Internal Capabilities and External Knowledge Sourcing for Product Innovation in LMT SMEs

Abstract

Low- and medium-tech small and medium-sized enterprises (LMT SMEs) constitute a large and important segment in European economies. Because of increasingly international competition, LMT SMEs must rely on innovation to strengthen their competitive position over time. In this study, we empirically analyze possible complementarity or substitutability between internal capabilities and external knowledge sourcing. Using a short panel of 142 Dutch LMT SMEs, we find empirical evidence that suggests a negative interplay between internal capabilities and external knowledge sourcing.