Is Innovation a Determinant for SME Performance? Cross-Country Analysis of the Economies of Former USSR Countries

Abstract

Strong and dynamic SME is crucial to economic growth, with firms making new investments, creating jobs, and triggering economic growth. Entrepreneurial activity and economic opportunities for small businesses in former USSR countries changed significantly following the transition to market economies. However, it requires SME in the former USSR economies to engage in innovation activity to maintain profitability and grow while coping with country-associated challenges such as informal competition and corruption. This research aims to investigate the impact of engaging in innovation activity on company growth among SMEs in former USSR countries and its magnitude in relevance to the country-specific environment and factors associated with it. The analysis includes the examination of firm-level indicators of innovation activity alongside the country-level statistics (such as taxation, ease of doing business, corruption, and other barriers) across selected countries. The latest available World Bank Entrepreneurship Database and World Bank Enterprise Survey (2012–2013) data were used to feature the determinants of high-growth SMEs. Strategic implications of the findings for policy makers are suggested.