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line 1 (of Affiliation): dept. name of organization line 2: name of organization, acronyms acceptable line 3: City, Country line 4: e-mail: name@xyz.com Abstract Development of small and medium industries will
lead to economic development in next decade so they play a crucial role in the market. It is declared that small and medium industries can affect the world economic by for channels that are entrepreneurship, innovation, creating new jobs and enhancing the salary. Moreover, increase in global competition, lack of reliability and a huge demand for variety of products results in more attention to such industries. Although economic policy makers still have focus on large scale industries because of rate of production, large scale production, benefits of small and medium scale industries such as the size of market, efficiency of selection and control and transportation make these industries first choice in production. In this paper characteristic of medium and small industries and role of innovation will be considered.. (Abstract) innovation, SME (small and medium enterprises) (key words)

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line 1 (of Affiliation): dept. name of organization line 2: name of organization, acronyms acceptable line 3: City, Country line 4: e-mail: name@xyz.com manufacturing process. However, Bentley (2003) suggests that small scale companies should implement six sigma and ISO 900 for better quality and successful production. Successful manufacturing companies develop the relationship with customers and have more capability to adjust themselves with their customers than large companies. Besides offering a good customer service manufacturing companies should provide good quality raw material and enough information for its employees (Pelham 2009). Dossen Hach (2005) emphasizes on better communication with employees. III. DEFINITION OF MEDIUM AND SMALL SCALE ENTERPRISES

I.

INTRODUCTION

Small manufacturing companies have considerable intangible assets but for production and marketing face with scarcity in capital and resources. Despite the facts that market is changing rapidly and tend to globalization and these industries struggle to manage scarcities still rate of their failure is much less than what was expected. Many SMEs face with some barriers such as a high failure rate (Smallbone and Rogut, 2005); internal barriers such as, management and contracting of less qualified labor Smith and Smith, 2007); funding (Pissarides, 1999; Joubert, 2004); and external barriers such as the availability of access to prime materials, delays in payments of invoices by customers (Smith and Smith, 2007). So innovation is one of the ways to escape from these kinds of barriers. II. SUCCSESSFUL MANUFACTURING COMPANIES

The literature of small enterprises is so vast that it has different definition in different countries. These definitions vary to the extent of age group, population, cultural and development structure of the country. Although there are similarities among small or medium enterprises in different countries, there is no unique definition for it. Most of the definitions are given based on quantitative scale such as number of employees or turnover rate. IV. CHARACTERISTICS OF SMALL ANUFACTURING COMPANIES Velsh and White believe that there are many differences between large and small scale companies in policy making, structure and handling resources. As Baumck (1998) large companies in U.S indeed were small companies which run their business with limited capital. Examples for such companies are: Microsoft, HP and Ford. Most of the small companies have simple system to show flexibility, understand and satisfy customers needs, get their feedback. Small scale industries have defined responsibility and authority in their field of activity so the result is enhancing common goal and unity among workforce as well as assurance of a well done job. Also the less number of employees lead to better relationship and better group work. On the other hand weak points of such companies like financial scarcity, difficulty in getting business loan and less

Successful manufacturing companies have certain characteristics which distinguish them from unsuccessful ones so let them survive longer in market environment. They privileged in continuous improvement of products, customer service, training employees. These companies generally use investigation system before, along and after

budget allocation to human resource training can make them to face unsatisfactory situations. Such companies have difficulty in finding expert workforce and they should compete with large scale companies with more expertise work force (as these kinds of companies can hire more professional employees with higher salary and better work situation); moreover small manufacturing companies confront with lack of raw material and should spend more for fluctuations in raw material price. In comparison with large companies they have less chance to create credit for themselves in addition less power for bargaining. As small companies establishers attend less official training courses about principals of management so they are less skilled and professional. In small scale manufacturing companies those who control the company are the owner so a poor experience leads to poor management. According to Kraiporsak(2002) and Chee (1987)most of these companies rely on old technologies and labor intensive and traditional management. Some of them dont trust new technologies, which make inefficiency and lack of information. It can be concluded that appropriate technology and efficient production system play an important role in relative advantageous and competition of small scale manufacturing companies.(Deros et al 2006) V. INNOVATION

With regard to the external environment, these show regional variation such as the level of activities (e.g. White, Braczyk, Ghobadian, & Niebuhr, 1988), market types (Sebora, Hartman, & Tower, 1994), sectors (Abreu, Grinevich, Kitson, & Savona, 2007; Freel & Robson, 2004), strategic orientation, market orientation, and competitive structure (e.g. Laforet, 2008; Salavou, Baltas, & Lioukas, 2004) have an impact on SME innovation. Firm-specific characteristics such as the organization, the entrepreneur, and the project team also affect SME innovation (e.g. Beaver & Prince, 2002; Brown, 1998; Gapp & Fisher, 2007; Georgellis, oyce, & Woods, 2000; Goldsmith & Kerr, 1991; Gray, 2002; Lipparini & Sobrero, 1994; Mambula & Sawyer, 2004; Ramachandran & Ramnarayan, 1993). VI. INNOVATION IN SMALL AND MEDIUM COMPANIES

What is innovation? From one point of view: innovation is managerial system which emphasis on the organizations mission statement, seeks for unique situations and determine whether it is based on strategic position of organization or not. According to Druker a successful innovation requires goal oriented hard work. Innovation is a major factor in global competition which leads to organizational growth. Porte and Stern declared that companies should be able to create a stream of new processes and products to use more technology and survive in the market. Druker insists that each company needs a skill and ability which is innovation. Maravelakis consider organizational innovation based on product, process and executive innovation. In organizational point of view true success of innovation happens in the market. Changes in rules and regulation of strategic innovation are a main factor for success of most of managers. The point is that innovation does not necessarily leads to sales increase.(Yeh-Yum and Yi-Chiry, 2007). Best companies try to face with change as reaching to new way demands facing with change. So the companies which tend to innovate something try to make change in their resources both human and technical. For better utilization company should use all employees imagination and skill to make something new. External environment, structural factors, and firm-specific characteristics affect SME innovation.

Innovation has different types such as: technological, marketing, executive and strategic. Technological innovation happens to make changes in products or service process. Marketing innovation consist of introducing a new brand, creating new approaches and leading new market. Executive innovations are those which relate to make changes in organizational structure or executive processes. Strategic innovations emphasizes on steady competitive edge for company. As Cummings and Paramita mentioned the larger the organization, the more effective and efficient but the younger company more innovator. (By size of the company number of employees to be considered) medium and small companies with foreign investment have better reaction toward innovation plus sale. Today innovation is a major key for surviving in competitive world. Global competition make companies practice more to be more innovative and creative. For companies with lack of professional workforce, financial resources, international scope, globalization is terrible. There are many small and medium enterprises which have difficulty competing on price. Utilizing innovation and improving efficiency help firms to choose to compete on price. Innovation will serve firms better if they focus on the development and introduction of new products and services, especially if they can earn a price premium and higher margins (Weera wardena and McColl-Kennedy, 2002). Innovation can enhance the specified and implemented strategy. Innovation can upgrade daily operations of the firm, and increase scale of generating ideas by employee for new products or services and make commercialization more easy and efficient.

ACKNOWLEDGMENT

The preferred spelling of the word acknowledgment in America is without an e after the g. Avoid the stilted expression, One of us (R.B.G.) thanks . . . Instead, try R.B.G. thanks. Put applicable sponsor acknowledgments here; DO NOT place them on the first page of your paper or as a footnote. REFERENCES List and number all bibliographical references in 9-point Times, single-spaced, at the end of your paper. When referenced in the text, enclose the citation number in square brackets, for example [1]. Where appropriate, include the name(s) of editors of referenced books. The template will number citations consecutively within brackets [1]. The sentence punctuation follows the bracket [2]. Refer simply to the reference number, as in [3]do not use Ref. [3] or reference [3] except at the beginning of a sentence: Reference [3] was the first . . . Number footnotes separately in superscripts. Place the actual footnote at the bottom of the column in which it was cited. Do not put footnotes in the reference list. Use letters for table footnotes. Unless there are six authors or more give all authors names; do not use et al.. Papers that have not been published, even if they have been submitted for publication, should be cited as unpublished [4]. Papers that have been accepted for publication should be cited as in press [5]. Capitalize only the first word in a paper title, except for proper nouns and element symbols.

For papers published in translation journals, please give the English citation first, followed by the original foreignlanguage citation [6].
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Figure 1. Example of a TWO-COLUMN figure caption: (a) this is the format for referencing parts of a figure.