SME growth in crisis: how different hybrid structures respond to innovation funding

Abstract Hybrid enterprises combine the pursuit of financial performance with social impact and have played a notable role in mitigating the adverse effects of recent economic crises. While public innovation funding is recognized for alleviating economic distress among firms, its influence on the growth of different hybrid enterprise types during crises remains underexplored. This study examines the impact of public innovation funding on the growth of Finnish small and medium-sized enterprises (SMEs) during the COVID-19 crisis (2018–2022), focusing on different hybrid structures. The findings reveal that hybridity significantly moderates the relationship between innovation funding and SME growth, with contrasting outcomes for hybrids emphasizing economic objectives versus those driven by social missions. These results underscore the need for more nuanced consideration of hybridity in public funding decisions and question the effectiveness of current support measures for enterprises with mainly social motives. The study contributes to theory by linking hybrid organizing literature to firm growth, identifying boundary conditions for R&D support when profit maximization is not the sole goal, and by providing empirical evidence on the innovativeness and growth dynamics of hybrid enterprises during crises.