Small Scale Industries occupy a prominent place in Indian economy owing to their significant contribution to the national income, employment and exports. The value of exports of SSI in 1999-2000 formed about 35 per cent (Rs 53,975 crore) of the total exports of the country. In fact, it is their performance that will hold the key to India’s economic development in the future too.

And this will largely depend on their competitiveness in terms of price and quality. One of the strategies to achieve this is through research and development and technological innovation. It is R&D which would enable small and medium firms to introduce new products, improve the quality of the products and reduce the cost of the existing product.

But it is tough for SSIs to go in for R&D on their own formally, even in developed countries, leave alone the Indian context. However, there is considerable evidence in developed countries to show that small firms do contribute significantly in terms of innovations informally. And this is true to some extent in India also, though the exact magnitude of such efforts is not known.

For the first time in India, a department of Science and Technology-sponsored research project on 'R&D in Small Scale Industries in Karnataka' has been undertaken by the department of management studies, Indian Institute of Science, to gauge the R&D efforts taken up by the SSI units in Karnataka.

One of the major findings of the study is that out of the 2,025 (1354 non-tiny units [NTUs] and 671 tiny [TUs]) SSI units surveyed in the state, 53 per cent of the NTUs and 41 per cent of the TUs have performed R and D activity. About 45 per cent each of the NTUs and TUs, which perform R & D, have at least one fulltime worker devoted for R & D.

The study was conducted based on the data collected through a questionnaire from 1354 non-tiny and 671 tiny units across the state of Karnataka during November 1999- April 2001. Data on R & D objectives, dimensions, manpower, expenditure, achievements, employment, investment, production and exports were collected from the entrepreneurs.

Much of the R & D has been in developing new processes or undertaking improvement of the existing processes. There were 402 units, which developed new processes while 394 units had invested in improving an existing product.

Dr M H Bala Subramanyam, Principal investigator and assistant professor, IISc, said the study may not directly help the SSI, but it would definitely help the policy-makers. Identification of SSI units engaged in R&D and technology innovations, ascertaining their R&D dimensions, quantifying their R & D intensities and analysing its impact on economic performance will be of considerable significance for technology policy makers to formulate an appropriate policy to promote R&D in SSI towards enhancing their competitiveness.

This research is an indicator that implementation of R&D in an industry will definitely improve the competitiveness of the SSIs and in turn help the Indian economy to improve. Till now no planned research or surveys in these lines has been done in the country so far. I hope that the government takes a note of the research and do something to encourage R&D in SSIs, he said. The 13.77 lakh research project has been sponsored by the Department of Science and Technology.

A few statistics from the research report

		NTUs (Total-1354)	TUs (Total 671)
Units which have done R&D		716	273
Units having formal R&D		637	258
Factors determining R&D	Competition	497	196
	Technology Change	353	198
Factors for not doing R&D	No need	519	259
	No competition	13	28
Origin of Units with no need for R&D	1991-2000	371 (71.48%)	182 (70%)
Objective of R&D	Quality improvement	626	248
Total R&D expenditure		1890.01 lakh	201.9 lakh
R&D outcomes	Improved quality	588	213
	Reduced rejection	473	183

Major Findings of the Research Project:

• SSIs – tiny as well as non tiny units in Karnataka are predominantly independent. Ancillaries are very less significant in number.
• R&D is performed in-house, generally informally.
• Utilisation of external technological and technical support is only complementary and is confined to friends, relatives and consultants.
• Competition, technology change and customer requirements are the primary motivating factors for SSI to engage in R&D.
• The role of institutional technological support is negligible. Such a support is not easily accessible for SSIs.
• Capital expenditure accounted for 17 per cent of the total R & D expenditure in the non tiny sector and 10 per cent in the tiny sector in 98-99.
• Tiny sector’s R&D intensity (1.07 per cent) is higher than non tiny sector’s R & D intensity (0.89).
• SSI units, which have performed R & D have a larger scale of production, higher labour and capital productivities and therefore, higher efficiency as compared to SSI units which have not done r & D.
• More SSI units, which have performed R & D are export-oriented than those SSI units which have not done R&D.
• Export intensity is higher for SSI units which are engaged in R&D (0.57) un relation to SSI units which are not engaged in R&D (0.16).
• R&D, along with, labour and capital, makes a significant contribution to output and enable such SSI units to achieve higher returns to scale relative to SSI units which have not done any R&D.
• Capital productivity increased by 5.15 per cent in SSIs involved in R & D and by 2.61 per cent in non-R&D SSIs.