Monika Walicka
pages: 73-81, JEL classification: H25, L13, M13, O31, Key words: business taxation, innovation, entrepreneurship, SMEs, Abstract: Stimulating innovation is one of the pressing policy challenges facing many countries in the world today. The paper analyses the external factors that Polish entrepreneurs find most detrimental to their innovative activity. A sample of 199 small and medium size enterprises (SMEs) in Poland were subjected to a survey. The data collected revealed the innovation types of SMEs in Poland and external financial factors influencing innovation the most. The results show external factors such as legal regulations, access to external financing, bureaucracy of institutions, financial government support, the tax system, time necessary to comply with regulations, and crisis and instability are very important for SMEs. According to the results, process and marketing innovations are applied more frequently than product and organisational innovations. Finally, the results indicate that entrepreneurs indicate that lack of government support and weakness of tax incentives is an important barrier to the innovation process.