Managing R&D in SMEs

Abstract

It is a paradox of entrepreneurship that entrepreneurs often have to develop new products and/or modify existing ones for their entry into the market and for their survival, but find it difficult to attract the necessary expertise or afford the costs of setting up formal R&D facilities. This paper examines the ingenious methods employed by entrepreneurs to accomplish this apparently impossible task. Based on a review of the literature and an examination of anecdotes and case studies on new product launches, it is inferred that the principal strategy of entrepreneurs for developing and commercializing new ideas is to identify and leverage network resources. The most commonly used of these resources are: (a) large corporations with a need to externalize some of their activities; (b) small companies with similar or complementary interests but which are unable or unwilling to bear the full risk and therefore are interested in sharing the risk and returns; (c) research institutions that periodically come up with potentially useful ideas but are not in a position to commercialize them; (d) funding agencies that are interested in high returns and therefore are prepared to take high risks; and (e) government and public agencies interested in the development of their domains for which they consider the innovative entrepreneur to be one of the most effective instruments. All these organizations are motivated by self-interest and thus can provide opportunities for meaningful and productive partnerships for the entrepreneur. In this context, new product development in entrepreneurial small firms should be seen more as a social than a technological process.