Innovations in small businesses: do public procurement contracts and intellectual property rights matter?

Small and Medium Scale Enterprises (SMEs) are known to drive innovations, economic growth, and job creation. Numerous studies have analysed small businesses' innovations using new products and processes, with indicators such as funding, innovation activities, and collaborations. However, other vital determinants such as public procurement contracts and intellectual property rights protections capable of influencing innovations have not received enough scholarly attention, especially in the context of Central European countries. This paper aims to examine whether public procurement contracts, market orientations, public subsidies, intellectual property rights, and other firm characteristics shape small businesses' innovation outcomes in the Czech Republic. The results based on a cross-sectional sample of 4,193 small businesses from the Community Innovation survey 2014 prove that European utility models positively influence major and minor forms of innovation but not general innovations. Our findings also show that foreign procurement contracts matter for small businesses' major and minor forms of innovation but not general innovations. Our results further demonstrate that exporting, collaborations with universities and other public research organizations, and external research and development positively influence major and minor forms of innovation but not general innovations. The results on the average treatment effects confirm that firms' collaborations with universities and public research organizations have the highest additionality effects on major and minor forms of innovations. Finally, we find evidence that firm size and belonging to the enterprise group positively impact small businesses’ general innovations. We conclude with practical implications for policymakers and firm managers in Visegrad economies on measures that could be adopted to develop and improve upon existing and new policy initiatives to increase the effect of major and minor innovation outcomes.