The causes and the effects of innovation in small and medium firms in the province of Salerno

The paper focuses on the elements characterizing innovation and its effects in small and medium firms in a Southern Italian area, where the specialization is mainly concentrated in traditional sectors, the size of the firm affects consistently the chance to innovate and, at the same time, generally there is no Research and Development (R&D) department inside the firm. The paper aims to understand whether there are cases of small and medium firms able to exploit a competitive advantage using their innovative capability, beside the sectoral and size limits. One of the main expected result is to understand if in province of Salerno the size and the sector of the firm represent a limit in introducing some sort innovation (product, process or in the organization structure). In particular, we want to investigate if it is possible to innovate, in those firms where there is no R&D function. At the same time, if there is innovation, we want to understand what are the main factors of influence. In fact, apart those traditional elements (Griliches, 95) that have a positive and significant role innovation, we want to analyze if other elements, such as entrepreneur education, learning or the networks characterising the relationship between small and medium firms, play a key role in the introduction of innovation, and if the expected result is an improvement it the competitive position of firms. Innovation has became an important point in economic theory since is positive effect in assessing a competitive advantage to the firms adopting it is widely accepted. Researcher have focused on the determinants and on the effects of innovation, which is usually expected to give, at least, a temporary competitive advantage to the firm and an impact to sector dynamics (Nelson and Winter, 82; Dosi, 88; Freeman and Soete, 87). Usually innovation is strictly linked to the major dimension of the firms and to a competitive advantage of them, but: can be a firm be innovative even if it has not a relevant size and do not compete in a dynamic, innovative sector? In this cases, innovation may be linked to the way in which the firms interact between them, circulate ideas and information. Besides we considered as important some characteristics of the management or the entrepreneur, in fact an important element was the variable of the firm‐owner’s previous activity and his/her level of education, in order to investigate the training and professional background. In fact, another point of investigation is the effect of innovation, since R&D effort does not give a measure of the effects of innovation and there are different sources of innovation, especially in traditional sectors where very often technologies are embodied in new machinery and equipment. The data used was drawn from the OPIS databank, a survey on a sample of about 500 firms of the province of Salerno (Italy). An important section was devoted to collect information on the type (process, product and organizational) and the timing of innovations, the effectiveness and way in which the enterprise acquired information about the innovations. The econometric methodology consist of the estimation of an Heckman probit model or probit with sample selection. In fact, we estimate, the probability that innovation is successful, controlling for the selection bias deriving form the fact that the output of the innovations was know only for firms that have introduced the innovation