Innovation and Peripherality: An Empirical Comparative Study of SMEs in Six European Union Member Countries

Abstract This article examines the rates of innovative activity of small and medium‐sized enterprises (SMEs) in central areas and equally developed but less accessible areas in six European Union member states. The probability of innovating is well predicted by the observable characteristics of firms, entrepreneurial characteristics, and business networks. More accessible areas consistently present higher rates of innovative activity than do their peripheral counterparts. The difference in the rates of peripheral and central areas is decomposed into observable and non‐observable factors. The entire innovation gap is attributed to nonobservable factors that constitute a combination of behavior and environment. Innovation policy for SMEs should aim to meet businesses' specific needs (firm‐specific factors) and to sustain and improve the innovative environment.