Climbing the Value Chain: The Critical Role of Innovation Routines in Korean SMEs’ Global Competitiveness

This study examines how systematically managed innovation routines drive value chain upgrading and competitive performance among Korean manufacturing SMEs. Drawing on the dynamic capabilities view and routines-based perspective, a conceptual model was developed to analyze the relationships among three innovation routines (technological innovation systematization, product development, and manufacturing), two dimensions of upgrading (product and process), and overall competitiveness. Survey data from 131 SMEs reveal that technological innovation systematization routines strongly enhance both product development and manufacturing routines. Product development routines, in turn, significantly boost both product upgrading and process upgrading, whereas manufacturing routines significantly affect only process upgrading. Further, both types of upgrading are shown to improve a firm’s competitive advantage, with process upgrading emerging as particularly impactful in cost-sensitive, subcontracting contexts. These findings highlight the importance of cross-functional integration, open innovation, and balancing product-focused and process-focused strategies. By clarifying how resource-limited SMEs can systematically build and leverage innovation routines, this research offers novel theoretical insights and practical guidelines for firms seeking to ascend global value chains under competitive pressures.