Technological innovation outcomes: Does the internal ecosystem play a key role?

Abstract

This study empirically investigates the causal relationship that exist between innovators and internal ecosystem factors driving technological innovation among small and medium-sized enterprises (SMEs) across the European region using the linear equation model. Our analysis is based on firm-level panel data from the European Innovation Survey conducted by the European Union from 2011–2018 with 296 SMEs across Europe. The results show that, human resources, research systems, financial support, firm investments, linkages, and employment impact was positively related to technological innovation performance. However, the outcome of an innovation-free environment and sales impacts as contextual factors had an insignificant influence on SMEs’ innovation performance. The results imply that effective human resource approach coupled with good governmental policies are important factors that can increase SMEs’ innovation performance. Based on this study results, SMEs’ managers can provide effective and sustainable policies that would provide both direct and support roles on the main drivers of regional and economic development. The outcome of this research indicates that firms need to pay greater attention to external factors such as governmental policies governing SMEs, considering customers’ needs, product specification and ensuring that they deliver quality product to satisfy consumers. © 2022 K. J. Somaiya Institute of Management.