Innovation in European SMEs: Exploring the Influence of Investments, Funding, Knowledge, and Intellectual Assets

Abstract This study examines the factors influencing innovation activities among small and medium-sized enterprises (SMEs) across Europe, utilizing data from the European Innovation Scoreboard 2024. SMEs play a vital role in the European economy but face significant challenges in fostering innovation due to limited resources and funding. The research explores the impact of firm investments, public and private funding, knowledge resources, and intellectual assets on SME innovation. Using Partial Least Squares Structural Equation Modeling (PLS-SEM), the analysis found that firm investments and knowledge resources have a significant positive effect on innovation activities. However, public and private funding and intellectual assets showed no significant direct influence on innovation. The findings contribute to a deeper understanding of the complex landscape of SME innovation in Europe, with implications for policy and strategic decision-making. Limitations include the cross-sectional nature of the data and the lack of sector-specific analysis, pointing to areas for further research. Keywords: European SMEs, Innovation activities, Knowledge resources, Intellectual assets, Funding, R&D investments.