It is a well-known fact that Small and Medium-sized Enterprises (SMEs) play a prominent part in worldwide economy. In India, the contribution of SMEs is about 45% of the gross turnover in the manufacturing sector and 40% of total exports. These companies are also a source of employment to many people and contribute maximum to the country’s economy. Knowledge has been recognized as a major determinant of competitive edge. And it has replaced traditional factors with knowledge factors. The results show that innovation has a positive impact on the size of the enterprise, and also on its performance. This paper analyzes case studies of some enterprises in information technology and pharmaceutical sectors. Information technology firms tend to innovate more due to their impact on the other sectors. More competition in the past has pushed these enterprises into more innovative activities. These case studies present the background information, management of innovation, factors that influence innovation, and resources of innovation that affect implementation of innovative practices in SMEs. Some enterprises are startups, while some are decade-old companies which have grown with time. The factors that influence innovation are opportunities, new business proposition, high cost of existing product, aim to have more market share, to be the market leader and to provide affordable technical solution to everybody.

Small and Medium-sized Enterprises (SMEs) provide employment to a large number of people and contribute significantly to growth and GDP of an economy. In order to survive and compete in the globalized market, SMEs need to use knowledge to innovate. These SMEs, however, lose out to the big enterprises in terms of financial sustainability, range of products, marketing clout, brand and bargaining power. At the same time, it is observed that there are a number of SMEs which are growing and becoming competitive. These enterprises operate in a niche area, produce better products and keep on innovating in their operations through improvement in technology and introduction of modern technology. The present study presents a few case studies of SMEs in Information Technology (IT) and pharmaceutical sectors in India and explores how these SMEs manage their knowledge to be innovative.

Innovation has been described as the ‘Industrial Religion of the 21st century’ that offers both a belief and a palliative concern about economic change, restructuring, competition, competitiveness and survival in a turbulent and uncertain business world. One can create new and differentiating market opportunities by being innovative. This creation reflects how knowledge is managed effectively to present innovative solutions to day-to-day problems. Innovation includes a process that starts with an invention, proceeds with the development of the invention and results in the introduction of a new product, process or service to the marketplace. It also involves commercialization of new or improved products and processes. There is a need to clarify the terms “new”, “significant” and “improved”. First, what is new to one firm is not necessarily new to another. It is possible that the same behavior in two separate firms may be labeled as “innovative behavior” in one firm but not in the other firm. Second, the significant degree of improvement is necessary to qualify one activity as an innovation. Different writers have recognized these differences on innovation and argue on the meaning of the term by presenting different forms and manifestations of the activity.

Knowledge Management Journal, Small and Medium-sized Enterprises (SMEs), Information Technology (IT), Research and Development (R&D), All India Census of MSMEs, Management of Innovation, IT, Pharmaceutical SMEs.