A Study of Technological Change in the Small Enterprises of a Developing Economy: Analytical Framework and Empirical Examination

What firm level processes of diffusion of new technologies are there for small enterprises in a developing economy? This paper attempts to answer this question by focusing on the differential characteristics of small enterprises (vis-à-vis larger ones) including their differential access to inputs like finance and information that are necessary for the inevitable technological upgradation of these enterprises in the globalised era.

An analytical framework is developed that enables one to characterise the process of firm level technological change and examines the factors affecting it in the small enterprises of a developing nation. The empirical evidence from the framework is then examined.

Analysis of the study reveals that factors influencing enterprises change in the technologies include:

• product market
• owner-manager's perception of market changes
• technological capabilities
• scale of operation
• labour behaviour
• attitudes of the firm
• the availability of finance, information, complementary skills and materials to the firm
• the relative factor prices that the firm faces

Using this framework, the paper investigates the factors influencing technological change in some of the small auto component units of India using the primary survey data.

Results indicate that the important determinants of transformation technology (i.e., level of mechanisation) are:

• the availability of institutional finance
• the scale of operation
• labour attitudes

The paper concludes that small enterprises of developing nations are too small to think of going in for higher levels of technologies such as NC machinery, total quality system of ISO9000 and electronic mail. Few of these enterprises that can consider using these higher technologies as they are constrained by their limited access to institutional finance.