For many firms, the challenge is less about whether or not to innovate than about increasing the degree of novelty of their innovations in order to improve their competitive advantage and create opportunities to access new markets. This paper contributes to advance knowledge on the degree of novelty of innovation in established small and medium manufacturing firms by using as dependent variables both innovation and the degree of novelty of innovation. This approach is implemented in two stages. First, we study the presence/absence of product and process innovations. Second, we adopt a firm's perspective to examine the degree of novelty of innovations of the sub-sample of these SMEs that have developed product or process innovations. The results indicate that various types of learning impact on the presence (or absence) of innovation as well as on the degree of novelty of innovation. Overall, the results show that variables related to learning by doing, learning by training and learning by interacting have the highest impact on the degree of novelty of innovation of established SMEs. The results of the paper are also used to derive practical implications for owners and managers of established SMEs and for policy makers. © 2008 Elsevier Ltd. All rights reserved.
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