DIMETIC Strasbourg, March 23 – April 3, 2009 Viviana Munoz Tellez Ecole Polytechnique Fédérale de Lausanne Collège du Management de la Technologie

 Introduction  Research questions  Empirical data  Discussion and conclusions

 Motivation ◦ SMEs as mayor source of employment ◦ Importance for SMEs to develop technological capabilities  How to promote innovation by SMEs in developing countries?

 To what extent are SMEs in the manufacturing sector in developing countries innovating?  Is the extent is SME innovation related to: ◦ Use of licensed foreign technology ◦ Sources of acquisition of technological innovations ◦ Market orientation – domestic, export

 Firm level data from World Bank Enterprise Surveys for the years 2002 –  The size of the survey sample ranges from 250 to 1,500 firms and covers over 50 developing countries.  Firm size determined by work force. ◦ Small >=5 and <=19 ◦ Medium =20 and <=99 ◦ Large >=100  Include only firms in manufacturing sector.  Include only firms owned >= 50% by private domestic individuals, companies or organizations

 Siddharth Sharma, Financial Development and Innovation in Small Firms, The World Bank, August 2007 Uses firm level data of the WB Enterprise Surveys from a cross-section of 57 countries to study how financial development affects innovation in small firms.

1 Measure innovation SQ: a) How many products does your establishment produce b) How many new products (i.e. those that involve a significant change in the production process) has your establishment introduced in the last three years? SQ: In the past three years 1) has the firm developed a major new product line 2) has the firm upgraded an existing product line 3) has the firm introduced new technology that has substantially changed the way that the main product is produced SQ: How much did your establishment spend on design or R&D last year? [Spending includes wages and salaries of R&D personnel, such as scientists and engineers; materials, education costs, and subcontracting costs

2. Correlate innovation with use of licensed foreign technology SQ: Does your establishment use technology licensed from a foreign- owned company?

 Correlate innovation with sources of acquisition of technological innovations SQ: what were the leading ways in which your establishment acquired technological innovations? i) the most important? ii) the second most important? iii) the third most important? 1) Embodied in new machinery or equipment 2) By hiring key personnel 3) Licensing or turnkey operations from international sources 4) Licensing or turnkey operations from domestic sources 5) Developed or adapted within the establishment locally 6) Transferred from parent company 7) Developed in cooperation with client firms 8) Developed with equipment or machinery supplier 9) From a business or industry association 10) Trade Fairs and/or Study Tours 11) Consultants 12) From universities, public institutions

3. Correlate innovation with market orientation SQ: What percent of your establishment’s sales are: i) sold domestically ii) exported indirectly – through a distributor iii) Exported directly

 Potential Gaps of Empirical Study: ◦ Measure of innovation ◦ Time span ◦ Need to compare SME data with large firm data ◦ Robustness of the results ◦ ?  Interpretation of results  Literature review – theoretical analysis  Country level analysis