Abstract

Increasingly research points to the importance of the small firm as a major contributor to innovation (Carlsson, Acs, Audretsch, & Braunerhjelm, 2009; Laforet, 2013); however, these studies often use the SME designation (up to 250 employees) to define small firms. We contend that a finer-grained examination of “small” firms is warranted and we specifically compare micro (fewer than 10 employees and sales less than €2M) and small firms (10-50 employees and sales between €2M and €50M). We do so because resource theory and barriers to entry suggest that micro-firms may have to innovate in ways unique from other small firms. Additionally, research examining the micro-firm innovation processes is limited even though micro-organizations account for at least 90% of the organizations in the US and 92% in Europe (US Census data; European Commission).

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