ABSTRACT
Entrepreneurs and small firms have an almost mythological place in thinking about innovation. In Silicon Valley, small firms are associated with the inventiveness and creativity associated with the computer and IT sector (Saxenian, 1996), while in Cambridge, UK, small university spin-out companies have helped drive biotechnology and regional development (Druilhe and Garnsey, 2003). Other studies have emphasized the role of small firms in commercializing new research results and opening up new markets (Roberts, 1991, Lockett et al., 2003). In this chapter we explore the role of small firms in innovation. Key themes are: the heterogeneity of small companies — and therefore, the difficulty of generalization; the specific barriers which entrepreneurs and small firms face in undertaking innovation and the managerial and strategic challenges these pose. The key learning objectives therefore are:
To introduce the notion of innovation and its conceptual and empirical relationship to entrepreneurship.
To explore the strengths and weaknesses of small firms in terms of their ability to innovate and how these might vary across different national and international contexts.
To evaluate a range of different policy instruments which have been used to overcome the barriers to innovation by entrepreneurs and small firms.
