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H4. Firm success has an impact on the innovation activity (IPRs) of growing SMEs. 2.4 Public R&D funding and innovativeness Investment in R&D is one of the most powerful indicators of IPR activity (Archibugi, 1988). Usually, investments in innovation inputs precede the potential outputs. Investment in R&D creates the opportunity platform for the commercialization of new product and processes. However, Venkataraman (2004, pp. 162-166) pointed out that finance as a single resource does not generate other prerequisites for business growth and success. “There have to be also resources that are engaged in the process of ensuring that good ideas are being developed, that somebody actually starts the firm, makes the prototype, gets the first customer, develops the product and places it into a competitive product situation”. Since IPRs require plenty of resources SMEs especially might experience financial challenges or pressures in their R&D activities. North et al., (2001) emphasize that finance in SMEs is the most commonly identified barrier to innovations, with some sectorial differences. The incidence of business failure seems to be greater in firms with smaller assets than in larger, publicly traded firms (Moskowitz and Vissing-Jørgensen, 2002). Moreover, difficulties in obtaining capital or the existence of unfavourable demand conditions have been used to explain why some firms fail to grow or disappear entirely (Penrose, 1955). Some prior studies have shown that SMEs in unfavourable rural areas may not be disadvantaged in raising funds for their R&D activities (Storey and Westhead, 1997). This means that the location of the firm does not significantly affect the presence of financial constraints. Moreover, North et al., (2001) pointed out that the problem is not the availability of financial sources since most small firms do not seek external finance at all. Public R&D funding is one of the most influential instruments for supporting and increasing overall innovativeness of firm and the generation of intellectual property rights (IPRs) in firms (Santarelli and Piergiovanni, 1996). Lerner (2002) pointed out that public venture investments should be focused especially on technologies that are not currently popular among venture investors and provide follow-on capital to firms already funded by venture capitalists or other finance providers during periods when venture inflows are falling. Government’s role should be to encourage the sharing of both the risks and returns between the providers of finance and the entrepreneurs. Financial resources are not a sufficient condition for successful R&D activities and high performance. For example, large firms with adequate financial resources may require other
specialized assistance to support their innovations. Tether (1998) argued that financial support may even lead to selection of such projects which may not be optimal from the point of view of the innovations. This is likely to increase the number of imitations with little genuine innovation. However, in many circumstances financial support may have positive impacts, too. Santarelli and Piergiovanni (1996) discovered that the presence of spill-overs at the regional level from both private and public R&D expenditures is positively correlated with the development of new products. Moreover, firms that have R&D collaboration agreements have a higher probability of applying at least one patent, and they also apply for a higher number of patents (Brouwer and Kleinknecht, 1999). Based on these prior findings and the assumption that public R&D funding increases the overall innovativeness of the firm, the fifth hypotheses will be defined as follows: H5. Public R&D funding has an impact on the innovation activity (IPRs) of growing SMEs. 3. Data and methodology The data were collected using the purposive sampling procedure (Miles and Huberman, 1994). Recently, purposeful sampling strategy has been recommended for use especially in studies where specific types of firms are of interest (Achtenhagen et al., 2010). The total size of the sample data is 348 continuously growing SMEs from the period of 2002-2005. From these firms 262 are located in urban areas and 86 in rural areas (Table 1); 28 of these firms have produced and owned at least 1 IPR during the period 1988-2005 whereas 320 of the businesses were classified as non-IPR growth SMEs. The study analyses SME data from all the branches of industry in two Finnish regions, Eastern Finland (a rural area) and Helsinki Region (an urban area). The Helsinki region has twice as many people as Eastern Finland living in a spatial area that is 8 times smaller. This would indicate more market opportunities and larger markets as well as better possibilities for recruiting human resources. The corporate population density is 14 times higher and its relative growth has also been higher in the Helsinki area than in Eastern Finland (Appendix 1). Moreover, private and public R&D investments have been around 3 times higher in the Helsinki region compared with those in Eastern Finland. This difference could indicate that the Helsinki region has been a more favourable area for the creation of new products and innovation-driven growth. Almost all the growing firms (around 95 %) in both Eastern Finland and the Helsinki region are located in towns, municipality centres or their close neighbourhood. Manufacturing is the dominant branch of industry in Eastern Finland, employing one-third of the total number of private sector employees (Appendix 3). In both areas the employment has decreased mostly in manufacturing. The
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Aalto University publication series
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Author Tomi Heimonen Name of the do
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Acknowledgements This dissertation
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CONTENTS PART 1: Overview of the di
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List of Articles This thesis is bas
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1 Introduction Some scholars claim
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1 Introduction In addition, the dur
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1 Introduction Figure 1: Framework
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1 Introduction factors that affect
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1 Introduction 1.4 Key concepts and
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2 Literature review and conceptual
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3 Research methodology Constructivi
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3 Research methodology and the meth
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3 Research methodology The data use
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3 Research methodology 3.4 Models a
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3 Research methodology reliable. Se
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Page 70 and 71: References Abetti, P. A. (2001). Ac
Page 72 and 73: References Bhide, A. (2000). The or
Page 74 and 75: References Creswell, J. W. (2003).
Page 76 and 77: References Golafshani, N. (2003). U
Page 78 and 79: References Leitch, C., Hill, F., an
Page 80 and 81: References Pellikka, J. and Laurone
Page 82 and 83: References Storper, M. (1992). The
Page 84 and 85: Appendixes Overview: Appendix 1: Ke
Page 86 and 87: Appendixes High growth When examini
Page 88 and 89: Appendixes profitability, liquidity
Page 90 and 91: Appendixes Appendix 1 Continued (Ke
Page 92 and 93: Appendixes Appendix 2 Construction
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Page 96 and 97: not increased compared to Eastern F
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Page 100 and 101: propensity for risk taking (Covin a
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Page 104 and 105: firm’s annual sales growth (Arund
Page 108 and 109: other branches in which employment
Page 110 and 111: and Rao, 2008). Because of the unev
Page 112 and 113: Table 1. Characteristics of the dat
Page 114 and 115: firms from other firms. The data in
Page 116 and 117: Table 2. Logistic Regression analys
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Page 120 and 121: References Achtenhagen, L., Naldi,
Page 122 and 123: Kanter, R. (1985), “Supporting in
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392 Int. J. Entrepreneurial Venturi
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394 J. Siikonen et al. firms’ gro
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398 J. Siikonen et al. determinants
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400 J. Siikonen et al. 3.1 National
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402 J. Siikonen et al. 2 the firm
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404 J. Siikonen et al. 4 Results 4.
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