Local or Global? The Role of Local and Cross-locality Links in SME Innovation and Growth

Ever since the Bolton Report (1971), academics and policy makers have looked towards the small business sector as a primary source of economic development, innovation and growth. The realisation that fast growing SMEs are major contributors to economic prosperity has also seen these firms being increasingly attributed with a more central role in the development of wealth, innovation, employment and national competitiveness. Additionally, whilst network arrangements are often seen on a broad scale as a foundation for economic growth, this can also be seen specifically at the level of the regional economy (see Brusco 1982; Brusco and Righi 1989) where promotion of geographically-based entrepreneurial networks and clusters often occurs (Kinsella 1989), suggesting a particular importance for proximity in these processes. In terms of innovation also, there is increasing belief that learning and therefore innovation occurs through a highly interactive, iterative and networked approach (Weick, 1990; Cooke, 1998). There is also evidence, however, that such beneficial collaborations can often be non-local in nature; a recent study into the effects of social capital on SME performance found that innovative and higher growth firms tend to make greater use of non-local networks (Cooke et al. 2005). This highlights a need to evaluate the importance of both local and non-local linkages in SME innovation and growth processes. Moreover, the multi-faceted nature of innovation processes highlighted by Leyesdorff (2000) suggests this should involve the examination of wide-ranging relationships (e.g. with other firms, government agencies, universities, etc.). This paper therefore examines the interrelationships between small firm growth and innovation and the impact upon these of collaborative relationships between SMEs and industry, government and institutional stakeholders, at both local and non-local levels, to begin to explore the importance of these relationships in the complex processes of growth and innovation.