Benchmarking of factors influencing adoption of innovation in software product SMEs

Purpose The purpose of this paper is to investigate the factors influencing small and medium enterprises’ (SMEs) adoption of innovation approaches. Design/methodology/approach The methodology involves two steps. First, all the variables relevant to the adoption of innovation in SMEs are identified. Subsequently, primary data are gathered from decision makers of 213 SMEs, and a multinomial logistic regression analysis is performed. Findings The results indicate that SMEs adopt both open innovation and closed innovation approaches. The firm-level factors such as firm age, firm size, education qualification, work experience and culture, and external factors such as customers, competition, technological advances and ecosystem influence adoption of open innovation approach compared to closed innovation approach. Factors such as culture among firm-level factors and competition among external factors influence the adoption of closed innovation approach. Practical implications The study helps the managers or the decision makers of the SMEs to know the suitable factors influencing the firm to adopt innovation which could potentially help the firms in their business strategy. Originality/value The study explores the adoption of innovation approaches of SMEs in emerging economies. The outcomes of this research have far-reaching implications for theory and practitioners in emerging economies.