Technological Innovations in Small-Scale Industries: Case Studies of Two Foundries in Karnataka

Article excerpt

This paper probes the origin, sources, nature, dimensions and outcomes of technological innovations carried out in two small-scale foundries in Belgaum city, Belgaum district, Karnataka state. The two foundries have initiated technological innovations primarily due to the vision and motivation of their respective entrepreneurs. One of the two entrepreneurs in both the foundries is a technical graduate, who is instrumental in initiating and carrying out technological innovations. This brings out the crucial importance of educational background in the promotion of entrepreneurial dynamism. Technical innovations are carried out with self-efforts, with little external assistance, particularly from that of the government. Incremental innovations characterized by changing product designs/shapes/dimensions, reduction of cost, quality improvement and import substitution through 'reverse engineering' are the major features of technological innovations. Enhancement of competitiveness due to cost reduction, quality improvement and consequently, reduction in rejection rates, customers' need satisfaction, import substitution and penetration of the international market through exports are the major achievements.


Small-scale industries occupy a place of strategic importance in Indian economy due to their considerable contribution to employment, production and exports. In 2000/01, small-scale industries accounted for 95% of the industrial units, 40% of the manufacturing value added, 80% of the manufacturing employment and 35% of the total exports (PlanningCommission, 2001). However, since 1991 Indian small-scale industries have been exposed to intensifying competitive environment internally as well as externally and therefore, their performance in terms of growth of units, employment, production and exports and their relative contribution to national income have come down (BaIa Subrahmanya M H; forthcoming).

In view of the above, enhancing the competitiveness of small-scale industries has assumed significance in order to sustain and promote its contribution to the national economy. According to Fisher and Reuber (2000), those Small and Medium Enterprises (SMEs) that are internationally competitive are better able to grow as well as to survive in their domestic markets. In order to become internationally competitive, SMEs must be market-oriented and offer products and services of international quality (Fisher and Reuber, 2000). Technological innovations, which contribute to technology development, market orientation, cost reduction and quality improvement, among others, enable firms/ enterprises to compete effectively in national and international markets. Therefore, it is essential to facilitate and encourage in-house technological innovations of enterprises, irrespective of size, if they have to acquire competitiveness. In most developing countries, majority of the enterprises as well as highest proportion of employment is accounted by Small and Medium Enterprises (SMEs) and therefore, technology progress in SMEs is of crucial importance to such countries. The same holds good for India where majority of the industrial sector comprises SMEs, particularly small-scale industries, as referred above.

Therefore, Government of India has made technology development as one of the major objectives of small-scale industries policy. However, the mechanism evolved for technology development in small-scale industries relies heavily on technology transfer rather than promoting technological innovations (BaIa Subrahmanya, M H, et al., 2002). Government policy has largely overlooked the R & D efforts and technological innovations of small-scale enterprises. But in Karnataka, a considerable proportion of small-scale enterprises across industries does carry out technological innovations, largely informally, to enhance competitiveness through cost reduction and quality improvement, among others. Innovation expenditure makes a significant contribution to the value of output (BaIa Subrahmanya, M H, et al. …