genesis of entrepreneurial companies are also contributing factors in their resistance to change and slow adoption of more advanced technologies and new organizational structures.

Five fundamental barriers to manufacturing performance improvement in smaller manufacturers were identified and discussed during the eight workshops hosted by the committee; all are well corroborated in the extensive literature about conditions in smaller firms. The committee met with nearly one hundred small manufacturing owners/managers, as well as extension service field agents and managers from Manufacturing Technology Centers (MTCs), state extension programs, universities, and trade associations. In addition to discussing barriers facing smaller manufacturers, both company representatives and assistance providers discussed opportunities to help firms overcome these barriers and significantly improve the cost, quality, and market responsiveness of their manufacturing operations. The following sections describe the ideas raised in these discussions.


The Barrier

The regulatory environment creates a disproportionate burden for smaller firms. National, state, and local initiatives and decisions concerning trade, the environment, employment, work place safety, health care, and liability have a direct impact on the competitiveness of manufacturing companies. For smaller firms, the economic impact of regulatory compliance is much greater as a percentage of capital investment than it is for larger businesses.

"Compliance with regulations is straining the resources of the company [sales of $7–8 million]. . . last year our entire budget for new investment and new equipment—$500,000—was spent to meet EPA [Environmental Protection Agency] regulations."

Whereas many large firms spend enormous sums of money for corrective activities and new equipment to comply with complex regulations, smaller firms cannot easily afford or justify such investments. First, the alternatives are limited in many instances because equipment appropriate for their scale of operations and capital budgets

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