2.5.2 those in which the firm is currently

2.5.2    Investment
strategies 

Investment is about risk and expected return. No one likes risk
and the higher an investment’s expected return, the better.  Lowth,
et. al., (2010) opined that investment strategies are business
adaptation strategies that might involve expenditure on innovation and market
diversification.   Many firms would not
want to implement investment strategy because of the risk involved in it
especially during recession period. Firms are likely to be too preoccupied with
short-term survival to think about innovation and growth (Lowth, et. al., 2010).Conversely, Ndesaulwa, (2016) posit that  one of the key means to overcoming harsh
economic conditions is innovation. 

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Base on Lowth, et. al., definition
of investment strategy, the two main component of investment strategy is:
innovation” and diversification.   By way
of definition, innovation is described as the introduction of new or
improved processes, products or services based on new scientific or technology
knowledge and/or organizational know-how (Oke, 2015).  While diversification occurs when a firm
enters a product markets different from those in which the firm is currently
engaged in (Thompson and Strickland, 2001).  
In this phase of the study, only innovation would be discussed as a
major component of investment strategy. Diversification would be discussed
under survival strategies in the later part of this study.

Trott, (2008) posit that most business innovations revolves round
; new products / services, production processes, marketing techniques,  organizational or managerial structures,
technology, intellectual property, business, or physical activity etc.  Meanwhile, several empirical studies tried to
establish a relationship between SMEs performance and innovation.   For instance, Hajar, (2015) examined the
relationship between innovation and performance of wooden furniture
manufacturing SMEs in Indonesia. The study shows that   innovation has a positive effect on firm`s
performance. Likewise in Turkey, Sattari. (2013) examined
innovation and firm performance in automotive industry. Their results show that
technological innovation has significant and positive impact on firm
performance.  In a related version, Ngungi.
(2013) carried out a study on the influence of innovation on the growth of SMEs
in Kenya.  The outcome of the study shows
that innovation influences the growth of SMEs in Kenya.  He also established the fact the there is a
high tendency that business owners would want to be involve in new ideas,
experimentation and creative process that 
would result into creation of new products/services which would
eventually influence the performance of SMEs.

Despite the
significant relationship between SMEs performance and innovation (as an
investment strategy), Skorvagova, & Pasztorova, (2014) states that there is no surety
that a particular business adaptation strategy would produced the required
result. They proposed that business success is contingent on important
stakeholders (owner, suppliers, customers etc) in a particular business.  For example, if a firm engages in product
innovation, it might increase sales and have positive effects on customers and
their loyalty to small business, but there is also a possibility that
innovation may have opposite effects and will not produce the intended outcomes.

From the
foregoing discussion, it can be implied that a single form of strategy might
not produce the required result that an organization expect. Therefore could be
a need to make use of ambidextrous strategies (cost cutting and investment in
product innovation) so that the inefficiency of a particular strategy might not
be glaring. Furthermore, there is always a need for organizations adopting a
particular strategy to do a proper cost-benefit analysis of the supposed
strategy before making use of it.

 

2.5.3    Business
networks

Business networks, it is a form of
cooperation or partnership activity among SMEs. 
It is a free business association that is able to create structures and
process, joint decision making, integration of members’ ideas for design and
creation of product and services and exchange of resources which could also be
information (Cheungsuvadee, 2006).
On the other hand, networking refers to any network process used by SMEs
owners/ managers to manage their businesses (Hakinpoor, Tat, Khani, &
Samani, 2011).

The notion of forming business networks
have been welcomed by many SMEs around the world. It is believed that forming
business networks would make them compete effectively in the global
market.  In addition to this, such
strategic alliance creates avenue for firms to have access to resources of
their partners of which they cannot have if they are to be standing alone etc.
Furthermore, business networks allow SMEs focus on their core competence and
gain economies of scale. It also empirically proven that SMEs that engages in
business network tend to have a higher survival and success rate. Hence, this
business network forms a path to achieve to gaining competitive edge above
others in its industry (Smith, 2004).

Cheungsuvadee, (2006) states some of the
possible business networks that SMEs uses and include:
collaborations, setting up co-operatives, forming business alliances, member of
business associations etc. Business network for SMEs consists of many
SMEs, each with their own problems and resources. SMEs are linked together in
order to solve those problems and to exploit those resources (Ford, Håkansson,
& Snehota, 2006).  Relationships are
the basis for cooperation, the means to gain access to the resources of our
suppliers, customers, other members of the network and resources in the wider
area network. Business network formed through collaboration involves mutual
engagement of partners to solve a particular problem. This kind of association
often involves trust and commitment. To this effect, it has been observed that
businesses that trust their partners are more likely to continue to engage in
networking (Wincent, 2005).

Since forming business networks could lead to SMEs survival and
competitiveness, this study therefore examines various business networks that
could serve as business adaptation strategies that the Nigerian SMEs uses to
survive the current recession in Nigeria.