Government support for SME innovations in the regional industries: The case of government financial support program in South Korea

•We examine the impact of governmental subsidy on innovation of regional SMEs.•Governmental support policies enhance patent and new design registrations of SMEs.•Networks with universities promote tehnological innovation of regional SMEs. This study explores the impact of governmental support policies on the innovation of SMEs in the regional strategic industries in South Korea. We use the technological development assistance funds as a proxy for governmental support policies for SMEs in the regional industries in Korea. The innovation of SMEs is measured by technological innovation: patent, utility model, trademark, and new design registrations. Before empirically testing the impact of governmental support policies on the innovation of SMEs, this study reviews the literature concerning the innovation and the governmental support policies of SMEs in regional industries. Results from empirical models, which simultaneously control for factors which were thought to affect the innovation of regional SMEs, indicate that a positive relationship exists among the technological development assistance by the Korean government and patent acquisitions and new design registrations of regional SMEs. Networks with universities also have a positive relationship with patent acquisitions and new design registrations of regional SMEs. This study suggests there is an importance to governmental financial aids for regional SME innovations, and there is an importance to the need to build a strong social relationship in today's networked economy.