Innovation and Internationalization of Hungarian SMEs in the IT Industry

Abstract

Abstract The aim of this paper is to look at the extent and type of internationalization among Hungarian information technology (IT) small- and medium-sized enterprises (SMEs) and the possible relationship between the degree of innovativeness and the internationalization of these companies. Information technologies play an important role in the Hungarian economy: this sector is one of the most R&D intensive industries in which many SMEs are active. The paper reviews relevant theories of internationalization in research, development and innovation (RDI) to give a broader picture of the environment in which SMEs have to succeed. This is followed by a secondary data analysis to show the situation of the industry in Hungary, then by an analysis of the survey data and interviews designed specifically for the purpose of this research. The new empirical results show that Hungarian IT SMEs are still at the beginning of the internationalization process: while aware of the advantages of collaborations and internationalization, they are still reluctant to venture out of their “safety zone” and therefore they collaborate only with their closest partners. Very few SMEs have decided to establish international RDI contacts. The analysis suggests that the main barriers in internationalization of the Hungarian SMEs are due to lack of capital, appropriate managerial capabilities and innovation-friendly economic environment. So far, most theories/empirical research have concentrated on the role and activities of multinational enterprises in the internationalization of RDI, while in the literature less relevant knowledge on SMEs is available. The aim of this paper is to contribute to this latter part of the literature by analyzing the international activities of innovative/R&D-intensive SMEs in Hungary.