The combined network effect of sparse and interlocked connections in SMEs’ innovation.

Abstract

This paper aims to examine the relationship between the structures of inter-organizational connections and innovation results in the context of small and medium enterprises (SMEs). Existing literature shows that inter-organization connections can benefit firms in terms of innovation. However, there is a theoretical gap regarding how a combination of various structures of inter-organization connections affects innovation results. To close this gap, innovation network theory is employed to support our hypotheses. Consistent with prior research, we find that SMEs’ innovation can benefit from having sparse connections and interlocked connections. However, in contrast to prior research, our research emphasizes the importance of the combined network effect between sparse and interlocked connections.