Globalisation of Innovation in SMEs: Why They Go Abroad and What They Bring Back Home

This paper investigates the drivers and the effects of the internationalisation of innovation activities in SMEs based on a large data set of German firms. We look at different stages of the innovation process (R&D, design, production and sales of new products, and implementation of new processes) and explore the role of internal resources, home market competition and innovation-related location advantages for an SME’s decision to engage in innovation activities abroad. By linking international innovation activities to firm growth in the home market we try to identify likely internationalisation effects at the firm level. The results show that export experience and experience in knowledge protection are highly important for international innovation activities of SMEs. High innovation costs at home stimulate internationalisation of non-R&D innovation activities, and shortage of qualified labour expels production of new products. R&D activities abroad and exports of new products spur firm growth in the home market.COMMENT: Axel Mangelsdorf