How much innovation is enough? The case of Australian small firms

The importance of innovation to small firms has been much debated, but conflicting results from existing research identify more questions than answers. Yet, a better understanding of how innovation can improve performance may hold much benefit to small firms. This quantitative study uses a large scale longitudinal dataset on Australian small firm innovation to shed light on the directionality, temporality and contextual nature of this relationship. We find that the innovation – performance relationship is a mutually beneficial, reciprocal relationship which is context dependent. Innovation breadth exhibits characteristics of diminishing returns.