Increasing attention has been paid of late to the importance of effectively developing both
exploratory and exploitative innovation in firms. Small and medium-sized enterprises (SMEs) play
a significant role in the growth of economies and in job creation, yet at the same time they can
differ significantly from larger firms with respect to effective management. Recent research has
examined the effects of environmental and organizational characteristics on the effective development
of exploratory and exploitative innovation. SMEs differ from larger firms in many ways,
such as the availability of resources, and it is unclear whether findings based on studies in larger
firms will also hold true for SMEs. As such, it is important to explore and understand the extent to
which SMEs differ from large firms in this important area. Specifically, this paper empirically
examines the extent to which organizational factors (connected, centralization, formalization)
and business environment (dynamism and hostility) are associated with different types of
innovation orientations (exploratory and exploitative) among SMEs.