The effectiveness of implementing innovations in small and medium-sized businesses as a tool for economic

Abstract

This study empirically examines the impact of innovation adoption on economic growth among small and medium-sized enterprises (SMEs) in Ukraine, with a primary focus on revenue expansion as the key outcome. Utilizing a stratified sample of 200 SMEs across diverse industries and regions, the analysis integrates multiple measures of innovation, including R&D intensity, technological adoption, and organizational innovation within a rigorous econometric framework. Ordinary least squares (OLS), robust regression, fixed effects panel, and dynamic system-GMM models are employed to address endogeneity, unobserved heterogeneity, and growth persistence. Findings reveal that increased investment in R&D and higher levels of technology adoption significantly enhance the revenue growth of SMEs. Organizational innovation also makes a positive contribution, with amplified effects in the IT sector and among firms located in Kyiv and Eastern oblasts, illustrating sectoral and regional heterogeneity in innovation returns. Dynamic panel results further demonstrate persistent growth effects, indicating cumulative advantages for innovative SMEs. Diagnostic tests affirm model robustness, validating reliable inference. These results highlight the crucial role of innovation in enhancing SME competitiveness and promoting sustainable growth in Ukraine’s transitional economy. The study provides actionable policy insights that support targeted innovation promotion, particularly in technology-intensive sectors and urban clusters, to drive broader economic recovery and integration into global markets.