Knowledge strategy and business model conditions for sustainable growth of SMEs

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Purpose– The purpose of this study is to figure out the factors for sustainable growth of small- and medium-sized enterprises (SMEs).Design/methodology/approach– In all, 27 SMEs in the area of IT (Information Technology) in Korea were analysed through interview method basically.Findings– It is found that sustainable development of SMEs requires two kinds of open innovation which are knowledge strategy and business model. According to developing process, SMEs change their open innovation strategy in knowledge strategy and business model. The highest growth limit of SMEs depends on open innovation in knowledge strategy and business model in sequence from closed innovation in both, through open innovation in both, to open innovation in knowledge strategy and closed innovation in business model and to closed innovation in knowledge strategy and open innovation in business model.Research limitations/implications– First, the present study was conducted with IT sector SMEs in Korea. It is true that the IT sector is one of the most rapidly changing industrial sectors and is one of representative business types of SMEs in which manufacturing and service industries coexist and diverse sizes of SMEs exist (Malerba, 2002). Second, the present study relies on case study methods. It is true that case study is a method that gives excellent qualitative analysis in firm studies (Yin, 2008).Practical implications– SMEs cannot survive if they do not accept open innovation in knowledge strategy and business model. SMEs that show absolute limitations in resources and manpower should absolutely implement open innovation strategies to secure more diverse resources from markets and external knowledge bases rather than preparing all resources and capabilities by themselves (Van de Vrandeet al., 2009; Yun and Mohan, 2012a, 2012b).Social implications– SMEs should bear in mind the two different levels of open innovation, such as knowledge strategies and business models (Chesbrough, 2007; Chesbrough and Appleyard, 2007).Originality/value– SMEs should not confuse between temporally sustainable development and infinite sustainable development. Firms that take closed innovation strategies in both knowledge strategies and business models can also grow for some time. However, because of the deepening of knowledge-based economy, not only the amount of knowledge existing in the world and the speed of knowledge distribution increased but also the customers’ demands and expectations have been observed to increase in the market immediately through social networking sites (SNS), etc. (Yun and Ryu, 2012).