Internationalisation as a stimulus for SME innovation in developing economies: Comparing SMEs in factor-driven and efficiency-driven economies

Given the potential of internationalisation for overcoming constraints in the domestic knowledge and technology of developing economies and thus enabling SME innovation, this study investigates the importance of foreign technology licensing, exporting, and importing for SME innovation in developing economies at different levels of development. Using the lens of institutional theory and the levels of development model, we examine samples of SMEs in the factor-driven economies of Sub-Saharan Africa and the efficiency-driven economies of various European and Central Asian post-socialist countries. Our results suggest that the effects of ‘importing’ and ‘exporting’ on SME innovation strongly depend on the level of the country’s economic development. We also find a positive association between foreign technology licensing and innovation; the effect is stronger in the Sub-Saharan factor-driven economies than in efficiency-driven economies.