Relationship between growth and R&D intensity in low‐tech and high‐tech Portuguese service SMEs

Purpose – The purpose of this paper is to determine if the relationship between growth and research and development (R&D) intensity is of a different nature in the context of low‐ and high‐tech Portuguese service small to medium‐sized enterprises (SMEs). Design/methodology/approach – The System Analysis of Iberian Balance Sheets database is used. Based on the European Union's recommendation, L124/36 (2003/261/CE), the authors select 764 low‐tech and 139 high‐tech Portuguese service SMEs for the period 1999‐2006. As method of analysis, panel data are used. Findings – A negative relationship between growth and R&D intensity for low‐tech Portuguese service SMEs is identified, whatever the level of R&D intensity. For high‐tech Portuguese service SMEs, a quadratic U‐shaped relationship between growth and R&D intensity is identified. Moreover, the authors find that relationships between growth and determinants are of a special nature in the context of high‐tech Portuguese service SMEs with high levels of R&D intensity. Practical implications – It is recommended that as far as possible the managers/owners of low‐tech Portuguese service SMEs, and especially high‐tech ones with non‐high levels of R&D intensity, hire qualified human resources and make more continuous investment in R&D. The authors advise managers/owners of high‐tech Portuguese service SMEs with high levels of R&D intensity to establish stable relationships with creditors. Policy‐makers should increase financial support directed, above all, to innovative Portuguese service SMEs. Originality/value – The paper is pioneering in presenting different relationships between growth and R&D intensity in the context of low‐ and high‐tech service SMEs.