Foreign ownership and innovation in independent SMEs. A cross-European analysis

Global markets force small and medium-sized enterprises (SMEs) to innovate in order to remain competitive. However, it is to note that independent SMEs are primary source of radical innovation, even if, usually, they face some innovation constraints. We argue that independent SMEs, in order to compete in the global market and overcome their constraints, may get in touch directly with foreign investors, which, in turn, look for breakthroughs by independent entrepreneurs. We hypothesize that foreign venture capital/private equity investors may effectively spur the innovation performance of independent SMEs, compared to other form of foreign investors, thanks to their abilities in overcoming information asymmetries and in promoting long-term investments, as well as thanks to their better knowledge, their worldwide marketing linkages, their managerial, entrepreneurial and financial resources. We found evidences confirming our hypotheses on a panel sample of 23,962 firms from 24 European Union Countries, observed during the period 2006–2015.