structural changes in our economy, the broadening of decisionmaking processes and the emergence of the network society,
Entrepreneurs, able to draw on unprecedented scale economies, built vast empires. Great fortunes were made. The government demanded that these powerful new monopolists be held accountable under antitrust law.
which the old business models seemed no longer to apply. Yet, somehow, the basic laws of economics asserted themselves.
Those who mastered these laws survived in the new environment. Those who did not failed.
This quotation, dating from the end of the 19th century, was used by Shapiro and Varian to introduce their book‘Information Rules:
A Strategic Guide to the Network Economy'1. One of the main themes discussed in this book is that
the opportunities new scientific insights offer us, and the world in which we are able to make them reality,
since its first appearance on the Internet. 862 R. Smits/Technological Forecasting & Social Change 69 (2002) 861 883 Although by no means all economists agree with Shapiro and Hall,
but results in a major environmental problem The many unsuccessful attempts to introduce road pricing The small and medium-sized enterprises that continue to find it difficult to transform knowledge into successful products
and services The high number of promising new high-tech firms in the fields of life sciences
the OECD nations substantially increased their investment in research. While this did lead to a major growth in scientific and technological knowledge,
This phenomenon is known among economists and innovation scientists as the‘Solow Paradox'or the‘Productivity Puzzle'6. In the European context,
services and solutions for societal problems 7. The solution to this problem has been the main theme of innovation policy for almost two decades in most OECD countries.
Knowledge-intensive products and services are taking on an increasingly significant role in the economy.
exports of these products and services from the United states and Japan have increased by 500%to 600%8
Illustrative of the increasing knowledge content of our economy is the observation that the weight of 1 dollar in American export has been cut by half over the past 10 years.
versus innovation It will be clear from the foregoing that new scientific and technological knowledge often fails to lead as a matter of course to successful products, services and solutions to problems in society.
in international competition by making well-considered use of their comparative advantages. However, this context has changed 866 R. Smits/Technological Forecasting & Social Change 69 (2002) 861 883 considerably over the past few decades.
and have confronted innovation studies with new questions. 3. 2. Structural changes in our economic system Important sectors of our economic system are currently going through a period of structural transition.
the boundaries between the agricultural, industrial and services sectors are becoming blurred. Agriculture gets more and more industrialised
whereas the industrial and the services sector become more and more intertwined. In The netherlands the traditionally knowledge-intensive agricultural sector is apparently going to rack and ruin because of the unmistakable successes of the past.
Changes that are not only better for the environment, but which also lead to an upgrading of this sector,
while at the same time the significance of the private services sector and to a lesser extent the noncommercial services sector, is increasing enormously.
In its Central Economic Plan, The netherlands Central Planning Office points out that while the ICT sector makes up only 5%of the Dutch economy
it is still responsible for 25%of our economic growth 16. The enormous changes and issues this trend can bring about can be illustrated by the emergence of
Roads and Challenges'potentially important role of‘Cultural Industry'in our economic system was pointed out 7. When accepting his professorship in‘Cultural Industry'at the Erasmus University, Rotterdam,
In this area too, cultural, institutional, organisational and managerial competencies are important factors determining the societal return on investments made in the development of science
and will need to start anticipating the wishes of customers with very different needs and wishes.
b) While industry and services are constantly becoming more interwoven, it must be noted that innovation processes in industry differ fundamentally from those in the services sector 18.
While our understanding of these new innovation processes is growing, it has reached not yet a level that allows a substantial contribution to be made towards the management of innovation processes 19,20.
which role knowledge-intensive (business) services can play in innovation processes in (all) other sectors,
C a recent and rather heated discussion focuses on the existence or nonexistence of the‘New Economy'.
it would seem that economists are still unable to make up their minds about this. Sustainability is another major issue in today's economy.
Major questions here: are economic performance and sustainability at right angles? And what could be the role of ICT, 868 R. Smits/Technological Forecasting & Social Change 69 (2002) 861 883 life sciences, materials technology, not to mention nanotechnology, in the development of a more sustainable economic system?
With regard to the last question, expectations are rather high, but very little empirical proof has been available until now to support these expectations.
d) The growing importance of innovation in services and the growing insight into innovation processes in general stimulate the need for indicators that not only measure the (hard) input variables like investments in R&d and the number of scientists,
Other laws apply in this‘network society'or‘knowledge economy'than in the hierarchical variant. More and more often do we see the main goal being the optimisation of chains or systems of organisations, rather than a maximisation of the performance of components (e g.,
how to strike the balance between competition and cooperation, what are the implications for the‘corporate culture'of the far more porous character of the firm,
b) In this context also the role of (knowledge) intermediaries, for instance knowledgeintensive business services, in innovation processes is at stake.
The genesis of the network society demands a new role for government and other players involved in innovation processes.
The growing importance of users in innovation processes and the network character of innovation demand new concepts.
what they are able to do for the economy and the society of the future. As a follow-up to the above, there is the demand for management of the knowledge infrastructure.
The increasing trend for universities being expected to account for themselves is only one manifestation of an expansive phenomenon that is emerging in the international dimension:
The emergence of knowledge-intensive services (engineering firms, software houses, knowledge-intensive consultants) plays an important role in this respect.
Recent research shows that these services play a crucial role in innovation processes, both in industry and in the service sector 18.
Universities, because the demand for more specific orientation towards the problem in question calls for a multidisciplinary approach,
'and on the other hand because as soon as they do this with some success they are clipped around the ears and accused of‘unfair'competition.
case studies dealing with innovation processes in the area of the life sciences and in the services sector and research conducted at the sectoral level into the contribution made by ICT towards a more sustainable society are examples of specific trajectories.
services sector) must also be mentioned here. Together, these case studies could serve as the basis for the development of various types of indicators that can help to better understand
while the generator of the variations (potential innovations) can take into account the characteristics of the selection environment in innovation processes.
Developments are described often as a competition between mutually relatively independent organisations and/or technologies. The approach taken by Arthur 50 in his‘Competing Technologies'clearly illustrates this.
Collaboration and competition within and among networks, as well as the question of what the consequences are for the strategies of organisations (To pull together
Disciplines such as economics, public policy analysis and business administration are confronted with a lack of insight into the dynamics of innovation processes and systems 4 In his contribution to the collection of texts by Barre'et al.
Freeman's proposition is that the success of The british in this period should not be attributed primarily to the strength of the system components (politics, economy, science and technology, culture) but rather to the cunning way in
The exceptionally lengthy period of high economic growth in the last decade of the 20th century in the USA
without it till very recently being coupled to rising inflation and unemployment, gives rise to some economists assuming that structural changes in
which knowledge plays an important role are under way in our economy. Not only as a production factor,
but also as a product and a service. One notable feature of knowledge is that knowledge is easier to copy than tangible products.
This undermines the meaning of the word‘scarcity 'which even today is the main variable in mainstream economics.
The fact that the products of network technologies, such as faxes and PCS, become all the more in demand the greater their market penetration
brings up for discussion another basic rule of economics that prices fall if supplies increase.
Of note is that, within the community of established economists, these stories are dismissed generally as‘old ideas parading as new ones,
'The discussion among economists on this subject is apparently as we read every day in the newspapers still in the early stages 1, 51 54.
finally, business administration experts and organisational sociologists discuss the question of how to interpret the far more open business strategies demanded by the network economy in their models 58,59.
Insight into the potential of new technologies for the economy and society, the appreciation thereof by several different parties
Also cluster studies that focus on the articulation of the demand for new technology are useful in this context 49.
the network society places high demands on the management of the interface between organisations and the networks within which they operate,
and for the development of rules (and legislation) regarding competition and collaboration in networks, resulting in the public knowledge infrastructure becoming effectively integrated into innovation systems 63.
In his dissertation, Mayer 57 gives a good overview of the opportunities these instruments offer,
while such instruments do offer potentially major opportunities, a deeper study into their functionality and the conditions for their use is called for. 5. Conclusion An attempt has been made in this paper to analyse the questions
which Box 3 Major trends Structural changes in the economy:.within sectors (agriculture. between sectors (from agriculture to industry to services.
new sectors (cultural industry) Thread: growing knowledge intensity Changes in the‘strategy and management paradigm':.
Techniek in Nederland in de twintigste eeuw (Technology in The netherlands in the Twentieth Century), Stichting Historie der Techniek, Walburg Pers, 1998.6 OECD, Technology and the economy.
The key relationships, Report of the Technology and Economy Programme, OECD, Paris, 1992.7 European commission, Growth, Competitive Strength, Employment.
I. Miles, Services in innovation: Knowledge intensive business services as co-producers of innovation, SI4S synthesis paper no. 3, Published by STEP, Oslo, 1998.19 F. Gallouj, O. Weinstein, Innovation in services, Res.
Policy 20 (1997) 499 514.20 R. Coombs, I. Miles, Innovation, measurement and services: The new problematique, in:
J. Metcalfe, I. Miles (Eds. Innovations Systems in the Services Economy: Measurement and Case study Analysis, Kluwer Academic Publishing, Norwell, MA, 1999, pp. 85 103.21 R. Smits, A. Leyten, P. den Hertog, Technology assessment
and technology policy in Europe: New concepts, new goals, new infrastructures, Policy Sci. 28.22 M. Gibbons, Policies for a New Era Workshop, Stockholm, 15 16 january 2001.23 J
, Technical Change and Economic theory, Pinter, London, 1988.46 R. Nelson, S. Winter, In search of a useful theory of innovation, Res.
of a New Discipline), address at the opening of the academic year, Utrecht University, 1999.52 K. Kelly, New Rules for the New Economy, Viking Books US/Forth Estate, UK, 1998.53 H. J. Brouwer,
64 Netherlands Ministry of Economic Affairs, Industrie-en dienstenbeleid (Industrial and Services Policy), Letter to the Lower House 26 628, session 1998 1999, Staatsuitgeverij
This paper is based on his inaugural address and on the presentation‘Impacts from Trends in Economy and Society'during the Workshop‘Innovation Policies for a New Era',Six Countries Program/Royal Swedish Academy of Engineering sciences
The technological environment within which firms operate has been transformed. Technology has become so complex that it cannot be handled by individual corporations.
Public authorities have tried to recreate the Italian district atmosphere by providing new services and by fostering technology transfer.
Those who establish weak ties with their environment may not favourably react to public policies which emphasis on inter-firm collaboration.
When agents have to support durable investment, competition is transformed into a bilateral transaction. In such a situation, vertical integration is adapted best to avoid F. Bougrain, B. Haudeville/Research Policy 31 (2002) 735 747 737 opportunistic behaviours.
This decision is considered as a choice of last resort(‘try markets try long-term contracts and other hybrid modes,
In fact, negotiations which lead up to a bargain should not be considered as a cost but as an investment (Everaere
Therefore, firms need to achieve economies through specialisation (Demsetz, 1991. This may explains why firms usually prefer to concentrate their resources toward core activities.
and it may be essential that human capital in an effective team configuration accompany the transfer'(Teece, 1980, p. 228). 738 F. Bougrain,
In this scheme, investment costs are dissociated from receipts (Amendola and Gaffard, 1994. Thus, it takes time to recover the initial investment.
Collaborative relationships will release the financial constraints by helping the firm to share the sunk costs associated with innovation.
Indeed, frequent communications help them to specify their mutual needs. In this case, unlike the transaction cost theory, recurrent transactions favour cooperative agreement.
and external communication SMES tend to be less innovative than large companies and to dedicate less resources to the acquisition of external technologies.
and horizontal communications favours quick reaction to keep abreast with environmental disturbances and fast changing market requirements.
So they only innovate under the pressure of their environment. They limit their contacts with the external environment to suppliers and clients.
The management style is centralised. The second kind of entrepreneurial managers encourage rapid growth of their company.
and try to take advantages of every new opportunity. To enhance the performance and the growth of their company,
Information is the nerve of competition which sets up among firms. Nevertheless, the complexity of information makes it more difficult to master.
We ground our study on 313 projects (247 enterprises) which were financed partly by the agency located in Orléans from 1980 to 1987.
the enterprises were classified into eight categories depending on their size and their ownership status (Appendix A). These firms are supposed not to be representative of the population of French SMES.
and is open to its institutional environment. 4. 1. 1. The sector of production of the innovation The innovative projects were classified according to The french Industrial Classification of Products and Activities (NAF 16)( SESSI, 1995).
. 7) Automobile 2 0 0 1 3 2 1 2 11 (3. 5) Capital goods 29 17 37 20 19
It does not show how SMES are linked to networks. 4. 2. The role of linkages to external resources The success rate of small and medium enterprises
model 3 Constant-0. 3033(-0. 685) 0. 3701 (0. 877) 0. 3554 (1. 496) Categories of firms Very small enterprises
(1 9 employees)- 0. 9152*(-1. 938)- 1. 2468**(2. 536)- 1. 1226**(2. 936) Very small enterprises (10 19
. 827)- 1. 7413*(-2. 050) Capital goods industry-0. 4124(-1. 324)- 0. 3416(-1. 049)- 0. 4722+(-1. 829
0. 196 (0. 616) Partners Supplier-0. 9202**(2. 826)- 0. 8627**(2. 709) Client-0. 1145(-0. 408) Enterprise
This 9 The size affects negatively the results of the innovative projects only for very small enterprises (less than 10 employees.
All cooperative projects between customers and suppliers do not always lead to payment in full. This is the case when a customer tests for free the new product of his supplier.
Firms'ability to develop an absorptive capacity heavily depends on investment made during previous periods. These initial investments allow them to make better technological choices
and to exploit new opportunities better. If a firm temporarily neglects to invest in a technical field,
it will be less aware of technological opportunities (Cohen and Levinthal, 1990). So it will increase its initial weakness.
To maintain their potential competitiveness, firms need to have at least a window on state-of-the-art technologies.
Firms must focus both on the interface between the departments and the external environment and on horizontal communication among departments.
Consequently, it is difficult to identify R&d investments of small firms (Roper, 1998. This indicator cannot be satisfactory to analyse SMES'ability to innovate. 12
If a decoding does not happen, the assimilation of external knowledge to the firm's‘technological capital'(Le Bas and Zuscovitch, 1993,
Appendix A The enterprises were classified into eight categories depending on their size and their ownership status. Our classification is more detailed than the recommendations of the OECD (1992).
The other categories concern large enterprises and subsidiaries. We distinguish regional groups with more than 500 employees whose headquarters is located in the Centre region and subsidiaries of company
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Dosi, G. Ed.),Technical Change and Economic theory. Pinter Publishers, London, pp. 370 398. Perrin, J.-C.,1991.
Economics of Innovation and New Technology 8, 79 103. Roper, S.,1998. Under-reporting of R&d in small firms:
Small Business Economics 12,131 135. Rosenfeld, S. A.,1996. Does co-operation enhance competitiveness? Assessing the impacts of inter-firm collaboration.
Economies et Sociétés 29 (9), 99 118. SESSI, 1996. L'innovation technologique dans l'industrie.
Economies of scope and the scope of the enterprise. Journal of Economic Behaviour and Organisation 1, 223 247.
Smaller enterprises and innovation in the UK: the SPRU innovations database revisited. Research Policy 26 (3), 19 32.
Transaction cost economics. In: Schmalensee, R.,Willig, R. Eds. Handbook of Industrial Organisation. North Holland, Amsterdam, pp. 135 182.
International Journal of Economics and Management Engineering (IJEME) Oct. 2013, Vol. 3 Iss. 5, PP. 176-181-176-Innovation, Performance and Growth Intentions
by positioning innovation as the dependent variable and examining whether SME growth intention or past performance leads to increased innovation in small-to-medium-sized enterprises.
Increasingly, innovation in new products/services and the implementation of key processes are becoming vital sources for firm competitive advantage (Rumelt, 1987;
and services are positioned to compete more successfully (Hodgetts, Luthans & Slocum, 1999). The ability to develop new products
by positioning innovation as the dependent variable and examining whether SME growth intentions or past performance leads to increased innovation in small-to-medium-sized enterprises.
and foster the culture of innovation and entrepreneurship at the State of Entrepreneurship Conference, February 9, 2012.
LITERATURE REVIEW A. SMES Interest in SMES is concerned primarily with their role in stimulating economic growth 3. However
While research in the area of business failure is debated, research suggests that failure rates are generally high (Watson, 2003).
Entrepreneurship is considered a major driver of competitiveness as new companies in the form of small, young firms create most new jobs (Davis, Haltiwanger, Jarmin, Krizan, Miranda, & Sandusky, 2006).
New innovations can improve quality of life through beneficial or improved products and services. B. Innovation In search of innovation, large firms are increasingly outsourcing a wide range of business activities,
which can create new opportunities for SMES. Larger firms rely on smaller firms for new ideas
International Journal of Economics and Management Engineering (IJEME) Oct. 2013, Vol. 3 Iss. 5, PP. 176-181-177-Innovation has been discussed as the development of a new product,
This open model has been gaining support due to several factors, such as worker mobility, short product life cycles, globalization and increased competition (Rahman & Ramos, 2010.
n d.).Innovation has been studied in several forms in the entrepreneurship literature. For example, a firm's‘Entrepreneurial Orientation'suggests that a combination of three basic dimensions:
and services, adopting new operating practices, technological, organizational or market-oriented, or creating new skills and competencies (9;
the framework for our hypothesis development is based on new product/services, opportunity recognition, process/practice development
and creativity in accomplishing goals. C. Growth Intentions Entrepreneurs vary considerably in their intentions to grow their business 6. Alterations in markets offer new opportunities for growth,
and this can be exploited in an innovative fashion (Sexton & Bowman, 1991; Brown, Davidsson & Wiklund, 2001;
Growth intentions and innovation have been linked in previous studies as firms look to take advantage of opportunities, renew processes,
and introduce new products or services (Schumpeter, 1942; Hamel, 2000; Kiam & Mauborgne, 2005; Langerek & Hultink, 2006.
Journal of Economics and Management Engineering (IJEME) Oct. 2013, Vol. 3 Iss. 5, PP. 176-181-178-factor in firm growth.
METHOD Currently the SBA defines a business concern as one that is organized for profit, has a place of business in the US,
or makes a significant contribution to the US economy through payment of taxes or use of American products,
A. Innovation Early research has examined the important role of innovation within entrepreneurship (Schumpeter, 1947. Therefore, in order to measure innovation, several dimensions were included in a twelve-item Likert scale.
3) whether the company can acquire knowledge about new products/services, and 4) whether the company can exploit this knowledge.
In addition, existing unique products/services in the company's portfolio are investigated. In order for innovation to occur,
and exhibit opportunity recognition and exploitation skills and thus three items that measured the willingness of firms to take on new opportunities
and also their willingness to adjust their business as necessary in order to exploit them. The proactive nature of firms to utilize opportunities was measured by action
and decision-making shown in uncertain situations. Innovation throughout an organization was tested with regard to general business practices,
which the venture operates be taken into consideration when measuring performance (Sandberg & Hofer, 1987). Therefore, subjective performance measures were utilized,
C. Growth Intentions International Journal of Economics and Management Engineering (IJEME) Oct. 2013, Vol. 3 Iss. 5, PP. 176-181-179-Innovation
and opportunities and increasing consumer willingness to pay more for added product benefits and features (Cho & Pucik,
opening new locations and introducing new products/services. IV. RESULTS The firms'characteristics are shown in Tables 1,
9 4. 5 22 9. 6 Other Services 14 1 0. 5 7 3. 1 Total 201 100 229 100
The US sample International Journal of Economics and Management Engineering (IJEME) Oct. 2013, Vol. 3 Iss. 5, PP. 176-181-180-shows a beta
in order to impact society has significant implications for SME owners/managers, SME employees and the economies in
High levels of innovation can facilitate firm growth and subsequent profit performance which in turn can yield employment gains
Due to the lack of resources usually common within the small firm environment, a stronger understanding of the factors contributing to their innovative performance is beneficial 1. Why is past performance a better indicator of firm innovation
or otherwise can by its nature be altered quickly by either internal or external events in the firm environment.
Busenitz & Lau (1996) described how national culture influences a tendency towards new venture creation 4. However,
The SME sector is an important contributor to both the US and global economies. SME activity makes a significant contribution to economic and social wellbeing as often new,
play an important role in innovation and provide alternative employment opportunities for many subsets of the adult population 2. Innovation in small firms is essential for the continued dynamism of modern economies (Klapper
Economies of most nations are composed largely of small-and medium-sized enterprises (SMES) and their ability to innovate has been viewed as a critical element in economic growth and renewal (Wolff & Pett, 2006;
Verhees & Meulenberg, 2004. This has led many nations to policy-making that supports innovation in SMES (Jones & Tilley, 2003.
International Journal of Economics and Management Engineering (IJEME) Oct. 2013, Vol. 3 Iss. 5, PP. 176-181-181-2 Autio, E. 2005.
Global Entrepreneurship Monitor: Report on High-Expectationentrepreneurship, London Business school/Mazars/Babson. 3 Bhide A. 2000.
A cross-cultural cognitive model of new venture creation. Entrepreneurship: Theory and Practice, 20 (4), 25-39.5 Covin, J,
. & Slevin, D. 1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10 (1), 75-87.6 Gundry, L. K,
. & Welsch, H p. 2001). The ambitious entrepreneur: High growth strategies of women-owned enterprises. Journal of Business Venturing, 16,453-470.7 Hofstede, G. 1980a.
Culture's Consequences: International Differences in Work Related Values. Beverly hills, CA: Sage. 8 Lumpkin, G. T,
Entrepreneurship: Theory and Practice, May, 507-528.11 Wiklund, J, . & Shepherd, D. 2005). Entrepreneurial orientation and small business performance:
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