New technology-based firms and technology acquisition in Portugal: Firms' adaptive responses to a less favourable environment

Technovation, 15(8) (1995) 497-510

New technology-based firms and technology acquisition in Portugal: firms" adaptive responses to a less favourable environment

Margarida Fontes and Rod Coombs Manchester School of Management, University of Manchester Institute of Science and Technology (UMIST), PC) Box 88, Manchester M60 1QD, UK

Abstract

This paper summarizes an empirical study of NTBF creation and early evolution in Portugal. It focuses on the implications of being created and operating in a country with a weak national system of innovation for the process of acquisition of technological knowledge and technology necessary for formation and subsequent development of the firm.

It is agreed that start-up conditions concerning the acquisition of the initial technology and the relationships then established have important implications for the subsequent process of technology acquisition, and a number of patterns of behaviour are identified. The main options for the launch of an NTBF are analysed. One stereotype is firms which have a privileged link with a particular source of technology which they use in a more or less 'symbiotic' way. A second stereotype is the firm which has a more independent s tance - by choice or out of necessity - - but is able to build alternative forms of technology acquisition.

The privileged relationship appeared to have a number of advantages, although it is a relatively recent experience whose implications are not yet completely clear. The experience of firms which did not have the privileged relationship shows that technology access is often a complex undertaking for NTBFs in less well-endowed environments. The strategies followed by firms to guarantee the acquisition of relevant technological knowledge are thus adaptive resportses, devised to cope with the limitations of their environment.

1. The process of NTBF creation

New firm creation has been increasingly addressed by researchers as a complex and integrated process, whose comprehension requires the investigation of different dimensions and of the interactions between them [1]. In this view, firm

creation has been regarded as a process of resource acquisition into which funds, capabilities and technologies are drawn, involving several sources and interveners, and which needs to be analysed in the context where it occurs [2]. This process is 'orchestrated' by the founders, who are often the major driving force behind creation [3]. But the

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M. Fontes and R. Coombs

founders are by no means the sole participants in this process, and the network of relationships they establish assumes particular importance [4, 5]. In the particular case of the creation of new technology-based firms (NTBFs), a plurality of roles and actors performing them have been identified [6-8], some of them sharing the entrepreneurial role with the founder or team of founders [9], and generally having a determinant impact on firms' early evolution.

On the basis of these contributions, NTBF creation can be regarded as a process involving several actors, sometimes from different origins, which establish between them and with the environment a set of relationships. The nature of the actors and of their relationships shapes the new organization being created, and has a determinant influence on its subsequent evolution. Since conditions differ according to the characteristics of the context where this process occurs, it is possible to argue that NTBF creation is largely a context- based process. In other words, NTBF creation is based on the ability of a given context to generate the diverse ' inputs'--environmental conditions, actors and relationships - - that will ultimately lead to the creation of a technology-based firm. Because of the technological nature of this type of firm, technology-related inputs are likely to be predomi- nant. Similarly, NTBFs' subsequent evolution as technology-oriented firms will depend on the ability of that context to continue to provide the relevant inputs, or at least the conditions for their access.

2. National systems of innovation and NTBF creation

An understanding of the way the various inputs are generated and accessed is therefore necessary in order to evaluate the ability of a particular context to generate NTBFs. Winter [10] pointed out that "innovative entry" is determined by the occurrence of innovative ideas and of the entrepreneurial ability to exploit them. Further- more, access to the "knowledge assets" relevant

for new firm creation is related to the degree of exposure of people to the knowledge base from which they are generated. In industries with a specialized knowledge base, the production or research activities being undertaken in government organizations, or by suppliers of embodied technology and employment in existing firms, provide the conditions for such access. This is consistent with the view that research undertaken in universities and other non-profit organizations, and the activities of existing firms, provide a basic scientific and technological context for the emergence of the opportunities which are exploited by NTBFs [9]. These organizations are often described as having an 'incubating' role [11]. They not only generate a relevant part of the knowledge, but may also provide the future entrepreneurs in the form of their employees who were exposed to the new knowledge and possess the skills to detect its potential applications [8, 12, 13].

The founders of NTBFs (and the other eventual actors in the creation process) are in fact identifying and using technological opportunities which are not being exploited by other organizations. In doing that they are, to some extent, 'internalizing' into a new organization the externalities created by the process of generation and diffusion of technology. Those externalities may take the form of public knowledge, which is widely available, or of more localized knowledge, which Dosi [14 (p. 226)] described as the "technological complementarities, 'synergies' and flow of stimuli and constraints which do not entirely correspond to commodity flows", only accessible to the actors in a particular context. While in the first case they may be procured by 'outsiders', in the latter, immersion in the environment where they are generated is indispensable.

It can be concluded that the more extensive the externalities generated in one particular context, the greater the potential for technological opportunities to emerge; and the higher the number of people exposed to the sources from which those opportunities emanate, the higher the possibility that they will be identified, and that an innovative idea will emerge. Finally, the possibility of effec-

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NTBFs and technology acquisition in Portugal

tively exploiting that idea, turning it into a successful business, will depend on the presence of a technology-oriented demand. Other conditions (from financing to infrastructural facilities) may contribute to increasing the willingness of the would-be entrepreneurs to launch the new firm, and facilitate the cementing of that process [15]. But it can be argued that the basic premise in this process is the emergence of an opportunity, and the sole presence of these additional conditions does not substitute for a "system of interacting private and public firms (either large or small), universities or government agencies aiming at the production of science and technology within national borders" [16 (p.212)], i.e. a strong and integrated national system of innovation [17, 18].

The fundamental importance for NTBF creation of the conditions which permit the emergence, identification and exploitation of technological opportunities - - not only at the origin of the new firm, but also during its subsequent l i f e - can explain why some national contexts appear to be systematically more propitious than others for NTBF formation, notwithstanding the efforts undertaken to create more favourable conditions. Different national systems of innovation (NSIs) provide different endowments of the relevant factors, and hence a country system of innovation can be said to strongly determine the rate of creation and the behaviour of NTBFs. The "missing building blocks" and "missing links" [16], which characterize countries with less complete and integrated NSIs, will contribute to reducing the emergence of technological opportunities, and will limit the circumstances where those opportunities can be identified and transformed into a marketable idea. They may also complicate the actual process of launch of a new firm, as well as constrain its evolution. But, on the other hand, they may create gaps and hence provide opportunities for new firms to fill those gaps that would not arise in more integrated contexts, and may also provide an environment where there may be less competition from existing organizations.

In spite of the scarcity of research concerning NTBFs in these more hostile environments, it thus

appears interesting to evaluate the consequences of the contextual circumstances on the firms that are ultimately created, and whether those finns develop adaptive responses to their environments.

3. Empirical research

3.1 Purpose of research and description of sample

An empirical study of NTBF creation and early evolution, conducted in Portugal, addressed the impact of an incomplete and less integrated NSI on NTBF creation and behaviour. The research concentrated on the implications of the environment for the process of acquisition of technological knowledge and technology, both in terms of the creation process - - i.e. the initial technology base for its formation - - and in terms of the subsequent e v o l u t i o n - i.e. the upgrading and expansion of the initial technology base and the building-up of technological competences. The focus was thus on the supply component of a process characterized by supply and demand issues. In doing this we are not assuming technology demand problems to be of secondary importance; we are simply focusing on one element of a complex situation, which would be impossible to treat as a whole in the context of this paper.

The empirical study involved detailed interviews with 28 NTBFs, two of which had gone out of business, undertaken between 1991 and 1992. Those firms were selected among the 123 firms which responded to a mailed questionnaire, addressed to what was thought to be the universe of Portuguese NTBFs, identified through an extensive search. A definition of NTBF was devised for the purpose of this research: a young independent firm involved in the development and~or diffusion of new technologies. Following this definition, the firms selected were: (i) between 1 and 15 years old at the time of the survey; (ii) launched by individual entrepreneurs; (iii) created to exploit a new t echno logy- this included firms developing frontier technologies and their early applications;

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and (iv) firms using new technologies to create new or substantially improved products. Most firms of these types operated in fields which can be broadly included under the 'information technologies' umbrella.

3.2 The origin of the technology

3.2.1 The qncubating" role of existing organizations

The majority of firms interviewed were launched by industry-based founders, and only about one- third came from research organizations (universities and research centres). The origin of the founders had some implications for the process of identification of the technological opportunity and for the way the initial technology was accessed. For most research-based founders the identification of an opportunity derived directly from their research work, and a substantial part of the technology and/or skills on which the new firm was based originated from the research organization. In the case of industry-based founders, although a similar situation occurred in a few cases, very often technological opportunities were identified not directly through their work, but through the opportunity the employer afforded them to become exposed to more technologically advanced external sources. Usually the identification and exploitation of these opportunities was based on the combination of the insights gained through those contacts--and sometimes the technology or knowledge transferred from those s o u r c e s - and of the skills already possessed by the founders. but in some cases these skills were only of limited use, and founders were required to acquire and develop substantially new ones. In still other cases, previous employment led the founders to identify a potential need (felt by the employer or by its clients), which they thought they would be able to fulfill, but whose prosecution required them to depart, sometimes significantly, from the areas where they used to work, implying the acquisition of new knowledge and the development of new skills.

One of the implications of this different role of

research and industry 'incubator' organizations was on the input brought by founders to the new firm.. Even in the cases where industry ex-employers were the direct or indirect source of the technological opportunity, and where the new firm applied a relatively similar technology, it was rare that the founders brought with them anything more defined than an idea. Perhaps surprisingly, in the case of research-based firms, it was frequent to find a more or less complete application transferred, with or without their developers. This latter situation was nevertheless associated with recent cases of transfer from more industry-oriented research centres. In the early 1980s, founders originating from the university were in a position similar to their industry-based counterparts: they used their knowledge and skills to develop the technology and/or its application in the context of the new firm.

3.2.2 A variety of sources of technological knowledge and technology

In spite of the importance of the previous organizations in the acquisition of skills and technology necessary to launch the new firm, these were not the sole sources used by the NTBF founders. The use of the channels provided by the previous employer to access the knowledge and technology that was later exploited in the context of the new firm was more frequent in the case of industry-based founders, but a few cases were also identified among research-based ones. A number of situations of this type were observed:

(i) industry-based founders who gained access to the results of local research and launched a firm to exploit them commercially;

(ii) research-based founders who obtained knowledge of advanced technologies through postgraduate research undertaken abroad;

(iii) use of those channels to identify and acquire technology abroad, either through contrac- tual technology transfer or through the purchase of sophisticated equipment used to deliver a service;

(iv) founders' exposure to new knowledge emerging elsewhere, which they were able to access



through less tangible means (publications, international meetings, personal contacts) and were prepared to develop in the Portu- guese context.

In most of these cases there was in fact a mixed situation in which technology and knowledge from different origins were combined, synthesized and exploited. This process was, at least to some extent, based on the skills gained by the founders in their previous employment but also drew extensively on other sources, particularly foreign ones.

The use of foreign sources of technology can be seen as a way to overcome the country's limitations in terms of technological knowledge and competences in some areas. In some cases acquisition was done through the conventional means of purchase of advanced technology, and through licensing. But most cases entailed a greater involvement of the founders in the actual development of the new technologies. Some founders who had acquired advanced skills were prepared to lead the application of those skills in the Portuguese context; while others, who had identified opportunities in the application of technologies emerging elsewhere, were prepared to enter new fields which departed significantly f r o m their existing experience and to develop some capabilities almost from scratch. These situations occurred more frequently in the case of the NTBFs created in the early 1980s, and strongly influenced by foreign role models, whose founders displayed a certain 'pioneer spirit' concerning the introduction into Portugal of advanced technologies not yet available in the country. Both a p p r o a c h e s - the use of foreign-based technology and the

development of competences in areas that were new in national t e r m s - had consequences in terms of the firms' ability to find local complementary sources of knowledge and technology. As a result, a number of firms were, at least at start- up, very lonely in technological terms.

More recently launched NTBFs seem to be less prepared to undertake this pioneer role, and tend to establish themselves in areas where competences

exist locally; and as a result they tend to draw more extensively on external sources of technology. This posture is possibly related to the greater availability of sources to use. A large proportion of firms created by research-based founders and/ or using technology transferred from research centres is concentrated in a number of fields associated with information technologies. In those fields there are currently some poles of scientific and technological knowledge in Portugal, which show some willingness to transfer the results of research to industry and have a policy of giving incentives to firm launch. This activity is likely to function as a seed-bed for NTBF formation and to create the conditions for synergies between them.

3.3 The implications of start-up conditions on the subsequent process of technology acquisition

The way the initial technology was acquired was important not only because it shaped the initial technology base of the new firms, but also because it had a strong influence on the subsequent process of technology acquisition. NTBFs are small firms with relatively scarce internal resources but substantial technological requirements, and so the access to external sources of technological knowledge and the ability to achieve technological complementarities with other organizations are likely to be important factors for their evolution [19, 20]. As we shall see, the Portuguese NTBFs interviewed were not diferent with regard to this.

3.3.1 In-house technology acquisition The firms interviewed were technology intensive

and all but three of them mentioned the presence of R&D activities. Most of them undertook essentially development activities, with a certain proportion of very targeted applied research. Some firms explicitly admitted that they did not undertake any research except what was required to sort out problems related to product development. A few others, however, mentioned the



practice of research less directly oriented to a specific application, based on a strategic identification of technologies that might become relevant in the future, and in which they were interested in gaining early competence. Both research and non-research oriented firms were usually very competent in engineering, especially product engineering. With a few exceptions, firms concentrated their efforts on product technology, with process technology being secondary to their preoccu- pations.

In general, R&D or development teams were small, and often the same group of people carried out all the activities associated with the conception, development and finalization of a product. While some firms considered the existing human resources enough for their needs, in others scarcity was seen as a constraint on their activities, and expansion regarded as critical. Nevertheless, some firms had devised means to compensate the limited in-house resources and competences using more or less extensively external consultants or part-time con- tracted people, although this was not always regarded as the ideal situation. Other firms also resorted extensively to collaboration with external organizations. These solutions permitted the creation of a sort of 'virtual' team, which in some cases substantially augmented the in-house resources.

3.3.2 The limits of in-house activities and the importance of external relationships

The above compressed description gives a picture of the strengths and limitations of the firms' practices concerning their in-house technological acquisition. It suggests that Portuguese NTBFs would benefit from the possibility of comp- lementing their in-house technological acquisition with inputs from external sources. Although firms may have different requirements, according to the type of activities they perform in-house, the important issue is whether or not they are able to obtain in their environment the inputs they require.

But, at this level, Portuguese NTBFs are likely to face a situation that is different from that of similar firms in more advanced countries. In fact, unlike those firms, Portuguese NTBFs operate in

an industrial context which is characterized by the absence of the technological infrastructure provided by a number of large and technologically advanced firms located in a variety of industrial sectors, undertaking a great proportion of the industrial R&D. Furthermore, the S&T context is characterized by the absence of a comprehensive infrastructure provided by universities and other research organizations where new knowledge is generated and transferred in a variety of fields. There are some centres of excellence in research, but their coverage of scientific fields is limited, and transfer to industry is not always adequately undertaken. There are some large firms which undertake research, but they are only a few and extremely localized. Moreover, the still limited number of technology intensive firms, large or small, deprives NTBFs from the advantages of the presence of a technologically dynamic industrial community and, with very few exceptions, does not permit the formation of effective networks of firms working in similar or complementary areas [21]. This context has obvious implications for the ability firms have to acquire the resources they need and to obtain useful complementarities.

It is exactly at this level that the conditions in which firms were launched, and the contacts and relationships their founders brought into the new firms, can make a difference. Firms which were launched in areas where competences existed locally in a useful form, and firms whose founders were able to establish a network of useful relationships with potential sources of knowledge and technology, were likely to be in a better condition to overcome the problems caused both by their own in-house limitations and by the environmental constraints. These initial conditions were effec- tively found to have an important impact on firms' acquisition behaviour. Although, in time, some firms were able to alter those initial circumstances, they defined clear trajectories, which correspond to a number of major patterns. Four basic patterns were found to be associated with the initial conditions faced by firms at start-up or early stages. These patterns are listed below.

1. 'Symbiotic'. Firms with a symbiotic relationship



with a source of science and technology, since start-up, which they use extensively to lever their internal capabilities.

2. 'Link+'. Firms with a privileged link with a source of science and/or technology, since start-up or early years, which supplements their in-house capabilities in areas where weaknesses are recognized.

3. 'Independent'. Firms which rely largely on in- house capacities, and use a variety of formal and informal links with local sources on an opportunistic basis. Two sub-categories exist: 3.1 'Independent~links'. Firms which use those

links for more marginal skills and/or knowledge acquisition, to complement their own;

3.2 'Independent~upgrade'. Firms which at any point have used more extensively one or a few relationships to obtain new skills and/or knowledge they did not possess but considered to be important for their future activity.

4. 'Autonomous'. Firms whose relationships with local sources are weak or virtually absent, either because competences do not exist or because they were unable to access them, and which have thus built an extensive in-house autonomy. Two categories exist: 4.1 'Autonomous~solitary'. Firms which

remained largely self-contained; 4.2 'Autonomous~integrated'. Firms which,

with time, were able to integrate themselves in alternative networks, namely international ones.

Table 1 describes the patterns in more detail, but requires a few remarks. 'Symbiotic' is a relatively homogeneous category, in which firms resulted from technology transferred from a research organization with which a strong link was kept. They have some similarities with the 'Link+' firms, based on the fact that both have a privileged link with a complementary organization. But while in the case of symbiotic firms it is an 'organic' relationship, based on extensive sharing of people and technologies, in the case of link+ the role of the

complementary organization (which is frequently a research organization but can also be a privileged supplier) is confined to particular area(s) where weaknesses are recognized, the firms revealing greater reliance on their in-house activities in other areas. Both groups include a large proportion of young firms.

'Independent' firms are usually R&D intensive firms, which have in common the opportunistic use of a variety of sources - - i.e. different sources are used according to their utility to the firm's activity at a given m o m e n t - but differ substantially in terms of the degree of relevance attributed to those relationships, the level of their use, and the need to resort to alternative sources elsewhere. This group includes a larger number of older firms, and thus some evolution has occurred. The 'upgrade' sub-group is a major evolution, which resulted from the fact that a number of firms have at some point searched for external sources to acquire capacities in new areas, departing from their usual practice, and often creating closer and preferential relationships.

The 'autonomous' firms are more hetero- geneous. They have in common the low relevance of local sources of technological knowledge, but they differ in the reasons for this, and in the implications of this fact for their activities. For one group of firms, the absence of relationships derives from the local non-existence of competences. These are R&D-intensive firms which have developed extensive autonomy; if they consider it indispensable to complement it with external inputs, they have searched for expertise elsewhere, some of them being able to achieve some integration in international n e t w o r k s - the 'integrated' sub-group (4.2). For the 'solitary' group, composed of less research-oriented and usually younger firms, the absence of relationships does not derive from lack of local expertise but from the firms' inability to establish links with sometimes very closed research communities. While some of them appeared to be willing to establish more research-oriented relationships, it did not come as a high priority, since they obtained most relevant inputs from market transactions



TABLE 1 Patterns of technology acquisition

Symbiotic Link+ Independent Independent links Autonomous insert Autonomous 'solitary' upgrade

Principal role of Leverage of firm Supplement in- Enter new fields Complement in- Source of Not very relevant external capabilities in core house weaknesses house capacities in information and/or (except suppliers) relationships areas in some core areas more marginal research spillovers

areas

Local competences S&T: Yes S&T: At least in S&T: At least in S&T: At least in S&T: Absent or S&T: (i) Absent or at launch: S&T IND: some areas some areas some areas seen as useless seen as useless infrastructure and (i) Some IND: Some IND: Rare or IND: Rare or IND: Rare or (ii) Difficult to access industry (IND) (ii) Rare or absent absent absent absent IND: (i) Rare or

absent (ii) Some

Types of Symbiotic Privileged Informal Informal No relationships When competences relationship relationship with relationship with relationships and relationships and with local sources, exist locally: some established with source 'complementary' personal contacts personal contacts Some personal personal contacts local sources at organization organization; with several with several contacts (industrial sources) launch or early life informal contacts sources sources

with other sources

Evolution: actual P: Expand range P: Build up A: Greater use of A: Greater use of A: Development A: Development of (A) or potential of relationships; greater in-house external sources: external sources: of extensive in- extensive in-house (P) build up greater autonomy formal and formal and house autonomy; autonomy

in-house autonomy informal informal alternative use of P: Eventual (some firms); relationships; relationships, foreign sources: establishment of greater insertion in establishment of namely foreign use of local relationships if network (some some closer sources (some informal contacts competences exist time) relationships firms); build up as channels and/or (younger firms)

more extensive insertion in foreign networks networks

and from occasional personal contacts with other industry practitioners.

3.4 Symbiotic relationships vs. independent posture

Although there are effective differences between the four groups of firms, they can be also merged into two larger groups: firms with and without a privileged and close link with a particular organization - - frequently a research organization with some industrial orientation. These are in fact the two major ways of launching and operating a small technology-based firm. In the Portuguese context they correspond to different situations, which deserve a closer analysis.

3.4. 1 The advantages of a privileged relationship

In a context like the Portuguese, the symbiotic relationship (or its close substitute, the link+) appears instinctively as particularly favourable for the firms involved. In fact this close link with a source of technological knowledge is likely to be advantageous in a context where the generation of knowledge and technology is very reduced. An additional advantage comes from the possibility of networking in a group of similar firms with complementary skills, and from a number of other side-effects - - market, finance, credibility - - derived from inclusion in a technology-oriented

group. The major advantages of this relationship can therefore be described as:



(i) ready access to scientific and technological inputs from an organization working in fields of activity directly relevant for the NTBF, and whose scope goes much beyond that of an individual firm;

(ii) access to the organization's information channels, which provide a range of information the firm would be unable to collect and absorb by itself;

(iii) possibility of using those channels to access other sources, and particularly to connect to international networks;

(iv) easier access to qualified human resources, in areas where they are scarce;

(v) possibility of creating synergies within the network of other symbiotic firms, when it exists.

A number of potential shortcomings were, however, perceived. One of them derives from the NTBFs' strong technological orientation. Symbiotic firms originating from r e s e a r c h - their founders and staff often having been researchers themselves-~ were confronted with some difficulties in achieving a more market-oriented approach. Symbiotic firms where all or part of the founders were not researchers, and link+ firms, usually possessed greater industrial and market experience and were better positioned to fight against the tendency to put technology considerations before market ones, which was still strong in some firms.

Another potential problem concerns the need for the firms to achieve greater in-house autonomy, not meaning by that to relinquish the advantages of existing links, but to achieve less dependence on them. While some firms have cut the 'umbilical cord', or are in a process of gaining greater independence, others still rely extensively on the complementary organization. It is possible that a close link will, to some extent, function as a deterrent from building more extensive in-house capacities and/or diversifying sources and relationships. The decision to diversify is associated both with the ability of the complementary organizations to fulfil firms' needs, at least in the medium term,

and with the alternatives available. As the firm evolves, the resources accessible through the research centre and the other firms in the network may become insufficient. But, in attempting diver- sification, some firms may face difficulties not very different from those confronted by the 'independent' firms, because the sources required may not be available locally. Here the research centre can still play a role, acting as a channel to other sources. But it can only function as the trigger. As some older 'symbiotic' firms have started to acknowledge, in time firms will be required to create a set of new linkages of their own, tailored to their particular needs as relatively specialized organizations.

3.4.2 Independent practices: an adaptive response to the environment

In spite of the advantages of a privileged link with a source of technological knowledge in a context where access may be problematic, not all founders were able or willing to obtain that sort of relationship. Indeed, some founders were very keen to keep an independent position and not be directly associated with any particular organization. So, how do those other firms - - both 'independent' and 'autonomous' - - solve their technology acquisition problems? While some of their practices do not differ from those found in NTBFs elsewhere, others represent adaptive responses to the conditions of their environment. Some of them are described below.

(i) Building up strong in-house capacities and achieving some autonomy, at least in areas considered critical [or firms' activity, and sometimes also in more marginal areas, due to the difficulty in accessing other sources.

The extensive reliance on in-house capacities was a necessity rather than a choice. So it was not simply based on considerations of the need to internalize the technological knowledge brought with the founders at start-up and to build firm- specific c o m p e t e n c e s - a 'normal' behaviour in NTBFs [ 2 2 ] - but it was forced by the absence of alternatives. This happened both with firms



which had few chances of resorting to external relationships other than market ones to obtain the required knowledge, and with firms which did establish relationships but were aware of the limitations of the local sources with regard to their activities.

(ii) Pertinence of relationships wth non-industrial research organizations as sources of advanced technological knowledge (even for less research- oriented firms), due to the absence of industrial research vs. effective relationships established.

Firms were aware that research organizations could provide advanced inputs in favourable conditions, but the fact that the knowledge generated was likely to be less targeted to their needs [23], and the behaviour of academic researchers in terms of pace, deadlines and type of output, led firms with scarce resources and with pressing needs for results to adopt a careful posture. For several firms, links with universities and research centres were viewed mainly as a source of scientific knowlege and/or information on the evolution of technological knowledge. Those which used them more extensively did not seem very keen on engaging in extensive collaboration, preferring to use them as 'suppliers' of specific pieces of research or of technology. More far-reaching collaborative projects, involving the creation of mixed teams, were much less frequent. Although some firms were happy with such collaboration, others had negative opinions of their experiences.

(iii) The extensive use of suppliers as sources of advanced technology, which means in fact the prevalence of market relationships with regard to technology acquisition, and the great importance of foreign suppliers.

While non-market transactions have been increasingly described as a feature of small technology- oriented firms' strategies elsewhere [19], market relationships seemed to prevail for most Portuguese NTBFs, as they do for Portuguese firms in general [24]. The purchase of technology embodied in components, systems and techniques was the major form of access to advanced technology for several

firms. Embodied technology was described as important for NTBFs in similar sectors elsewhere [3], but it can be argued that, for some of these firms, market relationships with sophisticated foreign suppliers, providing advanced inputs (which firms saw as 'building blocks' for products resulting from their in-house R&D) and contributing to the solution of complex problems, substituted for collaborative relationships with absent local partners. Some firms had to rely strongly on foreign suppliers, due to the lack of a local supplier base, and the process of identifying the relevant suppliers and achieving a steady relationship with the crucial ones was not an easy task. Even when they had built a good supplier network, firms still considered that peripherality caused some access difficulties, especially for early access, crucial in terms of competitiveness.

(iv) Building up mechanisms to access foreign sources of technological knowledge and technology, as an alternative to its absence in the national environment.

Possibly one of the greatest shortcomings faced by these firms concerns the impact of a weak industrial structure, combined with a peripheal location, on opportunities to cooperate with other industrial firms, and on the ability to access the less tangible flows of technologicalknowledge, which are regarded as extremely relevant by firms elsewhere [14, 25]. Several firms acknowledged this 'locational disadvantage' [26]. They com- plained of a certain 'solitude' in technological terms, or stressed the inconvenience of being excluded from the informal flows generated in more dynamic milieux by not being consistently present there and hence being regarded as outsiders. Firms addressed this problem in several ways.

• Search for partnerships with a technological component with foreign companies.

Although the growing number of NTBFs and the activities of a few large firms and/or their technology-based subsidiaries may have started to change the situation in a number of fields, with



some firms mentioning an increase in the extent of informal know-how trading [27], the number of potential industrial partners which could complement firms' relatively specialized competences is still very restricted. Partnerships with foreign firms - - often mixing commercial and technological objectives - - although not easy to cement, are thus envisaged as an alternative.

• Attempt to integrate foreign networks, or at least to achieve relationships which provide a direct window on the places where knowledge and information flow, to compensate for the impact of peripherality in the use of less tangible means of accessing knowledge and technology.

Very few firms had been able to achieve integration in foreign networks, and even those that did used these linkages moderately. The small size of the firms and the geographic location of Portugal makes this option costly and time consuming, and thus only firms which definitively cannot find the necessary inputs locally, and do not want to rely exclusively on market transactions, are prepared to try it. An alternative option was either to use existing contacts, namely those with universities, as channels to more buoyant milieux, or to use the visibility and the access to recent research permitted by participation in EC-funded collaborative projects.

• Extensive use of formal and especially informal links with various s o u r c e s - from academic research to s u p p l i e r s - as well as a variety of scanning practices, as a form of obtaining information and 'research spill-overs' [25], the firm being absorbed and transformed internally.

While most firms had developed good scanning mechanisms, for some of them they were one of the basic forms of external technology acquisition. Although recognizing the limitations introduced by peripherality, they considered extensive scanning as a means of minimizing its effects. However, this option might not work in the same way for firms in all sectors, depending on the degree of secrecy and of appropriation prevailing in the field.

(v) The 'opportunistic' use of a diversity of local sources of technology, whenever they were available, to complement in-house capacities or to gain knowledge in areas outside the firm's competences.

This is in fact a 'best practice' that Portuguese NTBFs share with similar firms elsewhere, the difference being that it might be less easy to achieve or less effective, especially in some fields of activity. But those who had the possibility had learned how to maximize the opportunities available. On the other hand, not all 'independent' firms were created in areas where technology access was difficult, and some had developed good networks of formal and informal relationships and were particularly skilled in profiting from the links available. A few firms remarked that they were able to obtain most of their inputs from the local environment and in general did not seem to regard their location as a constraint in terms of technology access, although this was not a frequent situation, especially among the more technology-intensive firms.

These cases, together with those of some 'symbiotic' firms, show that one evident path to overcome some of the limitations described above is to create stronger competences at national level, at least in fields where greater expertise already exists. The small size of the country and the increased globalization of technological development will always require firms to rely strongly on foreign inputs [28], but, as Freeman [29] remarked, when addressing the problems of small advanced countries, firms will be favoured if a more dynamic industrial and scientific community exists and cooperates in their field of activity. The network experience around some symbiotic firms, which has in some cases extended to include otherwise independent firms, can be seen as a step in this direction. Some recent attempts to build a 'cluster' of firms with complementary competences and linkages in a given field, around a large firm, are another. The basic premise is to build some 'critical mass' [30], which potentiates the efforts of the individual participants.



4. Conclusion

The different experiences of the finns interviewed, concerning the process of knowledge and technology acquisition, provide some insight into the difficulties faced by NTBFs in an environment characterized by a less complete and integrated NSI, and also into the adaptive responses used by firms to meet them.

Both the 'symbiotic' and the 'link+' privileged relationships appear as a particularly advantageous option in an environment where technology access is difficult. This option is associated with the development of national competences in a number of areas, and thus with the creation of a critical mass which may allow firms to lever their individual efforts. It becomes particularly relevant when the process goes beyond the group of firms closely associated with the centres of expertise and includes other finns, thus expanding the network and bringing in the additional experience gathered by 'outsider' firms working in similar or complementary fields (namely older firms, which were often pioneers in their field of activity).

The experience of firms which did not have such a' privileged link shows that, at least from the standpoint of technology acquisition, the launch and operation of an NTBF was often a complex undertaking, especially if it was done in areas where expertise did not exist locally or was limited or difficult to access. Whether or not local competences in their field existed at the time of the launch or developed during their lifetime, one of the basic characteristics of these firms was the attempt to build good in-house competences, at least in the areas considered critical to their activity, using external relationships (when they were possible to establish) mainly to complement them. In spite of the limitations of the local context, several firms learned how to maximize the use of the available sources, local or foreign. The combination of good in-house competences and an extensive network of relationships, achieved by some older 'independent' firms, is indeed the situation towards which other firms should ideally

progress, even if they maintain or create preferential links with particular organizations.

The Portuguese conditions have also generated the 'autonomous' R&D-intensive small firm, whose relatively self-contained behaviour is somewhat unexpected for this type of firm. Because of the structural gaps in the Portuguese S&T infrastructure and industrial structure, firms will possibly continue to be launched in fields scarcely exploited in Portugal, in spite of recent founders' tendency to concentrate in fields where expertise exists locally. But the increased importance of inter- nationalization and the greater facilities for achieving it, even for small firms, is likely to convert the movement towards greater opening to international contacts into the normal behaviour for finns which have difficulties in finding local interlocutors. It can be argued that the creation of these firms, usually on the basis of technology and/or skills brought from elsewhere, in contributing to intro- duce these technologies in the Portuguese context, can act as a 'short circuit' to the limitations of the Portuguese NSI. But this pioneer role will always create problems for the firms involved. The experience of the 'autonomous' NTBFs, launched in new fields and without close links with local sources of technological knowledge, but which were able to build alternative relationships elsewhere, can provide some learning ground for those founders.

Acknowledgements

The authors are grateful to the founders of the NTBFs involved in this study, who spent a considerable amount of their valuable time speak- ing with one of them about their companies. Part of this research was carried out under a scholarship from Junta Nacional de Investiga~fio Cientffica e Tecnol6gica (Portugal) awarded to Margarida Fontes.



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Margarida Fontes is Research Assistant at the Instituto Nacional de Engenharia e Tecnoiogia Industrial in Lisbon. Currently she is a PhD student at the Manchester School of Management (UMIST), carrying out research on new technology-based firms in Portugal. She gained her Licenciature in Economics from the Instituto Superior de Economia e Gestfio (Lisbon), and

her MSc in Management Sciences from UMIST. She has participated in a number of studies concerning the design of industrial and technology policies in Portugal. Her current research interests include the process of technical entrepreneurship in developing countries and the management of technology in small firms.

Rod Coombs is Professor of Technology Management at the Manchester School of Management, UMIST. He teaches and does research in all aspects of technological innovation and management of technology.


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New technology-based firms and technology acquisition in Portugal: Firms' adaptive responses to a less favourable environment