s? There is evidence that the upward trend in the average size of firms that had been an enduring feature of economic development since the industrial revolution (Galbraith 1956, Chandler 1977) has slowed down or even reversed itself since the 1970s (Peters 1992, Acs 1996), calling into question the view that there are increasing returns to scale - internal to firms - that drive successful firms to increase in size. Focusing on technology and innovation in particular, Acs and Preston (1997 p.2.) posit the question: "Is the apparent resurgence of smaller firms due to the emergence of a dynamic, vital innovative entrepreneurial sector, or is it due to the inability of large incumbent MNEs [multinational enterprises] to prevail in a technologically dynamic global environment?"There is some evidence that small and medium enterprises (SMEs) are better innovators than their larger counterparts. This is suggested, for example, by the US data associated with Federal research funding which indicates that SMEs spend less on R&D than large firms, yet generate more new knowledge (Acs and Preston 1997). How can this be explained?The research to date clearly indicates that the internal institutional context is an important variable. Researchers trying to understand why, often tend to start with a closer look at the more salient characteristics of the innovation process itself (Quinn 1979, Quinn 1985, Kanter 1988, Peters 1990). Most now agree that the process, in whatever organisational context, large or small, is essentially a probabilistic one, that even when well managed can best be described as one of "controlled chaos" (Quinn 1985). As Peters (1990, p.17) put it, "innovation, in the end and no matter how well thought out is a numbers game". It requires variety in idea generation, and multiple independent approaches help to improve substantially the odds for success. It further requires a high degree of personal or group obsession to see the innov...
