Faculty of Business Seminar Series / İrem Demirkan

Title: Innovation in SMEs: The Role of Employee Training in German SMEs

Abstract: Small and medium enterprises (SMEs) in the manufacturing sector make a significant contribution to a country’s economic growth. This paper explores the role of effective resource and knowledge management capabilities on product innovation capabilities in the context of SMEs. Specifically, we research the role of the human resource investments in the form of employee training and how SMEs manage these investments when we account for the boundary conditions such as the existing level of employee education, SME size, and the frequency of investments in R&D. Using a sample of 1,359 small and medium sized manufacturing firms from Germany, we find a positive association between increased investments in employee training and product innovation capabilities. Furthermore, our findings support that (1) the relationship between employee training and innovation capabilities is weaker in industries with greater proportion of employees with university degrees (2) the effectiveness of investments in employee training is lower among larger SMEs than smaller SMEs, and (3) continuous R&D weakens the relationship between training expenditure and innovation capabilities. The results of this study offer both theoretical and managerial implications for SMEs striving to increase performance and innovation.

Place: Meeting Room AB2-345