Non-R&D innovation in SMEs: is there complementarity or substitutability between internal and external innovation sourcing strategies?

This paper investigates to what extent non-R&D activities individually and jointly drive innovation processes in small- and medium-sized enterprises (SMEs). We argue that non-R&D-performing and R&D-performing SMEs (non-R&D vs R&D performers) differ with respect to the separate and combined effects of non-R&D activities on technological innovations (product vs process). Drawing on a sample of 1392 Chinese manufacturing SMEs, our empirical results paint a complex and comprehensive picture of innovation processes in SMEs based on a set of non-R&D activities. We find that non-R&D performers rely primarily on embodied knowledge to develop innovations, and that R&D performers can access external networking in which customers and scientific sources drive product innovation and suppliers affect process innovation. We also find that the existence of substitutability between internal and external innovation sourcing strategies composed of non-R&D activities is limited to product innovation for non-R&D performers and process innovation for R&D performers.