Traditional SMEs and innovation: the role of the industrial policy in Italy

The aim of this paper is two-fold. First, it analyses the Italian aid programmes for innovation and technology and, in particular, the role of the regions in view of the recent legislative framework. The second aim is to match the needs of Italian SMEs for technological innovation with the state and regional aid programmes. Two empirical research programmes carried out at Ceris-CNR (Institute of Economic Research on Firms and Growth - Italian National Research Council) confirmed that the Italian SMEs' approach to innovation tends to meet the demand of the existing market through incremental processes. The most common way of introducing new technology is by purchasing new machines and equipment to reduce costs and improve quality. All industrialized countries tend to favour the linking of SMEs with external sources of knowledge. The paper shows that in Italy such a policy clashes with the capacity of SMEs for absorbing innovation. Most of thetas lack the technical structures (technical office, design department, R&D laboratory, prototype department, etc.) and the graduate staff capable of interacting with the research bodies.