Innovative activity in SMEs and rural economic development: Some evidence from England

Recent writings on the factors influencing the competitiveness of regional and local economies have emphasized the importance of innovation in SMEs. T his paper discusses the findings of a study of the innovation process in a sample of SMEs located in rural environments. Adopting a broad, evolutionar y view of the innovation process, the study highlights important sectoral v ariations using a multidimensional index of innovation. The way in which in novation is achieved is found to be shaped by various aspects of the rural environment, but relatively few firms are constrained by their rural locati on. Nor does the lack of local networking opportunities appear to hold back innovation in the more active SMEs. In conclusion, the most innovative fir ms are shown to make an important contribution to rural economies in terms of external income generation and employment generation.