It has often been pointed out that process innovation may be particularly helpful or suitable for small firms, since by this means they can share in advanced technology developed by larger firms. The adoption of a proven process technology may also have the advantages of low risk and short-term payback. The limitation of depending upon investments in process innovation, however, is that any competitor can easily follow suit, removing the initial advantage gained from the investment. Whereas new products tend to put a firm ahead of its competitors, investment in available process technology merely brings a firm up to standard. From the viewpoint of regional development, nevertheless, it is important that the process technology used by local industry should be up to an adequate standard, since otherwise the region will cease to be competitive with other regions where investment in up-to-date technology is higher.

For the purposes of our study, a particular interest is how investment in process technology relates to product innovation. Some advocates of investment in process innovation have seen it as an alternative to product innovation, especially if it permits existing products to be made at lower cost. The reverse is also possible: if products can be given a new lease of life through modifications made at low cost, this may be preferred to investment in sophisticated and costly equipment. Finally, it could be that investment in new production equipment goes hand-in-hand with product development. This might take place simply because innovative firms are likely to innovate in numerous ways. Or, similar technical expertise may be needed both to introduce new equipment and to develop new products: this could be particularly true where the same technology, such as that of microelectronics, was involved in both. Or again, firms diversifying their product ranges may need new equipment to be able to make the different types of products.