Abstract
ABSTRACT SMEs have a significant impact on the economies of developing countries. Thus it is crucial to understand how they can improve their performance. This study explores the relationship between innovation capabilities, innovation strategy and financial performance in a sample of 136 SMEs from Valle del Cauca – Colombia. We use a structural equation model to analyse how this relationship could inform the management of innovation in SMEs. This study demonstrated positive relationships between innovation capabilities and innovation strategy, as well as between these two variables and financial performance. The results indicate that not all strategies generate good performance and although cooperation is one of the best performing strategies, other findings are discussed in the study.
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