The role of the agglomeration economy and innovation ecosystem in the process of competency development and growth of small and medium-sized enterprises

In our paper, we examine the simultaneous impact of the agglomeration economy (AE) and the innovation ecosystem (IE) on the competency development of SMEs in the Piemonte region in three high-tech sectors: aerospace, mechatronics, and automotive. This study focuses on the critical challenge for SMEs: survival and market position expansion amidst rapidly changing external environments. We used the capability approach, which includes identifying and assessing a company's competencies through the capability matrix, as a tool to analyse a company's competitiveness in the industry based on structural changes; we determined the key insights from managerial practices of SMEs that help to comprehend the behaviour of high-performing, sustainable-performing, and low-performing companies in the development of competencies. The key finding is that SMEs' sustainability in the context of structural changes in the external environment is primarily influenced by factors such as investment in the development of company competencies, industrial cooperation, strategic planning, cross-fertilisation, and the impact of company age and size on the availability of resources, along with the level of internationalisation. This study also identifies the main challenges these SMEs face, particularly the lack of highly skilled human resources to meet the sector's specific needs, as well as the difficulties companies face in adapting to changes in consumer behaviour and forecasting future business strategies. In addition, this study introduces the AE and IE variables as strategic tools to enable company representatives to improve their development strategies.