Who should really get government support: an analysis of Turkish SME cases

Small firms dominate the economy in terms of their share in employment and enterprise totals in most economies. Despite their central role in economic growth and their potential for innovation, the innovation activities these firms undertake are limited or unknown in contrast to many large firms. Most governments across the globe establish frameworks, create funds and revise their taxation and educational policies to stimulate the innovation activities of small firms. This study concerns the relationship between the innovation policies initiated by the Turkish Government to promote innovation among small businesses and the performance of these organisations at the firm level. We investigate the effect of support funds, for the innovativeness of SMEs given by the public agency of the Small and Medium Enterprises Development Organization, on the firms' net sales with respect to size, sector and location. Our results reveal support funds positively contribute to net sales with higher contributions in manufacturing firms relative to the firms from other industrial sectors. Size and location also matter for net sales. Firms that are relatively larger and those located in industrial zones and technology development centres established by the small business development organisation and universities create higher contributions.