FIRM STRATEGY AND PRODUCT INNOVATION IN SMES: THE MEDIATING ROLE OF BUSINESS NETWORKS

Abstract

Product innovation is essential for the growth and profitability of SMEs. Existing scientific evidence suggests that firm strategy and participation in business networks could influence this innovation. In turn, participation in networks might influence the configuration and allocation of the organizational resources and capabilities that help shape firm strategy. Hence, this study analyzes business networks as a mediator between firm strategy and product innovation in SMEs. It uses a sample of 205 SMEs from Costa Rica compiled by the Global Competitiveness Project. The proposed mediation is tested using OLS regression equations. The findings show that business networks do indeed play a mediating role in the relationship between firm strategy and product innovation, which has implications for SMEs in terms of the relevance of participating in such networks and also for public policymakers regarding the importance of managing them.