External technology acquisition of SMEs in the engineering industry of Bangalore

Abstract

Purpose – The purpose of this paper is to ascertain: first, India's public policy support for small and medium enterprises (SMEs) for external technology acquisition (ETA); second, objectives of SMEs for ETA; and third, factors which induced them to obtain their first ETA. Design/methodology/approach – Public policy is examined through survey of literature, whereas objectives and factors influencing first ETAs by SMEs are analyzed based on primary data collected from 64 SMEs in Bangalore. Objectives of ETAs are analyzed descriptively whereas factors which facilitated/hindered early ETAs are examined through Cox regression analysis. Findings – Public policy for ETAs by SMEs includes technology information, assistance and fiscal incentives. The technology focus of these SMEs has been shifting from conventional lathes to computer numerical control (CNC) machines. Most of the SMEs have gone for technology up-gradation with the objective of improving product quality, scale expansion, and meeting customer demand. Majority of these SMEs have obtained their first ETA within six years of their inception. Firm level factors have significantly influenced the time taken by these SMEs for their first ETAs. Overall, when technology is well developed and easily accessible, SMEs would hardly look for external support for ETAs. Research limitations/implications – The shifting technology focus from conventional lathes to CNC machines is a welcome development, which is driven by the need for “competitiveness enhancement”. Since there is no major obstacle for ETAs, policy makers may focus more on providing SMEs with market information and market developments. Practical implications – The shifting technology focus from conventional lathes to CNC machines in Indian SMEs is a welcome development, which is largely driven by the need for better product quality, scale expansion and customer demand, and internal factors played a crucial role in the time taken by these SMEs in accomplishing their first ETA. As such there is no major obstacle for these SMEs in going for ETAs since technology suppliers are available at the door-step and finance is available from the banks. Therefore, policy makers may focus more on providing SMEs with market information and market developments in the domestic as well as international market. Originality/value – This is a first attempt to examine public policy, objectives and factors influencing SMEs for ETAs in India, after 1991.