* External support can only play a complementary role

* Appropriate external support has a more crucial role to play in a developing country than in a developed country

* But external support may be more reliable in a developed country than in a developing country and therefore, plays a more significant role in the former than in the latter

* Product innovations enable a SME to sail through the competitive environment in the domestic as well as in the international market

* Product innovations facilitate SMEs to grow in size.

These inferences and propositions can be tested through further research in a comparative perspective between developed and developing countries.

6. SUMMARY AND CONCLUSIONS

SMEs have the inherent potential to undertake technological innovations. Of late, SMEs across the world are increasingly exposed to intensifying competitive environment due to globalization, among others. It is product innovations carried out by the two SMEs in two different parts of the globe, which has enabled them to withstand the threat of competition and grow in size. Both the SMEs are partnership firms and the partner entrepreneurs of both SMEs have technical education backgrounds. Japanese SME has its origin in the pre-war period due to the initiative of the late father of the present partners whereas Indian SME emerged due to the drive and initiative of the present partners who resigned from a 'well-established' large firm to pursue their innovative ideas.

However, while the Japanese SME has strong linkages with two of the internationally known Japanese large firms located in Tokyo as its customers, the Indian SME has little direct contact with any large firm within India. The Japanese SME has been carrying out product innovations with the support of large firm customers, interaction with research institutes and training that their employees receive from large firms and consultants, Indian SME's product innovations are primarily driven by the motivation, perception and direction of the partner entrepreneurs. The Japanese SME foresaw the threat that would emerge from China as early as in the early 1990s, which prompted it to climb-up the value chain through product innovations to satisfy the new product needs of its large customers. The Indian SME owes its very origin to the innovative idea of its entrepreneurs and the birth of the SME enabled its entrepreneurs to give shape to their innovative ideas by means of product innovations. Product innovations enabled both the SMEs to withstand competition and grow over time. While the Japanese SME is exclusively focused on the domestic market, the Indian SME caters to the international market as well.

The two case studies bring out that it is the internal factors such as technical background, motivation and market perception of entrepreneurs which are decisive for the success of product innovations in SMEs. However whether and how external support would be used as a complement to a SME's internal capabilities would depend upon the level of capability of external sources of support. Given this, a developing country SME is less likely to rely on external sources of support than an SME in a developed country where external sources of support would have noted the SME's reputation for assistance in production and delivery of innovations.

Received 17 October 2007 Accepted 19 June 2008

References

Bala Subrahmanya MH, Srinivasan MN, Mathirajan M and Balachandra P (2001) 'Research Project Report on R&D in Small Scale Industries in Karnataka'. Department of Science and Technology, New Delhi.

Bala Subrahmanya MH (2003) SMEs in India in the Era of Globalization: Performance and Prospects. ASCI Journal of Management. Administrative College of India, Hyderabad 32(1&2): 54-67.

Bala Subrahmanya MH (2005) Small Scale Industries in India in the Globalization Era: Performance and Prospects. International Journal of Management and Enterprise Development 2(1): 122-139.

Bala Subrahmanya MH (2006) 'Manufacturing SMEs in Japan: Subcontracting, Structure and Performance'. Research Report submitted to Japan Foundation, Tokyo. National Graduate Institute for Policy Studies, Tokyo.

Chaminade C and Vang-Laudridsen J (2006) Innovation Policies for Asian SMEs: An Innovation System Perspective. In Yeung H (Ed.) Handbook of Research on Asian Studies, London: Edward Elgar.

DIC Mysore (2002) Perspective Plan of Industrial Development, Mysore 2001-2005. Mysore: District Industries Centre.

Lee Chew Ging (2005) 'SME Innovation in the Malaysian Manufacturing Sector'. Paper presented at Singapore Economics Review Conference 2005, Singapore.

Ministry of SSI (2006) Micro, Small and Medium Enterprises Act 2006. New Delhi: Government of India.

OECD (1992) Oslo Manual: The Measurement of Scientific and Technological Activities. Paris: Organization for Economic Cooperation and Development.

Planning Commission (2002) Tenth Five Year Plan (2002-2007). Volume II, New Delhi: Government of India.

PIO (Plaza Industry Ota) (2004) A Guide to Ota City Industries. Tokyo: Ota City Industrial Promotion Organization.

Rothwell J (1983) Innovation and firm size: A case for dynamic complementarity; or small really beautiful? Journal of General Management 8(3): 5-25.

SME Agency (1999) White Paper on Small and Medium Enterprises in Japan 1999. Tokyo: Ministry of Economy, Trade and Industry.

SME Agency 2004) White Paper on Small and Medium Enterprises in Japan 2004. Tokyo: Ministry of Economy, Trade and Industry.

SME Agency (2007) website: http://www.chusho. meti.go.jp/sme_english/index.html

UNDP (2001) Human Development Report 2001. New York: Oxford University Press.

Ussman A, Almeida A, Ferrira J, Mendes L and Franco M (2001) SMEs and Innovation: Perceived Barriers and Behavioural Patterns. The International Journal of Innovation and Entrepreneurship 2(2): 111-118.

Whittaker DH (1997) Small Firms in the Japanese Economy. Cambridge: Cambridge University Press.

(1) The Japanese and Indian case studies used in this paper have been earlier used separately for two different papers in two different journals, namely, (i) Asia Pacific Tech Monitor (2006) January-February: 40-44, and (ii) International Journal of Entrepreneurship and Innovation Management (2005) 5(5/6): 401-420, respectively.

M H BALA SUBRAHMANYA

Associate Professor, Department of Management Studies, Indian Institute of Science, Bangalore, India

Print Get the Mag Weekly Updates