Abstract
Small and medium enterprises (SMEs) in the manufacturing sector make a significant contribution to a country’s economic growth. Despite this contribution, majority research concerning innovation management in the manufacturing sector is focused on large organisations. This paper therefore explores the role of effective resource and knowledge management capabilities on innovation in the context of SMEs. Using a sample of 185 manufacturing firms, we find a positive association between increased investments in R&D and human resources (i.e, training employees) with innovation capabilities. Our data also supports that SMEs with intermittent R&D would experience stronger associations between R&D investments and product innovation capabilities, and that SMEs should not strive for balance in the choice between internal and external search. The results of this study offer both theoretical and managerial implications for SMEs striving to increase performance and innovation.
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