Is ‘Learning’ the Tipping Point for Innovation in Small Firms

Small firms choose to innovate even in a challenging environment. Unlike stylised facts, innovation by small and medium firms in South Asia is not just technology-based but is rather human resource oriented. Using microdata from the World Bank Enterprise Surveys, we find that learning, research and development, and formal training impact innovation the most. We use a mix of frequentist statistics and machine learning algorithms. Learning is the core factor valid for all streams of innovation. Combining the learning with the other two causes a discernible increase in the chance to innovate. Any improvement in learning in the firm will make strides in innovation. However, to sustain this, there is a need for policies that combine innovation with research and development and with training. An innovation ecosystem that fosters these combinations through collaborations will be impactful. Learning is the tipping point of innovation to have new products and processes, an adaptive organisation and a new marketing strategy.