Improving The Mechanism of Innovative Activity in The Development of Small Business Entities

Abstract

The advancement of small business entities plays a pivotal role in fostering economic diversification, generating employment opportunities, and achieving long-term sustainable development. Despite their significance, the innovation potential of small and medium-sized enterprises (SMEs) remains significantly hindered by a range of challenges, including limited access to financial resources, institutional inefficiencies, and underdeveloped infrastructure. This paper critically examines the existing mechanisms that support innovative activity within the SME sector, identifying key barriers that restrict their capacity for technological advancement and competitiveness. Drawing upon comparative analysis, primary field data, and empirical investigations, the study evaluates the effectiveness of current support systems in stimulating innovation among small firms. The research further introduces a comprehensive model designed to improve the innovation ecosystem for SMEs, integrating financial instruments, institutional support structures, and infrastructural enhancements. Through this model, the study aims to bridge the gap between policy frameworks and the practical needs of small businesses striving for innovation-led growth. The proposed recommendations emphasize the importance of targeted state support, public-private partnerships, and the development of innovation hubs tailored to the unique needs of SMEs. Ultimately, the paper contributes to the broader discourse on innovation policy by providing actionable strategies to unlock the untapped potential of small business entities in driving economic resilience and inclusive development. The findings underscore the urgency of aligning national innovation agendas with SME development strategies to ensure sustained progress in competitive and dynamic economic environments.