The Determinants of Innovation Challenges in SMEs: A Systematic Review

Abstract

While small and medium-sized enterprises (SMEs) are recognized as key drivers for job creation and competitive industry revitalization, SMEs' innovation activities are affected by a frictious and enduring mix of internal and external barriers of latent resources. This systematic review summarizes publication from 2015 to 2025 and aims to identify the key factors of innovation challenges in SMEs, providing a conceptual model of financial, technological, human resources and managerial, market, regulatory and policy barriers, innovation capability, innovation challenges, and industry type. Within the framework of PRISMA 2020, 45 studies were reviewed, and evidence was structured using a binary literature review matrix. The synthesis demonstrated that challenges SMEs face in innovation are due to combinations of resource limitations. Specifically, from the synthesis, limited resources can lead to a lack of financial resources to support trial and error processes, leading to weak technological capabilities and subsequently leading to less processing and structural innovation, weak human resources leading to less managerial and organizational innovation, limited financial resources, and marginal market innovation, and more regulatory compliance barriers. SMEs experience uneven innovation challenges based on the combinations of the challenges mentioned herein. Innovation capability shapes the intensity of these challenges, and the industry type influences the correlation between innovation challenges and innovation capability.