INNOVATION CHARACTERISTICS OF SMALL AND MEDIUM SIZED TECHNOLOGY-BASED FIRMS IN SÃO PAULO, BRAZIL: A PRELIMINARY ANALYS IS

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1 INNOVATION CHARACTERISTICS OF SMALL AND MEDIUM SIZED TECHNOLOGY-BASED FIRMS IN SÃO PAULO, BRAZIL: A PRELIMINARY ANALYS IS ANA CRISTINA FERNANDES Universidade Federal de São Carlos Dept. de Engenharia Civil tel: anacf@power.ufscar.br MAURO ROCHA CÔRTES Universidade Federal de São Carlos Dept. de Engenharia de Produção tel: mauro@power.ufscar.br JORGE OISHI Universidade Federal de São Carlos Dept. de Estatística tel: djoi@power.ufscar.br ABSTRACT * The present paper proposes a procedure to addresses the profile of Brazilian small and medium sized high technology firms (SMFs), an important though poorly understood aspect of the country s innovation dynamics, in spite of several contributions which include Ferro and Torkomian (1988) and Stefanuto (1993), and more recently Quadros et allii (1999). In order to do so, we followed a widely accepted assumption that, in line with Bell and Pavitt s (1993) findings about developing countries, the major part of these firms innovation-related activities are connected with diffusion, adaptation and improvement of existing technologies rather than development of new technology, or significant innovation. In line with this, we applied three criteria that could reflect basic innovation attributes that could distinguish a technology-based SMF in a developing country like Brazil: i) presence of an R&D sector within the firm whether or not formally structured; ii) relationships with universities or research centres; and iii) investment in R&D. Firms which answered negatively to all of these three attributes have been withdrawn, in that the final sample ended up with a total of 136 firms, spread along 12 industrial sectors. Application of this criteria gave us the first approximation to the searched profile of the Brazilian technology-based SMFs: they are rather small firms, relatively young (below ten years of age), highly concentrated in two industrial sectors (precision and medical instruments and information technology), predominantly located in the metropolitan region of São Paulo, and present innovation features which are well above those of overall firms from São Paulo state, therefore much well above the overall Brazilian firms. The authors want to acknowledge with thanks the most valuable contribution that our colleague Marcelo Silva Pinho, also from UFSCar, has made to the present article, by discussing the conception of the profile of technology-based SMFs applied in the present paper. We also want to acknowledge the financial support of FAPESP that has allowed our research to continue. 1

2 1. INTRODUCTION The present paper intends to address the profile of Brazilian small and medium sized high technology firms (SMFs), an imp ortant though poorly understood aspect of the country s innovation dynamics. The search for a profile of small and medium sized high tech firms in Brazil has inspired several contributions which include Ferro and Torkomian (1988) and Stefanuto (1993), and more recently Quadros et allii (1999). These authors After all, as Quandt (1997) estimates, Brazil s R&D expenditure represents only 0.6% of national GDP, in comparison to 1.4% regarding other medium-income countries like Malaysia, Korea and Hong Kong, let alone high income countries (2.5%). The dimension of such R&D expenditure is even more alarming if one considers that innovation increasingly demands higher investment and more sophisticated human and organisational resources. In this way, if a profile of Brazilian high tech SMFs is to be defined, a starting point would be to consider the historical and geographical constraints to which they are exposed. This means recognising their limits to access knowledge, markets, credit in a given period in history, because they are established in a less dynamic national innovation system, at the same time that they have to face strong competition from their counterparts from more developed countries. Consequently, the majority of the Brazilian high tech SMFs would reside in a sort of fringe of the innovation environment of the national economy in opposition to a dynamic nucleus where hardly any significant innovation or any new economically viable technology would occur. Such an assumption necessarily requires the translation of the concept of high tech firm from a developed country understanding into a developing country one, which could reflect the conditions of the specific innovation system where they operate. Otherwise, the survey would not be able to assess a significant innovation activity, which is taking place in this country by simply regretting the qualification of high tech to less dynamic firms as compared to those from developed countries. Following the steps, further aspects must be introduced in order to give significance to results. Firstly, there might be differentiation between modernised and high tech firms, being the former those, which have introduced new technologies within their production process. This leads to the recognition of the firm s product as its main reference of innovation: new products reflect new technology developed within the firm, no matter whether in connection with other firms, research centres or not. But this product must be in the market, must be economically viable, or else it would be only an invention, applied scientific knowledge. Secondly, the firm must show innovation capabilities embedded in its expenditures in R&D activities and specialised human resources, however low the intensity of such capabilities and expenditures as compared to those found in advanced country s innovation systems. Expenditures would reflect the importance given to technological accumulation in respect to the firm s mission and market strategy. Acquisition of technology outside the firm could also count if related to a technological accumulation strategy of the sort mentioned by Bell and Pavitt (1993), that is, an evolutionary technical change through continuous imitation and diffusion towards technical change implemented by firms within contemporary developing countries. Thirdly, there is the firm s ability to keep evolving in terms of both product innovation and learning capabilities. This would also imply getting involved into project development networks, which would help improve its organis ational skills while getting acquainted to technology produced elsewhere. Altogether, these aspects would reflect technological learning as a condition needed for it be considered a high tech firm. In this way, attention would address both the material and relational (as proposed by Storper, 1993) conditions for technological accumulation, hence the innovation dynamics that would be flourishing. Finally, the firm s dimension small and medium size would reflect not only its widely mentioned flexibility and diligent nature, its ability to find new business opportunities, and its innovation and product development co-operation with large firms, but also its lower age, higher business uncertainty and more restricted investment capacity in general, and in R&D in particular, in spite of high returns that might follow eventually. In summary, the Brazilian small and medium technology-based firm would be assessed through a product-cum-innovation capacity filter, derived from a set of indicators. These would include i) in-house 2

3 developed product; ii) R&D expenditures in relation to the firm s turnover 1 ; iii) presence of an R&D department in the firm; iv) ratio of engineers and scientists to the firm s total employees (not only those engaged in the R&D department, as in many cases there is no R&D department but informally undertaken R&D activities); v) relationship with universities and/or research centres; and vi) expenditures in acquisition of new technology related to technological accumulation. An additional characteristic was added, namely, the firm s foreign commercial relations, as these would reflect the product s market competitivity. These indicators should then reflect the innovation intensity of the firms surveyed and in consequence, the profile of Brazilian high tech SMFs so much looked after. Their application to the survey s data base would therefore return a sub-group of firms which would reflect higher innovation intensity then the average firm within the Brazilian economy, although how high we would only be able to know afterwards. To the results derived from this profile proposed we will turn our attention, after a few more words about the methodology utilised, though. 2. METHODOLOGY It does so by exploring the results of a direct survey carried out in , which led to a data basis out from 226 firms below 700 employees from 5 technology-dense regions 3 in the state of São Paulo, the most industrialised among Brazilian states. The survey was based on a questionnaire which included information about the firm s locational preferences, commercial relations, financial characteristics, investment strategy besides innovation activities. In an effort to characterise such firms, a set of criteria was finally applied to the data basis. The survey had been oriented towards assessing firms located in São Paulo s most advanced industrial regions, as required by SEBRAE-SP, the institution that supported it. These include part of the metropolitan region of São Paulo (the nucleous of the metropolis, on the one hand, and the so-called ABCD region 4, on the other hand), Campinas and São José dos Campos, important industrial areas which respond for nearly 20% of the state industry, particularly the former, and Ribeirão Preto and São Carlos. The latter is now recognised, along Campinas and São José dos Campos, as the state s main technological poles, while Ribeirão Preto has developed the reputation of locating some high tech firms related to medical instruments due to its well-known medical school (at the University of São Paulo s campus in town). In order to produce the sample, 38 data bases from various institutions (ranging from universities and technological incubators to firm associations and research funding agencies) have been investigated, mounting to a huge data base formed of 97,729 records of firms located in those regions. Considering that these records do not present the innovation indicators mentioned above, a first selection based on the industrial sector had to be carried out. This led to a new base with 67,000 records. A second selection, based on the innovation opportunities of industrial sectors as those proposed by Pavitt (1984), resulted in a 10,000 record-base. Telephone contact and so-called sensibility meetings produced another base, now formed of 675 records, to which the questionnaires have been delivered. Out of these, 226 firms answered the questionnaires, that is, a 33.5% of returning rate. A first review of the innovation characteristics of these firms led to a sample formed by 178 firm-data base. Over these firms, we then applied three criteria that would reflect a set of basic innovation attributes that would distinguish a technology-based SMF in a developing country like Brazil. The attributes chosen to give this distinction were: i) presence of an R&D sector within the firm whether or not formally structured; ii) relationships with universities or research centres; and iii) investment in R&D. Firms which answered negatively to all of these three attributes have been withdrawn, in that the final sample ended up with a total of 136 firms, spread along 12 industrial sectors. Application of this criteria gave us the first approximation to the searched profile of the Brazilian technology-based SMFs. Analysis of the remaining general and innovation characteristics of the firms 1 The ratio R&D expenditure to value added was not feasible to be extracted from the survey under focus. We had to substitute value added with turnover. It is worth mentioning that comprehensive economic, let alone innovation, statistics have not been produced in Brazil for the past 15 years. A valuable exception is a recent survey by SEADE (see Quadros et al, 1999), to which we are applying the same criteria. Results are now being produced. 2 The survey was carried out by the authors after invitation by São Carlos ParqTec, and was sponsored by SEBRAE- SP (which stands for the Brazilian Service for Business Supporting). 3 The metropolitan region of São Paulo, Campinas, São José dos Campos, São Carlos and Ribeirão Preto. 4 ABCD stands for Santo André, B for São Bernardo, C for São Caetano and D for Diadema, four important industrial cities within the metropolitan region. 3

4 given by the questionnaires would help complete the profile. On this analysis attention will focus in the next sections. 3. RESULTS General characteristics First thing, it is worth mentioning that the number of firms nearly doubled between 1990 and 1997, from 63 to This tendency may reflect the firms capacity to explore innovation-intensive market opportunities, especially because they are highly concentrated in two science-based CNAE 6 sectors: medical equipment and precision and automation instruments (36.0%); and information technology (22.8%). Together these two sectors account for over half (58.8%) of the sample, thus being an indicative of high sector concentration. Electronical and communications equipment and chemical firms come next (with 8.8% and 6.6%, respectively), responding for 15.4%, which means that they are far below the leading sectors, and quite a clear different threshold. The remaining 8 industrial sectors present in the sample accounted for a quarter of the firms surveyed, that is, 35 establishments. This concentration is therefore a second important aspect which we have come accross, which may reflect the windows of opportunity that the market and technology characteristics of activities within these sectors shall offer to SMFs in developing countries. This is certainly a question to be further investigated in future research. Regarding regional distribution, the sample also showed a significant concentration in the metropolitan region of São Paulo, where over half of the firms are established (53.7%, out of which 39.7% within the metropolitan nucleus, the city of São Paulo). This concentration obviously reflects the metropolis agglomeration economies, which was therefore expected. Campinas comes next, as it also holds a very important position within the state urban system, apart from its large research reputation, especially in communication and information technologies. It houses 16.9% of the firms surveyed, followed by São Carlos with 12%, where concentration of technology-related research is also significant as far as the Brazilian research conditions are concerned. São José dos Campos with 8.8% and Ribeirão Preto with 8.1% fall a little behind. As for regional specialisation, as seen in figure 1, production of medical equipment and precision and automation instruments sector is the first or second more important sector in every one of the regions, including São Paulo, being especially significant for São Carlos (41.2%) and Ribeirão Preto (81.8%). The latter region shows therefore a strong sector specialisation. In Campinas the information technology sector predominates (34.8%), in São José dos Campos communications and electronical equipment share the lead with medical equipment and precision and automation instruments, both accounting for one third of the region s firms, while the metropolitan periphery (ABCD), as expected, shows a more diversified distribution among industrial sectors, with machinery coming up as one of the main sectors (with 26.3%). 5 Firms that did not exist in 1990 did not answer to the question regarding number of employees, so that the number of firms in 1997 is different from 136, the survey s total. 6 CNAE stands for the Brazilian classification of economic activities, by IBGE, the federal bureau of geography and statistics. 4

5 90,0% 80,0% 70,0% 60,0% 50,0% 40,0% 30,0% 20,0% 10,0% 0,0% São Paulo ABCD Campinas São José dos Campos São Carlos Ribeirão Preto Medical equip. & precision instrum. Machinery Information Techology Electron. & comms. equip. Figure 1. Sector concentration by region Considering the firms size, as seen in table 1, the survey shows that, along with an average size of 37.2 employees (having increased from 24.1 in 1990), there is a considerable concentration of micro (63%), as compared with small (24%) and medium (2%) sized firms 7. This characteristic holds true for each region and industrial sector, being chemical (73.5 employees), office and information equipment (66.5 employees) and machinery (45.3 employees) industries those which showed the largest average number of employees in 1997, all of them within the category of small firm according to SEBRAE. It is worth noting that the office and information equipment industry presented a significant increase in its average number of employees, growing 10.2 times since 1990 (6.5 employees). It joins other 5 industries, which increased their average number of employees (chemical, metallurgy, electrical material, electronical and communications equipment, and information technology). As figure 2 shows, the regional tendencies varied considerably regarding the firms size in number of employees. Four regions showed an increase in their average size, between 1990 and 1997: São Paulo, ABCD, Campinas and Ribeirão Preto. Interesting to register is that São Paulo has overcome São José dos Campos as the region with the largest average size of firms, increasing from 31.6 to 52.8 employees in the period, while the latter has dropped by nearly half to 30.9 employees. This reduction reflects downscaling and subcontracting that industry as a whole has undergone during the 1990s in Brazil. However the intensity to which this process has reached particularly in São José dos Campos remains something to be verified. Finally, it is interesting to note that the average size of firms located in the ABCD region, Campinas, São José dos Campos and Ribeirão Preto range around 30 employees, whereas São Carlos s firms are well below this average (15.8 employees), whilst São Paulo is in the opposite side. 7 Firm size of CIESP (industrial firms representative centre of São Paulo) adopted: micro up to 29 employees; small between 30 and 199; medium between 200 and

6 70 Average number of employe Years São Paulo ABCD Campinas São José dos Campos São Carlos Ribeirão Preto Figure 2. Average age of firms In order to complement the firms general characteristics, table 1 shows some other indicators for the whole survey and by region, such as average turnover (in Brazilian Reais and US Dollars), the annual average rate of growth of turnover between 1994 and 1997, average age and, again, the average number of employees in Regarding average turnover, we must comment that the results showed a great dispersion so that the survey reflects a strong differentiation among firms. Given that, we can observe that the mean firm size in terms of turnover is US$ million and there has been an average increase of 42.1% in the forms turnover in the period. We can also see that there are three classes of firms regarding the turnover: one with an average turnover higher than US$ 2 million, another one between US$ 1 million and US$ 2 million; and the last one below US$ 1 million. São Paulo, São José dos Campos and São Carlos fell in this last category, whereas Campinas is placed in the first one. Although all regions show growing turnover in the period (42.1% per year in general), São José dos Campos show a remarkable rate, while São Carlos falls well behind the general average growth. This led us to compare turnover with average age, which shows that firms located in São José dos Campos are the youngest, which can be consistent with the dimension of turnover growth of this region s firms. However, those firms also present the average indicator of labour productivity (turnover per employee), below the general average, that is US$17,206, whilst Campinas shows the highest ratio, followed by the ABCD region and Ribeirão Preto. Like São José dos Campos, São Carlos and São Paulo are below the general average, an expected return concerning the latter. Table 1. General characteristics of firms average turnover (R$) average turnover (US$)* turnover annual growth (%) average age average number of employees productivity (turnover/ employee) US$ São Paulo 1,732, , ,61 ABCD 3,060,005 1,700, ,47 Campinas 5,013,099 2,785, ,49 São José dos Campos 957, , ,42 São Carlos 922, , ,72 Ribeirão Preto 2,024,741 1,124, ,99 General average 2,336,581 1,298, ,17 Source: Fernandes and Côrtes. Exchange rate: R$1.80 = US$1.00. In summary, we can see that the survey is comprised of small firms in terms of employees, even for contemporary, post-restructuring conditions, but they still show high growth rates as far as turnover is concerned. The survey also show that there are significant disparities among regional performances, regarding all indicators considered, to the exception of average age of firms. Although in general the firms are not old, as technology-intensive firms are expected to be, they can neither be considered start-ups, in 6

7 that they may therefore have overcome initial product uncertainties although still presenting high turnover growth rates. Innovation characteristics In respect to innovation effort, the survey gives four important quantitative data: graduate staff engaged in R&D, percentage of turnover invested in R&D, relationships with universities and research centres and the presence of formally structured R&D within the firm. As a matter of illustration, we included the firms that carry out R&D activities, to show that even if this is a basic aspect to distinguish technology-based firms, among firms in São Paulo this does not hold true for some industrial sectors, although both are less technology-intensive industries (non-metallic mineral products and metallurgy). This observation leads to one of the main features that the survey returned: the results confirmed the expectations regarding the low technological effort and capability of São Paulo s technology-based firms as compared to advanced countries, but well above the total set of firms from São Paulo s economy analysed by Quadros et al (1999). Whilst the authors found an average ratio of 1.2% of graduate staff in R&D to total employment of firms with R&D, our survey on technology-based firms (which considered more rigid innovation parameters than that applied in the former case) shows a much higher ratio, 26.7%. A second feature regards the fact that, like the analysis by Quadros et al., the sectors R&D activity and innovation effort are relatively more concentrated in those sectors which are ranked high, as far as technology opportunities and intensity are concerned. Moreover, considering a ranking defined by percentage of turnover invested in R&D, the survey shows three classes of firms: one with a ratio larger than 20%, another one with a ratio between 20% and 10% and a last one below 10%. As such, the survey s four main sectors are among those ranked within the former two classes, considering that electronics material scored virtually 10%. Table 2. Innovation indicators of firms graduate staff in R&D on total employment investment in R&D on total turnover relationship w/ formal R&D universities & sector within research centres the firm perform R&D activities Non-metallic mineral products ,0 - - Metallurgy ,0 - - Services to firms 8,9 23,8 5,0 48,3 62,5 25,0 100,0 Information technology 30,0 48,4 18,3 29,3 29,0 16,1 100,0 Chemicals & pharmaceuticals 7,1 13,2 3,0 19,0 66,7 22,2 100,0 Instruments & automation equipment 16,8 20,9 14,8 14,3 46,9 26,5 100,0 Research & development - 31,3-12,0 66,7-100,0 Electronics material & telecom 50,7 25,4 6,0 9,9 16,7 33,3 100,0 Electrical machinery 26,3 19,5 1,0 8,7 71,4 14,3 80,0 Office machinery & information equipment 47,7 24,8 5,0 6,5 25,0 50,0 100,0 Mechanical machinery 4,0 21,2 2,0 4,0 37,5 12,5 71,4 Metal products 10,0 11,1 1,0 1,0 100,0-66,7 General average 21,4 26,7 11,2 17,5 44,9 22,1 100,0 Number of firms 37,0 88,0 31,0 69,0 136,0 136,0 100,0 Source: Fernandes and Côrtes. A third feature we want to point out is the fact that in general the share of graduate staff engaged in R&D in total employment is significantly high (26.7%, in 1997), having additionally increased since 1990 (21.4%), a period marked by the opening up of Brazilian economy, thus increased international competition and economic uncertainties. Actually, the only sectors whose ratios declined are those especially hit by commercial liberalisation that improved in the 1990s in Brazil (electronics material, electrical machinery and office machinery and information equipment). The latter sector, however, in spite of having reduced its graduate staff in R&D by nearly half, it still ranked the third position among all 7

8 sectors. The survey also shows that 44.9% of firms engage in relationships with universities and research centres, whereas 22.1% have R&D department formally established within the firm. In general, the survey s main sectors present high scores in all indicators of technological effort and capability, but also that R&D effort of the technology-based SMFs from São Paulo is concentrated in science-based and conventional engineering industries, which present higher technology opportunities. However, for these firms high technology opportunities seem to derive from market niches into which large or multinational firms are not keen to occupy, so that incremental innovation is more likely to come about. These are two research questions with which further surveys should deal. Table 3. Correlation between age/investment in R&D and size of firms Average age micro small medium total below 5 years 82% 14% 4% 100% between 5 and 10 years 71% 29% 0% 100% more than 10 years 66% 30% 4% 100% Total 72% 26% 3% 100% Share of turnover invested in R&D Até 10% 49% 49% 3% 100% 10 a 20% 83% 17% 0% 100% Acima de 20% 94% 6% 0% 100% Total 66% 32% 2% 100% Source: Fernandes and Côrtes. When classes of age of firms and intensity of investment in R&D were confronted against size of firms, as seen in table 3, we found that i) in all classes of ages micro firms predominate as they do in every class of investment in R&D; ii) firms with more then ten years of age and those which invest up to 10% of turnover in R&D show the smallest concentration of micro size. But it seems that the highest the investment in R&D, the strongest is concentration in micro firms; and iii) medium firms represent a small proportion of firms surveyed regarding both indicators, although regarding size, medium firms concentrate the majority (67%, not seen in table 3) of firms with more than ten years of age. Regional distribution of technological effort is also worth addressing 8. A first feature that derives from table 4 is the fact that technology effort varies considerably among regions, although regarding investment in R&D they seem to have experienced some cohesion between 1990 and A second feature is concerned with the performance of Campinas, which can be distinguished as the most dynamic region as it either leads or ranks second or third place in all indicators. This is not surprising as far as the position of Campinas in the state urban system, close to the metropolis (90km away) and connected to the latter through modern highways, at the same time that it is an important consumer market (a population of more than one million people) not to mention its important research centres and university (Instituto Agronômico, CATI, CPqD telecom, CTI information technology centre, and UNICAMP, among others. Campinas also houses Brazil s second largest airport in terms of international cargo. Finally, it is also worth noting that following Campinas, only in Ribeirão Preto the totality of firms stated that perform R&D activities. São Carlos showed the highest concentration of firms which declared that engage in relationship with universities and research centres, which is also in line with the characteristics of the city which polarise this region: much smaller (around 180 thousand inhabitants), São Carlos houses two important technology-oriented universities (an USP state university campus, and UFSCar, a federal university), from which many spin-offs have been registered in the literature (Torkomian, 1999). São Paulo, on the other hand, in spite of its high concentration of technology-based SMFs has not appeared as technologically affluent as its position as the country s main metropolis would tell. 8 Sums of tables 2 and 3 do not match because they result from total answers instead of total number of firms. 8

9 Table 4. Innovation indicators by region graduate staff in R&D on total employment investment in R&D on total turnover relationship w/ universities & research centres formal R&D sector within the firm perform R&D activities São José dos Campos 44,3 29,1 26,6 25,3 58,3 16,7 90,0 Campinas 32,8 35,5 19,6 23,3 56,5 30,4 100,0 São Paulo 23,2 21,8 11,8 15,2 40,7 20,4 97,7 São Carlos 16,7 45,5 2,0 15,0 64,7 17,6 90,0 ABCD 11,5 25,2 2,0 14,5 26,3 26,3 85,7 Ribeirão Preto 11,9 9,0 11,1 8,8 27,3 18,2 100,0 General average 21,4 26,7 11,2 17,5 44,9 22,1 95,1 Number of firms Source: Fernandes and Côrtes. This is not obviously the case when large firms are considered, as preliminary results from regional analysis of PAEP shows 9. Not only São Paulo s ratio of graduate staff engaged in R&D to total employment declined in the period (like São José dos Campos and Ribeirão Preto), but it also presented figures below the general average in 4 out of the 5 indicators analysed. Resembling São Paulo s performance, that of São José dos Campos is also intriguing, as long as it houses some of Brazil s important technological centres and firms, especially related to aeronautics industry, such as CTA aeronautics technology centre, ITA aeronautics technology institute, INPI aerospatial research institute, and Embraer the Brazilian aeronautic company. 4. CONCLUSIONS This paper aimed at testing a procedure to assess the profile of technology-based SMFs in the Brazilian economy, applied to the data basis derived from a sample survey carried out in 1997, in São Paulo s most technologically advanced regions. The exercise produced interesting insights about these firms profile, which had not yet been empirically examined, especially after flexibilisation of Brazilian economy. Results have filled expectations about the lacking conditions of innovation capabilities and technological accumulation among Brazilian high tech firms located in São Paulo, as compared to advanced countries and their rather small average size, so that the average profile of firms would be placed in the fringe of the innovation environment presented above. In this way, we found that incremental as against significant innovation is predominantly taking place within the firms surveyed. Yet they are relevantly distinct as compared with the innovation effort of the whole industrial economy of São Paulo state, although just a minority present formally established R&D department within the firm. Moreover, they have also shown important technical progress regarding growth of both graduate employees on total employment and investment in R&D, in spite of various difficulties that are associated with economic liberalisation and unstable economic performance during the 1990s in Brazil. If, on the one hand, these difficulties seem to have even opened some opportunities for these firms, they are not irrelevant at all for their economic performance as a whole: high interest rates lasting for a long period, sudden trade liberalisation, increase of international sourcing, and overall difficulties to access credit, among others. In spite of this, the technical progress observed may thus reflect the firms recognition that technology and innovation are crucial aspects for their competitiveness and capacity to explore opportunities in each of their market niches so as to remain in business. In a few words, the Brazilian technology-based SMFs from São Paulo are rather small firms, although they are getting bigger in terms of both number of employees and turnover. They are also relatively young (below ten years of age), although already past the death rate threshold of 3 years of age, for Brazilian SMFs standards according to SEBRAE. Considering their sector distribution, they are highly concentrated in two industrial sectors (precision and medical instruments and information technology), whilst predominantly located in the metropolitan region of São Paulo. Those located in Campinas, in turn, are more innovative, productive and larger in terms of turnover. As the whole firms surveyed present 9 At the moment, we are engaged in implementing a similar analysis of PAEP data basis, applying the same methodology regarding the innovation attributes mentioned before. 9

10 innovation features well above those of overall firms from São Paulo state, we assume that they are even more innovative than the overall Brazilian SMFs. Several questions can be easily raised from this analysis: how large is the share of technologybased firms in the whole of the economy; which correlations exist between firm size, innovation capacities and location for different industrial sectors; what sort of attributes or market characteristics prevent larger firms to dispute some niches where technology-based SMFs operate; which limits and potentials characterise these firms particular markets; whether or not they engage into R&D co-operation with other firms; and so on. In this way, we understand that that we have managed to demonstrate that the profile designed at the onset of the paper succeeded in recognising the distinguished character of technology-based SMFs as compared with overall firms from São Paulo, as well as their regional and sector distinction and specialisation. However, it is worth pointing out that, on the one hand, we understand that this still is a difficult profile to design, not only because innovation conditions vary from place to place, from time to time, but especially because firms hold a sector identity, rather than a technology-based identity. Market, competitiveness and technology seem to matter for them in terms of sector of activity than in terms of categories of firms given by innovation intensity. On the other hand, results are still preliminary so that the questions that have been raised so far shall constitute subject for further research. 10

11 5. MAIN REFERENCES Bell, M e Pavitt, K 1993 Technological accumulation and industrial growth: contrasts between developed and developing countries. In Industrial and Corporate Change, 2(2): Ferro, J R and Torkomian, A L 1988 Criação de pequenas empresas de alta tecnologia. In Revista de Administração de Empresas, 22(2): Fernandes, A C e Côrtes, M R 1999 Caracterização do perfil da pequena empresa de base tecnológica no estado de São Paulo: uma análise preliminar. Paper presented at the Science and Technology Research Seminar, Unicamp, Instituto de Geociências, October. Fernandes, A C e Côrtes, M R 1998 Caracterização do perfil da pequena empresa de base tecnológica no estado de São Paulo. Research report. SEBRAE-SP and UFSCar, mimeo. Quadros, R, Furtado, A, Bernardes, R e Franco, E 1999 Technological innovation in Brazilian industry: an assessment based on the São Paulo innovation survey. Artigo apresentado no 3 rd International Conference on Technology Policy and Innovation, Austin, Agosto. Quandt, C 1997 The emerging high technology cluster of Campinas, Brazil. In Voyer, R Technopolis, 97, Ottawa, International Development Research Centre. Stefanuto, G N 1993 As empresas de base tecnológica de Campinas. Campinas, Unicamp, Instituto de Geociências, dissertação de mestrado. 11