The SME R&D intensity and product innovation relationship: the mediating role of quality management in the context of a developing country

Abstract

SMEs engage in product innovation despite their inherent resource constraints, lack of financial slack, and the under‐development of competitively viable strategic configurations around the globe. While progress has been made in identifying the antecedents and capabilities attributed to successful innovation outcomes and the performance of these firms, there remain disparate and often paradoxical observations on the factors that affect SME innovation performance across geographies (i.e. developed vs developing countries) and operational contexts (R&D intensity and quality management practices). This study collected data from 241 resource‐constrained small and medium‐sized enterprises (SMEs) in a developing country (Ghana) to contribute to this debate. The results of structural equation modeling show that quality management mediates the relationship between R&D intensity and product innovation. The results also reveal the effects of knowledge integration and financial slack on the relationship between R&D intensity and product innovation, with a high level of knowledge integration enhancing the effect but a high financial slack hinders it. This study sheds light on a broader range of contextual and financial variables when seeking contingencies of SME product innovation performance within theory and practice.