Market Dynamics and Innovation Management on Performance in SMEs: Multi-agent Simulation Approach

Abstract Small and medium enterprises (SMEs) make a significant contribution to economic growth. However, how to improve their performance through innovation management in the long term is a big challenge. Innovation and performance issues in small and medium enterprises (SMEs) are growing exponentially. Innovation is considered to be one of the most important engines for a company growth, and successful innovation can propel a company forward in its sector. Based on contingency perspectives, this study is focused on investigating effective ways to design Innovation management and maximize firm performance according to market dynamics levels. Considering the SMEs as an agent, the study employed a multi-agent simulation method to understand the progress of performance improvement in SMEs, by observing the innovation activity of SMEs over certain periods of time. The results first reveal that the level of firm diversity influences the amount of performance manifested by SMEs’ innovative activities. Second, managers have to properly facilitate innovative activity depending on task importance and market dynamics.

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