Co-creation as a means to innovate: The role of vertical strategic collaborations and R&D teams for enhanced innovation among Latin American SMEs

Innovation in small and medium-sized enterprises (SMEs) increasingly depends on collaborative approaches that integrate internal capabilities with external knowledge sources. In emerging economies, resource constraints and uneven digitalization often push firms to leverage vertical strategic collaborations and internal research and development (R&D) teams as mechanisms for enhancing product innovation. This study examines whether and how vertical collaborations with suppliers and customers, as well as the presence of an internal R&D team, influence product innovation outcomes in Latin American SMEs. Using survey data from 477 SMEs in five countries and applying multilevel logit regression, the results show that supplier collaborations are positively and significantly associated with product innovation, while customer collaborations are not statistically significant. The presence of an R&D team has a strong positive effect but negatively moderates the relationship between supplier collaboration and product innovation, indicating a substitution effect. These findings highlight the importance of supplier partnerships for SMEs lacking internal R&D capabilities and the strategic role of R&D teams in shaping collaboration outcomes. The study offers theoretical and practical insights for managers and policymakers seeking to enhance innovation capacity in resource-constrained contexts.