In a rapidly changing environment, the technological innovation of SMEs is essential to the survival of companies. In particular, unlike large corporations, SMEs’ internal capabilities are recognized as essential due to limited resources, and SMEs are investing a lot in increasing their internal capabilities (entrepreneurship, innovation differentiation strategy, and innovative culture). In addition, the performance evaluation system checks whether a company is faithfully performing its work and performance, and based on these results, it serves as a foundation for external investment or growth. Nevertheless, only some SMEs are interested in implementing the performance evaluation system. Therefore, this study empirically analyzed the effect of SMEs’ internal capabilities on technological innovation performance and the moderating effect of the performance evaluation system on the relationship between internal capabilities and technological innovation performance. A survey was conducted on small and medium-sized manufacturing companies for hypotheses testing, and 172 data were used for empirical analysis. As a result of the analysis, it was found that the entrepreneurship and innovation differentiation strategy of SMEs had a positive and significant effect on technological innovation performance. Also, the performance evaluation system moderates the relationship between internal capabilities (entrepreneurship and innovation differentiation strategy) and technological innovation. However, there is no effect of innovative culture on technological innovation. Lastly, the results suggest that the establishment of competitive internal capabilities of SMEs is an important factor in technological innovation, and it is necessary to establish a systematic performance evaluation system.

Hwang, S. J., & Choi. J. H. (2024). Internal Capabilities and Technological Innovation of SMEs: Moderating Effect of Performance Evaluation System. Review of Integrative Business and Economics Research, Vol. 13(4), 671-684.