THE INDIRECT EFFECT OF INNOVATION OBJECTIVES AND KNOWLEDGE SOURCES ON ECONOMIC PERFORMANCES OF SMALL SERVICE COMPANIES IN BOSNIA AND HERZEGOVINA

Sa？etak Innovations are the cornerstone for achieving competitive advantage and better business results. This paper analyses the impact of innovation objectives and knowledge sources on the level of a firm’s innovation and economic performance. The paper aims to investigate the role and importance that innovations have in small service companies in Bosnia and Herzegovina and to determine whether a greater diversity of innovation objectives and knowledge sources can contribute to the explanation of variation in the innovation activity of the company. Our results partially confirm the existence of a statistically significant and positive association between, on the one hand, the number of innovation objectives and knowledge sources, and on the other hand, some technological and non-technological innovations in small service companies. Also, only one type of technological innovation (an innovation of products and services), and one type of non-technological innovations (change of business practices) have statistically significant and positive impact on the economic performance of small service companies. Finally, our results confirm that there is a statistically significant and positive indirect effect of innovation objectives and knowledge sources on economic performance. These results should be taken with caution due to a smaller sample