R&D Capabilities, Market Resilience, and Performance in Korean SMEs

In this paper, we examine how SMEs can come up with the growth problem when they face with myopic inertia problems in business ecosystem. We argue that although R&D capabilities in short-term may lead SMEs to low firm performance, they can overcome the inertial behaviors by enhancing market resilience. We propose that, in order to sustain their growth, SMEs need to be equipped with a capacity that responds well to market turbulence in business ecosystem. With structural equation model, we test our theory using data that cover the innovation, export, and firm performance of 3,600 SMEs in Korea. A negative relationship is presented between R&D capabilities and firm performance and a firm’s market resilience plays a mediating role on such a negative relation. Furthermore, we found that there are four types of cycles in business ecosystem among Korean SMEs and suggest how each cycle is formed and how SMEs can move to virtuous cycle.