Manchester School of Management
Economic and Public Policy Analysis of Technology

Innovation in High-Technology Companies:
The Small Firm’s Perspective with Reference to the
Mobile Phone Sector

Authors: 

Katrina Cain & Ben Beiske

November 2002

Table of Contents

1 INTRODUCTION 1

2 DEFINITION NEW TECHNOLOGY BASED FIRMS 3

3 CHARACTERISTICS NEW TECHNOLOGY BASED FIRMS 4
3.1 SURVIVAL 5
3.2 FOUNDERS 5
3.3 GROWTH AND EMPLOYMENT 6
3.4 EXTERNAL FACTORS 7
3.5 NETWORKING 8

4 SMALL FIRMS – BIG FIRMS 9
4.1 WHY COLLABORATE? 9

5 PUTTING THEORY IN PRACTISE: THE MOBILE PHONE SECTOR 11
5.1 MOBILE PHONE TECHNOLOGY 12
5.2 EXCURSION: CHINA – THE WORLD’S LARGEST MOBILE PHONE MARKET 13
5.3 NOKIA AND SMALL COMPANIES 14
5.4 INNOVATION OF THE SMALL PLAYER – PICOCHIP 15
5.5 CONCLUSION MOBILE PHONE SECTOR 17

6 COUNTRY INVOLVEMENT IN INNOVATION 19

7 CONCLUSION 21

8 APPENDIX I 23

9 BIBLIOGRAPHY 24

1 Introduction

In the last twenty years, many researchers and even governments have undertaken studies concerning small, innovative firms operating in new technology sectors. Different researchers have concluded different things from different studies, and different opinions prevail in many areas.

Even a brief look into the area of New Technology-Based Firms (NTBFs) shows that extensive literature exists on a wide range of topics, both on a more general scale, but also on rather specialised sub-areas of NTBFs. While it is certainly desirable to explore any one of these specialised areas in more depth, the focus of this paper is to give a brief but comprehensive overview of the area of NTBFs about research in the last 20 to 25 years. The underlying notion of the paper is to question if large firms are better at innovation than small firms. An answer to this question in the light of the findings of this paper will be attempted in the conclusion in chapter seven. Specifically, the purpose of this paper is to define and highlight briefly the main characteristics of NTBFs, and to point out the level of cooperation between small and large firms in the technology sector. It will then evaluate these in the light of the Mobile Phone sector. The influence of governments on small innovative companies will also be considered.

This paper will start out with a definition of NTBFs in chapter two. Chapter three will highlight the five main characteristics of a NTBF that will ultimately determine the success or failure of the company. Chapter four will then look at the interplay between small and large companies, and will consider how much these two parties cooperate or compete. In chapter five, the findings of the previous chapters will be examined in the light of the mobile phone industry, with reference made to the mobile phone market in China, and also to a small innovative UK company. In chapter six, four countries and their approaches to foster innovation among small companies will be highlighted. Finally, chapter seven will sum up the findings of this paper and offer a conclusion on the underlying question if large firms are better at innovation than small ones.

2 Definition New Technology Based Firms

The study of New Technology-Based Firms is, compared to other areas of research, a relatively new phenomenon. Arthur D. Little produced one of the first studies in the field in 1977, which generated interest among researchers and governments alike. One of the first problems arising when talking about NTBFs is a clear and concise definition of the NTBF itself. Researchers offer different definitions of the term; from the literature reviewed, one can broadly divide these into two categories: A narrow definition of NTBF, and a broader definition. Arthur D. Little (1977) sees NTBFs essentially as ‘an independent owned business established for not more than 25 years and based on the exploitation of an invention which implies substantial technological risk’. While this appears to be a very narrow definition, a broader view is favoured by other authors such as Butchard (1987), who essentially sees NTBFs as industries in sectors ‘…with above-average R&D intensity and above-average proportion of scientists, professional engineers and technicians in the labour force’.

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