Given the circumstances described above (several types of IT still in their infancy; some industries just beginning to employ IT on a larger scale; many SMEs that have not yet adopted IT), there seems to be ample room for further IT diffusion (and for its encouragement by public policy). But, as the last two decades have shown, rapid technological development can co-exist with productivity performance that is rather poor in historical comparison. Productivity growth rates have been rising over the last few years, but are still below those of the 1960s and 1970s in almost all OECD countries.
Behind this "productivity puzzle"57(i.e. the co-existence of rapid diffusion of new technologies and poor productivity performance) lie the difficulties involved in using IT properly. It is important to ensure a mode of use of new technologies that is able to capture their full economic potential. Tidd has elaborated the existence of numerous flexibility problems accompanying the introduction of "flexible automation".58 These range from problems of reprogramming software, technical barriers in sensors and control devices, missing linkages between existing "islands of automation", to rigidity of organisations and internal hierarchies within factories.59
With respect to the main limitations of SMEs (primarily problems of finance, especially when the general economic climate is bad), their situation is eased somewhat as regards IT because of the declining price of computing power. It may not, therefore, be necessary to further subsidise purchases of mature types of IT such as CNC machine tools as these machines have become sufficiently cheap as to be affordable by a larger number of SMEs. The issue is somewhat different for the more advanced forms of IT, such as FMS and CIM.
In addition to the well-documented problems faced by SMEs in capital markets,60recent research has pointed to the crucial importance of organisational change in SMEs61 in the process of IT adoption.
In particular, SMEs benefited to a large extent from measures such as the support of (technical or managerial) consultancy in several technology promotion programmes (e.g. the Danish TDP, the Canadian AMTAP and the Austrian Flex-CIM programme).62
According to some evaluations, the efficiency of financial subsidies (as measured by the degree of "additionality")63 seems to be higher in SMEs because of the possibility for larger firms to "enshrine"
projects that are seen as vital for the core competence of the firm, while getting other (less important) projects funded publicly.
Therefore, efficient policy mechanisms for IT diffusion among SMEs should increasingly take into account the organisational aspect. This aspect not only includes the "internal" adaptation of organisational structures and behaviour, but also the re-positioning of SMEs within networks of "external" co-operation.
The degree of innovativeness (and the level of IT adoption) seems to be dependent on the type of external networking, whether SMEs are forced to increase their IT use by larger firms in order to keep their position as sub-contractors in just-in-time (JIT)-networks, or whether they form a more interdependent network as is the case for firms in some Italian and German regions (Northern Italy, Baden-Wurttemberg).
As has been pointed out before, the comprehensiveness of policy measures is one prerequisite for successful policies in support of SMEs. Addressing only one point in the innovation chain (for example by subsidising R&D or the purchase of equipment) is likely to miss the point of SME problems.
Recent policy developments in many European OECD countries have put more weight on the promotion of R&D and -- moderately -- on support for SMEs.64 This can be seen from the development of industrial support programmes in the late 1980s, where such traditional defensive measures as "crisis aid"
or "general investment promotion" lost in importance, while more offensive instruments, such as the promotion of R&D and support for education and training, were the channel for increasing shares of government funding (see Table 9). Another indication of the increased weight is the broad range of policy tools that have been successively developed and deployed since the late 1970s (see Table 10).
Table9.IndustrialsupportprogrammesintheOECD,1986-89 NCG*(incurrentUS$billion)DistributionofNCG PolicyobjectivesNumberNCG availableAverage NCG1986198719881989Total1986198719881989Total Sectoralprogrammes130118444.46.35.84.120.65.99.38.77.77.9 Crisisaid3729451.820.70.75.22.42.91.01.32.0 R&Dsupport159144466.77.46.26.126.49.010.99.311.510.1 Regionaldevelopment1621368410.211.711.911.845.613.717.217.822.217.4 Generalinvestmentaid1239129040.925.224.415105.554.837.036.528.240.2 SMEprogrammes11787332.53.13.22.811.63.44.64.85.34.4 Employment/trainingsupport6054441.923.629.52.52.95.43.83.6 Export-relatedaids91801196.310.310.910.5388.415.116.319.814.5 Total8797398974.668.166.953.1262.4100100100100100 1.NCG=NetCosttoGovernment. Source:OECD(1992),"IndustrialSupportPoliciesinOECDCountries1986-89",OCDE/GD(92)126,Paris.
Table10.SMEproductionmeasuresbycentralgovernment AUTBELCYPCSDENFINFRAGERGRCHUNITALICNLDNORPOLPORTESPSWECHTURKUK 1Definition* byEmployees:
M500S25 M300 M500M500M500M?M100M100M300M500M200MfgM 150 byFinancialindicators:10bnAs assets
DM 100m
350mDrsS<500m,M< 2500mHUF 2.2bEsc 2CentGovtdeptrespESIEIIXEII:SBAI& Others
EEI& Others I& Others I/APMEI/[MP]III& Others
Emplmt (Ind) 3Govtburdenunit•None but under review
None but under review
••Nonebut underreview
None but under review
•None but under review
••Nonebut under review
•None but gen prog
None butgen prog
• 4.1Localgovtmeasures•••••••••••• 5.1Subsidisedinfoservices•••••o•••••o•o••• 5.2Subsidisedadvice/counselling••••o•••••o••• 5.3SubsidisedSMEemployertrg••••••••oo••• 5.4Corporationtax••••o•oNone• 5.5Businessincometax•••••o•o•oNone• 5.6Localtax•••oNone• 5.7Relieffor3rdpartyequity•••ooNone•• 5.8Venturecapital••oNone?oNone 5.9Bankguarantees•••••••••oo••None?•• 5.10Subsidisedloans••••oo•••o••••• 5.11Grants••••o•••ooo• 5.12Publicpurchases••••• 5.13Employerco-ops•••••••••o••••?
Table10.SMEproductionmeasuresbycentralgovernment(cont’d) AUTBELCYPCSDENFINFRAGERGRCHUNITALICNLDNORPOLPORTESPSWECHTURKUK 5.14R&Dtechnology••••••••o•••• 5.15Exemption/socialrights••••None?None?••••• 5.16Start-ups•••••••••o•••••• 5.17Competitionlaw•••••None? 5.18OtherExprt prem Otrg &rect
None?••Exprt loans 6.1Publiclawchambers•?•••?•••• 6.2Voluntarychambers•••?••••••? 6.3Otherprivatebodies••••••••••••••••?• 6.4Independentgovtagencies••••••None?••••••••• 6.5Govtoffices•••••oo•••••••• Explanations:S...smallenterprises;M...medium-sizedenterprises;*...indicatesthatthispolicyinstrumentisused;o...indicatesthatthisinstrumentisseenasaveryeffectiveone;?...unclear;E/I/M/X...meantheMinistriesforEconomics,Industry,Middle Classesandmultiplerespectively. Abbreviationsofcountrynames: AUT...Austria,BEL...Belgium,CYP...Cyprus,CS...Czechoslovakia,DEN...Denmark,FIN...Finland,FRA...France,GER...Germany,GRC...Greece,HUN...Hungary,IT...Italy,LIC...Lichtenstein,NLD...Netherlands,NOR...Norway,POL...Poland, PORT...Portugal,ESP...Spain,SWE...Sweden,CH...Switzerland,TURK...Turkey,UK...UnitedKingdom. Source:Bannock,G.(1993),"ThePromotionofSmallandMedium-sizedEnterprisesinEurope",revisedreportfortheCouncilofEurope,EM-DE(93)2,31/32,Strasbourg.
Although SME policies still occupy only a modest position compared to other policy areas, major technology programmes are increasingly designed to meet the specific needs of SMEs more carefully than was the case in the past. Moreover, a programme with a technology focus will not necessarily foster IT diffusion in SMEs. Successful examples of technology diffusion promotion include "soft" instruments, such as the provision of consultancy and business services. In order to attract SMEs, the barriers for entry to these programmes must be kept as low as possible. For example:
-- they should include awareness measures and marketing for the programme itself;
-- bureaucratic barriers must be kept low;
-- programme duration should be sufficiently long to give time to adjust the programme flexibly to unanticipated needs of SMEs;
-- the funding should be raised above the comparatively low levels that have been devoted to SMEs in the past; and
-- programmes should help SMEs to access technical and scientific information; either:
i) via the encouragement of co-operation between users and producers of IT to establish stable relations. Networks of this type have been found to be one of the main sources of innovation;65 or
ii) via links to universities, technology transfer institutions or other parts of the technological infrastructure.
As has been argued above, SMEs face many difficulties in implementing IT. Far from being the spearhead of a new "manufacturing paradigm", they show lower levels of diffusion of new technologies and are, as yet, unable to fully utilise their potential.
Government intervention to overcome these problems would seem to be justified if it is well tailored to the needs of SMEs. Although the attention given to SME problems in the course of the introduction of new technologies is a fairly recent phenomenon, there are already some encouraging examples of successful policy approaches.
These examples have revealed some requirements for successful policy approaches, which have been elaborated above. The most important requirements are:
-- the supply of a comprehensive range of policy instruments in order to make sure that the different (and changing) needs of different types of enterprises, technologies, etc. are met;
and
-- a shift from "hard" to "soft" diffusion policies,66 that is, putting less emphasis on the subsidised introduction of hardware, but addressing the internal potential for adoption of the firm itself. A high intensity of investment subsidies might lead to a better age structure of the capital stock and to a higher level of diffusion of IT (in this case CNC machine tools), but not necessarily to a subsequently higher level of labour productivity.67
The adoption potential necessary for the efficient utilisation of IT can be fostered best by:
-- the provision of skilled labour and support in retraining the workforce;
-- the opening up of access to external sources of competence, be it consultancy services, databases and information networks, or links to research facilities and universities; and -- awareness and demonstration programmes showing examples of successful IT implementation.
The provision of these "infrastructural" prerequisites for innovation and diffusion processes in SMEs would help them to fully exploit the potential of IT and considerably raise productivity and competitiveness.