not appropriate for SCKIPSFs; and, conceptualising and empirically validating two forms of knowledge-based innovation: exploitative innovation and explorative innovation, along with their generic variables and their distinctive variables to success and failure, within a SCKTPSF context. The results emphasised the need, in practice, for appropriate: senior management education and training in innovation management; and, mechanisms for knowledge sharing between staff which are not solely driven by immediate project needs.