Incentive mechanism of SMEs innovation policy: empirical evidence from Zhejiang province, China

PurposeThis paper aims to explore the factors that influence innovation and productivity in small and medium-sized enterprises (SMEs) manufacturing enterprises in Colombia, in comparison with larger firms.Design/methodology/approachThe study was based on firm-level panel data extracted from a census of Colombian manufacturing firms between 2007 and 2014. The authors used an adapted version of the Crepon-Duguet-Mairesse (CDM) sequential approach that interrelates R&D intensity, innovation outputs and productivity.FindingsThis study's findings indicate that investing in R&D has a positive impact on innovation in both SMEs and larger firms. However, the effect on productivity is significantly higher for SMEs. Evidence also suggests that the innovation performance of SMEs and larger firms is influenced by co-evolution among the firm's resources and capabilities, knowledge flows with external organizations, access to funding and knowledge appropriability conditions. However, highly qualified personnel, internal and commercial sources of funding, and market knowledge sourcing are crucial for innovation in SMEs. These conclusions are especially relevant for the design of industrial and innovation policies in developing economies, where innovation is a prerequisite for catching up and economic advancement.Originality/valueThe paper provides new empirical evidence on the determinants of innovation in SMEs, the mechanisms by which innovation capabilities and outputs affect its productive performance, and how the relationship between these dimensions varies with firm size in the context of a developing country.

The question of whether and how innovation policy can effectively influence innovation in small and medium-sized enterprises (SMEs) has received limited attention in academic research. This study takes a first step towards filling this gap by examining how innovation policy and policy mixes influence innovation in SMEs. This paper takes China's National Equities Exchange and Quotations (NEEQ) listed enterprises from 2011 to 2020 as the research sample, and uses the Multi-Level Treatment Effect (MLTE) model to investigate the actual impact of different innovation policies on Small and Medium-sized Enterprise innovation and the heterogeneity of policy effects from the perspective of substantive and strategic innovation. It is found that innovation policies can obviously improve the innovation of SMEs, in particular the substantive innovation, and the effect of policy-mix in stimulating SME innovation is stronger than that of single innovation policy. SMEs that show "strong motivation" and "high ability" in innovation are more likely to be favored by relevant government agencies, and have a greater probability of becoming the implementation targets of innovation policies. As far as single innovation policies are concerned, government subsidy is better than tax incentive for high-tech SMEs, while tax incentive has a stronger role in promoting innovation than government subsidy for non-high-tech SMEs. By illuminating these differentiated impacts and the conditions under which innovation policies are most effective, this work not only advances our fundamental understanding of policy-driven innovation ecosystems but also offers actionable guidance to policymakers seeking to optimize the allocation of support to foster transformative innovation in the SME sector.

This study aimed to identify sources of external knowledge in small- and medium-sized enterprises (SMEs). Additionally, it aimed to determine how external knowledge flow affects the different types of SMEs’ innovation capabilities (product, process, organizational, and marketing innovation capability). A quantitative approach was adopted to achieve the objectives. A questionnaire survey was used to collect study data from 83 random SME managers/owners in Saudi Arabia. The data were analyzed using regression analysis and descriptive statistics. The findings of the study showed that customers were the main source of external knowledge in SMEs. The results of the regression analysis also demonstrated that external knowledge flow has a significant effect on SMEs’ innovation capabilities. External knowledge explains the changes in SMEs’ products and their process innovation capability. Additionally, external knowledge flow was a significant predictor of SMEs’ organizational innovation capability. The findings of the study provide policymakers and managers with many suggestions for developing innovations in SMEs. Additionally, this study provides a basis for researchers to conduct more future studies related to innovation and knowledge flow in SMEs.

Purpose Although scholars have been studying human resource management (HRM) and open innovation (OI), yet there is less attention to this relationship in the context of small-and medium-sized enterprises (SMEs). This paper aims to bring some insights about the human side of inbound open innovation (INOI) in SMEs. The goal is to better understand the role of organizational trust (OT) and developmental culture (DC) in the interactions between commitment-based HRM (C-HRM) and INOI.Design/methodology/approach The present study employs partial least squares-structural equation modeling to investigate the interrelationships among constructs, utilizing data gathered from a sample of 206 SMEs.Findings The study's empirical results indicate that the presence of OT serves as a complementary factor in mediating the relation between C-HRM and INOI. Furthermore, the analysis shows that there exists a moderating influence of DC in the relationship between C-HRM and INOI.Practical implications The role of HRM practices is important in developing OT and consequently foster INOI in SMEs. To achieve INOI, SMEs need a DC that induces C-HRM toward an OI approach.Originality/value This study adds to the understanding of the interactions between C-HRM practices and INOI in SMEs. The comprehension of the mediating function of OT and the moderating effect of DC serve to enhance the scholarly understanding of the human dimension of OI research.

This paper looks closely at the relationship existing between entrepreneurial activity, innovations and the development of Small and Medium Sized Enterprises (SMEs). Most SMEs result from implementing the entrepreneurial spirit, through which the entrepreneurs’ activity which is conducted in different domains. One of the most important aspect is the innovation in SMEs as an indicator of the entrepreneurial activity, on the one hand and as a contributor to the organization’s performance, on the other hand. This study therefore analyses the SMEs innovation activity over a period of time as an indication of entrepreneurship evolvement and manifested in Kenya as an East African country that integrated relatively recently into the East African Community Common market (EAC). The paper envisages looking at how innovations in SMEs from Kenya have evolved in the period 2010 to date. The innovative activities in SMEs are examined from a dynamic perspective and the analysis is based on the study of a number of aspects related to innovations, such as: types of innovative activities, investments in innovations, the intensity of renewing the existing products, the use of IT, the use of the Internet, etc. Based on these findings, the paper attempts to characterize the innovative activities in Kenyan SMEs and their evolution in time with emphasis on the recent times.

The present paper has as a starting point the close relationship existing between entrepreneurial activity, innovations and the development of Small and Medium Sized Enterprises (SMEs). Most SMEs result from implementing the entrepreneurial spirit, through which the entrepreneurs' activity is conducted in different domains. One aspect of utmost importance is the innovation in SMEs as an indicator of the entrepreneurial activity, on the one hand and as a contributor to the organization's performance, on the other hand. Therefore, we will study and analyse the SMEs innovation activity over a period of time as an indication of how entrepreneurship evolved and manifested in Romania as a European country that integrated relatively recently into the European Union. The paper envisages looking at how innovations in SMEs from Romania evolved in the period 2003/2004 - 2010/2011. The innovative activities in SMEs are examined from a dynamic perspective and the analysis is based on the study of a number of aspects related to innovations, such as: types of innovative activities, investments in innovations, the intensity of renewing the existing products, the use of IT, the use of the Internet, etc. Based on these findings, the paper attempts to characterize the innovative activities in Romanian SMEs and their evolution in time with emphasis on the recent period.

PurposeThis paper explores the role of effective resource and knowledge management capabilities on product innovation capabilities of the small and medium-sized enterprises (SMEs). Specifically, the authors research the role of the human resource investments in the form of employee training in developing firm's innovation capabilities and how SMEs manage these investments when we account for the boundary conditions such as the level of employee education, SME size and the frequency of investments in research and development (R&D).Design/methodology/approachThe authors use survey data conducted by The Centre for European Economic Research (Zentrum für Europäische Wirtschaftsforschung – ZEW). The final sample for analysis includes 983 SMEs from Germany that belong to 13 different industries. The authors use hierarchical OLS regression to test the hypotheses presented in this paper.FindingsThe authors find a positive association between increased investments in employee training and product innovation capabilities in the context of SMEs. More specifically, the authors’ findings support that (1) the relationship between employee training and innovation capabilities is weaker in industries with greater proportion of employees with university degrees, (2) the effectiveness of investments in employee training is lower among larger SMEs than smaller SMEs, and (3) continuous R&D weakens the relationship between training expenditure and innovation capabilities. While on the one hand the authors’ findings contribute to the debate of whether employee training is necessary for SMEs by affirming this notion, on the other hand the authors show that investments in employee training have differing implications for small and large SMEs within boundary conditions. Moreover, these findings have practical implications for the managers of all SMEs in terms of management of their knowledge resources.Research limitations/implicationsThe authors’ research makes important contributions to the study of innovation in SMEs. First, the authors contribute evidence to the debate whether employee training is necessary for SMEs by showing that employee training is particularly important for SMEs that are smaller in size, have lower proportion of employees with university degrees and when they invest in research and development in a targeted manner. The authors also demonstrate that investments in employee training is not a waste, rather such investments can increase the likelihood of survival for many of these firms through its positive impact on product innovation.Practical implicationsFor managers of SMEs, the authors’ findings suggest that while investments in employee training are important, the managers of particular SMEs with above-mentioned qualities should be persistent in such investments and must make deliberate efforts to reap the benefits in terms of innovative capabilities. Unlike large firms, who have the financial means to carry out investments in an abundant manner, SMEs appear to be more enterprising with their scarce resources when we also consider the role of investments in human resources.Originality/valueThe authors’ research makes important contributions to the study of innovation in SMEs. First, the authors contribute evidence to the debate whether employee training is necessary for SMEs by finding that employee training is particularly important for SMEs that are smaller in size, have lower proportion of employees with university degrees and when they do not invest in R&D continuously. The authors also demonstrate that investments in employee training is not a waste, but such investments can increase the likelihood of survival for many of these firms.

Over the past years, open innovation has gained wide attention in literature on innovation. However, small and medium-sized enterprises (SMEs) have been excluded from the mainstream discussion in open innovation. Very recent studies confirm that open innovation is increasingly important for SMEs but also suggest that findings from research on large firms cannot be simply transferred. This chapter aims to explicate the concept of open innovation in SMEs with a particular focus on services and tourism SMEs drawing upon and expanding recent empirical research. First, it discusses the specific nature of open innovation in SMEs and the particular facets of the tourism sector. Afterwards, it presents an overview of different modes of open innovation in SMEs. Against this background, the chapter conceptualizes the internal dimensions of managing open innovation in SMEs by drawing upon recent research on internal organizational facilitators and practices for open innovation. It concludes with recommendations for future research on open innovation in SMEs in the tourism sector.

International entrepreneurship in innovative SMEs: Examining the connection between CEOs’ dynamic managerial capabilities, business model innovation and export performance

Public policy on innovative small and medium-sized enterprises (SMEs) is regarded as an important issue throughout the world. Japan is not an exception. In 1995, a new policy to revitalize the Japanese economy was implemented. There has been, however, little empirical research conducted on SMEs in Japan. This paper challenges this research gap and evaluates the Japanese public policy program. Research was conducted with a questionnaire sent to all program awardees. In addition, matching firms that did not receive any program awards and closely resembled awardees were identified. It is found that program awardees grew faster than matching firms; however, firms that received multiple awards did not show better performance than firms receiving single awards. High-growth SMEs contribute to social wealth through the creation of new businesses and jobs (Phillips and Kirchhoff 1989; Storey 1994; Gavron et al. 1998; Acs 1999). In recent years, many governments have increased their attention regarding public policy toward SMEs (OECD 1994, 1997, 1998). Economic literature suggests that there are two rationales for a government to support innovative SMEs. First is the generation of positive externalities. Government subsidies such as research and development (RD Greenwald, Stiglitz, and Weiss 1984). This public certification to the quality of firms helps SMEs receive external management and financial resources and helps them grow faster (Pfeffer and Salancik 1978). As a response to market failure, government subsidies can be justified (De Long, Bradford, and Summers 1991). Public policy toward innovative SMEs has been monitored and assessed in Organization for Economic Cooperation and Development (OECD) countries (Storey 1994; OECD 1995; Gavron et al. 1998; Lerner 1999). However, very few studies of public policy toward innovative SMEs have been conducted in Japan. This paper confronts this research gap. Research Background When the bubble economy collapsed in Japan, the growth rate of the gross domestic product (GDP) declined from 2.9 percent in 1990 to 0.4 percent in 1991 and continued at the same level for another two years. In addition, the economic climate for new business creation in Japan was not good even before the collapse of the economy. The business startup rate for all types of business in Japan had been declining, and the rate of business closings gradually had been increasing (Hawkins 1993). Furthermore, a high level of unemployment persisted. Under such serious economic circumstances, the first policy initiative was taken in 1995 to support innovative SMEs in Japan. Formally known as the Temporary Law Concerning Measures for the Promotion of the Creative Business Activities of Small and Medium Enterprises, it was the first legal foundation in Japan to support innovative SMEs and venture firms. Based on the United States' experience, the Japanese government introduced this new public policy program towards inno vative SMEs and expected innovative SMEs to revitalize the Japanese economy. This law was a symbolic sign of a shift in Japanese government policy on SMEs, which was followed by the amendment of the Small and Medium Enterprise Basic Law. This 1963 law, which determines the objectives and targets of public policy regarding SMEs in Japan, was amended in 1999. The amended law clearly states that the mission of government assistance is to develop and support a wide range of independent SMEs for greater economic vitality, whereas the previous law stated that the mission was to rectify the gap between large enterprises and SMEs in terms of productivity. …

Purpose Innovation is considered as a solution that small and medium-sized enterprises (SMEs) can adopt to improve their performance during the normal context and sustain their business during a crisis. There are limited studies on the association between firm agglomeration and innovation in SMEs. Therefore, this study aims to shed light on this topic by focusing on the case of a developing country. Design/methodology/approach This study uses the secondary data collected from SMEs in Vietnam for empirical analysis. The authors use propensity score matching to examine the relationship between firm agglomeration and innovation as well as to mitigate potential endogeneity. Findings This study finds that firm agglomeration is positively associated with SMEs’ adoption of new processes or technologies. Meanwhile, there is no sufficient evidence to conclude the effects of firm agglomeration on product improvement and introduction of new products. Practical implications Drawing from the findings, this study presents a set of policy recommendations some policy implications aimed at fostering innovation in SMEs, with a focus on firm agglomeration. These implications can benefit policymakers in other developing economies seeking to enhance innovation in SMEs. Originality/value This research represents one of the early attempts to examine the role of firm agglomeration in fostering innovation in SMEs in a developing country.

PurposeBusiness excellence relies heavily upon sustainable innovation. Still, sustainable innovation is an emerging concept in business practices and has yet to reach a common perception among small- and medium-sized enterprises (SMEs). This study aims to address sustainable innovation in SMEs and the factors driving sustainable innovation development.Design/methodology/approachAn exploratory study was conducted to gain insight into the emerging concept of sustainable innovation in the SMEs’ context. Empirical evidence was collected from five case studies. Twenty-five interviews were conducted.FindingsThis study findings show that SMEs have different ways of understanding sustainable innovation, resulting in different approaches to integrate sustainable innovation into their business. In SMEs, sustainable innovation may not be a fixed concept due to its ambiguous boundaries and various ways of understanding. External and internal factors are driving SMEs’ sustainable innovation. It depends mainly on organizational culture and the capabilities of SMEs and their members in terms of cooperation and integration in work teams, conditions to achieve consensus, articulation of activities, coherence and commitment to the firms’ objectives. These factors collide and enhance each other and positively impact SMEs’ sustainable innovation.Originality/valueThe scientific relevance of this study lies in the integration of sustainable innovation research in the context of SMEs. There has been limited exploration of how SMEs perceive and engage in sustainable innovation and the factors that drive sustainable innovation development outside of large firms. This study empirically explored the concept of sustainable innovation in the context of SMEs to understand underlying factors related to sustainable innovation.

The digital era is radically changing our societies and how firms do business. Innovating the business model has become a fundamental capability to survive competition, particularly for small and medium-sized enterprises (SMEs). This study investigates the digital-era role of boundary management capabilities in the processes of Business Model Innovation (BMI) in SMEs. Structural Equation Modelling is adopted to analyse data from a survey of 250 Italian experts who possess direct research and consulting experience with SMEs. Our findings reveal that digitalisation and firms’ boundaries affect BMI in SMEs. Moreover, our results demonstrate how boundary management, specifically its technological and relational aspects, directly impacts BMI and mediates the relationship between boundary size and BMI. The study also offers important theoretical and practical insights, calling on scholars and managers to give more attention to the boundary management of SMEs in order to support BMI.

From silence to spark: How transformational leadership empowers employee innovation and voice in SMEs.

Both innovating and internationalizing can hold the key to survival and growth among small- and medium-sized enterprises (SMEs). Service innovation in particular is highly relevant in the increasingly digitalized and high-technology global trade. However, there have been until now few studies on service innovation in international entrepreneurship. Thus, in an effort to illuminate its role in entrepreneurial internationalization, the present study examines the profitability impact of service innovation in SME internationalization, while also outlining the differing impacts of entrepreneurial orientation and human capital as the antecedents of both. The empirical data were collected via an online survey of Finnish SMEs in the information and communications technology (ICT) industrial sector, the final sample comprising 104 companies. The data were analyzed through structural equation modeling. The results indicate, first, that entrepreneurial orientation underlies both degree of internationalization and service innovation, yet different dimensions of entrepreneurial orientation have distinct impacts on the two outcomes. Second, we find that the level human capital also determines the level of service innovation in as an antecedent and third, international expansion, but not service innovation, has a negative impact on profitability. We discuss the implications of these results, which imply that SMEs may face an internationalization-innovation paradox in that engaging in both activities may not be a feasible strategic option for them, and that prioritizing internationalizing in favor of innovating may incur costs and result in lower profitability.