Innovation, Innovative capacities of small and large firms and Innovative diffusion

~ Abstract ~ In this paper on innovation and diffusion the innovative capacities of small vs. large firms are discussed, reviewed and linked to the diffusion process. A commonly held view is that the relative advantages of large firms are predominantly material and those of small firms lie in behavioural characteristics. This also implies that small and large firms take over different stages of the diffusion process. However, having argued on the former we came to the conclusion that it is not solely and clearly the distinction between material and behavioural characteristics to be made. Small firms are taking over and combining the advantages of large firms and vice versa. Furthermore, we argued that when holding a dynamic view the innovative capacities regarding the diffusion process can actually overlap and the different stages in the innovation and diffusion process could occur simultaneously. Changes in e.g. communication technology and permanent changes in organizational structures of firms could lead to new innovation and diffusion processes.