Small and medium-sized enterprises (SMEs) say they lack the funding and qualified staff to undertake innovation, according to a new survey.

It found that 60 per cent of the 233 firms polled cited a shortage of funds to invest in innovation while 56 per cent said they found it difficult to hire qualified workers. It also found that 51 per cent of firms involved in innovation focused on product or service innovation.

About 47 per cent of SMEs in the services sector said they were using innovation for their business models and to improve their marketing methods. About half of the SMEs viewed the digital economy, Internet of Things, and data analytics as factors that impact "moderately" on their businesses.

The survey conducted by the Singapore Chinese Chamber of Commerce and Industry (SCCCI) and NUS Business School from April to June targeted all sectors, including manufacturing, construction and services. It was aimed at understanding the approaches SMEs take to innovation and the challenges they face.

SCCCI president Thomas Chua, speaking at a briefing yesterday, said only 51 per cent of those polled were engaged in innovation efforts. And just 35 per cent had invested in innovation activities in the past two years, mainly because they felt it brought uncertain investment returns.

"Innovation is the driving force of the sustainable growth of enterprises," said Mr Chua. "In order to transform successfully, enterprises need to be equipped with the capability to innovate, in addition to increasing their productivity."

Mr Chua said a firm that adopts an innovative culture can attract talent, which will, in turn, generate growth and help a business remain relevant and sustainable. He also urged firms to check out what their more cutting-edge competitors are achieving.

The Soup Spoon introduced an online ordering system in 2014 and via a mobile app this year. The eatery, which has 27 outlets islandwide, has also developed an app to serve as a loyalty rewards card.

"We saw about an 8.5 per cent increase in average customer spending per visit," said its co-founder Benedict Leow. The Soup Spoon aims to acquire new shelf-life preservation technology to maintain the freshness of its soups.

LHT Holdings, which processes engineered wood pallets, used engineered wood technology and automation to innovate its production processes. The company has been using radio-frequency identification technology since 2005 to trace pallets, improve billing accuracy and reduce reliance on manpower.

The poll also found that 55 per cent of firms relied on the Productivity and Innovation Credit Scheme to fund their innovation efforts, but Mr Chua said the scheme will be phased out in 2018.