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The IUP Journal of Knowledge Management :
Innovation for Survival: Entrepreneurial Response of Indian MSMEs to Demonetization
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The aim of this paper is to explore entrepreneurial response of Micro, Small and Medium Enterprises (MSMEs) in India with respect to demonetization. MSMEs act as crucial originators of entrepreneurship and innovation because they provide employment to a large number of people and also contribute to growth of an economy. In the ever-changing business environment, MSMEs have to respond frequently in an innovative way. The frequent changes in the business environment force enterprises to think out-of-the-box and reinvent themselves. In recent times, there have been changes in the use of technology due to demonetization in India. This has attracted progressive response from the MSMEs. But it has also resulted in failure of many enterprises. This study presents entrepreneurial response to changes in technology due to demonetization. Some MSMEs have adopted innovative techniques to tackle the challenges of demonetization. The result shows an increase in registration of MSMEs. They have adopted process innovations to tackle demonetization. There is greater use of technology to cut the overall cost. The use of technology is more in the payment methods, designing and other operational activities, etc.

 
 
 

In order to remain competitive, Micro, Small and Medium Enterprises (MSMEs) must respond to challenges in the developing countries. These challenges are in the form of new operating conditions and markets (Morris et al., 2008). Enterprises adopt opportunity-seeking and advantage-seeking behaviors for building and sustainable competitive advantage (Ireland and Webb, 2007). Changes in the business environment are considered either as opportunity or as a threat by enterprises. It is an opportunity for those who innovate while threat for non-innovators. MSMEs adopt innovation management techniques in order to face uncertain or certain changes in business environment (Sharma, 2017). The concept of innovation and its management has gained much prominence in recent times. It has been regarded as a key driver that is responsible for growth of firms (Geroski and Machin, 1992). However, despite numerous studies on innovation and its management in case of MSMEs, there is relative paucity of research in the Indian context. MSMEs are considered as the main source of entrepreneurship and innovation. Being the main source of entrepreneurship, they result in employment and contribute significantly to growth of the economy. They tend to respond to business environmental factors in order to survive. In India, MSMEs contribute about 45% of the gross turnover in the manufacturing sector and 40% of total exports. Most of them pursue a less systematic approach to innovation management due to limited resources (Mazzarol and Reboud, 2011). Due to limited resources, MSMEs often lose out to the big enterprises in terms of financial sustainability and better technologies. But through the present study, it is observed that there are a number of MSMEs which are innovating and becoming competitive in the presence of changing business environment. These enterprises operate in a niche area, think out-of-the-box and innovate in their operations through improvement in technology and introduction of lean practices. Even though many innovations come from MSMEs, most of the research has been done on large firms (Hoffman et al., 1998). This paper aims to explore entrepreneurial behavior of MSMEs in the presence of business environmental factors like demonetization.

 
 
 

Knowledge Management Journal,Small and Medium Enterprises (MSMEs), Ever-changing business environment,, operational activities.