Determinants for innovation implementation at SME and inter SME levels within peripheral regions

Purpose – Innovation efforts of small- or medium-sized enterprises (SMEs) in peripheral regions are limited both by innate resource limitations and by location factors such as excessive distance from key markets and higher cost bases for new technology. However, the emergence of the knowledge economy may enable leveraging of knowledge to address such innate limitations. The aim of this study is to twofold. First, the study explores how SMEs in peripheral areas, i.e. challenging regions, seek to implement innovation from a path perspective by examining the contributions from antecedent and mediator variables or constructs, including knowledge-based factors identified in the literature, using a cross-sectional survey of SMEs at firm level. Second, to further examine how these path model constructs and relationships contribute in a causal manner to innovation implementation at an activity level of analysis based on knowledge-based view and dynamic capability theory, using a case study analysis. Design/methodology/approach – A sequential mixed method approach is used. In relation to the first aim a hypothetical path model is tested using structured equation modelling techniques based on a cross-sectional survey of SMEs in peripheral regions ( n =604). For the second aim, to further examine how the path model constructs and relationships contribute to innovation implementation in a causal manner at an activity level of analysis, an explanatory case-based approach is used based on dynamic capability theory. Findings – The findings show that at a firm level knowledge factors influence innovation implementation as mediating factors through knowledge acquisition and assimilation which is consistent with potential absorptive capacity, and knowledge sharing linkages. Antecedent factors of lifecycle, leadership, culture and historical propensity to innovation were found to interact with the mediating variables of knowledge acquisition and assimilation, TQM/business improvement and knowledge sharing linkages (external), to produce a range of innovation outputs, including knowledge transformation and sales of new products and services from innovation activities. Based on the case study findings the underlying knowledge-based dynamic capabilities which contribute to the relationships within the path model were identified and further research agendas established. Originality/value – There is a relative paucity of studies on innovation implementation within SMEs in peripheral regions using a knowledge-based perspective at firm level, as opposed to regional level (e.g. regional innovation studies). In this context unique resource limitations and the contribution of knowledge-based factors need to be addressed. This study seeks to compliment regional level studies by making a contribution at both a cross-sectional SME or firm level and at an activity level of analysis in this area and to identify areas for further research.