Does founders’ local pre-founding experience influence SMEs’ innovativeness

Our study delves into the concept of liability of localness, which initially referred to the competition between local companies and multinational companies’ subsidiaries, and extends to SMEs and, specifically to their founders’ experience and knowledge acquired during their study periods. We argued that Founders’ local pre-founding experience is transmitted to their SMEs via the imprinting effect. We further introduced two additional theoretical variables able to capture two channel mechanisms through which represent how the imprinting effect will produce its effect on SMEs. These two mechanisms, namely the local scope and the stability of task environment relationships, reflect the founders’ local pre-founding experience, and induce a liability to SMEs, by making their knowledge less diverse and more homogeneous, thus less able to contribute to innovation outcomes. We also advanced that such an iron cage, produced by founders’ local pre-founding experience on SMEs’ task environment, is partially unleashed for SMEs that established relationships with local public research organizations. These organizations are to inject new partnership opportunities, new contacts, and new, diverse knowledge, which in turn will reduce the effect of founders’ local pre-founding experience on SMEs’ local scope and stability of task environment relationships. In other words, SMEs’ collaboration with public research organizations is a moderating variable to partially offset founders' local prior experience negative effect on SMEs' innovation.