Types of Product Innovations and Small Business Performance in Hostile and Benign Environments

The relationship between innovation and performance has been widely studied. In addition, many studies have examined moderating effects of types of competitive environments on this relationship. However, little work has been done to examine how specific types of product innovation strategies are related to performance in hostile and benign environments. Using results from a survey of a sample of small businesses, this paper used regression analysis to examine how degree of change in new product offerings and number of new product lines were related to satisfaction with financial performance. While neither type of innovation was related to satisfaction with performance in benign environments, the number of new lines developed was positively related to satisfaction with financial performance in hostile environments. The results from this sample indicate that the strategy of innovation through development of more new product lines may be preferable to developing dramatic innovations for small businesses in a hostile external environment.