THE EFFECT OF PRODUCT INNOVATION ON THE EXPORT PERFORMANCE OF KOSOVO SMEs

The aim of the paper is to provide a better understanding of factors influencing product innovations that are important to SMEs' exporting activities. A probit model is used to analyse the innovation pattern in 100 Kosovo manufacturing and exporting SMEs. They export to the EU and regional countries' markets. Our data shows that there is a link between the type of product innovation and the increase in exports. Incremental innovation shows a strong positive relationship with export growth of these SMEs, a result should prove helpful to both researchers of SME product innovation and managers of exporting SMEs. This study addresses the current gap that is present in the Western Balkan literature by evaluating the impact of product innovation on SMEs export performance.