Why do only some SMEs achieve external support for better innovation performance: empirical evidence from Bangalore, India

Abstract

Small and medium enterprises (SMEs) share unique characteristics of innovation and are simultaneously bounded by resource constraints. This study probes the role of internal factors in SMEs to obtain external support from government-promoted SME agencies, large enterprises, R&D institutes, universities, and other SMEs to achieve better innovation performance in the context of autocomponent, electronics, and machine tool industries in Bangalore in India. Using a stepwise logistic regression analysis, this study found that SMEs could obtain external support if they have internal technical competence (in terms of a technically qualified entrepreneur, an exclusive design centre, and frequent product or product & process innovation). The use of stepwise multiple regression showed that SMEs are able to exhibit superior innovation performance if they implement innovative ideas (or exploit market opportunities) and obtain external support with technically qualified entrepreneurs. Therefore, policy support to enhance the firm-level technical competence of SMEs and strengthen the external support infrastructure for SMEs would be beneficial.

Keywords:

• Bangalore
• external support
• firm level factors
• innovation performance
• SMEs