Competitiveness of small and medium sized enterprises: towards a two dimensional model of innovation and business clusters

Abstract

There is a well-established literature on innovation, entrepreneurship and business clusters and how each of these concepts affects small and medium sized enterprises (SMEs) competitiveness and growth. There is also an impetus by government agencies around the globe to encourage the creation of business clusters as a means of improving competitive advantages of SMEs and promoting regional economic growth. This article explores the relation between innovation and business collaborations and how these affect competitiveness and growth of SMEs, in less developed regions of Europe, through an analysis of four SMEs in an industrial cluster. On the basis of this, it presents a hypothetical, descriptive two-dimensional model of innovation and business clusters. SMEs that develop strategic partnerships are more likely to innovate and grow, than those SMEs that adopt a more 'traditional' go-it-alone approach. The article concludes with a discussion of policy implications of these findings for generating economic growth in less developed regions of Europe.

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