There are relatively few SMEs doing R&D and Innovation and an even more limited number on an international scale. That is a pity, because based on various studies, we can see that SMEs operating actively in international markets make more profit, grow faster (thus create more jobs) and innovate more quickly. Dialogic examined the barriers for SMEs to innovate.

• Doing business internationally is both costly and full of risks. SMEs find it difficult for example to protect their intellectual property;
• SMEs encounter trade restrictions and complex administrative procedures;
• Finding good local partners is also a major challenge. Cooperation with foreign partners is hampered by distance, language barriers, but also by cultural differences.

Additionally, we investigated to what extent current European policy is encouraging international innovation. Stimulating internationalisation (export) and R&D or innovation often appear to be two separate worlds.

We conducted this research together with German consultancy Empirica on behalf of the European Commission, DG Research and Innovation.

This study focuses on the combination of two subjects - innovation and internationalisation - which are deemed to be crucial for the European economy. The study has two key parts: (1) twelve case studies of innovative SMEs with insightful international activity and (2) an analysis of strengths, weaknesses, opportunities and threats (SWOT) of European policy measures and infrastructure seeking to enhance such internationalisation.

The case studies show that there are many different combinations of types of internationalising innovation, and no dominant scheme. Reaching a sufficient number of customers was found to be the principal driver for internationalisation. The case SMEs use a variety of public support measures for internationalising their innovation activities; European research projects seem to be a prominent way. All case SMEs report positive impacts of internationalisation.

A SWOT analysis shows that the main strengths of European policies for supporting international activity of SMEs is the diversity of instruments, their accessibility for all sorts of SMEs, and the clear focus of Horizon 2020 on transnational research, development and innovation cooperation and exchange as a stepping stone towards greater competitiveness on the global scene. However, a weakness is that many coordination and support policy measures that support internationalisation of SMEs focus primarily on export and trade promotion, without necessarily stimulating SMEs´ internationalisation of innovation activities.

The study identified four principal challenges when internationalising innovation: having to stay at the top end of international technological and knowledge development; establishing contacts to foreign countries; dealing with foreign cultures; and dealing with governmental policy, regulation in particular. Dedicated national and European policy measures may help in tackling these challenges.