INTRODUCTION

Small firm innovation and industrial growth

It is clear that innovation is the key to sustained prosperity and growth in the industrial firm (Mansfield, 1968; Freeman, 1974; Thwaites, 1978). Without improvements in product and process design in manufacturing, the competitive edge of the firm in national and international markets will decline over time (Feller, 1975; Ewers and Wettmann, 1980). This imperative applies throughout all sectors and scales of production, but will vary between industries and over time. There is evidence to suggest, however, that as individual industries mature, the scope for smaller producers is reduced due to formalization and subsequently increased cost of research and development, the standardization of products, and the general change in emphasis from product technology to process improvements (Vernon, 1966; Rees, 1979). With the general standardization of products, there is greater scope for the introduction of capital intensive machinery at scales and costs of production that exclude the small firm producer in, for example, motor vehicle production (Riley, 1973) or the electronics semiconductor industry (Rothwell and Zegveld, 1982).

Nonetheless, the broadly defined electronics and control instrumentation sectors are areas of high technology production where constantly evolving products and overall growth facilitates the continuing entry of many small firms to fill emerging new production niches (Oakey, 1981). Because the bulk of these evolving product niches are high technology, constant research and development is indicated by the need to keep internal product development at the leading edge of advancing technology.