A Study on the Low Technology Trap of Small-Medium Sized Firms : in Consideration of the Relationship between Technological Capability and R&D Investment for Innovation

The objective of this paper is to theoretically and empirically explore the relationship between firm size, technological capability and innovation. Through the facts that there are economies of scale in obtaining technological capability and that technological capability and innovation are dynamic complements in both ways, it can be predicted that (1) there will be differences in technological capability and innovation performance between large and small firms and (2) there will be high probability for small firms to fall into 'low technology trap'. The firms in low technology trap cannot carry out innovation but also do not adjust themselves in changing circumstances. So, the implication for public policy for this paper is that there would be a urgent need for the policy of supporting the build-up of technological capability to small firms.