The influence of functional and geographical diversity in collaboration on product innovation performance in SMEs

Collaboration in innovation is considered an effective strategy to overcome barriers to innovate in SMEs. However, resource constraints and risk of knowledge leakage force management in SMEs to be selective with whom and where to collaborate. Still little is known about interactions between types of partners and their geographical location. This paper sheds new light on the relation between functional and geographical diversity in innovation partners and new-to-the-market and new-to-the-firm innovation performance in SMEs. Using data from two waves (2008 and 2010) of the Community Innovation Survey for Belgium, a positive relation is found between market partners and innovation new-to-the-firm, and between science and global partners and innovation new-to-the-market. A larger diversity in type and in geographical spread of partners is found to be positively associated with innovation new-to-the-market. Cooperation with a diverse set of market partners enhances new-to-the-firm innovation. More diversity in science partners enhances the balance between new-to-the-firm and new-to-the-market innovation. Diversity among international partners enhances new-to-the-firm and new-to-the-market innovation, but not the balance between both. A cooperation strategy balancing functional with geographical partner diversity enhances the balance between new-to-the-firm versus new-to-the-market innovation.