Government support versus international knowledge: Investigating innovations from emerging-market small and medium enterprises

We compare how non-financial government support, versus knowledge gained through exporting, supports innovation in Vietnamese small and medium enterprises (SMEs). Analysis of panel data of 1,018 SMEs shows that government support for staff training and technological development quality increases the likelihood of product and process innovation. Resource slack mediates the relationship between these non-financial government support measures and innovation, thus pointing to the importance of underutilized resources to enable the use of external sources of knowledge. Therefore, these policy measures are more efficient for emerging-market SMEs that can incorporate them. The negative moderation effect of exporting in the relationship between non-financial government support and process innovation suggests that policy-makers should limit the use of non-financial support when they design exporting policies for emerging-market SMEs.