External Knowledge Accession and Innovation Speed in the Small and Medium Sized Enterprise (SME)

Abstract

In this paper we examine the effects of two sources of external knowledge, alliances and outsourcing activities, on the innovation speed of small and medium enterprises (SMEs). We integrate relevant literature, consider key conceptual issues and tradeoffs, and develop falsifiable hypotheses related to these relationships. A multi-industry study of 158 new product development projects in 73 SMEs is presented that empirically tests the effects of alliances and outsourcing on SMEs’ innovation speed, for both radical and incremental technological advances. The clearest finding is that external sourcing does not appear to speed up innovation in SMEs and may indeed act as a barrier to fast-paced development.