Small and medium enterprise innovation

in region of Antofagasta - Chile

Gianni A. Romani

Doutor em Administracao - Financas, Universidade de Sao Paulo.

Director of MBA Program, Assistant Professor, Faculty of Economics and Business.
Universidad Catlica del Norte Chile
e-mail: gachocce@ucn.cl

Miguel Atienza

Doctor en Ciencias Econmicas Universidad Autnoma de Madrid.

Director of Human Development Regional Observatory,
Assistant Professor, Faculty of Economics and Business.
Universidad Catlica del Norte Chile
e-mail: miatien@ucn.cl

ABSTRACT
The aim of this study is to analyze the innovative potential of small and
medium enterprises (SMEs) in the Region of Antofagasta. The results of
a questionnaire applied to 50 SMEs considered as innovative according to OCDE
criteria show a contradictory situation: there is an increasing awareness of the
importance of innovation in the region while many obstacles to innovate are
recognized. This constrains can affect negatively the project of creating an
industrial and service cluster around mining in the region.

Small and Medium Enterprise (SME), Innovation, Regional SME.

Palabras
Clave:

INTRODUCTION
Small and Medium Enterprises (SMEs), despite their financial, organizational and
technological constrains, can be regarded as one of the most relevant agents in
regional innovation processes (OCDE, 2003a; and Alfonso, 2002). SMEs
innovation is heterogeneous and its traits heavily depend on each region history
and characteristics. The aim of this work is to analyze the SMEs innovative
potential in the Region of Antofagasta (Chile). That is, to evaluate local
SMEs capacity to create or modify products or processes and to introduce them
in the market.
There are two reasons that support the analysis of SMEs innovation processes
in the Region of Antofagasta. On the one hand, studies that allow the
identification of key factors for competitivity and regional endogenous
development are still scarce in Chile; on the other hand, the characterization of
SMEs innovation practices is essential for the proposal and application of
policies aiming to reduce SMEs constraints and to facilitate the establishment
of regional networks for innovative enterprises. This focus on policy application
is particularly important in the Region of Antofagasta because a program for
creating a mining cluster is being implemented since 2002, one of whose main
goals is to promote local innovation.
Section one presents a detailed bibliographic revision on innovation and the
characteristics of SMEs innovation processes. Section two describes the
methodology of the study, which has been based on a structured survey
designed according to the criteria of innovation polls used by INE (Chile) and
OCDE in Oslo (1997) and Frascati (2003b) Manuals. The study sample was
selected from databases provided by institutions such as CORFO (Corporation
for Fostering Production) through FONTEC, CDP (Corporation for Productive
Development) and AIA (Antofagasta Industrial Association). After analyzing
these databases, 50 enterprises were selected for the study. The survey was
directed to enterprise managers, 37 of which responded: 7 micro-enterprises,
22 small enterprises and 8 medium enterprises from different areas, mainly
general and industrial service companies. Finally, section three shows and
analyzes questionnaire results and comes to some conclusions regarding their
policy implications.

1. THEORETICAL AND CONCEPTUAL FRAMEWORK

1.1. Knowledge as a basis for innovation

Schumpeter seminal work (1934) analyzed how entrepreneurs innovations lead
to technological change and, consequently, to the creation of knowledge. The
so-called promoter entrepreneur is motivated to take the risk of introducing
new ideas in the market due to the monopoly profits he eventually expects for
being the first to enter the market. Technological changes introduced by
entrepreneurs cause a productivity increase and, in the long run, create
opportunities for future investments in other entrepreneurs productive capacity.
From this perspective, knowledge incorporated into technology will eventually
lead to a greater growth. Thus, technology is likely to play a fundamental role
in present knowledge-based economy. Nowadays, expressions like society of
knowledge and knowledge economy are widely used to describe the trend of
more advanced economies to a greater use of knowledge as a development
factor. This tendency has been closely related to the technological advances
produced by information revolution, to transport cost reduction and to the
emergence of an increasingly global economic and social space. Knowledge in
its various forms plays an essential role in economic behavior (OECD, 1996).
From a microeconomic perspective, individuals with greater capacity to manage
information and change it into knowledge will have indeed greater possibilities
of a better life, and companies able to manage and systematically use knowledge
will have more possibilities to compete in global markets, adapt to changes, and
get more benefits. At the same time, from a macroeconomic perspective,
countries and regions effectively developing and managing their knowledge as
assets will reach greater development and growth. The recent recognition of
knowledge as a strategic productive factor explains the increase investment in
research and development, education, training and other intangibles. In fact,
most countries have given increasing importance to these types of investments
against physical ones, having the conviction that knowledge applied to
technology is the key for development.

1.2. Concepts and types of innovations.

Schumpeter (1934) defines innovation as "The result of establishing a new
production function, a change in the set of possibilities to define what a product
is and how it could be. This definition does not necessarily involve the
introduction of a new element or novelty in the economic process, but it focuses
on technological changes understood as the way of combining different
productive factors that allow an increase the frontier of production possibilities
in an economy. From this definition, Schumpeter put forward a classification that
includes five forms of innovation, whose basic aspects are still used:
 Product innovations: They consist in the introduction into
the market of a new product or a qualitative change in an
existing product;
Process innovations: They consist in the creation of new
ways to produce in an industry or a substantial change in
the existing ones;
> Organizational innovations: They consist in the
introduction of meaningful changes in organizational
structure, and the implementation of advanced
management techniques and new or substantial changes
in the companys strategic guidelines;
Opening of new markets; and
>Use of new sources for getting raw materials and other
inputs.

The first two categories of this classification are currently used to assess science
and technology policies. In fact, OECD Oslo Manual (1997) call them
"technological product and process innovations".
Another classification extensively found in related economic literature is the one
that distinguishes between radical and incremental innovations (Vzquez-
Barquero, 1999):

Radical innovations also known as rupture innovations,

are those that produce great discontinuity in the
productive and industrial system, or generate and develop
new industrial activities. They are scarce and tend to
cause technological revolutions.
Incremental innovations are those technological changes
and adaptations that involve progressive improvement of
products and processes, like small engineering changes
introduced in productive processes to efficiently
incorporate and use available raw materials or changes in
design and product specifications so that final goods meet
customers needs.

Undoubtedly, both types of innovations, radical and incremental, are closely

related since incremental innovations involve improvement of radical
innovations, and, sometimes, can have more economic importance than initial
radical innovation, whose potential application may not be known thoroughly.
There are several classifications of innovation which reveal different aspects of
innovative processes and reflect their complexity. This work used the
classification proposed by OCDE in its Oslo Manual (1997), where a distinction
is made between product and process innovations:
"Technological product and process innovations comprise
new technologically implemented products and processes
and meaningful technological product and process
improvements."
"A technological product and process improvement has
been implemented if it has been introduced in the market
(product innovation) or used in a productive process
(process innovation). Technological product and process
innovations involve a series of scientific, technological,
 organizational, financial, and commercial activities. The
enterprise technologically innovating in product and
process is that which has technologically implemented new
or meaningful product or process improvements during the
period under study. In this case, the product or process
should be new or meaningfully improved for the enterprise
(it does not have to be new for the world).
Among the main components of technological innovations are, therefore,
products and processes according to the extent of novelty that has been
introduced in each case.
a) Technological product innovation can take two forms:
(1)

Technologically new products: These are products whose

technological characteristics or uses meaningfully differ
from products previously produced. These innovations
may involve radically new technologies, based on
combinations of existing technologies for new uses, or on
the application of new knowledge.
Technologically improved products: These are existing
products whose result has been meaningfully improved or
updated. A simple product may be improved (in terms of
either a better result or a lower cost) by applying new
components or materials, or a complex product with a
number of integrated technical subsystems that can be
improved by partial changes in one of the subsystems.

b) Technological process innovation consists in adopting technologically new or

improved production methods, including product delivery methods. These
methods may involve changes in equipment, production organization, a
combination of both, or can be due to the application of new knowledge. These
processes may be used to produce or provide technologically new or improved
products which cannot be produced or provided by conventional production
methods, or essentially, to increase efficient production or provision of existing
products.
c) Technological product and process innovation must be distinguished from
organizational innovation and other product or process changes:

Organizational innovation involves introducing meaningful

changes in organizational structure, implementing
advanced management techniques or new or substantial
changes in enterprise strategic direction.
Other product or process changes are smaller and do not
involve neither enough novelty nor "other creative
improvements" related to the use and characteristics of
the products or to the way they are produced, but to
aesthetics or other subjective qualities (See Figure 1.1).
 Figure 1.1. Type and degree innovations

1.3. The innovation process.

Schumpeters contribution (1934) mainly focused on radical innovations
introduced by promoter entrepreneurs who generate big discontinuities in the
productive system in order to get monopoly profits and, with them, promote
economic growth in imperfect competition situations. From this perspective,
other activities connected to technological change were considered less
important. Invention was regarded as exogenous to the productive system, that
is, externally provided by scientific research and knowledge.
In his latest work, Schumpeter (1943) advances toward a more nuanced position
in which the endogenous character of a big portion of technological
improvements and inventions was recognized. This perspective makes
incremental innovations more important for enterprise development since
innovation is regarded as a continuous process, endogenous to productive
network and able to spread by continuous improvement (Vzquez Barquero,
1999). During the XX century, scholars have tried to give light to the way in
which innovation is generated in the enterprise and how this is influenced by
internal and external factors. The main models used to describe the innovation
process have evolved toward increasingly wider and more complex explanations
of the way enterprises innovate. Initially the lineal model, also known as
Science Push, puts emphasis on scientific knowledge supply as a basis for
innovation and economic performance. According to the hypothesis of this
model, a lineal process leads to innovation in progressive stages. First,
knowledge is discovered in universities and research centers; spreads towards
enterprises through publications, patents, and other forms of scientific
dissemination and, lastly, arrives to the final consumer in the form either of
products or services.
Unlike the lineal model where innovations come from science, the Demand pull
model establishes that the origin of innovation lies in market demand. According
to this assumption, consumer demand variations reflected in investment rates
have a direct impact on the number of patents, that is, patented innovation
creation is an economic activity of the market subjected to demand behavior
(Schmookler, 1966). Since the 1970s, several studies began to show the
excessive simplicity of lineal and demand pull models. Among alternative
proposals, the so-called Chain-Link model stands out. This model, developed
by Kline and Rosenberg (1986: 289-291), was adopted by OECD in the report
from the Technology/Economics Program (TEP, OCDE, 1996a) and used as a
conceptual framework in the Oslo Manual (OCDE, 1996b) for measuring
technological innovation. The model conceptualizes innovation in terms of the
interaction among market opportunities, knowledge basis and enterprise
abilities. In this sense, it contains and surpasses lineal and demand pull
innovation models. Kline and Rosenberg propose the existence of innovation
stages in the enterprise and relate them to the innovation system where the
firm is involved. Each of these stages involves a number of sub processes.
Therefore, there is no continuous and lineal progression in the process of
innovation, and it is frequently necessary to return to initial stages to overcome
difficulties. All this implies feedback among the different parts of the process and
an endogeneization of the innovation process.
The Chain-Link model has advanced toward increasingly complex proposals
establishing high levels of functional integration in the innovation process. In
this respect, Rothwell (1994) proposes the creation of the so-called fifth-
generation models or System Integration Network (SIN) models, which
emphasize the importance of transferring and spreading ideas, abilities,
knowledge, information, and various types of signals. In these models the
channels and networks through which information, knowledge, and innovation
flow and disseminate are embedded in cultural, political and social environment
and strongly driven by institutional structures. More recent theories about
innovation processes integrate the economic perspective of technological change
with sociological, psychological and knowledge theories that focus on learning
as the fundamental basis of innovation. From this perspective, both learning and
innovation are interactive processes linked to productive and social networks. In
this respect, Vzquez Barquero (1999) states that the innovation process is a
social phenomenon, that is, a process stimulated through cooperation between
local actors and specific territory endowments. In this sense, Asheim and
Isaksen (1998) state that innovation processes are based on cooperation
between the enterprises and institutions that make up the productive, social and
institutional network of a territory. From this view, innovation is basically a
learning process. The social and territorial dimension of innovation implies the
creation of knowledge transcends enterprise and actors individuality and
become a collective learning process through territorial interactions.
One of the most interesting traits of innovation conceived as a social process is
its close relation to space. Innovation takes place in a specific territory and its
characteristics make innovation more or less probable. In this sense, it is
common to speak of innovative regions or millieux innovateurs as those
territories having a productive and institutional framework that makes the region
competitive due to its innovation capacity. This view of innovation has been one
of the arguments that have led countries to a progressive regionalization of
innovation policies.

1.4. SMEs in the Region of Antofagasta.

According to Markusens typology (1996), figure1.2, the territorial organization
of production in the Region of Antofagasta is close to be a Hub-and Spoke
District, where a network of service and industrial SMEs (spokes) works around
large mining companies (hubs) , mainly from abroad, that subcontract
(2)

specialized services for different stages of the value chain.

 Figure 1.2. Hub-and-Spoke District
Source: Markusen, 1996.

Culverwell (2002) states that, in 2001, large mining enterprises bought 51.6%
of their intermediate products and services in the Region while the rest was
purchased in other Chilean regions or abroad. Large companies did 40% of their
purchases to subcontractors; 30% to electricity, gas and water enterprises and
the remaining 30% to industry and other activities related to commerce, lodging,
food and transport. All these activities represent about 90% of firms in the
region, 90% of which are SMEs.
Large mining enterprises contracts tend to be in the short term (3 to 10 months),
except in the case of electricity, gas, water, and transport enterprises (31% of
the total), activities where medium and large enterprises are predominant. Thus,
about 70% of products and services purchased in the region by large mining
enterprises come from microenterprises and SMEs (Culverwell, 2002).
Taking into account the strong mining specialization of the Region of Antofagasta
(more than 60% of its GNP comes from this activity), CORFO has proposed an
Integrated Territorial Program (PTI) in order to create an industrial and service
productive cluster around mining, whose execution period will be 2003 to 2006.
PTI considers SMEs as key actors for creating the mining cluster and also accepts
the limitations and obstacles these enterprises face in the region, recognizing
that "The relationship between regional large mining industry and SMEs has not
been able to generate the necessary chain to allow developing a sustainable
entrepreneurial basis in the long run, with adequate profits for the region"
(CORFO, 2003).
The Region of Antofagasta represents 2.9% of Chilean SMEs. This percentage is
lower than the region weight in terms of both population and product. However,
during the second half of the 1990, regional SMEs growth has been greater than
in the rest of the country s and has been characterized by high enterprise birth
and death rates (Crespi, 2003). Activities involving a greater number of SMEs
are commerce, transport and construction, while technical services and industry
(food, metallic products, and machinery) rank in second and third place.
According to Pykes classification (1994), the network of SMEs in the Region of
Antofagasta is predominantly composed by dependent contractors. These are
firms with reduced technological competence and subjected to asymmetric
relationships with large mining enterprises which, in many cases, are their only
customers. They produce parts on demand or provide services at medium or low
specialization. So, they are under strong pricing pressure because they can be
easily substituted by other subcontractors. In order to offer lower prices they
follow a cost reduction strategy affecting work contract flexibility (seasonal
contracts, extra hours or subcontracts with smaller companies) and the type of
worker employed, commonly medium or low qualified.
The formation of a mining cluster based on the conditions above described, close
to a Hub-and-Spoke District and mainly related to dependent subcontracted
enterprises poses difficulties for the creation of productive networks promoting
management modernization and productive innovation, particularly in the case
of SMEs:

Since large mining companies are predominantly foreign

and strongly related to their main premises abroad, their
link with the local productive network tends to be weak
and mainly related to subcontracts in some stages of the
productive chain which, generally, requires less
technological modernization. Aroca (2001, 2002) shows
that copper mining activity linkages have been and are
weak and limited to electricity, gas, water (where there is
no SMEs dominion), construction and some services.
Relationships between SMEs and large mining enterprises
tend to be asymmetric. Commercial management capacity
is limited and there is little negotiation power with
subcontractors and large enterprises. In this case, the
horizontal interdependent relationships among firms that
characterize industrial clusters become dependent
relationships that make network formation difficult and
limit SME initiatives. Dependence associated to the risk
of losing contracts that represent a great part of SMEs
revenue generates uncertainty and distrust.
Lack of associativity between enterprises and other
organizations: Cooperation incentives among SMEs
looking for the same customers are reduced. This
negatively influences both innovative capacity and
bargain power with large mining enterprises. Direct
dependence and competition erode mutual trust among
SMEs and makes difficult the setting-up of cooperative
institutions and knowledge dissemination channels.
Medium or low qualified manpower with little capacity for
market analysis (technological niches) or mining-applied
innovations.

2. METHODOLOGY

2.1 Sample Description.

In order to analyze the innovative potential of SMEs in the Region of
Antofagasta. recommendations from OECD, Oslo and Frascati Manuals, were
considered to design an innovation and R&D survey in the entrepreneurial
sector. Due to the lack of a reliable and detailed SMEs directory to estimate the
universe to be analyzed, a non-random sample including SMEs that do or are
supposed to do modernization and innovation activities was selected. To identify
this type of SMEs, various specialized organizations were chosen in the Region
of Antofagasta:

CORFO: Data came from the Technological and Productive

Development Fund (FONTEC) whose aim is to co-finance
innovation, associative transfer, and technological
infrastructure projects. Data included all innovation,
associative transfer, and technological infrastructure
projects funded in the last few years. They were 50
 projects; but some enterprises had more than one. Once
data were analyzed, a database of 40 enterprises was
prepared, among which there were micro, small, medium
and large ones.
Productive Development Corporation (CDP) provided
information on enterprises that had some type of
qualification (ISO 9000, 14,000, etc.). These enterprises
amounted to 60; many of them were included in the
information provided by FONTEC and also micro, small,
medium and large ones were registered.
Antofagasta Industrial Association (AIA) provided a list of
14 enterprises considered innovative; 2 or 3 of them were
in operation. The remaining enterprises could not be
identified for various reasons, from management changes
to closure.

After crossing data of the three organizations in which many enterprises were
repeated, a list of 53 regional enterprises characterized by innovation was
prepared. The final sample consisted of 37 enterprises. Response rate was
relatively high reaching almost 70%, though it was necessary to insist before
having access to many enterprises and some surveys had to be given twice or
eliminated owing to the low degree of response. In this respect, it was difficult
to collect information related to turnover, export and profits.
Of the 37 enterprises that responded the survey, 60% are small. Ranking second
are medium enterprises with 21.6% and then micro enterprises with 19%.
Undoubtedly, this distribution does not correspond with the regional enterprise
universe, where the biggest group is that of micro enterprises. Nevertheless, its
important to note that this is a non-random sampling and, so the possibilities of
innovative activities for micro enterprises are more reduced than for bigger
firms. (Table 2.1).

Size Frequency Percent

Micro (0 9 employees) 7 18,9

Small (10 - 49 emp.) 22 59.5

Medium (50 199 emp.) 8 21.6

Total 37 100.0

Table 2.1 Enterprises size

Source: Author

If type of activity and firm size (Table 2.2) are analyzed, 5 out of 7 micro
enterprises provide services to industry and only 2 represent other industrial
sectors. In the case of small enterprises, though types of activities are more
diverse, still service enterprises both general and industrial predominate. The
same is true for medium enterprises where 6 out of 8 belong to the service
sector.
 Micro Small Mdium Total

Wood and furniture 0 3 0 3

Chemicals and gum 1 1 2 4

General service 0 6 2 8

Basic metals 0 2 0 2

Metal product manufacturers 0 2 0 2

Others 0 1 0 1

Industrial services 5 7 4 16

Basic non-ferrous metals 1 0 0 1

Total 7 22 8 37

Table 2.2 SMEs classification according to line of business and size.

Source: Author

2.2 Data Collection Questionnaire.

A close-ended questionnaire was prepared according to the criteria established
by INE and Oslo and Frascati OCDE manuals. The questionnaire consisted of 12
questions beginning with general questions that allow identifying and classifying
enterprises. The following part of the questionnaire dealt with different aspects
of the innovation process such as types of innovation, origin of innovative ideas,
execution of innovation activities, technical progress in equipment purchased,
innovation obstacles and innovation financing, among others. A pilot
questionnaire was given to 5 enterprises considered innovative. Results were
used to revise the test, eliminating and correcting some questions to produce
the final version.

3. RESULTS.

3.1. Product Innovation.

A high percentage of enterprises reported product innovations in the last three
years. These innovations mainly relate to technological improvement (78.4%)
and adaptation of products existing in the market (67.6%). About 30% of
enterprises surveyed reported introducing new products into the market (See
table 3.1.). Compared to similar surveys, this figure is higher than that
commonly reported. This may involve an overestimation of product innovation
by regional micro enterprises and SMEs. In the case of new products, a clear
relationship exists between enterprise age and innovation results reported: 50%
of enterprises older than 20 years reported this type of innovation (See graph
3.1.). Conversely, no meaningful differences are observed when comparing firm
according to the number of employees.

Type of product innovation %

Technological improvement 78.4

New products for enterprise, existing in the market 67.6

New products for enterprise and market 29.7

Table 3.1. Product Innovations.

Graph 3.1. New products and enterprise age (%).

Source: Author

3.2. Process Innovation.

Results reported for this type of innovation are also high (See table 3.2.) and
mainly related to technological improvements (67.6%) and process organization
improvements (73%). The introduction of new processes shows too high a result
(59.5%). This leads to think that entrepreneurs may have considered equipment
purchase a form of innovation.

Type of process innovation %

New processes 59.5

Technological improvements 73.0

Organizational improvements 67.6

Adaptations 27.0
Table 3.2. Process Innovations.
Source: Author.

Enterprises older than 20 years reported greater amounts of innovations related

to organizational process improvements and adaptations; while younger
enterprises reported greater technological improvements (See graph 3.2.).
Medium enterprises reported the greatest percent of organizational process
improvements and the smallest in other innovations of this type.

Graph 3.2. Process innovations and enterprise age (%).

Source: Author

3.3. Other Innovations.

More than 75% of the enterprises reported some type of innovation in
organizational management. No differences in enterprise size are observed,
though this form of innovation may exist mainly in those older than 10 years.
Design innovations are reported by 54% and packing innovations by 42.3%.
There are no big differences among different types of enterprises versus size
and age. Regarding projects done or to be done to develop new products and
processes, 27% reported unsuccessful projects between 2000 and 2002; while
32.4% are presently involved in projects.

3.4. Innovation Financing.

Financing mechanisms used for innovation have been 80% private and 20%
public. Main internal financing sources have been own funds representing about
50% of innovation expenses. Bank credits represent 30% of financing. Other
forms of private financing such as issuing shares or providers and customers
advance payment seem to play an irrelevant role in innovation financing (See
graph 3.3.). Medium enterprises seem to be the least dependent on public and
bank financing for innovation. More than 60% of their expenses are financed
with own resources. Conversely, micro enterprises need help to finance their
innovations in a greater percent (27.5%). Finally, small enterprises ask for funds
in banks to finance innovation expenses, representing about a third of their total
expenses (See graph 3.3.).
 Graph 3.3: Financial sources for innovation.
Source: Author.

3.5. Innovation Obstacles.

Among the obstacles regional SMEs face to innovate, financial difficulties stand
out. Almost 60% of the enterprises report that the high cost of innovation is a
very important obstacle and 54% consider the difficulty to get adequate
financing very important (See table 3.3.). Other aspects related to innovation
project financing, like long return periods and economic risks innovation
involves, are less important. Conversely, more technical aspects related to
innovation management are regarded as obstacles by most enterprises surveyed
(See table 3.3.).
Curiously, lack of qualified personnel is regarded as a quite or very important
obstacle for less than 50% of the enterprises. It seems to be more difficult to
find experienced than qualified personnel. This obstacle is regarded as quite or
very important by 51.3% of the enterprises (See table 3.4.). Resistance to
change is considered a quite or very important obstacle by 43.1% of the
enterprises; while the need to reduce payroll as a result of innovation activities
is reported by 21.6%.
When considering other obstacles for innovation, lack of market information
affects almost 46% of the enterprises and lack of technological information 41%.
This percentage is similar to that of the difficulty for establishing cooperation
with other enterprises or public institutions. The latter is considered a quite or
very important innovation obstacle by more than 40% of the enterprises. Lastly,
43.2% reported few incentives for innovation and more than a quarter reported
no innovation because it is not necessary (See table 3.5.).
Due to SMEs heterogeneity, innovation obstacles vary in importance according
to size. Thus, innovation cost is the greatest obstacle for medium enterprises,
reported as quite or very important by 100%. These enterprises also find more
difficulties in the control of innovation expenses and are the most affected by
their long return period. Besides, they find more difficulties for cooperation,
especially with public institutions, possibly because of the need of larger
investment and because public innovation-supporting programs focus on smaller
enterprises. Because of their greater number of workers, medium enterprises
consider payroll reduction as a quite or very important for innovation, reporting
25%; while the rest of the sample gives it almost no importance to this obstacle.
Qualified personnel are also important for 50% of these enterprises; while they
seem to have less trouble to hire experienced personnel.
 Small enterprises have more difficulty to get financing. 63.7% of this group
considers this factor as a quite or very important obstacle. They also have the
greatest trouble to hire qualified personnel (59.1%) and experienced personnel
(72.7%). This may be due to the fact that this group reported having less
information on technology which is regarded as a quite or very important
obstacle for innovation by 50%. Besides, small enterprises negatively stand out
for lack of innovative culture. In fact, 45.5% considers that the lack of incentives
greatly limits innovation and 36.3% considers that innovation is not necessary.

IMPORTANT

VERY VERY
NON LITTLE QUITE
OBSTACLES LITTLE MUCH

Technical risks 48.6 16.2 13.5 16.2 5.4

High innovation cost 2.7 13.5 24.3 24.3 35.1

Innovation expenses difficult

18.9 16.2 29.7 18.9 16.2
to control

Economic risk 13.5 5.4 40.5 18.9 21.6

Return period too long 10.8 16.2 27.0 27.0 18.9

Difficulty for getting adequate

8.1 10.8 27.0 24.3 29.7
financing

Table 3.3. Economic obstacles for innovation.

Source: Author.

IMPORTANT

VERY VERY
NON LITTLE QUITE
OBSTACLES LITTLE MUCH

Lack of qualified personnel 16.2 16.2 18.9 35.1 13.5

Lack of personnel experience 13.5 18.9 16.2 35.1 16.2

Resistance to change 18.9 8.1 29.7 27.0 16.2

Payroll reduction 35.1 10.8 32.4 10.8 10.8

Table 3.4. Personnel obstacles for innovation.

Source: Author.

OBSTACLES
IMPORTANT
 VERY VERY
NON LITTLE QUITE
LITTLE MUCH

Lack of technological
16.2 16.2 27.0 21.6 18.9
information

Lack of market information 27.0 13.5 13.5 35.1 10.8

Absence of technological
24.3 18.9 32.4 16.2 8.1
dynamics

Innovation to easy to imitate 29.7 13.5 29.7 16.2 10.8

Scarce possibilities of
cooperation with other 24.3 10.8 21.6 16.2 27.0
enterprises

Scarce possibilities of
cooperation with public 21.6 13.5 24.3 16.2 24.3
institutions

Innovation is not necessary 37.8 21.6 13.5 10.8 16.2

Lack of incentives 13.5 24.3 18.9 21.6 21.6

Table 3.5. Other obstacles for innovation.

Source: Author.

In the case of micro enterprises, there seems to be lack of knowledge about

possible obstacles to innovate maybe because this group had the least
possibilities to do it. Anyway, 57.1% reported that lack of knowledge about
market affects innovative initiatives quite or very negatively, followed by
technical risks with 50% and lack of incentives, a quite or very important
obstacle for 43% of the sample.

CONCLUSIONS
Results show that SMEs in the Region of Antofagasta are rather highly concerned
about innovation as a strategy to competition. Innovation percentages reported
are high in products, processes and organization. These results are remarkable
particularly on product and process adaptation and improvement. In some
cases, however, these may be due to an overestimation of innovative activity
by respondent entrepreneurs. In fact, data on new products and processes for
the market are not realistic and could be covering lack of knowledge about
market and state of technology, or rather involving too wide a concept of
innovation. In this sense, little changes in services and products offered as well
as machinery purchase may be considered as market novelties. Although
innovative activities are done mainly within the enterprise, the main obstacle
reported has to do with capacity and access to financing. Access to external
public resources is limited, except for small enterprises and more than half
innovation expenses are funded with own resources. Human capital, regarded
as one of the main sources of innovation ideas, may not exist in the necessary
amount within regional SMEs network. This problem mainly affects micro and
small enterprises that may not have enough capacity to attract more highly
trained workers.
A particularly negative data is that at least a quarter of the sample considers
that innovation is not necessary for their activity, or that they do not have
incentives to innovate. This lack of innovative culture affects, above all, small
and medium enterprises since they find more obstacles when accessing
information on markets and available technology.
As a conclusion, there is a regional SMEs network which seems to have an
increasing awareness of the importance of innovation for competitiveness and
regional development (except in the case of some micro and small enterprises).
This situation is related by SMEs to the need of equipment renewal and
acquisition of international quality certificates, though the need of more
ambitious innovation is not that large.
SMEs innovation possibilities in the Region of Antofagasta are closely related to
the way they organize as a productive network. The existence of a Hub-and-
Spoke district makes innovation to be regarded important by some enterprises
even without having important links with other organizations. In this sense, lack
of cooperation with enterprises having the same line of business and the scarce
importance of universities and public institutions are remarkable. Several path
of research open up out of results obtained. Among them, it is highly interesting
to deepen on the type of innovations that may result from customer-provider
interaction and try to discover the mechanisms to reach better SMEs integration
with the regional productive network. If this does not occur, the strength of a
possible mining cluster is highly improbable.

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Notas
[volver] 1 The term product refers both to goods and services
[volver] 2 The region of Antofagasta produces more than 50% of Chilean minerals
and represents 33,9% of world copper production, 100% of natural
nitrates, 46% of lithium and 22% of Molybdenum.