Technovation 19 (1999) 561–570 www.elsevier.com/locate/technovation Barriers to innovation for SMEs in a small less developed country (Cyprus) Athanasios Hadjimanolis * 2, Panteli Charalambous, Klirou, 2600 Nicosia, Cyprus Received 29 October 1998; received in revised form 18 January 1999; accepted 3 February 1999 Abstract The present research, conducted in Cyprus, a small less developed country, concentrates on the barriers approach to innovation. The importance of barriers, as perceived by the firms’ owners/managers was, rather surprisingly, not statistically correlated either to innovativeness, economic performance or the extent of the horizontal networking. The study of barriers offers, nevertheless, some interesting clues to the innovation practice in small less developed countries. Some similarities with barriers in industrialized countries (e.g. in supply of finance and skilled labour) were found, but many differences as well, as expected from the peculiar environment of a less technologically developed country. The role of Government policies is of particular importance.  1999 Elsevier Science Ltd. All rights reserved. Keywords: Barriers approach; Innovation; Less developed countries; Government policies; Small firms; Survey 1. Introduction While firms in less developed countries, in the recent past, were operating within a relatively protected environment, they must now face the global forces of competition. The globalization of the markets requires the adaptation of firms in order to survive. Even small firms have to introduce new products of higher quality and take advantage of new technology. Innovation is a difficult undertaking, especially for firms with little experience and limited resources. Small firms in less developed countries have to face in addition to the liability of their size, the limitations of an inadequate infrastructure. The study of innovation, including the obstacles to its successful implementation, while relatively well researched in the industrialized countries is rather neglected in less developed countries (Bell and Pavitt, 1992). The present research was conducted in Cyprus, a small less developed country. It is located in the eastern end of the Mediterranean Sea and has an open and rela- tively well-developed economy with a high per capita * Corresponding author: Tel: + 35-7263-2476; e-mail:hadjimat@ mail.cytanet.com.cy 0166-4972/99/$ - see front matter  1999 Elsevier Science Ltd. All rights reserved. PII:S0166-4972(99)00034-6 income (US$13 000 in 1997). It is classified as a "high income economy" in the World Development Report of 1997. The next section introduces the barriers approach to innovation. The methodology is then presented, followed by the results of the study. The findings are compared with those of the literature and the last section presents some conclusions and recommendations for policy mak- ers and managers. 2. The barriers approach to innovation One of the several different approaches to innovation concentrates on the main barriers, i.e. obstacles, to inno- vation usually as perceived by the top managers of the firms. This approach is sometimes extended to include factors motivating innovation, i.e. facilitators. The aim of the research on barriers is initially to find out about their nature, origin, and importance. It attempts then to identify their point of impact in the innovation process and to measure their effects or consequences. The measurement of effects is the really difficult part. Barriers can be classified in various ways, a usual one differentiates between external to the firm or exogenous