WHY SMALL- AND MEDIUM-SIZED ENTERPRISES DO NOT CONDUCT RESEARCH AND DEVELOPMENT — THE RELATIONAL EMBEDDEDNESS MODEL

Research and development (R&D) represents the strength of corporate innovation; however, many small- and medium-sized enterprises (SMEs) do not engage in R&D activities. Resource constraints are often cited as the reason; however, no deeper understanding has been provided yet. To fill this gap, we investigated a research model based on the relational embeddedness between customer firms and SMEs (suppliers) using a questionnaire obtained from Japanese manufacturing SMEs. Our findings show that SMEs’ R&D activities are likely to be positively impacted by inter-organisational trust (IT) and negatively impacted by relational inertia (RI) and relational duration (RD). The relationships between the variables behind these impacts were also analysed. This study also highlights the dark side of relational embeddedness. SMEs with the closest and major customer relationships may be hindered in their overall R&D activities by the effects of RI and RD.