Research on the Sustainable Innovation Dilemma and Breakthrough Paths for Small and Micro Enterprises under Involution-type Competition: From the Perspectives of Capability Building and External Empowerment

Abstract

In the current Chinese economic context, small and micro enterprises (SMEs) are widely trapped in the dilemma of "involution-type competition," which severely inhibits their capacity for sustainable innovation. This paper aims to explore the impact mechanism of involution-type competition on SME innovation and, based on the dual perspectives of internal capability building and external empowerment, proposes systematic breakthrough paths. The study finds that the involution environment hinders innovation by squeezing profit margins, fostering short-termism, and intensifying resource constraints. The breakthrough paths lie in: at the micro level, enterprises need to build dual capabilities in "opportunity identification and operation management"; at the meso level, leveraging digital finance to overcome financing bottlenecks is crucial; at the macro level, the government needs to provide targeted empowerment by designing high-intensity "passive events." This research provides a theoretical framework and practical insights for SMEs to achieve sustainable development in high-pressure competitive environments.