What are the factors that affect innovation in growing SMEs?

The purpose of this paper is to report on a study aimed at identifying factors that affect the innovativeness of growing small and medium‐sized firms (SMEs). It aims to use intellectual property rights (IPRs) as a proxy for innovations. The IPRs to be used include patents, trademarks, utility models and registered designs.

A theoretical model was developed and tested on longitudinal sample data representing 348 continuously growing SMEs located in two diverse regions in Finland. The firms in the sample represented various industries. Logistic regression analysis was used to analyse the data.

About 8 per cent of the firms in the sample could be defined as innovative growth SMEs. Most of these firms operate in the service and manufacturing sectors. They are small businesses that employ ten to 49 people and are between five and 19 years old. Innovative firms in this class were found to be less likely successful in the short‐term than their non‐innovative counterparts. The results obtained seem to be consistent with the expected preconception that growing IPR‐intensive firms may be subject to greater financial pressures than those that do not produce IPRs. Public research and development (R&D) funding seems to increase the likelihood of innovation.

From a policy perspective, the allocation of resources to R&D has been an appropriate strategy for increasing the amount of IPRs generated by growing SMEs.

This paper reports one of a very small number of studies that have sought to identify and analyse factors that affect innovation in growing SMEs.