Public Sector Financial Support for SME Innovativeness: Case Study of Selected CEE countries

Abstract

The impact of innovation on economic development cannot be underestimated. Innovation has been touted as the anchor on which firms can nick a competitive advantage for themselves. Over the years, public sector interest in innovation has been emphasized due to the impact innovation has made on economic development of some nations. Different public sector support systems are available to firms to access for their innovative activities. Small and Medium Scale Enterprises (SME’s) play vital role in the economies of most countries. Despite their contribution to development, they are constrained by inadequate funds to engage in R&D for innovation. In the light of this, the research sought to find out whether the innovativeness of SME’s from Selected CEE Countries determines the public financial support from the government or the European Union. The logistic regression model was employed using the harmonized European Union Community Innovation Survey 2012-2014 data for the empirical analysis. Our results indicate that SME’s that are engaged in innovative activities attract public financial support from national government and/or the European Union. This is because, the public sector financial support from the government and the EU target firms that are already engaged in innovation or show potential to be innovative.