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Innovation and Small Enterprises in the Third World

Innovation and Small Enterprises in the Third World

New Horizons in the Economics of Innovation series

Edited by Meine Pieter van Dijk and Henry Sandee

Innovation is crucial for small enterprises to become and remain competitive in the global economy. In this book, the authors have combined theoretical insights with comprehensive case studies on innovation among small-scale enterprises in developing countries, paying particular attention to technological change in clusters of small firms.

Chapter 2: Small Enterprise Development in Developing Countries: Innovation or Acquisition of Technological Capability?

Henny Romijn

Subjects: development studies, development economics, economics and finance, development economics


Chapter 2 15/3/02 8:56 am Page 3 2. Small enterprise development in developing countries: innovation or acquisition of technological capability? 1 Henny Romijn The need to create remunerative employment opportunities in small-scale industries in low-income countries has already occupied the attention of researchers and policy makers for quite some time. The urgency is clear. Registered small-scale firms2 generate an estimated 63 per cent of manufacturing employment in countries with incomes between US$ 500 and 1000 per capita, and close to 40 per cent in countries with incomes between US$ 1000 and 2000 (Gillis et al., 1996:4 96). These percentages would be much higher still if we could give estimates that also include the countless unregistered activities that typify the small-scale manufacturing sector in developing countries. A plethora of policies and programmes have been mounted to improve the income conditions in these enterprises since the early 1970s, and an almost boundless literature documenting these efforts is now available. Yet, the importance of small firms’ technological performance is hardly discussed in this literature. This is peculiar, because one might expect that improvements in products, processes and production organization would be crucial for their sustained competitiveness, and thus for their income-generation potential. This would seem to be especially vital in a context of economic liberalization and increasing global integration, where many developing country markets even traditional ones - are undergoing fast change. In this environment, lack of adaptation and upgrading spells defeat, while firms that keep up or even initiate their...

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