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Internationalization and SME Innovations: An empirical study in Japan and in Germany

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We investigate the role of internationalisation strategies of small and medium-sized enterprises (SMEs) in Japan and Germany on the firms' product innovation performance. While both countries are a mong the leading innovation nations, innovation performance of SMEs differs substantially. The paper aims to explore the role of SME internationalisation as a driver for diverging performance in innovation. We find evidence for an association between exploitation-based internationalisation strategy and firms' new-to-market (novel) product innovation performance. Furthermore, while the link between firm cooperation and innovation is evidenced in Germany, this association is not supported by Japanese SMEs. Perhaps the most consistent phenomenon is that firms combining exploitation and exploration strategies can achieve the best innovation performance. We also evidence the influential power grounded on the aspects of distance constraints, company size and product type. These results lead to important implications to the strategies of internationalization and innovation for SMEs’ managers and policy makers.