Educational Partnerships and Innovation in Small Firms: Evidence from Finland

Abstract

University–industry collaboration is frequently promoted as a means of strengthening innovation in small and medium-sized enterprises (SMEs), particularly in regional ecosystems where firms and higher education institutions (HEIs) interact closely. This paper investigates whether small companies that collaborate with HEIs exhibit higher innovation activity than firms without such partnerships and assesses whether this relationship varies across firm characteristics. The study draws on survey data collected in 2025 from 291 small companies (fewer than 50 employees and less than €10M revenue) in South Karelia, Finland; the analytic sample includes 242 firms with complete information. In the survey, firms report recent innovation activity, cooperation partners, and other information, such as perceived barriers and enablers to development. Using logistic regression, we estimate the relationship between HEI collaboration and a binary indicator of whether the firm developed a new product, service, or process within the past two years. The results show a positive and statistically significant relationship between HEI collaboration and innovation activity. In substantive terms, the results indicate that the likelihood of innovating is 41.7 per cent among non-collaborating firms and 55.7 per cent among collaborating firms, holding covariates constant. We further report marginal effects to facilitate interpretation and to assess whether the relationship differs by firm size, revenue class, industry, and municipality. The estimated collaboration effect is broadly stable across these categories, suggesting that HEI collaboration is positively associated with innovation activity, and that there is little meaningful variation in the effect measured separately by firm size, revenue class, industry, or municipality. The analysis is exploratory and based on cross-sectional survey data; accordingly, the findings should be interpreted as associational rather than causal. By focusing on small firms in a non-metropolitan setting, the study complements prior evidence that is often dominated by high-tech or R&D-intensive contexts. Overall, the results highlight HEI collaboration as a promising—and broadly relevant—lever for supporting innovation activity in small firms and for informing place-based innovation policy and institutional outreach.