measure of the rate of innovation --research-and-development (R&D) expenditure per employee compared to new patents received per employee -- does not adequately capture a unique feature of SMEs namely that owners and managers are often themselves innovators. For example in Japan 52 per cent of SMEs innovations reported in 1986 were created by employers whereas in large firms 72 per cent of innovations were created by research technicians. Nevertheless patchy evidence from Germany the United Kingdom and the United States indicates that SMEs at least hold their own in terms of innovation compared to large firms. Perhaps most significantly a recent study indicates that while the total number of innovations is positively related to R&D expenditures skilled labour and the degree to which large firms comprise the industry in innovative industries innovative activity tends to emanate more from SMEs than large firms. This is probably because in industries where large firms dominate SMEs need to be innovative to survive. There is much information to suggest that in technologies such as micro-electronics new materials and biotechnology SMEs tend to be in the vanguard of innovation. Small and medium-sized enterprises as exporters. The contribution of SMEs to a national economy from exporting is generally small; for example in Japan SMEs accounted for only 13 per cent of merchandise exports in 1990.