How do SMEs manage innovation projects compared to larger enterprises - and what drives success or failure? A resource-based view with capabilities

Small and medium-sized enterprises (SMEs) play a critical role in driving innovation but face unique challenges in managing innovation projects compared to larger organizations. This study examines how SMEs succeed or struggle in managing such projects by analyzing two Danish initiatives: Gentænk NU!, involving 36 SMEs and 53 projects, and Half Double, involving 23 large enterprises and 33 projects. Findings reveal a clear performance gap, with larger firms achieving higher success rates, primarily due to structural advantages such as dedicated resources, formal governance, and standardized methodologies. In contrast, SMEs operate under resource constraints, low project maturity, and informal decision-making, which provide flexibility but increase vulnerability to disruptions and prioritization conflicts. Successful SME projects are characterized by structured approaches, systematic follow-up, strong leadership, and clear strategic direction, while failures often stem from insufficient resource allocation, weak internal organization, and operational pressures. The study contributes to SME innovation and project management theory by identifying the capabilities and competencies required for SMEs to improve project outcomes under conditions of resource scarcity and low maturity. It introduces a capability-based perspective that distinguishes between strategic and project-level dimensions at both organizational and initiative levels. This perspective advances the SME literature by showing how firms can strengthen project maturity through lightweight structures, systematic learning, and ambidextrous thinking that balance exploration and exploitation. It also emphasizes meta-learning across initiatives as a mechanism for embedding best practices into SME routines. In practice, the study offers actionable recommendations for SMEs, initiative managers, and funding agencies to foster structured methodologies, clear governance, and dedicated resources. By translating lessons learned into capability-building strategies, the findings help SMEs enhance competitiveness and adaptability in dynamic environments