Innovation and the Use of Technology in Manufacturing Plants and SMEs: An Interregional Comparison

Abstract

In this paper we are concerned with the nature and extent of product and process innovation and adoption of information and communications technologies (ICTs) in manufacturing plants and SMEs. The paper is based on extensive postal surveys conducted in southeast (SE) England, Northern Ireland (NI), and the Republic of Ireland (RoI) with a harmonised survey instrument. We confirm the findings of a number of previous studies by demonstrating a positive association between product and process innovation and business performance. Data collected from all three surveys show that sales growth, employment growth, and profit margins were higher for innovators than growth, for noninnovators. It also appears that although foreign-owned plants show a higher propensity for innovation than indigenously owned plants, the latter grew faster than their foreign owned counterparts in all three regions. This suggests that a targeting strategy focused on innovative, indigenously owned SMEs may be particularly rewarding. With regard to the nature and extent of the use of ICT and electronic business (e-business), the survey found a higher level of adoption of nearly all ICT facilities in SE England compared with the levels in NI and the RoI. Differences in ICT capability between the regions are greatest in the case of smaller plants, with the adoption of various ICT facilities being particularly favoured amongst the smallest plants in SE England, most of which are indigenously owned. However, there is evidence to suggest that the technology may be underutilised in each region, possibly reflecting a lack of in-house knowledge and resources in some applications and external barriers in others. SE England was found to have the highest proportion of plants engaged in some R&D compared with the two Irish regions, particularly NI. Unsurprisingly, there is a tendency for the propensity of a firm to be engaged in R&D to increase with firm size. The surveys also underlined sectoral differences in explaining the relative importance of R&D. ‘Technology transfer’ was significantly more common in the two Irish regions, reflecting the higher proportion of externally controlled plants. With respect to the role of external linkages in innovation, links with customers and suppliers were the ones most commonly identified in all three regions. In SE England there is a particularly low propensity to engage in collaboration with external agencies and research institutions, indicating scope here for further policy intervention. We conclude with a number of suggestions for the agenda of the new regional centre of manufacturing excellence in SE England.