Impact of SME Policies on Innovation Capabilities: The Turkish Case

The purpose of this paper is to explore the determinants of innovative capabilities in an emerging country context. We focus more particularly on the impact of recent changes in SME policies in Turkey. Using a unique firm-level survey conducted on 45.000 SMEs, innovative capabilities of firms are assessed at three different levels; their innovation efforts, innovation decision and innovative intensity. We analyze and compare the impact of two different incentive schemes; one a purely financial support, and the second, consultancy and technological assistance coupled with financial facilities. Whereas all firms seem to benefit from financial support, only less innovative firms take full advantage of the advisory services. Overall, the determinants of innovative capabilities depend considerably on the type of firms, suggesting the need for differentiated policy measures.