Innovation success of non-R&D-performers: substituting technology by management in SMEs

This paper investigates the impact of in-house R&D and innovation management practices on innovation success in small and medium-sized firms (SMEs). While there is little doubt about the significance of technology competence for generating successful innovations, in-house R&D activities may be a particular challenge for SMEs due to high risk exposure, high fixed costs, high minimum investment and severe financial constraints. SMEs may thus opt for refraining from R&D and relying more on innovation management tools in order to achieve innovation success. We analyse whether such a strategy can pay off. Based on data from the German CIS, we find that R&D activities are a main driver for innovation success if combined with external R&D, using external innovation sources or by entering into co-operation agreements. SMEs without in-house R&D can yield a similar innovation success if they effectively apply human resource management tools or team work to facilitate innovation processes.