Importance of Technological Innovation for SME Growth - Evidence from India

M. H. Bala Subrahmanya, M. Mathirajan & K. N. Krishnaswamy


This paper probes the drivers, dimensions, achievements, and outcomes of technological innovations carried out by SMEs in the auto components, electronics, and machine tool sectors of Bangalore in India. Further, it ascertains the growth rates of innovative SMEs vis-à-vis noninnovative SMEs in terms of sales turnover, employment, and investment. Thereafter, it probes the relationship between innovation and growth of SMEs by (i) estimating a correlation between innovation sales and sales growth, (ii) calculating innovation sales for high, medium, and low growth innovative SMEs and doing a one-way ANOVA, and (iii) ascertaining the influence of innovation sales, along with investment growth and employment growth on gross value-added growth by means of multiple regression analysis. The paper brings out substantial evidence to argue that innovations of SMEs contributed to their growth.

Keywords: technological innovations, sales growth, auto components, electronics, machine tools, Bangalore

JEL classification: L25, L26

UNU-MERIT Working Papers ISSN 1871-9872

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