Removing the Barriers to Innovation: Firm Size Matters!

Innovation is often hampered by obstacles which decrease propensity to innovate or even prevent it outright. Identifying and removing such obstacles is essential at the firm level to improve performance and at the policy level to design effective interventions. Past innovation studies led to a broad understanding of the range of obstacles involved, without though a discernible consensus on their relative importance. Interestingly, these studies have been primarily based on surveys by major consulting companies of their clients and as such tend to reflect the views of large enterprises. Yet policy interventions at the local, regional or national level routinely aim to support small and medium-sized enterprises. The objective of this paper is to examine whether the relative importance of the various obstacles to innovation varies with firm size, by using EUROSTAT data. To empower the interpretive context of the analysis, the focus is on data from Germany, because the country provides the richest milieu of company sizes and sectors and the concerns of over 100,000 of its companies have been recorded painstakingly. The paper advances the thesis that firm size matters, and that the relative significance of the various barriers is moderated by whether the firm is involved or not in innovative activities.