How knowledge affects incremental innovation in SMEs: Knowledge base and knowledge heterogeneity

Abstract

While scholars have widely examined the effect of knowledge base (i.e. knowledge breadth (KB) and knowledge depth (KD)) on innovation performance, the relationship between KB/KD and incremental innovations remains not clear. This article examines how existing knowledge base interacts with external and internal knowledge heterogeneity (KH) to affect incremental innovation in small and medium enterprises (SMEs). A collection of 230 samples from high-technology SMEs in China demonstrate that the effects of KB and KD are contingent on external and internal KH in opposite ways. The study proposes that a firm with a broad knowledge base is better able to develop incremental innovations matched with internal KH rather than external KH; firms with high depth of knowledge benefit more from external KH than internal KH for fostering its incremental innovations.