Diffusion of radical innovation for the case of biotechnology SMEs: does proximity matter?

Abstract

Radical innovations by definition have a great influence on the future of the existing economic systems. It means that not only radical innovators, but also other stakeholders can experience their impact. The factors, influencing the direction and strength of this impact are far from being understood. Early appropriation of radical innovator’s knowledge may be especially important for small and medium-sized firms (SMEs), serving as the source of competitive advantage. Here different proximity dimensions (geographical, cognitive, institutional, organizational and social), measuring respective distances to a radical innovator, may play a crucial role. Thus, this paper opts at revealing the importance of proximity measures for the case of German biotechnology SMEs. A longitudinal dataset covering the period from 1996 to 2016 for the innovative performance of SMEs, that are citing radical innovators, is used as the base of the analysis. Results only partially confirm the findings of previous research by indicating the negative effect of higher distance and organizational proximity. However, the effect of both cognitive and social dimension could not be confirmed. Reasons for that potentially lie both in unique character of radical innovation and peculiarities of the biotechnology field in Germany.