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This paper draws on case and interview material, from research with entrepreneurs in small and medium‐sized enterprises (SMEs) to examine the process of entrepreneurship and entrepreneurial learning in SMEs. The cases have been drawn from different sectors including services, manufacturing and technology‐based sectors such as hydraulics, and software development. This paper reviews the contribution of organisational learning theories, which, it is argued, have been developed for large firms rather than SMEs. More appropriate theories are examined from fields that accepted the impact of uncertainty and dynamics in decision making, such as Schumpeterian dynamic approaches to learning and development. Case study evidence is presented on the nature of entrepreneurial learning in growth SMEs and compared with theories in the literature.

MARK S. FREEL IS A LECTURER IN THE Centre for Entrepreneurship at the University of Aberdeen, Scotland. This paper seeks to understand the nature and extent of barriers to innovation within a sample of small manufacturing firms. After identifying from the literature four broad categories of constraint (finance, management and marketing, skilled labour, and information) it is found, inter alia, that: * while the sample provides no evidence that innovators are more likely to apply for external finance (as a proxy for greater need), the data does suggest that, of those firms who had applied for external funds, innovators were less likely to have been successful than their less innovative peers. This latter finding is tempered by generally low levels of applications and application failures. However, perhaps of more concern, there remains a heavy reliance on short-term debt funding for innovation. * improving in-house technical and marketing competencies are identified by the firms as key to improving their innovative activity rather than accessing external skills and increasing the number of internal 'experts' and in preferen-ce to managemenit, finanice and exporting skills. * the study also signals the eiiployment of graduates as imnportan-t to innovation, although the nature of cause and effect is unclear. * finally, the study suggests that the level of firm interaction with external agencies is disappointingly low and that the principal barriers to collaboration are "lack ol trust" and "inability to find suitable partner", Public policy may find such intangible 'barriers' somewhat intractable.

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Drawing upon a sample of 256 small firms who applied for bank loans, the current paper is concerned with the extent to which ‘innovativeness’ is associated with a lower level of loan application success. The paper records the proportion of loan successfully applied for and estimates a series of tobit models utilising a number of proxy measures for innovation (in terms of inputs, outputs, and commercial significance to the firm) and incorporating standard controls. In general, the models suggest (as anticipated) that the most innovative firms are less successful in loan markets than their less innovative peers – though there is some variation by proxy. Moreover, there is tentative evidence that ‘a little innovation may be a good thing’. Copyright Springer 2007