5. Key Environmental Factors

a. Sources of Finance and Incentives

Andreas Lewicki argues strongly that the major source of finance for innovation in general – namely, the public sector – is strongly blased against small firms. He claims two sources of support for this contention:

There are also other ways in which large firms have an advantage over their smaller counterparts in gaining access to government funds. For instance, the paperwork and application procedures are easily sufficient to occupy the full-time efforts of a department of application specialists – an approach which large industry has long since pursued. Such a resource for coping with government administration is simply beyond the means of the small firm. In addition, it is important to have been established for a long time in order to have “Bonität” or credibility in the eyes of government, which takes the view (albeit implicitly) that large industry is consistently a better bet when subsidising innovation projects.

Finally, given his location in Baden-Württemberg, Andreas Lewicki faces an additional, special problem in that this region is the centre of the machine tool industry in the Federal Republic. Consequently, most available funds are traditionally channelled into supporting the machine tool industry. Since most federal funds are distributed through land “filters”, it is virtually impossible for a thick film specialist to participate in the subsidy programme in this particular region.

b. Stimulation of Technical Innovation

Andreas Lewicki does not believe that a science park concept would work in Germany. Furthermore, he feels that the educational system runs contrary to the value systems necessary to promote such innovative activity and points out the almost total absence of courses in such subjects as hybrid-IC technology, thick and thin film technology and integrated circuit design.

c. Industry and Market Conditions

Andreas Lewicki feels that in the Federal Republic large firms have an abiding concern to keep small firms in their proper place so that they are limited to a contributory role as suppliers to large industry, rather than being technological innovators themselves. Lewicki identifies a number of motives that underlie this attitude toward small firms:

In Lewicki’s view, if government actively supported NTBF’s, the result would be to exert real competitive pressure on large industry in the area of technological innovation. The efforts of NTBF’s would force large industry to become much more dynamic than it is today. Andreas Lewicki maintains that large industry is well aware of this eventuality and actively works to dominate the subsidy programmes.

The practical result of this attitude is that small firms are usually prevented from making any major contribution in a new technological field, since large firms have a virtual monopoly on contacts with the government which leads to their securing the major contracts and the largest part of available public funds. The real tragedy of the situation, according to Lewicki, is that large firms are frequently not the most efficient means of exploiting a new technology and small firms, with their low overheads and high quality one-line specialisation, can do a better job. As evidence, Andreas Lewicki points to the fact that, in 1975, government support for the development of hybrid technologies ceases and, immediately, one of the two major companies involved closed its central hybrid facility. The other company subsequently closed its two main laboratories because they were still working at a loss. Lewicki maintains that both of these companies’ research teams were over-staffed and that they used too much and too expensive equipment and materials: “They learned how to get government money but not how to work economically and competitively.”

Andreas Lewicki does acknowledge, however, that small firms do experience some serious problems simply by virtue of their size and he suggests that any government interested in sponsoring NTBF’s should address itself to some of the following handicaps faced by small business:

Arthur D. Little AVENUE DES ARTS 56, C – 1040 BRUSSELS, BELGIUM R.C.B. 368.264 TEL. 58.59.58 TELEX 22812
11. März 1976