INNOVATIVE DEVELOPMENT OF HUMAN POTENTIAL AS A KEY FACTOR IN INCREASING THE COMPETITIVENESS OF SMALL AND MEDIUM-SIZED BUSINESSES IN UKRAINE

Abstract

The article explores the role of human capital as a key driver of innovative development and resilience in small and medium-sized enterprises (SMEs) under conditions of crisis and multi-level instability. It is emphasized that employees are no longer merely performers – they are becoming sources of innovation, adaptability, and strategic thinking. Particular attention is paid to fostering an innovative corporate culture that encourages creativity, initiative, and self-directed learning. The study argues that without a supportive organizational environment – one that is open to new ideas and tolerant of mistakes – investments in education and digitalization are unlikely to yield sustainable results. Within the framework of digital transformation, the article highlights the importance of developing employees' digital competencies and critical thinking skills as essential prerequisites for effective technology integration. It also addresses the persistent mismatch between educational programs and labor market needs, which hinders the integration of graduates into the entrepreneurial environment. Proposed solutions include the implementation of dual education models, business–education partnerships, and mentoring programs. Special attention is given to the financial and organizational barriers faced by SMEs in developing their workforce. Due to limited resources, many enterprises underinvest in professional development, leading to rapid obsolescence of skills and reduced competitiveness. The article underscores the importance of government support – including training vouchers, co-financing mechanisms, and the establishment of regional competence centers. Regional priorities are differentiated: for rural areas, the focus should be on stimulating entrepreneurship through local initiatives and business incubators; for urban areas, emphasis should be placed on enhancing digital literacy, managerial competencies, and innovation-focused acceleration programs. The author advocates for a shift in management paradigms within SMEs – from control-based models to trust, delegation, and leadership development. In conclusion, the article asserts that the innovative development of human potential must be pursued through a synergy of educational reform, business initiatives, and state policy, taking into account regional specificities, digital challenges, and modern management approaches.