Can Small Firms Be the Leaders of Innovation? Finding the Determinants of Product and Process Innovation

Details

Supervisors

Prof. Benoît Gailly ; Hugo Castro Silva

Faculty

Louvain School of Management

Degree label

Master [120] en ingénieur de gestion

Abstract

The determinant of innovation firm size has fostered an intensive debate in the literature with little consensus, especially when innovation is disaggregated into product and process. Moreover, the usual absence of joint innovation categories makes studies fall short in analysing the interrelationship between product and process innovations. Thus, we study the innovation-firm size relationship considering the choices of engaging in product, process, or in both innovations. Then, from the exploration-exploitation standpoint, we tackle the assumption that joint innovation strategies increase innovation performance by analysing potential trade-offs faced by different sized firms that follow both types simultaneously. Using the Portuguese Community Innovation Survey (CIS) and the Integrated Business Accounts System (SCIE), between 2008 and 2018, we find that small firms have relative advantage at introducing product innovation, medium at process innovation, and large firms at the joint category. Likewise, we observe that large firms benefit the most from joint innovation strategies, with small firms following. When we disaggregate firm size into a numerical variable, we learn that firms employing between 276 and 3,055 workers have contracted innovation performances.