This chapter considers how services innovation operates in smaller firms. Both the economies of scale and scope from services innovation are presumably more difficult to achieve for smaller organizations. Moreover, smaller firms lack the resources and often lack strong protection of their intellectual property that large firms typically enjoy.

The issue here is how small and medium-sized firms (SMEs) can manage these constraints in services innovation. This is not just an important theoretical question. Notwithstanding the power of many large firms, SMEs are of growing importance for an economy's innovative capacity. They have increased their R&D budget faster than the largest firms and ...

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