The Role of Networks in Small and Medium-Sized Enterprise Innovation and Firm Performance

The objective of this paper is to understand the contribution of networks to innovation and firm performance in small and medium enterprises (SMEs). Based on longitudinal data from 1,435 SMEs, we show that strong, heterogeneous ties improve innovation in SMEs. However, the connections between network ties and firm performance are more complex than previously thought, as the positive association is mediated by innovation. Consequently, SMEs should only concentrate on cultivating and maintaining networks if they lead directly to improvements in innovation.