In today’s fast-changing business climate, the priority on digital transformation demands organizations to develop innovation competencies to survive (Nambisan et al., 2017). To gain knowledge and know-how and stay innovative, organizations could work together with an Innovation Lab (IL) to remain competitive. To reach the best outcome from an IL, the dynamic between lab environment, resources, participants, and facilitation must be considered. Since SMEs typically have fewer resources, having an in-house IL is impossible. In addition, they require the guidance of experts to cope with the challenges of the digital era, to uncover solutions and continuous advancements, as innovation is critical for established companies to stay relevant in the phase of disruption and change (Berglund, 2007).

This study aims to deepen the understanding of the phenomenon of ILs in the context of SMEs. More precisely, we are scrutinizing the integration of acquired knowledge, inventions, competencies, and innovations to see what both ILs and SMEs could do to achieve a better outcome. This study aims to originate valuable insights on integration patterns and key issues SMEs face during the IL, to fill literature gaps and build on existing theories of ILs (Fecher et al., 2020) and absorptive capacity (Zahra & George, 2002). Our goal is to contribute with managerial implications for SMEs who wish to participate in ILs and achieve a favorable outcome. Additionally, to give IL facilitators suggestions on making the process more suitable for SMEs.

Our research aimed to answer the question of how SMEs integrate competencies and inventions developed during their IL participation in ILs. We established a multiple case study (Eisenhardt, 1989) to investigate the phenomenon. Together with existing literature and qualitative data, we set a model on: ‘SMEs’ Absorptive Capacity in the Context of Innovation Labs’. Our model describes how ACAP is present in the three lab phases and its effect on integrating competencies and inventions. First, our results show the relevance of preparation and participants in the pre- lab phase. Second, PACAP, including acquisition and assimilation, correlated with resources and the IL process in the lab phase. Third, in the post-lab phase or integration phase, RACAP with the capabilities of transformation and exploitation were significant for the business practice, IL process, IC, and resources. Concluding, each of the phases and SMEs’ capabilities during the IL process affects the integration and commercialization of the outcome.