336 Int. J. Knowledge Management Studies, Vol. 4, No. 4, 2011 Copyright © 2011 Inderscience Enterprises Ltd. Innovation capabilities in tourism and food production SMEs in the Baltic Sea Region Ilona Baumane* University of Latvia, Ubeles 2/1 – 34, LV 1073 Riga, Latvia E-mail: ilona.baumane@lu.lv *Corresponding author Per Lind Gotland University, Cramérgatan 3, S-621 57 Visby, Sweden E-mail: per.lind@hgo.se Tatjana Simonova University of Greifswald, Friedrich-Loeffler-Str. 70, 17489 Greifswald, Germany E-mail: tatjana.simonova@uni-greifswald.de Aivars Timofejevs Stockholm School of Economics in Riga, Strelnieku iela 4a, Riga LV 1010, Latvia E-mail: aivars.timofejevs@sseriga.edu.lv Rebekka Vedina University of Tartu; ESADE, Ramon Llull University, Narva mnt. 4, 51009 Tartu, Estonia E-mail: rebekka.vedina@ut.ee Piotr Wróbel University of Gdańsk, ul. Armii Krajowej 101, 81-824 Sopot, Poland E-mail: p.wrobel@ug.edu.pl Abstract: Drawing on the resource-based view, this paper addresses two fundamental questions: what innovation capabilities are most important for the creation of innovations in Small and Medium-sized Enterprises (SMEs) and