Enterprise and Small Business Principles
Innovation and the small business
Just as the economy has been besieged by a wave of technological change that has left virtually no sector of the economy untouched, scientific understanding of the innovative process - that is, the manner by which firms innovate, and the impact such technological change has in turn on enterprises and markets - has also undergone a revolution, which, if somewhat quieter, has been no less fundamental. Well into the 1970s, conventional wisdom about the nature of technological change was shaped largely by Schumpeter (1942). This conventional wisdom confirmed to a generation of scholars and policy makers that innovation and technological change lie in the domain of large corporations and that small business would fade away as the victim of its own inefficiencies.
While this conventional wisdom about the singular role played by large enterprises with market power prevailed during the first three decades subsequent to the close of World War II, more recently a wave of new studies has challenged this wisdom. Most importantly, these studies have identified a much wider spectrum of enterprises contributing to innovative activity, and that in particular small entrepreneurial firms as well as large established incumbents play an important role in the innovation and process of technological change.
In the global economy, the continued entry of new technology-based firms (NTBFs) into the economy is a crucial public policy issue. Government plays an important role in small firm innovation by increasing small business access to the R&D infrastructure, diffusing risk and providing capital.
