Technology Sources for SMEs

URN No: 98/1237

John Barber and Ray Lambert, IESE, DTI

Summary

This paper presents some evidence and analysis on the sources of technological information used in Small and Medium Size Enterprises in manufacturing. The first part of the paper sets out a framework for analysis of technology sourcing, emphasising the economic role played by technology. The framework is used to articulate the presentation of the results of a recent survey.

The Department of Trade and Industry (DTI) undertook, in conjunction with the Office for National Statistics (ONS), a detailed survey of small and medium sized enterprises to investigate their innovative activities. Questions were designed to illuminate aspects of innovation, the in-house development of new technology and its acquisition from outside the firm.

Acquisition of new technology by the firm is typically an input to developing proprietary products and services. External sources of technology embodied in products or in the form of technical knowledge, are generally complementary to internal resources.

Indicators of receptivity and innovativeness in SMEs were generated by the DTI/ONS survey. These include:

• the level of employment of graduate Qualified Scientists and Engineers (QSEs)
• QSEs roles in firms
• whether any staff specialise in R&D or in other innovation related functions
• the level of expenditure on new product and process developments
• the frequency of introduction of new technologies into the firm.

External Technology Sources

The main external sources of technology were:

• Suppliers
• Customers
• Knowledge Pools (eg Patents, Trade Fairs, Exhibitions, Trade Associations and Legislation)
• SET Base - Direct (eg HEIs, FE Colleges, Research and Technology Organisations)

Other External Sources

• e.g. Consultancy Firms, Business Links

Importance of External Sources

Firms rank their internal resources as the most important for technological innovation. They rank the various types of external source as follows:

1. Vertically Linked Firms - Suppliers and Customers
2. Customers
3. Knowledge Pools
4. SET Base & Technology Intermediaries

Concluding Remarks

This paper is intended primarily to contribute to discussion of the issues of policy towards innovation, especially in SMEs and to stimulate further debate. Some of the characteristics of manufacturing SMEs that emerge strongly from the analysis and have a bearing on the design and implementation of innovation and technology policy towards these firms can be summarised as follows:

1. The manufacturing SME Population is highly varied in its capacity for innovation and cannot be treated as homogeneous by policy makers.
2. internal competencies are the main drivers of innovativeness and performance
3. the supply chain is the largest source of technological information, but extensive use is made of knowledge pools
4. other external sources, including the SET base, are used as complements to internal resources, by the most technologically innovative SMEs.
5. high tech firms are important for growth and efficiency, but are a minority of SMEs. Firms in all sectors who are progressive but not leading edge, account for a large share of output and are vital to the supply chain.

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