Innovation and Absorptive Capacity: An Empirical Study of Manufacturing SMEs in the Western Province of Sri Lanka

Abstract

This research paper investigates the absorptive capacity of the manufacturing SMEs in the Western province of Sri Lanka.Present study attempts to understand application of the external linkages and information sources in the process of innovation by selected firms.A sample of 280 firms was selected using stratified random sampling from the data base of Enterprise Survey 2003 which was the only available sample frame at present.Survey based data collection method was used with the semi structured questionnaire developed aligning with standard innovation survey instruments.The survey was followed with a focus group discussion for the purpose of in depth understanding of the reality.Data was analyzed qualitatively employing descriptive and interpretive tools to draw the conclusion that the Manufacturing SMEs in the Western province of Sri Lanka do not extensively use external information sources and have not maintained sufficient links with other firms,knowledge sources and government institutions for bringing new knowledge into their innovation activities.