Institutional Stimulus and Firm Innovativeness: Examining the Roles of Digital Technologies Adoption and Inbound Openness

Drawing on the structure–conduct–performance (SCP) paradigm, this study proposes and tests a framework of how government institutional stimulus can spur small‐ and medium‐sized enterprises' (SMEs) innovativeness. An analysis of survey data from 195 SMEs operating in Ghana—a resource‐constrained developing economy—indicates that (1) institutional stimulus has a positive relationship with SME innovativeness; (2) the effect of institutional stimulus on SMEs' innovativeness is channeled through the adoption of relevant digital technologies; and (3) the positive effect of institutional stimulus on firm innovativeness through the adoption of digital technologies is strengthened under high levels of inbound openness. Our findings make important contributions to the extant innovation and R&D management literature and have practical implications.