Service innovation and internationalization in SMEs: antecedents and profitability outcomes

Abstract

Both innovating and internationalizing can hold the key to survival and growth among small-and medium-sized enterprises (SMEs). Service innovation in particular is highly relevant in the increasingly digitalized and high-technology global trade. However, there have been until now few studies on service innovation in international entrepreneurship. Thus, in an effort to illuminate its role in entrepreneurial internationalization, the present study examines the profitability impact of service innovation in SME internationalization, while also outlining the differing impacts of entrepreneurial orientation and human capital as the antecedents of both. The empirical data were collected via an online survey of Finnish SMEs in the information and communications technology (ICT) industrial sector, the final sample comprising 104 companies. The data were analyzed through structural equation modeling. The results indicate, first, that entrepreneurial orientation underlies both degree of internationalization and service innovation, yet different dimensions of entrepreneurial orientation have distinct impacts on the two outcomes. Second, we find that the level human capital also determines the level of service innovation in as an antecedent and third, international expansion, but not service innovation, has a negative impact on profitability. We discuss the implications of these results, which imply that SMEs may face an internationalizationinnovation paradox in that engaging in both activities may not be a feasible strategic option for them, and that prioritizing internationalizing in favor of innovating may incur costs and result in lower profitability.

Social media as a knowledge transfer tool for intellectual capital accumulation during the international growth of small firms

“…) Elements of HC among others help in identifying business opportunities and exploiting them (Mansion & Baush 2019;Ruzzier et al2007), thus forming the bases for international growth. Surprisingly, Vuorio et al (2020) did not find HC to have any effect on mostly small ICT firms' internationalization. This can be however be explained by the fact that they did not include international experience as part of the measurement of HC.…”

The Impact of Breakthrough Innovations on the Export Performance of SMEs in Developing Countries: The Moderating Role of Institutional Factors

“…Studies confirm that innovation strategies and technology enable firms to expand and compete internationally ( Amankwah-Amoah et al, 2018 ; Bortoluzzi et al, 2018 ; Pino Soto, 2018 ; Donbesuur et al, 2020 ; Vuorio et al, 2020 ). For instance, researchers have argued that formulating new technological strategies and adopting present ones are critical for firms’ productivity and the knowledge economy ( Wamboye et al, 2015 ; Wong, 2015 ; Schniederjans, 2017 ).…”

Measuring innovation effectiveness: a SEM-based cross-lagged analysis

“…The financial outcomes related to innovation include growth in sales, growth in profits and a higher return on assets. Vuorio et al (2020) concluded that firms with weaker innovation outcomes have lower profitability margins.…”