A Study of Innovation Strategies for SMEs in the Government R&D Subsidy System: The Case of IT Firms in Korea’s Innovation Cluster

Abstract

This paper studies the effects of SMEs’ innovation strategies on the relationship between R&D subsidy and firm performance, depending on the stage of growth of those SMEs. It employs secondary data on 476 SMEs located in Korea’s innovation cluster, which aims at improving society through mutual development of science, technology, and industry. The findings show that SMEs’ absorptive capacities and patent portfolios have positive moderating effects on the relationship between R&D subsidy and performance, regardless of the stage of growth. However, an SME’s external network activities at an early stage reduce the effect of R&D subsidy on firm performance, while enhancing the effect during the growth stage. The results show that differentiated innovation strategies are required, depending on an SME’s stage of growth, for them to improve society through science and technology.