Pathways to innovation in Romanian software SMEs: Exploring the impact of interdependencies between internationalisation and knowledge sources

This study explores the interdependent effects of internationalisation and sources of internal and external knowledge on the level of innovation. We present possible pathways that small innovative Romanian software product provider firms pursue to reconfigure their resources to be competitive beyond CEE. This product provider segment of the software development industry exhibits characteristics of innovation-driven economy in specific Romanian city-regions. We examine fourteen SMEs that develop their own products using fuzzy-set Qualitative Comparative Analysis. fsQCA allows us to methodologically differentiate between the distinct pathways to high-level and low-level innovation based on the sources of knowledge and the degree of internationalisation of the product market. We find that internationalisation accelerates the level of product innovation; but together with knowledge sources, it becomes a critical differentiator between high and low-level innovation products. We also find that while combining internal knowledge sources with internationalisation is an effective way for early and gradual internationalisers to introduce high-level innovation products, some internationalised firms rely on the advantages of early internationalisation to the exclusion of external knowledge sources. Moreover, if internationalised, local market-oriented firms can move beyond low-level innovation. Our findings extend the current understanding of the dynamics of SME internationalisation and innovation in the CEE context.