Abstract:

Innovation ecosystem is perceived as a major source of competitive advantage in global business environment. In this study, the innovation ecosystem for small and medium size enterprises (SME) in Turkey is defined within a causal framework where the internal and external indicators of innovation lead to enhanced innovation capability. The study further determines the innovation awareness and capability of SME and analyzes the impact of innovation capability indicators on innovation types utilizing primary data. The data sample covers 1663 SME with characteristics similar to the SME population in Turkey. Empirical findings are derived from multivariate analyses. Through factor analysis, thirty dimensions of process innovation are reduced to seven factors; three dimensions of product innovation to one factor and five dimensions of property rights to two factors. Regression analyses analyze the significance and impact of innovation indicators on innovation types. The empirical findings emphasize the significant effect of training and customer cooperation on process innovation and product innovation. Moreover, R&D expenditure in total revenue is very influential on product innovation activities, indicating that it is important for new product development of SME. Among ICT application indicators, the impact of e-trade dominates web-site ownership and portal membership.  Main policy implication is that the SME are open to training and they believe that knowledge is an important channel for them to create innovative activities. However, their technical infrastructure utilization should be encouraged and their international links should also be strengthened through incentives and supports by government, public and private sectors. [i]

[i]  The study is supported by Bogazici University Research Fund (Project #. 07HN202)