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2 Literature review and conceptual framework
between the providers of finance and the entrepreneurs. In many
circumstances financial support also has wider positive impacts. For
instance, Santarelli and Piergiovanni (1996) found that spillovers from both
private and public R&D expenditures are positively correlated with the
development of product innovations at the regional level.
However, financial resources alone are not sufficient for successful
innovation activities and high performance. Notably, 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 the selection of projects that may not be optimal from an
innovations perspective, which is likely to increase the number of imitations
with little genuine innovation. Moreover, as Venkataraman (2004, pp. 162-
166) argued, “There have to be also resources (apart from financial) 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”. Overall, from the above discussion we may
conclude that important factors affecting innovativeness include a range of
financial variables such as solvency, profitability, liquidity, public R&D
finance, but numerous other factors are also important.
2.3 Characteristics of HGS SMEs and methodological
challenges
2.3.1 Characteristics of HGS SMEs
Characteristics of small firm growth have been topics of rich empirical
research and academic discussion (Acs et al., 2008; Barringer et al., 2005;
Davidsson et al., 2009; Kiviluoto et al., 2011; Littunen and Virtanen, 2009;
Parker et al., 2010), and a wide spectrum of entrepreneurship and
management theories has been used in the applied theoretical backgrounds
and frameworks. Penrose (1959) focused on firm-level analysis of economic
performance, but stressed the critical roles of single actors and resource
slacks in firm growth theory. Davidsson et al. (2005) noted that there have
been numerous empirical studies on small firm growth, but few have
investigated the crucial relationship between growth and profitability.
Furthermore, as Birley and Westhead (1990) pointed out, success has even
been conveniently (but erroneously) regarded as a substitute for growth.
The growth and success of small firms have been examined, singly and in
combination, in several studies (Davidsson et al., 2009; Cowling, 2004;
Glancey, 1998; Markman and Gartner, 2002; Steffens et al., 2009). The key