Abstract
This study investigates the potential effects of product flexibility and personal interaction on technology innovation in the realm of the foreign customer relationships of small and medium-sized enterprises (SMEs). The results of a linear structural relations (LISREL) analysis of 188 relationships between Swedish SMEs and their foreign customers demonstrate that SMEs' product flexibility stimulates personal interaction in foreign customer relationships, which in turn enhances the firms' technology innovation. The findings suggest that personal interaction reinforces a trusting relationship and, thereby, facilitates processes by which the knowledge of the involved parties is combined into new technological solutions. Hence, we conclude that product flexibility and personal interaction with foreign customers are important strategic factors for SMEs' technological innovation in foreign markets.