Institutions and innovation performance nexus: a comparative study of SMEs in Ghana and South Korea

This paper examines the relationship between innovation activity and the performance of small and medium-sized enterprises (SMEs) under contrasting institutional conditions in Ghana and South Korea. Using firm-level data from the World Bank Enterprise Survey (WBES) for Ghana and the Korean Innovation Survey (KIS) for South Korea, the analysis applies ordinary least squares (OLS) regression models with bootstrapped standard errors within a comparative innovation-system framework linking firm inputs, innovation activities, and performance outcomes. SME performance is measured using the natural logarithm of annual revenue. Innovation activity is positively associated with SME performance in both countries, although the estimated performance returns are stronger among South Korean firms. The results further suggest that differences in institutional and structural conditions are associated with variation in firms’ ability to translate innovation into stronger performance outcomes. Because institutional quality indicators are not fully harmonized across the two datasets, institutional conditioning effects are examined primarily within the Ghana-specific analysis rather than treated as fully comparable across both countries. The paper contributes to the SME innovation literature by examining the innovation–performance relationship across contrasting national innovation-system environments and highlighting how differences in institutional coordination, technological capability, and innovation support structures may shape the performance returns to innovation. The findings suggest that innovation participation alone may generate uneven performance outcomes where institutional support systems remain fragmented.