Interaction between Innovation in Small Firms and their Environments: An Exploratory Study

Small food firms make up an important sector in the European economy and are particularly significant in rural areas where they are potential sources of employment and growth. Despite this, their behaviour as regards innovation has been relatively little studied to date. This exploratory investigation finds different types of innovative behaviours among small agro-food firms in peripheral regions and identifies some of the factors with which they are associated. The research reported here is based on a sample of 323 small and very small food and drink (hereafter “food”) firms drawn from 11 regions in six European countries. The food industry is generally regarded as a mature, low-technology industry, but this study identifies different clusters of small food firms according to innovative behaviours. It finds that, although a substantial number of firms may be defined as non-innovators, by far the largest cluster of food firms is involved in multiple forms of innovative activity. Recent studies have demonstrated the complexity of the determinants of technological progress. This may be modelled as a learning process in which small innovative firms tend to draw on internal and external sources of expertise and are both influenced by and influence the broader socio-economic environment in which they operate. This study uses cluster analyses to identify four types of innovative behaviours and examines the factors influencing these. It takes first steps to incorporate both measures of innovative capacity at the firm level as well as of the local development environment in order to explore links between the innovative capacity of small food firms and the characteristics of their regional contexts.