KNOWLEDGE MANAGEMENT AND INNOVATION FACTORS OF SME DEVELOPMENT

Abstract

Nowadays, when the world faces great turbulences, globalization, crisis, expansion of new technologies and knowledge, the only thing that is constant is change itself. Change is a precondition for survival.The basic rule is that there are no rules. In order to survive, SMEs should learn how to live with change. Knowledge has always been a basis for the progress of human society. As early as in 1993, Peter F. Drucker in his Post-Capitalist Society pointed out that the basic resources in economy are no longer the capital, natural resources or labour, but knowledge. Modern-day economy gives precedence to the intellectual aspect of the company over natural resources. Knowledge may be defined as appropriate data gathering for the purpose of achieving new usability. Knowledge management has become an important factor in business development and gaining a competitive edge. Knowledge is an invisible asset. People and knowledge are now the single most valuable capital of each company. The ability and speed with which knowledge and innovation is used in a company represent the greatest advantage that such company can have. Knowledge management is a deterministic and chain process leading to a range of innovations. Each chain of knowledge consists of a number of internal and external beliefs, frames of mind and responsibility of individuals and their environment. Broadly speaking, knowledge management includes human resources, processes and technology. According to author Pentti Sydanmaanlakka, the life cycle of knowledge management may be represented as a chain of knowledge management consisting of the following five stages: knowledge creation, knowledge acquisition, knowledge keeping, knowledge sharing and knowledge application. Innovation can be seen as a process of transforming knowledge into new values. Innovation is the process of creating innovations. Innovation is related to creativity. Creativity is the driving force behind innovations. Innovation can be seen as creating new ideas or perceiving business opportunities using creativity and turning them into reality (product, service, process, etc.).SME survival and development depends on their position to knowledge and innovation. SME sector plays a significant role in the development of Serbian economy. According to data issued by the Ministry of Economy (2014), SME sector generates 84.8% of employment and contributes to the Republic of Serbia’s GDP with 32%. This paper presents the concept of knowledge management, the challenges it entails, its pros and cons, as well as the requirements for its development and the importance of its application for the development of SME sector and entrepreneurship. A special emphasis is placed on presenting the position of SME sector towards knowledge and innovation as the key factors for enabling changes and development. To further improve and develop the attitude to knowledge and innovation in Serbia, a research has been conducted into the positions and habits of professionals working in SME sector. Guidelines are shown for SME improvement and further development.