Exploring driving factors and challenges of innovation in service firms: evidence from Kosovo

Today, successful implementation of innovation within small and medium-sized enterprises (SMEs) has been a subject of great interest among authors. The purpose of this study is to explore the driving factors and challenges of innovation in the context of SMEs in the service sector. This study follows qualitative research with 21 SMEs in Kosovo from the service sector. Using NVivo software, our findings suggest that the main drivers of innovation are innovation budget, employees' skills, top management support and dealing with employees' resistance to change. On the other hand, the main challenges, which may impede SMEs to innovate comprise of cost-related factors, market conditions, as well as lack of skilled human resources. The results imply that human skills and technology acquisition, as well as government policies are important contextual factors to improve SMEs' innovation performance.