SMBs

Disentangling the Effects of Organizational Capabilities, Innovation and Firm Size on SME Sales Growth

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Executive Summary

This paper focuses on certain drivers of SME sales growth related to knowledge and innovation. Building on the dynamic capabilities literature, the authors test whether two organizational capabilities (external sourcing and employee involvement in renewal activities) predict sales growth, and if so, whether such effects are mediated by process and/or product innovation. Based on survey data from a panel study of Dutch SMEs, and controlling for several firm characteristics (firm size, sector, age and family business), they conclude that external sourcing has direct effects on both product and process innovation, with an indirect effect (mediated by process innovation) on sales growth.

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