Factors Influencing Innovation in Small and Medium Enterprises in the Czech Republic

Abstract

Our paper is focused on the factors that influence innovation in small and medium enterprises (SMEs) in the Czech Republic. The country that went through long economic transformation that resulted in the set-up of the new improved standards for entrepreneurship activities is currently dealing with the aftermath of world’s economic and financial crisis. With regard to all that, Czech SMEs are facing tough competition on domestic and EU markets. This is when innovations might become one of the key factors of success that can help to differentiate the product, beat the competition and attract more customers. Our study is based on the empirical model that employs the data from the survey questionnaire with 1144 Czech SMEs. We find several forms of innovations (e.g. own R&D, investment into technology, improvement of quality of a product or service, or presence on foreign (EU and world) markets) can become very significant in enhancing the growth and success of Czech SMEs, while the bureaucratic barriers for innovations and external factors with negative impact did not come through as obstacles. Based on our results, one can state thatthe most important policy implications are for the relevant stakeholders would be the support of investment activities of SMEs, creation of SMEs clusters within business parks, education of employees, expansions of Czech exports to the new markets, and intensive support of R&D. It would also make sense to increase the number of small SMEs (sole-traders and micro-enterprises) by making the registration process easier, or by offering subsidies or government support to the new companies and start-ups.