FIRM STRATEGY AND PRODUCT INNOVATION IN SMEs: THE MEDIATING ROLE OF BUSINESS NETWORKS

Melendez-Campos, Carlos; Mora-Esquivel, Ronald; Leiva, Juan C.

doi:10.1590/S0034-759020240104

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ARTICLES • Rev. adm. empres. 64 (1) • 2024 • https://doi.org/10.1590/S0034-759020240104 copy

FIRM STRATEGY AND PRODUCT INNOVATION IN SMEs: THE MEDIATING ROLE OF BUSINESS NETWORKS

Estrategia empresarial e innovación de productos en PyMEs: El rol mediador de las redes de negocios

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Product innovation is essential for the growth and profitability of SMEs. Existing scientific evidence suggests that firm strategy and participation in business networks could influence this innovation. In turn, participation in networks might influence the configuration and allocation of the organizational resources and capabilities that help shape firm strategy. Hence, this study analyzes business networks as a mediator between firm strategy and product innovation in SMEs. It uses a sample of 205 SMEs from Costa Rica compiled by the Global Competitiveness Project. The proposed mediation is tested using OLS regression equations. The findings show that business networks do indeed play a mediating role in the relationship between firm strategy and product innovation, which has implications for SMEs in terms of the relevance of participating in such networks and also for public policymakers regarding the importance of managing them.

Keywords:
product innovation; SMEs; firm strategy; business networks; competitiveness

Empirical studies	Relationship studied	Sample / Context	Results
Tarapuez et al. (2016)Tarapuez, E., Guzmán, B. E., & Hernández, R. P. (2016). Estrategia e innovación en las Mipymes colombianas ganadoras del premio Innova 2010-2013. Estudios Gerenciales, 32(139), 170-180. https://doi.org/10.1016/j.estger.2016.01.002 https://doi.org/10.1016/j.estger.2016.01...	Strategy and innovation	Colombian SMEs	Positive relationship
Udagedara & Allman (2019)	Strategy priorities and innovation focus	Sri Lankan companies	Positive relationship
Thoumrungroje & Racela (2022)	Business strategy and innovation performance	Thai firms	Positive relationship depending on the type of strategy.
Liu & Kong (2021)Liu, C., & Kong, D. (2021). Business strategy and sustainable development: Evidence from China. Business Strategy and the Environment, 30(1), 657-670. https://doi.org/10.1002/bse.2645 https://doi.org/10.1002/bse.2645...	Business strategy and green innovation	A-share listed firms in China from 2007 to 2016.	Variable relationship depending on the type of strategy, even in one case a negative relationship.
Yahya et al. (2022)Yahya, S., Khan, A., Farooq, M., & Irfan, M. (2022). Integrating green business strategies and green competencies to enhance green innovation: Evidence from manufacturing firms of Pakistan. Environmental Science and Pollution Research, 29(26), 39500-39514. https://doi.org/10.1007/s11356-021-18430-1 https://doi.org/10.1007/s11356-021-18430...	Green business strategy and green innovation	Manufacturing companies in Pakistan.	Moderate and positive relationship
Barzi et al. (2015)Barzi, F., Cortelezzi, F., Marseguerra, G., & Zoia, M. G. (2015). Cooperative innovation: In quest of effective partners - Evidence from Italian firms. Innovation, 17(3), 281-307. https://doi.org/10.1080/14479338.2015.1036541 https://doi.org/10.1080/14479338.2015.10...	Networks and innovation	Italian SMEs	Mixed results depending on the type of network.
Jordão et al. (2019)Jordão, R. V. D., Novas, J., & Gupta, V. (2019). The role of knowledge-based networks in the intellectual capital and organizational performance of small and medium-sized enterprises. Kybernetes, 49(1), 116-140. https://doi.org/10.1108/K-04-2019-0301 https://doi.org/10.1108/K-04-2019-0301...	Networks and innovation	Pharmaceutical SMEs in Brazil	Networks promote innovation.
Thatchenkery & Katila (2021)	Networks and innovation	US enterprise infrastructure software industry.	Firms’ positioning in competition networks impacts innovation.
Liu et al. (2020)Liu, X., Cai, J., & Smart, A. U. (2020). Does the way in which a firm interacts with its network partners influence its formulation of product innovation strategies? International Journal of Technology Management, 83(4), 181-204. https://doi.org/10.1504/IJTM.2020.110119 https://doi.org/10.1504/IJTM.2020.110119...	Networks and innovation	Chinese high-tech and traditional manufacturing industries.	Firms’ interactions with partners affect product innovation strategies.
Lan et al. (2020)Lan, Y., Massimino, B. J., Gray, J. V., & Chandrasekaran, A. (2020). The effects of product development network positions on product performance and confidentiality performance. Journal of Operations Management, 66(7-8), 866-894. https://doi.org/10.1002/joom.1105 https://doi.org/10.1002/joom.1105...	Networks and innovation	Video game developers.	Higher network centrality relates to better product performance.
Galvin et al. (2020)Galvin, P., Burton, N., Singh, P. J., Sarpong, D., Bach, N., & Teo, S. (2020). Network rivalry, competition and innovation. Technological Forecasting and Social Change, 161, 120253. https://doi.org/10.1016/j.techfore.2020.120253 https://doi.org/10.1016/j.techfore.2020....	Networks and innovation\|	Automotive industry for the 1993-2007 period	Mixed results depending on measure of rivalry between strategic networks.
Crema et al. (2014)Crema, M., Verbano, C., & Venturini, K. (2014). Linking strategy with open innovation and performance in SMEs. Measuring Business Excellence, 18(2), 14-27. https://doi.org/10.1108/MBE-07-2013-0042 https://doi.org/10.1108/MBE-07-2013-0042...	Relationship between strategy, network, and innovation.	Italian SMEs.	Strategy influences the level of participation in networks and consequently innovation performance.
Jiang et al. (2020)Jiang, W., Mavondo, F., & Zhao, W. (2020). The impact of business networks on dynamic capabilities and product innovation: The moderating role of strategic orientation. Asia Pacific Journal of Management, 37, 1239-1266. https://doi.org/10.1007/s10490-018-9628-2 https://doi.org/10.1007/s10490-018-9628-...	Relationship between strategy, network, and innovation.	Chinese manufacturers	Strategic orientation moderates the effect of networks on product innovation.

Variable	Mean	SD	Min.	Max.	1	2	3	4	5
1.Sector	0.26	0.43	0	1
2.Size	2.59	1.07	1.10	5.45	0.11
3.Age	2.61	0.80	0.69	4.77	0.11	0.39^* ***** p<0.001
4.Networks	0.56	0.20	0.06	1.00	0.04	0.33^* ***** p<0.001	0.18^ p<0.01,
5.Strategy	0.53	0.18	0.06	0.88	-0.06	0.07	-0.27^* ***** p<0.001	0.26^* ***** p<0.001
6.ProdInnov	0.49	0.25	0.06	1.00	0.10	0.20^ p<0.01,	0.05	0.48^* ***** p<0.001	0.24^* ***** p<0.001

	Model 1 Networks (Eq.1)	Model 2 PI (Eq.2)	Model 3 PI (Eq.3c)
Firm Strategy	0.347(0.0821)^***	0.352(0.0104) ^***
Firm Strategy (instrumental)			0.169(0.0948)
Networks			0.567(0.0740) ^***
Firm size	0.048(0.0140) ^***	0.037(.0175) ^*	0.017(0.0164)
Firm age	0.042(0.0174) ^*	0.013(0.0243)	-0.009 (0.0220)
Sector	0.004 (0.0290)	0.053(0.0369)	0.052(0.0349)
F-test	10.86^***	5.34^***	17.78^***
R² (adjusted)	0.189	0.102	0.256
VIF average (min-max)	1.19(1.02-1.34)	1.19(1.02-1.34)	1.20(1.02-1.37)
Observations	205	205	205
Robust standard errors are presented in parentheses. Significance level at ^p<0.05, ^p<0.01, ^**p<0.001

Paths	Coefficient & Standard error	CI 95% LB	CI 95% UB
Firm_strategy ->Networks	0.346 ^* ***** p<0.001 (0.0794)	0.1908	0.5022
Firm_size->Networks	0.048^* ***** p<0.001 (0.0135)	0.0212	0.0740
Firm_age->Networks	0.0418^* * p<0.05, (0.0189)	0.0047	0.0789
Constant	0.1394^* * p<0.05, (0.0700)	0.0022	0.2768
Networks -> Product Innovation	0.526^* ***** p<0.001 (0.0808)	0.3674	0.6843
Firm_strategy -> Product Innovation	0.169 (0.0962)	-0.0193	0.3577
Firm_size -> Product Innovation	0.012 (0.0161)	-0.0198	0.0433
Firm_age -> Product Innovation	-0.009 (0.0222)	-0.0521	0.0348
Sector -> Product Innovation	0.052 (0.0345)	-0.0162	0.1192
constant	0.084 (0.0820)	-0.0762	0.2450
Bootstrapping Test of the Indirect Effect
Coefficient Comp Strategy x Coefficient Network	0.1822^a a Coefficient of Percentile Bootstrapping Coefficient Interval test ^* ***** p<0.001 (0.0479^b b Bootstrap standard error )	0.0929^c c Lower bound percentile bootstrapping confidence interval	0.2818^d d Upper bound percentile bootstrapping confidence interval

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