Contextual Factors Affecting the Innovation Performance of Manufacturing SMEs in Korea: A Structural Equation Modeling Approach

Abstract

This study empirically explores the relationship between innovation performance and the internal and contextual factors driving technological innovation in manufacturing small and medium-sized enterprises (SMEs) in metropolitan areas of Korea using structural equation modeling (SEM). Our analysis is based on firm-level data from the Korean Innovation Survey conducted by the Science and Technology Policy Institute in 2012. According to the results, SMEs’ innovation capacity was positively related to technological innovation performance, and SMEs’ skills and technology acquisition is a contextual factor that positively influences their innovation performance. In this process, SMEs’ innovation capacity is a partial mediator between skills and technology acquisition and SMEs’ technological innovation performance. Moreover, the results show that the relationship between government and public policies and SMEs’ innovation performance is mediated by SMEs’ internal innovation capacity. The results imply that both skills and technology acquisition and government and public policies are important contextual factors can increase SMEs’ innovation performance. Based on the results, this study provides implications for policy makers in terms of the policies that provide both direct and support roles in fostering and sustaining innovation, which drives regional economic growth and development.

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