Determinants of Innovation in SMES: An Emperical Analysis of South Korea

Abstract

This paper examines the effects of four determinants of innovation (profit, export, foreign-ownership and inter-firm cooperation) on small and medium-sized firms (SMEs) in South Korea. It also discusses the different implications which these determinants have on innovation in low-tech and high-tech industries. Data for this paper are collected from the Survey of Business Activities in South Korea for the period of 2014 and 2015. A negative binomial model is applied to deal with the over-dispersed dependent variable. In the full sample, export, foreign-ownership and inter-firm cooperation had significant positive influences on innovation output, whereas profit had no significant influence in the full sample. In the sample of high-tech industries, export was the only significant factor for innovation output, whereas export and foreign-ownership had positive influences on innovation output in low-tech industries. Limitations and the further research areas are discussed. Key words: Innovation, SMEs, South Korea, patent, negative binomial model