Innovation Capability and Performance Of Manufacturing Smes: The Paradoxical Effect of IT Integration

In theory, IT integration through applications such as ERP, MRP-II and EDI provides an organization with the ability to exploit innovation capabilities. Based on survey data obtained from 309 Canadian manufacturing SMEs, this study aims to identify the enabling effect of IT integration upon the innovation capability of manufacturing SMEs, that is, in terms of growth and productivity outcomes, and to verify if this effect is subject to industry influences. While the firm’s innovation capability was found as expected to be positively related to the growth and productivity of manufacturing SMEs, the results underline paradoxical effects of IT integration in this regard. While IT integration was seen to enable the innovation capability of manufacturing SMEs in terms of growth, it was also seen to have a disabling effect on this same capability with regard to productivity.