SMEs' Radical Product Innovation: The Role of Internally and Externally Oriented Knowledge Capabilities*

This study examines the role and contribution of specific internally (knowledge diversity and sharing capabilities) and externally oriented knowledge-related capabilities (exploratory, transformative, and exploitative learning processes of absorptive capacity) to radical product innovation in small and medium-sized enterprises (SMEs). It extends the current literature on the topic by considering both types of knowledge-related capabilities and by hypothesizing and testing connections between both. Our path analysis results, based on a sample of 194 SMEs in dynamic environments, indicate that radical innovation is positively affected by exploitative learning and by the knowledge sharing capability. Implications and suggestions for future research are discussed.