Knowledge, location, and internationalization: empirical evidence for manufacturing SMEs

Abstract

This paper investigates the links between locational conditions, innovative capabilities, and internationalization of manufacturing small and medium-sized enterprises (SMEs). Two modes of foreign market servicing are explored: exporting activity and relocating of selected business activities abroad. The analysis is based on the survey of about 3000 firms. The results reveal that the outputs of SMEs' innovative activities – product innovations and patent applications – enhance exporting propensity. Nevertheless, the input-side indicator – R&D intensity – appears to exert no impact. Furthermore, the locational factor proximity to research institutions promotes SMEs' exporting. Regarding the determinants of selective relocations abroad, the findings show that SMEs with a high degree of R&D are less likely to separate production from other operations and relocate it abroad. Moreover, manufacturing SMEs assessing the proximity to research facilities, as well as support from various regional authorities as important and good-quality locational conditions, exhibit a significantly lower likelihood to relocate selected activities abroad.