The SME Growth Engine: A System Dynamics Model of Learning, Innovation, and Performance

Luis Salinas (Department of Computers Techniques Engineering, Department of Industrial Engineering, New Jersey Institute of Technology 323 Dr. Martin Luther King Jr Blvd., Newark, New Jersey, 07102, USA)
Muhammad Millah Irsyaddin (Universitas Winaya Mukti, Indonesia)

Greenation Management and Business Review (GMBR)
Vol. 3 No. 1 (2026): Greenation Management and Business Review (October 2026 - March 2027)

Small and medium enterprises (SMEs) need continuous learning and innovation to grow in changing markets. However, SME growth is rarely the result of one factor. Learning creates knowledge, knowledge supports innovation, innovation improves market responsiveness, and better performance can provide resources for further learning and innovation. This study develops a System Dynamics model called the SME Growth Engine to explain these relationships as a feedback system. A systematic literature review is used to identify the main variables and causal relationships, which are then translated into a Vensim-style causal loop structure. The model contains reinforcing loops in which learning, innovation, market responsiveness, and performance support one another, together with a balancing mechanism associated with market dynamism. The model provides a foundation for future stock-flow simulation and scenario testing using real SME data.