Overcoming the double hurdles to investing in technology

Technological activities of small and medium-sized enterprises (SMEs) have received considerable attention from researchers and policy makers since the mid-1980s. Small firms could nurture entrepreneurship and facilitate the creation and application of new ideas. In spite of their potential in generating innovations, it is also observed that SMEs shy away from formal RandD activities, and the firm size itself seems to be a barrier for RandD activities. SMEs operating in developing countries face extra hurdles to investing in RandD. Given the massive share of SMEs, it becomes crucial to realize their developmental potential in developing countries. In this paper, we study the drivers of RandD activities in SMEs in Turkish manufacturing industries by using panel data at the establishment level for the 1993DS2001 period. Our findings suggest that SMEs are less likely to conduct RandD, but if they overcome the first obstacle of conducting RandD, they spend proportionally more on RandD than the LSEs do. RandD intensity is higher in small than in large firms. Moreover, public RandD encourages firms to intensify their RandD efforts. The impact of RandD support is stronger for small firms. Reprinted by permission of Springer