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Article

External Knowledge Flows and Small and Medium-Sized Enterprises’ Innovation Capabilities Enhancement: An Empirical Investigation

by
Nawal Abdalla Adam
1,* and
Hind Alofaysan
2
1
Department of Business Administration, College of Business and Administration, Princess Nourah bint Abdulrahman University, Riyadh 11671, Saudi Arabia
2
Department of Economics, College of Business and Administration, Princess Nourah bint Abdulrahman University, Riyadh 11671, Saudi Arabia
*
Author to whom correspondence should be addressed.
Sustainability 2023, 15(5), 4071; https://doi.org/10.3390/su15054071
Submission received: 28 November 2022 / Revised: 2 February 2023 / Accepted: 6 February 2023 / Published: 23 February 2023
Versions Notes

Abstract

:
This study aimed to identify sources of external knowledge in small- and medium-sized enterprises (SMEs). Additionally, it aimed to determine how external knowledge flow affects the different types of SMEs’ innovation capabilities (product, process, organizational, and marketing innovation capability). A quantitative approach was adopted to achieve the objectives. A questionnaire survey was used to collect study data from 83 random SME managers/owners in Saudi Arabia. The data were analyzed using regression analysis and descriptive statistics. The findings of the study showed that customers were the main source of external knowledge in SMEs. The results of the regression analysis also demonstrated that external knowledge flow has a significant effect on SMEs’ innovation capabilities. External knowledge explains the changes in SMEs’ products and their process innovation capability. Additionally, external knowledge flow was a significant predictor of SMEs’ organizational innovation capability. The findings of the study provide policymakers and managers with many suggestions for developing innovations in SMEs. Additionally, this study provides a basis for researchers to conduct more future studies related to innovation and knowledge flow in SMEs.

1. Introduction

Innovation has become a prerequisite for the economic viability and sustainability of all enterprises in the current era. Through innovations, enterprises can raise their efficiency, increase their productivity [1], and improve their competitive advantage [2]. To obtain such benefits, however, enterprises should enhance their innovation capabilities. Innovation capabilities are defined as the enterprise’s ability to exploit available knowledge and resources to develop or improve its products, processes, organization, and marketing methods to achieve its stated goals [3]. The concept of innovation capabilities involves the enterprise’s ability to interact with and communicate elements of its surrounding environment [4]. Enhancing innovation capabilities reflects positively on an enterprise’s competitive advantage, adds value to customers [5,6], and stimulates the acquisition of advanced technology and knowledge [7]. The development of innovation capabilities is vital for enterprises to survive the fierce competition from large enterprises.
Previous studies reported many determinants of enterprise innovation capability, such as the availability of technology, ability to acquire knowledge, and management tendency to avoid risks [8]. With respect to SMEs, factors such as economic performance, business diversification, individual characteristics [9], entrepreneurial management characteristics, links with external parties, and knowledge development [10] are the most likely factors. There are additional factors that may hinder innovation in small- and medium-sized enterprises (SMEs), such as a lack of financial resources, limited human skills, a focus on day-to-day operations, technology mismanagement [11,12], a low budget for research and development (R&D), and weak spending on innovation development activities [13,14]. As a result, many SMEs fail to achieve the expected level of innovation [15]. Empirical studies have suggested using external knowledge to improve the SMEs’ innovation performance of enterprises [16,17,18,19].
Knowledge is the key enterprise input for transforming innovative ideas into outcomes. It is used to develop new products and improve business organizational and marketing methods and techniques [20,21,22]. The knowledge flow increases the enterprise’s performance [23], assists in achieving innovation activities efficiently [24], and enhances the enterprise’s absorption capacity [25]. For SMEs, the diversity of the sources of knowledge used helps in developing innovations [26]. External knowledge sources include publications, customers, trade shows, competitors, suppliers, universities, institutions, and internet websites. An enterprise’s success in acquiring external knowledge depends on its management of its interactions with institutions active in knowledge production as well as the effectiveness of the country’s national innovation system in knowledge creation and dissemination [27]. For instance, enterprises seeking collaboration with academic institutions face the problem of organizational cultural differences and organization and research project management issues [28]. It is critical for businesses to engage with knowledge actors in an effective and productive manner.
SMEs in Saudi Arabia represent the largest economic sectors (99.5%). They are also a tool for economic diversity and a main contributor to job creation (53%) Formatting... [29]. Since 2016, the Saudi government has adopted an ambitious economic plan that aims at reducing its dependence on petroleum products and achieving economic growth based on the knowledge economy and innovation development. SMEs’ development is one of the main pillars of the country’s economic development plan. This suggests that SMEs in Saudi Arabia should be actively involved in the knowledge economy to develop more innovations and increase their contribution to the country’s national gross domestic product. According to [30], SMEs in Saudi Arabia are facing the challenges of low innovation, a lack of skilled labor, and knowledge limitations. Studies have shown that SMEs in Saudi Arabia are facing difficulties managing knowledge because of their weak information technology infrastructure [31]. This raises the following question about the innovation capabilities of these enterprises: to what extent are SMEs in Saudi Arabia able to use external knowledge to develop their products, processes, and organizational and market operations?
This study aims to contribute to the literature on innovation and knowledge-based economies in emerging regions by empirically investigating the utilization of external knowledge for the development of SMEs’ innovation capabilities. Specifically, the main objective of the current study is to investigate the impact of external knowledge flow on the productive, process, organizational, and marketing innovation capabilities of SMEs in Saudi Arabia. Additionally, this study aims to determine the most used source of external knowledge by SMEs. This study uses the enterprise innovation survey to assess SMEs’ innovation capabilities and identify the extent to which external knowledge is exploited to enhance these enterprises’ innovation capabilities. According to [32], the interaction between enterprises and actors in knowledge production and the pattern of knowledge flow to enterprises differ from one country to another. The geographical area in which the SME is located determines the external flow of knowledge and its exploitation to develop innovations [33].
This paper is organized into six parts: Following the introduction comes the second part, which includes a survey of the literature and previous studies on innovative capabilities and knowledge flow. The third part explains the methodology that was used to complete the study. The fourth part presents the results of the study data analysis. The fifth part includes a discussion of the results of the study, the theoretical and practical contents of the study, and the determinants of the study. The sixth and final part represents the conclusion of the study.

2. Literature Review

2.1. Innovation Capabilities

Organizations vary in their ability to transform ideas and knowledge into improved or new products/services or processes that benefit the organization. Innovation capabilities indicate the ability to innovate [34]. Several determinants of an enterprise’s innovation capabilities have been identified in the literature, including organizational size [35], firm R&D expenditure [36], geographical location [37], the nature of the organization’s work [38], the type of innovation [39], and knowledge development and the enterprise’s external links [40].
The development of an enterprise’s innovation capabilities has a positive impact on its performance targets in terms of product level, sales volume, and profit margin [38]. According to the Organization for Economic Co-operation and Development [41], there are four types of innovation: product, process, organization, and marketing. The current study used this classification as a basis for measuring SMEs’ innovation capabilities. Product innovation includes the creation of new products or the addition of new benefits to existing products by using knowledge and improved mechanisms, machines, applications, or better-quality production materials [41]. Process innovation is the application of new and efficient methods, software, and machines to production, handling, and other business activities [41,42]. Market innovation is the renewal and improvement of marketing processes related to product presentation, promotion, and distribution [41]. Through market innovation, enterprises can meet customers’ desires, increase sales, improve their competitive position, and maximize profits [43]. Organizational innovation pertains to the adoption of new business practices and administrative work methods, the improvement of the work environment, and the creation of working links with new external parties [41] to increase employees’ motivation and productivity [44]. The literature indicates that factors such as the availability of financial resources, labor skills, level of innovation risk, enterprise size, and portfolio investment may positively or negatively affect SMEs’ innovation capabilities [45].
Studies have focused on SMEs’ innovation capabilities in varying ways. Some focused on a single type of innovation capability, for instance, product innovation [16,18,33,46], process innovation [47], or organizational innovation [19]. Some other studies dealt with two types of innovation capability, such as product and process [23,48] and organization and process [40]. Limited studies considered all kinds of innovation capabilities together concerning the product, process, organization, and marketing, except for [40,49,50]. It is noted that product innovation is the most covered innovation by previous studies compared to other types of innovative capabilities (process innovation, organizational denial, and marketing innovation). In general, previous research has focused on the technical aspects of SMEs’ innovation capabilities (product and process innovation capabilities) rather than the administrative aspects (organizational and marketing innovation capabilities) [51,52]. This analysis supports the massive studies dealing with manufacturing SMEs’ innovative capabilities [12,23,34,40,48,50]. The present study covers both the technical and administrative innovation capabilities of SMEs (product, process, organizational, and marketing innovation capabilities) and how they are affected by external knowledge flow. Further, the current study includes all types of SMEs, industrial and nonindustrial.
Empirical studies show a positive association between innovation capabilities and SMEs’ financial and operational performance [40,49,53]. Ref. [54] confirmed the positive impact of innovation capabilities on the survival of SMEs in Saudi Arabia. The researchers indicated that innovation capability has a positive impact on the performance of new products [55] and brand profitability and desire [56], which leads to SMEs’ competitive advantage improvement, and supports the enterprise customer orientation policy [57]. Previous research has demonstrated the contribution of individual and collective innovation capabilities to SMEs’ performance. Some studies indicated that all types of innovative capabilities (product, process, organizational, and marketing innovation) add to SMEs’ productivity [58] and profitability [49]. According to [40], product and marketing innovation stimulate financial performance, while organizational and process innovation contributes to the operational performance of SMEs. Previous studies have paid much attention to the outputs of the SME’s innovation capability rather than focusing on the requirements for enhancing such capabilities. This study deals with the impact of the external knowledge flow on SMEs’ innovation capabilities.

2.2. External Knowledge Flow

External knowledge flow is the movement of an enterprise’s related experiences, values, and information from external parties (such as customers, suppliers, and academic institutions) into the enterprise [59,60]. Empirical studies have shown that enterprises need a steady and continuous flow of knowledge through different channels to obtain innovation outcomes [61]. In addition to internal sources of knowledge, enterprises require knowledge flow from external sources to improve their innovation capabilities [62]. Researchers have confirmed that enterprises, through external knowledge, can respond promptly to customers’ tastes, desires, and preferences; improve their innovation and financial performance; and mitigate business risks [63]. External knowledge is characterized by the diversity of its sources and content of scientific knowledge, especially those issued by universities, research centers, and institutes [64]. Through information sourced from external sources, enterprises may obtain knowledge related to various fields, such as science, technology, consumer opinions, and market conditions [65]. Enterprises’ relationships with customers, suppliers, educational institutions, and other institutions in an industry results in knowledge that contributes to the development of products, processes, and practices in marketing and administrative institutions. The external knowledge resulting from joint research with academic institutions supports internal knowledge and improves the productivity of the institutions [66]. SMEs differ in the degree of their outsourcing of knowledge and the developmental purposes for which the knowledge is used. The current paper discusses external knowledge sources that SMEs use in Saudi Arabia, as well as the most common fields in which that knowledge is applied.
The knowledge flow is significant for SMEs because of their short production cycles [66], limited resources, lower R&D budgets, and lack of organizational flexibility [67]. Many industrial SMEs specialize in converting raw materials for one stage of processing. They supply large enterprises with production inputs [68]. Therefore, through knowledge flows, SMEs can expand their production scale, develop operations, increase their business size [68], enhance their competitive advantage [69], and improve their performance [70]. Knowledge from external sources contributes to the development of an enterprise’s innovation capabilities and complements the internal knowledge required to develop innovations [71]. To reap the benefits of external knowledge, an absorbing energy is required, which the organization’s internal knowledge supplements [16].
The literature has indicated that a link exists between external knowledge flow and SMEs’ innovation performance [72,73]. Ref. [74] concluded that the strength of SMEs’ collaboration with universities and research institutions to obtain knowledge depends on its competencies and its ability to create relationships and networks with external actors. For example, through joint research with universities, SMEs can obtain new technology and recruit competent personnel with subject matter expertise [74,75]. Furthermore, by obtaining customer suggestions and opinions, institutions can develop innovations without facing legal consequences [22]. At the same time, researchers have noted that there is a link between knowledge generated by competitors, suppliers, and public institutions and product innovation [76,77]. Previous research has found that SMEs are more likely than large enterprises to use external knowledge [76]. SMEs prefer low-cost sources of external knowledge, including informal relationships and networking [78].
Previous studies confirmed the link between the exploitation of external knowledge and an SME’s innovation capabilities [48,50]. Many studies indicated a positive impact of external knowledge on SMEs’ product innovation [16,18,79]. For example, [33] concluded that regional and local policies strengthen the relationship between external knowledge and SMEs’ product innovation. Limited studies examined the link between external knowledge and all SMEs’ innovative capabilities (product, process, organization, and marketing), except for [50]. Ref. [50] found that external knowledge from sources such as consultants, workshops, and new employees contributes to enhancing SMEs’ product, process, organization, and marketing of innovation capabilities. Furthermore, previous studies focused on external knowledge as a reinforcement of internal data to promote open innovation in SMEs [15,80]. External knowledge has been discussed in the literature as complementary to internal knowledge to develop specific innovations [81,82]. Ref. [17] concluded that internal knowledge supports process innovation, while external knowledge supports product innovation in SMEs. This study aims to address the lack of literature about SMEs’ external knowledge utilization by examining the effect of the pattern of external knowledge flow from different sources on the different types of innovation capabilities (product, process, organization, and marketing) of SMEs in Saudi Arabia.

3. Materials and Methods

3.1. Data

The current study aimed to discover the impact of external knowledge flow on SMEs’ innovation capabilities. The data of the study were collected via a survey of SME managers in Saudi Arabia. Based on the definition of small enterprises in Saudi Arabia, the study included enterprises whose number of employees ranged between 6 and 249. Given the size of SMEs in Saudi Arabia (663,900 SME, according to the statistics of the General Authority for Small and Medium Enterprises “Monshaat”, (2022) [83]), the researchers determined a sample size to be 500 SMEs (greater than the minimum sample size determined by [84]). First, the survey was translated into Arabic and sent to 500 randomly selected SMEs in Saudi Arabia between 10 October and 25, 2022. At the end of the period, 83 filled-out questionnaires were obtained, resulting in a 20% response rate. Due to the limited number of predictors (one predictor), the sample size was sufficient to perform multiple regression analysis [85,86].
Among the respondents, 48.2% were male and 51.8% were female. Most of the respondents were bachelor’s degree holders (60.2%), and their ages ranged between 45 and 49 years (59%). The study included 64 small enterprises (the number of employees ranged between 6 and 49) and 36 medium-sized enterprises (the number of employees ranged between 50 and 249). The vast majority of enterprises worked in the retail sector (43.4%), and their ages ranged between 1 and 4 years (38.6%). The sample included SMEs from diverse sectors such as retail (25%), food and beverage (21%), manufacturing (20%), training and education (9%), information and technology (8%), building and construction (7%), health and fitness (5%), consulting (3%), and other sectors (2%).

3.2. Measurements

The survey was distributed to respondents online to obtain a large number of responses in a short time. The survey had four sections: the respondent’s profile, the business profile, the enterprise’s innovation capabilities, and the enterprise’s knowledge flows. Innovation capabilities were measured using four dimensions borrowed from OECD [41]: (1) product innovation capability, (2) process innovation capability, (3) organizational innovation capability, and (4) marketing innovation capability. The innovation capabilities items were derived from the literature. The dimension “product innovation capability (ProIN)” was measured by four items derived from [3,87]. The items were related to the importance of new product development and the enterprise’s current product improvement. The dimension “process in-novation capability (ProcIN)” was measured by five items modified from [88,89] about the development and improvement of the enterprise’s operations related to task completion time and quality of customer service. The dimension “organizational innovation capability (OrgIN)” was measured by three items borrowed from [43,90,91] concerning the development of administrative work systems and the use of modern technology. The dimension “marketing innovation capability (MarIN)” was measured by five items modified from [3,42] related to enterprise improvements of products’ appearance, promotional methods, and the relationship with the enterprise’s customers and suppliers. These scales were tested by [92], and they showed their reliability and suitability for measuring SMEs’ innovation capabilities, and they showed their reliability and suitability for SMEs measuring the innovative capabilities. The scales were measured using a five-point Likert scale, ranging from strongly agree (5) to strongly disagree (1). External knowledge flows were measured using a five-point Likert scale, ranging from too much (5) to never (1). This scale was used to measure general knowledge flows across different actors (customers, competitors, computer applications, suppliers, publications, databases, public lecturers, inventors, universities, and institutions). Researchers widely use subjective measures whenever there is a lack of quantitative information [93].

4. Results

To identify the impact of external knowledge flow on SMEs’ innovation capabilities, a regression analysis was conducted. First, sample adequacy was examined. The analysis results showed a Kaiser–Mayer–Olkin value of 0.805, which is considered very good [94]. Then, an exploratory factor analysis was conducted for the 17 items of innovation capabilities constructs via principal component analysis with varimax rotation. Table 1 shows the factor loadings, the constructs’ eigenvalues, the total variance explained, and Cronbach’s alpha reliability coefficients. All the constructs’ items exhibited factor loadings > 0.50 [95]. The entire set of factors scored an eigenvalue > 1 and consequently were retained in the analysis. These factors explained 83.1% of the variation in the data, whereas product innovation capabilities explained about 39.311% of the variation. The results in the table also indicate that the constructs’ reliability was confirmed (Cronbach’s alpha values > 0.70) [96].

4.1. Descriptive Statistics Results

Before the regression analysis was conducted, the descriptive statistics and correlation analysis were carried out. The correlation values in Table 2 indicate that all types of innovations and capabilities were significantly correlated to each other. The results showed that product innovation capability (ProIN) had the highest mean. Organizational innovation capability (OrgIN) was highly correlated with KnFlow (Spearman’s correlation coefficient, p < 0.01). The results also indicated that product innovation capability (ProIN), process innovation capability (ProcIN), and marketing innovation capability (MarIN) were significantly and positively correlated with external knowledge flow (KnFlow) (at a significance level of p < 0.05).
Table 3 shows the mean and standard deviation of the flow of knowledge sources. The results of the descriptive statistics showed that the source customer had the highest average value (mean = 4.33). Universities and institutions, in contrast, had the lowest average (means of 3.01 and 2.87, respectively).

4.2. Regression Analysis Results

Table 4 shows the standardized regression coefficients for the constructs of innovation capabilities (product innovation capability (ProIN), process innovation capability (ProcIN), organizational innovation capability (OrgIN), and marketing innovation capability (MarIN)). The results of the regression analysis revealed that ProIN, ProcIN, OrgIN, and MarIN had a positive coefficient of determination (R2) (p < 0.05). These results indicated that external knowledge flow causes a change in ProIN of 15%, a change in ProcIN of 8.9%, a change in OrgIN of 23.7%, and a change in MarIN of 15.6%.
Table 5 shows the predictive power of external knowledge flow on the different types of innovation capabilities. The multiple regression results showed a positive regression coefficient (p < 0.05) for ProIN (β = 0.2777), ProcIN (β = 0.20101), OrgIN (β = 0.295 and 5), and MarIN (β = MarIN). These results indicate the significant positive impact of KnFlow on innovation capabilities (ProIN, ProcIN, OrgIN, MarIN).

5. Discussion

Contrary to expectations, SMEs reported having a poor innovation performance compared to large enterprises [93]. The literature review revealed a paucity of studies focusing on the importance of the flow of external knowledge concerning SMEs’ technical and managerial innovation capabilities in emerging economies. The current empirical study sought to fill a gap in the literature by examining the role of external knowledge flows in enhancing SMEs’ product, process, organizational, and marketing innovation capabilities.
The findings confirmed the importance of all innovation capabilities of SMEs. The technical innovation capabilities (product and process innovation capabilities) appeared to be more important than the administrative innovation capabilities (organizational and marketing capabilities). Product innovation capabilities showed the highest level of importance, whereas marketing capabilities showed the lowest level of importance. These findings indicated that SMEs are focusing to varying degrees on different types of innovation capabilities. Small- and medium-sized enterprises concentrate on adding new products and improving their existing products more than improving their marketing processes, such as product promotion and distribution. The research findings showed a correlation between product and marketing innovation capabilities (correlation coefficient = 0.609). Therefore, the current study suggests that product innovation capabilities may positively affect enterprise marketing innovation capabilities. These findings are consistent with [40,46], who stressed the importance of all innovation capabilities and product capabilities for SMEs’ performance. The current study showed the relative importance of product innovation compared to the rest of the other types of SMEs’ innovative capabilities (process, organizational, and marketing innovation capabilities). This study also provided empirical evidence for SMEs’ priorities related to innovation capabilities, which may be reflected in the type and sources of external knowledge that these enterprises may use.
The findings also confirmed the strong positive association between external knowledge flow and organizational innovation capabilities in SMEs. These findings indicated that knowledge flow from outside improves the enterprise’s organizational processes by encouraging the development of work methods and techniques. This link between organizational capabilities and external knowledge flow is important because SMEs have limited financial resources [9]. These findings partially align with those of [50], who explained the extent to which projects exploit knowledge flowing from a limited number of external sources (consultants, new employees, and workshops) on the different SMEs’ innovation capabilities. This study adds to the literature by figuring out the strength and nature of the relationship between a larger number of sources of external knowledge and the different types of SMEs’ innovation capabilities. The sources of knowledge included in this study were customers, competitors, computer applications, suppliers, publications, subsidiaries, databases, public lectures, inventions, universities, and institutions.
The current study’s findings indicate that SMEs depend more on external knowledge acquired from customers than other knowledge sources. This is because customers frequently provide enterprises with opinions and suggestions about product and marketing operations without SMEs having to incur costs, undertake procedures, or face risks. This is consistent with [22], who noted the importance of external knowledge from customers to SMEs’ technological innovation. This study revealed that the customer is the main source of external knowledge for different types of SMEs. Small- and medium-sized enterprises use the knowledge received from customers to develop their technological and nontechnological innovations.
The regression analysis results confirmed that knowledge flow from external sources has a more significant and positive impact on SMEs’ organizational innovation capabilities than their marketing, product, and organizational innovation capabilities. These findings reinforce previous studies’ results about the strong association between knowledge flow and organizational innovation capabilities [19]. Ref. [19] indicated the strength of the relationship between the external knowledge flow and organizational innovation in small enterprises compared to medium-sized enterprises. This study contributes to the literature by emphasizing the significance of the relationship between external knowledge flow and organizational innovation in SMEs. The positive values of the regression’s beta coefficients and t-test (t = 2.659; p < 0.05) indicate the significant predictive power of external knowledge flow concerning innovation capabilities. The research findings confirm that knowledge flow is highly predictive of product innovation. These results are partially consistent with the findings of [72], who demonstrated the positive impact of knowledge flow on SMEs’ innovation performance.
This study provided empirical evidence of the importance of external knowledge flow for developing useful innovation outputs in SMEs. The findings will help to enhance SMEs’ innovation capabilities, improve their performance, and ensure their sustainability. Thus, this study has added to the literature on the knowledge-based economy by revealing the role of knowledge actors in supporting SMEs’ innovation capabilities. The study findings showed that the most commonly used external source of knowledge by SMEs is their customers. By determining the effect of external knowledge flow on the different types of innovation capabilities (product, process, organizational, and marketing capabilities), the current study has significantly contributed to the innovation literature.
This study also provided empirical evidence of the effect of external knowledge flow on product, process, organizational, and market innovation capabilities. Therefore, the findings of this study may benefit SME managers by emphasizing the importance of exploiting external sources of knowledge to develop different innovations.
Policymakers in emerging economies are largely concerned with developing innovations in SMEs. Consequently, the current study provides policymakers with empirical evidence about SMEs’ level of interaction with knowledge actors in the national innovation system. This study suggests that the government adopt more policies to support and encourage SMEs’ interaction with institutions specializing in pertinent fields of knowledge, especially universities and research institutions, to enhance SMEs’ innovation capabilities. Assistance to SMEs may take the form of financial support and would facilitate collaboration between SMEs and government universities and institutions, support the development of innovative products, and assist in the training of staff.
The current empirical study has some limitations. First, this study included SMEs from different economic sectors (service, industrial, commercial, etc.). Future studies may focus on specific economic sectors that are the least covered by researchers, or may make a comparison between two sectors, for example, the educational sector and the service sector. Second, this study used a questionnaire survey to collect data from SMEs. Future research can look at the external knowledge flow to SMEs from the perspective of knowledge actors. Third, this study also focused on four types of innovation capabilities: product, process, organizational, and marketing innovation capabilities. Future studies may focus on other types of innovation capabilities, such as resource innovation capabilities. Fourth, this study included a limited number of SMEs due to a weak sample response. Future studies may include a larger sample size, which allows for the better generalization of study findings.

6. Conclusions

SMEs suffer from weak innovation capabilities due to the inability to benefit from the knowledge available from various sources. Knowledge has become an important strategic resource that contributes to increasing performance, developing innovations, and raising the competitive advantage of enterprises. The external knowledge flows into these enterprises and adds to its expertise, and develops its operations, helping in the success of innovations.
The researchers will continue to conduct studies to identify the extent to which external knowledge is acquired from various external sources and enhance SMEs’ innovation capabilities. The authors hope that the current research findings will lead to the expansion of the scope of collaboration between SMEs and knowledge-producing institutions. In addition, SME managers are working to increase their enterprises’ ability to acquire knowledge from various external sources.
The lack of diversity in external sources of knowledge for SMEs will certainly lead to a further reduction in their innovation capabilities. Relying on internal sources of knowledge and inexpensive external sources such as customers may not be enough to develop successful innovations in the future. With the importance of SMEs for the economics of many countries, there is a need for more research and government policies to provide innovative solutions that result in the increased exploitation of external sources of knowledge by these enterprises.

Author Contributions

Conceptualization and methodology, H.A.; data analysis, N.A.A.; writing—original draft preparation, N.A.A.; writing—review and editing, H.A. All authors have read and agreed to the published version of the manuscript.

Funding

This research was funded by the Deanship of Scientific Research at Princess Nourah bint Abdulrahman University, through the Research Funding Program, Grant No. (FRP-1444-3).

Institutional Review Board Statement

The study was conducted in accordance with the Declaration of Helsinki, and approved by the Institutional Review Board (or Ethics Committee) of Institutional Review Board (IRB) (protocol code 22-1184 and date of 3 January 2023).

Informed Consent Statement

Not Applicable.

Data Availability Statement

On behalf of all the authors, the corresponding author states that our data are available upon reasonable request.

Conflicts of Interest

The authors declare no conflict of interest.

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Table
Table 1. Factors loadings, eigenvalue, variance explained, Cronbach’s alpha.
Table 1. Factors loadings, eigenvalue, variance explained, Cronbach’s alpha.
1234EigenvalueExplained VarianceCronbach’s Alpha
Product innovate. cap. 3.04639.3110.817
ProIN10.869
ProIN20.797
ProIN30.774
ProIN40.631
Process innovate. cap. 2.09010.1650.774
ProcIN1 0.624
ProcIN2 0.622
ProcIN3 0.712
ProcIN4 0.770
Organizational innovate. cap. 1.5777.1660.788
OrgIN1 0.762
OrgIN2 0.751
OrgIN3 0.721
OrgIN4 0.654
Marketing innovate. cap. 2.1444.8880.821
MarIN1 0.562
MarIN2 0.483
MarIN3 0.532
MarIN4 0.831
MarIN5 0.612
Table
Table 2. Descriptive statistics and correlation analysis.
Table 2. Descriptive statistics and correlation analysis.
ConstructMeanStd. Dev.ProINProcINOrgINMarINKnFlow
Product innovate. cap. (ProIN)4.3690.5921.0000.762 **0.372 **0.609 **0.318 **
Process innovate. cap. (ProcIN)4.2350.699 1.0000.474 **0.673 **0.238 *
Organizational innovate. cap. (OrgIN)4.0870.701 1.0000.459 **0.432 **
Marketing innovate. cap. (MarIN)3.6960.486 1.0000.252 *
External knowledge flow (KnFlow)3.6030.714 1.000
** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).
Table
Table 3. Sources’ knowledge flows in SMEs (N = 83).
Table 3. Sources’ knowledge flows in SMEs (N = 83).
SourceMeanStd. Deviation
Customers4.330.767
Competitors3.961.163
Computer applications3.891.00
Suppliers3.81.237
Publications3.761.226
Subsidiaries3.711.33
Databases3.461.203
Public lectures3.101.402
Inventions3.081.433
Universities3.011.384
Institutions2.871.368
Table
Table 4. Coefficient of determination (R2).
Table 4. Coefficient of determination (R2).
ModelDependent
Variable		RR SquareAdjusted R SquareStd. Error of the Estimate
1ProIN0.3870.1500.1060.67455
2ProcIN0.2980.0890.0420.69833
3OrgIN0.4860.2370.1970.63930
4MarIN0.3950.1560.1010.67649
Table
Table 5. Multiple regression analysis results.
Table 5. Multiple regression analysis results.
ModelDependent VariablesUnstandardized CoefficientsStandardized CoefficientstSig. Level
βStd. ErrorBeta
1ProIN0.2770.1040.2832.6590.009
2ProcIN0.2010.1070.2051.8820.003
3OrgIN0.2950.0680.4324.3150.000
4MarIN0.2380.0880.2872.6980.008
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Adam, N.A.; Alofaysan, H. External Knowledge Flows and Small and Medium-Sized Enterprises’ Innovation Capabilities Enhancement: An Empirical Investigation. Sustainability 2023, 15, 4071. https://doi.org/10.3390/su15054071

AMA Style

Adam NA, Alofaysan H. External Knowledge Flows and Small and Medium-Sized Enterprises’ Innovation Capabilities Enhancement: An Empirical Investigation. Sustainability. 2023; 15(5):4071. https://doi.org/10.3390/su15054071

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Adam, Nawal Abdalla, and Hind Alofaysan. 2023. "External Knowledge Flows and Small and Medium-Sized Enterprises’ Innovation Capabilities Enhancement: An Empirical Investigation" Sustainability 15, no. 5: 4071. https://doi.org/10.3390/su15054071

APA Style

Adam, N. A., & Alofaysan, H. (2023). External Knowledge Flows and Small and Medium-Sized Enterprises’ Innovation Capabilities Enhancement: An Empirical Investigation. Sustainability, 15(5), 4071. https://doi.org/10.3390/su15054071

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