How does industry association impact micro and small enterprises’ innovation decisions? Evidence from China

Innovation is an important recovery strategy for Micro and small Enterprises (SMEs), which are expected to play an important role in the economic recovery and redevelopment in the post-epidemic era. We empirically explore how industry associations impact SMEs’ innovation decisions using China Micro and Small Enterprise Survey data. We find that industry associations’ information sharing support is possibly weakly dominant in promoting SMEs’ innovation decisions in general. The information-sharing support and institutional support are almost equally important for hard product or technical innovation, while industry associations’ information-sharing support weakly dominates institutional support for soft innovation. The most important channel for soft innovation in organization, services, marketing or culture is likely to introduce potential customers. We provide policy suggestions on how to guide industry associations to effectively help SMEs’ innovations.