INTRODUCTION

Innovation is traditionally equated with research and development. While it is true that in this study, we have shown a close relationship between R&D and innovation, we have also emphasized that there are alternate routes, including a focus on engineering, the adoption of advanced technology, and networks with customers and suppliers. Nevertheless, even here, our attention on these routes has implicitly focused on the scientific capabilities of firms.

Although the degree of inventiveness is commonly regarded as being determined by the underlying capabilities of a firm with regards to technical and scientific progress, the successful introduction of inventions requires a firm not only to develop core skills in the scientific area, but also to acquire a set of complementary skills in order to facilitate the process of commercialization.

Few firms can successfully innovate if they only discover new products and processes. They must develop successful marketing divisions; they must acquire the capacity to finance the risky activity of innovation; and they must attract and develop the knowledge base of their workforce.

Studies of the innovation system attempt to understand the forces that generate or that are associated with innovation. This is often done by delineating differences between innovators and non-innovators. Previous work has attempted to do so in one of two ways. On the one hand, Acs and Audretsch (1988) have asked what industry characteristics are associated with the existence of large-firm innovators and what industry characteristics are associated with small-firm innovators.