Innovation is the primary source of competitive advantage for an organization and offers long-term growth and sustainability. Firms and organizations consider developing innovative capabilities to survive in this competitive era. Considering the influence of firm size on enhancing innovation practices, special attention is directed toward small-sized firms, particularly MSMEs, recognizing their pivotal role in the economy. The present analysis emphasizes the necessity to address the concerns of small firms, as identified in various empirical studies, for improved performance through innovation. The study examines these concerns with the resource-based view (RBV), considering internal and external factors, and outlines future research directions for a deeper understanding. The research collected 145 articles from different databases from 2010 to 2022. Leveraging the insights from this review, entrepreneurs can bolster their growth prospects by enhancing their company's innovation capacity with the available resources.
Abd AzizNNSamadS (2016) Innovation and competitive advantage: Moderating effects of firm age in foods manufacturing SMEs in Malaysia. Procedia Economics and Finance35: 256–266.
2.
AcsZJPrestonL (1997) Small and medium-sized enterprises, technology, and globalization: Introduction to a special issue on small and medium-sized enterprises in the global economy. Small Business Economics9: 1–6.
3.
AgrawalSSinghPMazumdarM (2021) Innovation, firm size and ownership: A study of firm transition in India. International Journal of Global Business and Competitiveness16(1): 15–27.
4.
Al-RahmiWMYahayaNAlamriMM, et al. (2021) Integrating innovation diffusion theory with technology acceptance model: Supporting students’ attitude towards using massive open online courses (MOOCs) systems. Interactive Learning Environments29(8): 1380–1392.
5.
Ali H, Hao Y and Aijuan C. (2020) Innovation capabilities and small and medium enterprises' performance: An exploratory study. The Journal of Asian Finance, Economics and Business 7(10): 959–968.
6.
AlmusM (2000) Testing “Gibrat’s Law” for young firms–empirical results for West Germany. Small Business Economics15: 1–12.
7.
AmaraNLandryRBecheikhN, et al. (2008) Learning and novelty of innovation in established manufacturing SMEs. Technovation28(7): 450–463.
8.
AramburuNSaenzJ (2011) Structural capital, innovation capability, and size effect: An empirical study. Journal of Management & Organization17(3): 307–325.
9.
AwoleyeOMIloriOMOyebisiTO (2020) Sources of innovation capability and performance of ICT agglomerated MSMEs in Nigeria. International Journal of Innovation Management24(04): 2050032.
10.
BakarLJAAhmadH (2010) Assessing the relationship between firm resources and product innovation performance: A resource-based view. Business Process Management Journal16(3): 420–435.
11.
BarbieriJCVasconcelosIFGDAndreassiT, et al. (2010) Innovation and sustainability: New models and propositions. Revista de Administrac50: 146–154.
12.
BarneyJ (1991) Firm resources and sustained competitive advantage. Journal of Management17(1): 99–120.
13.
BellMPavittK (1995) The development of technological capabilities. Trade, Technology and International Competitiveness22(4831): 69–101.
CaloghirouYKastelliITsakanikasA (2004) Internal capabilities and external knowledge sources: Complements or substitutes for innovative performance?Technovation24(1): 2939.
16.
CamisońCVillar-LópezA (2014) Organizational innovation as an enabler of technological innovation capabilities and firm performance. Journal of Business Research67(1): 28912902.
17.
CarayannopoulosS (2017) Small, young firm flexibility and performance in the context of disruptive innovations. International Journal of Entrepreneurship and Innovation Management21(1–2): 105–118.
18.
ChaithanapatPPunnakitikashemPKhin Khin OoNC, et al. (2022) Relationships among knowledge-oriented leadership, customer knowledge management, innovation quality and firm performance in SMEs. Journal of Innovation & Knowledge7(1): 100162.
19.
ChanRY (2005) Does the natural-resource-based view of the firm apply in an emerging economy? A survey of foreign invested enterprises in China. Journal of Management Studies42(3): 625–672.
20.
ChengYLLinYH (2012) Performance evaluation of technological innovation capabilities in uncertainty. Procedia-Social and Behavioral Sciences40: 287–314.
21.
ChesbroughHW (2003) Open Innovation: The New Imperative for Creating and Profiting from Technology. Boston, MA: Harvard Business Press.
22.
ChettySKStanglLM (2010) Internationalization and innovation in a network relationship context. European Journal of Marketing44(11/12): 1725–1743.
23.
ChidigoMJelilovGOnderE (2016) Firm size and firm growth: Testing Gibrat’s law on 17 Nigeria manufacturing industry (2000–2011). The International Journal of Social Sciences and Humanities Invention13(4): 1869–1879.
24.
ChoiSBLeeSHWilliamsC (2011) Ownership and firm innovation in a transition economy: Evidence from China. Research policy40(3): 441–452.
25.
ChristensenCM (2013) The innovator’s dilemma: When new technologies cause great firms to fail. Innovation in a transition economy: Evidence from China. Research Policy40(3): 441–452.
26.
CohenWMLevinthalDA (1990) Absorptive capacity: A new perspective on learning and innovation. Administrative Science Quarterly35(1): 128–152.
27.
CunninghamJADamijNModicD, et al. (2023) MSME Technology adoption, entrepreneurial mindset and value creation: A configurational approach. The Journal of Technology Transfer48(5): 1574–1598.
28.
DatcheETitusKUKalimboAM (2023) The moderating effect of environmental dynamism in the relationship between innovation capability and performance of manufacturing firms in Nairobi city county, Kenya. Reviewed Journal International of Business Management4(1): 294–322.
29.
DawsonPDanielL (2010) Understanding social innovation: A provisional framework. International Journal of Technology Management51(1): 9–21.
30.
DeySK (2014) MSMEs in India: It’s growth and prospects. Abhinav National Monthly Refereed Journal of Research in Commerce & Management3(8): 26–33.
31.
DiezJR (2000) Innovative networks in manufacturing: Some empirical evidence from the metropolitan area of Barcelona. Technovation20(3): 139–150.
32.
EstevesLA (2007) A note on Gibrat’s law, Gibrat’s legacy and firm growth: Evidence from Brazilian companies. Economics Bulletin12(19): 1–7.
33.
FangVWTianXTiceS (2014) Does stock liquidity enhance or impede firm innovation?The Journal of Finance69(5): 2085–2125.
34.
FarooqRVijSKaurJ (2021) Innovation orientation and its relationship with business performance: Moderating role of firm size. Measuring Business Excellence25(3): 328345.
35.
FebriyantoroMTSuyotoYTSaputraF, et al. (2023) The effect of innovation capability on market performance mediated by external collaboration on SMEs. KnE Social Sciences5: 249–262.
36.
FialaRHedijaV (2015) The relationship between firm size and firm growth: The case of the Czech Republic. Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis63(5): 1639–1644.
37.
ForsmanH (2011) Innovation capacity and innovation development in small enterprises. A comparison between the manufacturing and service sectors. Research Policy40(5): 739750.
38.
FotopoulosGGiotopoulosI (2010) Gibrat’s law and persistence of growth in Greek manufacturing. Small Business Economics35: 191–202.
39.
FreelMS (2005) Patterns of innovation and skills in small firms. Technovation25(2): 123134.
40.
Gibrat R (1931) Les inégalités économiques. Paris: Librairie du Recueil Sirey.
GronumSVerreynneMLKastelleT (2012) The role of networks in small and mediumsized enterprise innovation and firm performance. Journal of Small Business Management50(2): 257–282.
43.
GuadalupeMKuzminaOThomasC (2012) Innovation and foreign ownership. American Economic Review102(7): 3594–3627.
44.
GuptaA (2019) Capital structure, ownership structure and R&D investments: Evidence from Indian firms. IUP Journal of Applied Finance20(4): 323–336.
45.
GuptaHBaruaMK (2016) Identifying enablers of technological innovation for Indian MSMEs using best–worst multi criteria decision making method. Technological Forecasting and Social Change107: 69–79.
46.
HamdaniJWirawanC (2012) Open innovation implementation to sustain Indonesian SMEs. Procedia Economics and Finance4: 223–233.
47.
HanaU (2013) Competitive advantage achievement through innovation and knowledge. Journal of Competitiveness5(1): 82–96.
48.
HanayshaJRAl-ShaikhMEJogheeS, et al. (2022) Impact of innovation capabilities on business sustainability in small and medium enterprises. FIIB Business Review11(1): 67–78.
49.
HansenJA (1992) Innovation, firm size, and firm age. Small Business Economics4: 37–44.
HassanNRaziqA (2019) Effects of knowledge management practices on innovation in SMEs. Management Science Letters9(7): 997–1008.
52.
HeenkendaHMJCBXuFKulathungaKMMCB, et al. (2022) The role of innovation capability in enhancing sustainability in SMEs: An emerging economy perspective. Sustainability14(17): 10832.
53.
HeimonenT (2012) What are the factors that affect innovation in growing SMEs?European Journal of Innovation Management15(1).
54.
HendersonRMClarkKB (1990) Architectural innovation: The reconfiguration of existing product technologies and the failure of established firms. Administrative Science Quarterly35: 9–30. doi:https://doi.org/10.2307/2393549.
55.
HigonDA (2012) The impact of ICT on innovation activities: Evidence for UK SMEs. International Small Business Journal30(6): 684–699.
56.
HusseinATTSinghSKFaroukS, et al. (2016) Knowledge sharing enablers, processes, and firm innovation capability. Journal of Workplace Learning28(8): 484–495.
57.
IbidunniAS (2020) Exploring knowledge dimensions for improving performance in organizations. Journal of Workplace Learning32(1): 76–93.
58.
IsmailWNSWMokhtarMZAliA, et al. (2014) Do it helps SMES gain better performance: A conceptual analysis on RBV theory. International Journal of Management and Sustainability3(5): 307–320.
59.
JalilMFAliAKamarulzamanR (2022) Does innovation capability improve SME performance in Malaysia? The mediating effect of technology adoption. The International Journal of Entrepreneurship and Innovation23(4): 253–267.
60.
JenssenJIAasheimK (2010) Organizational innovation promoters and performance effects in small, knowledge-intensive firms. The International Journal of Entrepreneurship and Innovation11(1): 19–27.
61.
KamienMISchwartzNL (1982) Market Structure and Innovation. Cambridge, UK: Cambridge University Press.
62.
KapopoulosPLazaretouS (2007) Corporate ownership structure and firm performance: Evidence from Greek firms. Corporate Governance: An International Review15(2): 144158.
63.
KhanRRehmanAUFatimaA (2009) Transformational leadership and organizational innovation: Moderated by organizational size. African Journal of Business Management3(11): 678.
64.
KimMSongJTricheJ (2015) Toward an integrated framework for innovation in service: A resource-based view and dynamic capabilities approach. Information Systems Frontiers17: 533–546.
65.
KmieciakRMichnaA (2018) Knowledge management orientation, innovativeness, and competitive intensity: Evidence from Polish SMEs. Knowledge Management Research & Practice16(4): 559–572.
66.
KorYYMahoneyJT (2004) Edith Penrose’s (1959) contributions to the resource-based view of strategic management. Journal of Management Studies41(1): 183–191.
67.
KostopoulosKCSpanosYE. and PrastacosGP (2002) The resource-based view of the firm and innovation: Identification of critical linkages. In The 2nd European academy of management conference, pp. 1–19.
68.
LatifahLSetiawanDAryaniYA, et al. (2021) Business strategy–MSMEs’ performance relationship: Innovation and accounting information system as mediators. Journal of Small Business and Enterprise Development28(1): 1–21.
69.
LeitaoJSerrasqueiroZNunesPM (2010) Testing Gibrat’s law for listed Portuguese companies: A quantile approach. International Research Journal of Finance and Economics37(1): 147–158.
70.
LohithCPSrinivasanRKadadevaramathRS, et al. (2017) Innovation the key to success: A literature review on Indian MSME’s’. Indian Journal of Science and Technology10(11): 1–6.
71.
LöofHHeshmatiA (2002) Knowledge capital and performance heterogeneity: A firm-level innovation study. International Journal of Production Economics76(1): 61–85.
72.
MamduhAPratiktoH (2021) Technology orientation and innovation capability in the digital transformation process of SMEs: A review. International Journal of Research in Business and Social Science (2147–4478)10(8): 76–81.
73.
ManelliAPaceRLeoneM (2022) Leverage, growth opportunities, and credit risk: Evidence from Italian innovative SMEs. Risks10(4): 74.
74.
Mendoza-SilvaA (2021) Innovation capability: A systematic literature review. European Journal of Innovation Management24(3): 707–734.
75.
MinBSSmythR (2016) How does leverage affect R&D intensity and how does R&D intensity impact on firm value in South Korea?Applied Economics48(58): 5667–5675.
76.
NaalaMNordinNOmarWABW (2017) Innovation capability and firm performance relationship: A study of pls-structural equation modeling (Pls-Sem). International Journal of Organization & Business Excellence2(1): 39–50.
77.
NagTGangulyBSinghR, et al. (2023) Influence of R&D and ICT capabilities on innovation performance: Evidence from Indian firms. FIIB Business Review: 23197145231167703.
78.
NaqshbandiMMKaurSMaP (2015) What organizational culture types enable and retard open innovation?Quality&Quantity49: 2123–2144.
79.
NietoMJSantamaríaL (2010) Technological collaboration: Bridging the innovation gap between small and large firms. Journal of Small Business Management48(1): 44–69.
80.
NooriJNasrabadiMBYazdiN, et al. (2017) Innovative performance of Iranian knowledge-based firms: Large firms or SMEs?Technological Forecasting and Social Change122: 179–185.
81.
NooteboomB (1994) Innovation and diffusion in small firms: Theory and evidence. Small Business Economics6: 327–347.
82.
O’ConnellVAbuGhazalehNTahatY, et al. (2022) The impact of R&D innovation success on the relationship between R&D investment and financial leverage. Journal of Open Innovation: Technology, Market, and Complexity8(3): 129.
83.
OctasylvaARPYuliatiLNHartoyoH, et al. (2022) Innovativeness as the key to MSMEs’ performances. Sustainability14(11): 6429.
84.
OsunsanOKJadwigaNEricM, et al. (2015) Firm age and performance in Kampala, Uganda: A selection of small business enterprises. International Journal of Academic Research in Business and Social Sciences5(4): 412–422.
85.
ParidaVWesterbergMFrishammarJ (2012) Inbound open innovation activities in high-tech SMEs: The impact on innovation performance. Journal of Small Business Management50(2): 283–309.
86.
PetruzzelliAMArditoLSavinoT (2018) Maturity of knowledge inputs and innovation value: The moderating effect of firm age and size. Journal of Business Research86: 190201.
87.
PhamHNguyenM (2017) Determinants of firm growth: Evidence on ownership structure effects and Gibrat’s law validity. Available at 2997301.
88.
PhamLTMVan VoLLeHTT, et al. (2018) Asset liquidity and firm innovation. International Review of Financial Analysis58: 225–234.
89.
PiergiovanniRSantarelliEKlompL, et al. (2003) Gibrat’s Law and the firm size/firm growth relationship in Italian small scale services. Revue D’economie Industrielle102(1): 69–82.
90.
Plehn-DujowichJM (2009) Firm size and types of innovation. Economics of Innovation and New Technology18(3): 205–223.
91.
PrakasaYSujokoAAzizNA, et al. (2022) Absorptive capacity and innovation capability: Assessing the impact on SMEs performance in the new normal era. Jurnal Ekonomi Bisnis Dan Kewirausahaan11(3): 325.
92.
PranataNSoekarniMMychelisdaE, et al. (2022) Technology adoption issues and challenges for micro, small and medium enterprises: A case study of the food and beverage sub-sector in Indonesia. The Journal of Asian Finance, Economics and Business (JAFEB)9(3): 265–274.
93.
RaghuvanshiJAgrawalRGhoshPK (2019) Measuring the innovation capability of micro enterprises in India: Construct development and validation. Benchmarking: An International Journal26(5): 1405–1430.
94.
RajapathiranaRJHuiY (2018) Relationship between innovation capability, innovation type, and firm performance. Journal of Innovation & Knowledge3(1): 44–55.
95.
RayappaMKAroraS (2021) Keeping up with innovation: Perspectives into the present and the future needs of the Indian food sector. Journal of the Knowledge Economy12(2): 470–488.
96.
Remmiya RajanPDineshA (2023) Darken phase of MSME due to COVID 19 in India. In: International Conference on Economics, Business and Sustainability, pp.162–167.
97.
RidongHUWuFAN (2019) Effects of leverage ratio on corporate research and development expenditure of small and Medium enterprises. Revista de Cercetare si Interventie Sociala67: 103.
98.
RiswandiRPermadiI (2022) Business sustainability through technology adoption: Readiness and acceptance of e-commerce technology in MSMEs. KnE Social SciencesX: 243–256.
99.
Rogers EM (1962) Diffusion of innovations. New York: Free Press.
100.
RogersM (2004) Networks, firm size and innovation. Small Business Economics22: 141–153.
RoperSHewitt-DundasN (2017) Investigating a neglected part of Schumpeter’s creative army: What drives new-to-the-market innovation in micro-enterprises?Small Business Economics49(3): 559–577.
103.
SahooS (2019) Quality management, innovation capability and firm performance: Empirical insights from Indian manufacturing SMEs. The TQM Journal31(6): 1003–1027.
104.
SarwarZKhanMAYangZ, et al. (2021) An investigation of entrepreneurial SMEs’ network capability and social capital to accomplish innovativeness: A dynamic capability perspective. SAGE Open11(3): 21582440211036089.
105.
Saunila M and Ukko J (2014) Innovation capability for SME success: perspectives of financial and operational performance. Journal of Advances in Management Research11(2): 163–175.
106.
SaunilaM (2020) Innovation capability in SMEs: A systematic review of the literature. Journal of Innovation & Knowledge5(4): 260–265.
107.
SaunilaMUkkoJ (2014) Intangible aspects of innovation capability in SMEs: Impacts of size and industry. Journal of Engineering and Technology Management33: 32–46.
108.
SchumpeterJA (1949) Science and ideology. American Economic Review39(2): 345–359.
109.
Schumpeter J and Capitalism S (1942) Democracy. New York 269.
110.
SinghDKhambaJSNandaT (2015) Role of technological innovation in improving manufacturing performance: A review. International Journal of Mechanical and Industrial Engineering9(1): 398–402.
111.
SpithovenAClarysseBKnockaertM (2011) Building absorptive capacity to organise inbound open innovation in traditional industries. Technovationm31(1): 10–21.
112.
SpithovenAVanhaverbekeWRoijakkersN (2013) Open innovation practices in SMEs and large enterprises. Small Business Economics41: 537–562.
113.
SrinivasanRLohithCP (2017) Strategic marketing and innovation for Indian MSMEs.
114.
SubrahmanyaMBMathirajanMKrishnaswamyKN (2010) Importance of technological innovation for SME growth evidence from India Maastricht Economic and Social Research and Training Centre on Innovation and Technology. UNU-MERIT Working Papers No. 007.
115.
TakyiLNaidooV (2020) Innovation and business sustainability among SMEs in Africa: The role of the institutions. In: Sustainability in the Entrepreneurial Ecosystem: Operating Mechanisms and Enterprise Growth. Hershey, Pennsylvania.
116.
TangLGuZZhangQ, et al. (2022) The effect of firm size, industry type and ownership structure on the relationship between firms’ sustainable innovation capability and stock liquidity. Operations Management Research15(3): 825837.
117.
TeeceDJ (1986) Profiting from technological innovation: Implications for integration, collaboration, licensing and public policy. Research Policy15(6): 285–305.
118.
TeguhSHartiwiPRidhoBI, et al. (2021) Innovation capability and sustainable competitive advantage: An entrepreneurial marketing perspective. The Journal of Asian Finance, Economics and Business8(5): 127–134.
119.
TerziovskiM (2010) Innovation practice and its performance implications in small and medium enterprises (SMEs) in the manufacturing sector: A resource-based view. Strategic Management Journal31(8): 892–902.
120.
ThongsriNChangAKH (2019) Interactions among factors influencing product innovation and innovation behaviour: Market orientation, managerial ties, and government support. Sustainability11(10): 2793.
121.
TriwahyonoBRahayuTKraugusteelianaK (2023) Analysing the role of technological innovation in improving the operational efficiency of MSMEs. Jurnal Minfo Polgan12(1): 1417–1426.
122.
UhlanerLMvan StelADuplatV, et al. (2013) Disentangling the effects of organizational capabilities, innovation and firm size on SME sales growth. Small Business Economics: 41581–41607. doi:https://doi.org/10.1007/s11187-012-9455-7.
123.
UssmanAAlmeidaAFerreiraJ, et al. (2001) SMEs and innovation: Perceived barriers and behavioural patterns. The International Journal of Entrepreneurship and Innovation2(2): 111–118.
124.
UtamiHAlamanosE (2022). Resource-based theory: A review. In S. Papagiannidis (Ed.), https://open.ncl.ac.uk/.
125.
Van DijkBDen HertogRMenkveldB, et al. (1997) Some new evidence on the determinants of large-and small-firm innovation. Small Business Economics9: 335–343.
126.
VesalainenJHakalaH (2014) Strategic capability architecture: The role of network capability. Industrial Marketing Management43(6): 938–950.
127.
WalterAAuerMRitterT (2006) The impact of network capabilities and entrepreneurial orientation on university spin-off performance. Journal of Business Venturing21(4): 541567.
128.
WalterCEFerreira PoloniaDAu-Yong-OliveiraM, et al. (2021) Drivers of innovation capacity and consequences for open innovation. Journal of Open Innovation: Technology, Market, and Complexity7(2): 140.
129.
WernerfeltB (1984) A resource-based view of the firm. Strategic Management Journal5: 171180.
130.
WignarajaG (2002) Firm size, technological capabilities and market-oriented policies in Mauritius. Oxford Development Studies30(1): 87–104.
131.
WilsonGADobniCB (2022) Which innovative methodologies and technologies help improve firm performance? A global study of SMEs. Research-Technology Management65(4): 50–60.
WuryaningratNF (2013) Knowledge sharing, absorptive capacity and innovation capabilities: An empirical study on small and Medium enterprises in north Sulawesi, Indonesia. Gadjah Mada International Journal of Business15(1): 61–77.
134.
XieXZouHQiG (2018) Knowledge absorptive capacity and innovation performance in high-tech companies: A multi-mediating analysis. Journal of Business Research88: 289297.
135.
YangCHTsouMW (2020) Globalization and firm growth: Does ownership matter?Small Business Economics55(4): 1019–1037.
136.
YeşilSKoskaABüyükbeşeT (2013) Knowledge sharing process, innovation capability and innovation performance: An empirical study. Procedia-Social and Behavioral Sciences75: 217–225.
137.
YunJJAhnHJLeeDS, et al. (2022) Inter-rationality; Modeling of bounded rationality in open innovation dynamics. Technological Forecasting and Social Change184: 122015.
138.
ZastempowskiM (2022) What shapes innovation capability in micro-enterprises? New-to-the maret product and process perspective. Journal of Open Innovation: Technology, Market, and Complexity8(1): 59.
139.
ZhaoHTongXWongPK, et al. (2005) Types of technology sourcing and innovative capability: An exploratory study of Singapore manufacturing firms. The Journal of High Technology Management Research16(2): 209–224.
