Relationship between growth and R&D intensity in low-tech and high-tech Portuguese service SMEs

Purpose – The purpose of this paper is to determine if the relationship between growth and research and development (R&D) intensity is of a different nature in the context of low- and high-tech Portuguese service small to medium-sized enterprises (SMEs).

Design/methodology/approach – The System Analysis of Iberian Balance Sheets database is used. Based on the European Union's recommendation, L124/36 (2003/261/CE), the authors select 764 low-tech and 139 high-tech Portuguese service SMEs for the period 1999-2006. As method of analysis, panel data are used.

Findings – A negative relationship between growth and R&D intensity for low-tech Portuguese service SMEs is identified, whatever the level of R&D intensity. For high-tech Portuguese service SMEs, a quadratic U-shaped relationship between growth and R&D intensity is identified. Moreover, the authors find that relationships between growth and determinants are of a special nature in the context of high-tech Portuguese service SMEs with high levels of R&D intensity.

Practical implications – It is recommended that as far as possible the managers/owners of low-tech Portuguese service SMEs, and especially high-tech ones with non-high levels of R&D intensity, hire qualified human resources and make more continuous investment in R&D. The authors advise managers/owners of high-tech Portuguese service SMEs with high levels of R&D intensity to establish stable relationships with creditors. Policy-makers should increase financial support directed, above all, to innovative Portuguese service SMEs.

Originality/value – The paper is pioneering in presenting different relationships between growth and R&D intensity in the context of low- and high-tech service SMEs.