In the late 1990s, we have seen significant advances in information technology and science that have not only changed our everyday habits but have also affected production relations throughout the economy. In order to maintain its competitiveness, a small state must follow the paradigm closely linked to innovation. Unlike the large states, small states have a different political and economic background, which is reflected in their development strategies. As a tool for achieving their development goals, states use innovation policies aimed at improving the quality and performance of their national innovation systems. The intensified political and economic cooperation between states in the globalised world has brought with it an opportunity for small states to benefit from size-related advantages. However, these opportunities do not come about by themselves – small states must recognise and address them accordingly. Understanding the specifics of maintaining the competitiveness of small economies is important in determining appropriate innovation policies and the potential of small states. By analysing secondary sources, I have examined the factors that influence the innovation performance of small countries and have gained important insight into their behaviour and position in the international environment. Based on conclusions, I conducted a comparative analysis in which I examined the relationship between innovation capacity in services and the overall innovation activity of small countries.
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