Abstract/Summary

There is a growing recognition that collaboration is a key source of new knowledge and innovation in small and medium-sized enterprises (SMEs). Bridging the gap in the open innovation in SMEs literature on returns to open innovation our study demonstrates that a type of partner and its geographical proximity predict innovation performance in SMEs. Controlling for selection bias and endogeneity and using the panel data on 9,213 SMEs in the United Kingdom (UK) during 2002–2014, we found that collaboration with suppliers and customers domestically and internationally, collaboration with universities domestically and competitors internationally facilitate innovation in SMEs. The results offer implications for policymakers, scholars, entrepreneurs and SME managers.