programmes on the capacity of tool-making and numerical control for machine toolfirms. Although these measures took account of the DQP-regime and the high shareof SMEs in this sector, the general policy impact was ambivalent. In the beginning itneglected smaller enterprises. This was due to the fact that many measures by thefederal government had neither been sector specific nor in particular designed forSMEs, but aimed at the innovation resulting from cross-sectoral demand for newtechnologies.
These had been termed key technologies (Schlüsseltechnologien). Theirtechnical development was supposed to be supported by indirect-specific measures,by which grants were offered to those firms expressing an interest. Very often it waslarge firms which made use of these grants, because their in-house capacities for theproduction of collective goods gave them resources that SMEs lacked.
Consequentlythe federal government strengthened the role of large firms as flagship enterprises,while a complementary strategy for smaller firms was pursued at Land level and byassociations.The VDMA and VDI supported the struggle of SMEs to develop customizedproducts which met the demand of new technology, and these efforts wereaccompanied by programmes of the Land government. In particular the restructuringof the Steinbeis Foundation (described in Glassmann and Voelzkow 2001) played animportant part, because it received enough funding to act autonomously (Semlinger1995). In addition, the Landesgewerbeamt (LGA) provided support specificallydesigned for SMEs, while Land polytechnics and universities specialized inparticular engineering disciplines. In these ways the Land government integrated thelocal production base further into the existing technology transfer and knowledgetransfer infrastructure, achieving a better supply of collective goods for SMEs.
The net consequence was even stronger ties between SMEs and large firms. Themutual penetration of different sectors – diagonal cooperation – was deepened in themid-1970s by research projects (also funded by the federal government) of theFraunhofer Institute for Production Technology and Automation (IPA), an institutefor applied research located in Stuttgart. Thus the government made use of theestablished external support infrastructure for the production of collective goods,thereby creating what might be termed the German version of servizi reali, thoughthese goods had not been produced only for the local production system. Geographyhas never been a restriction for the German system of collective goods provision, justan opportunity to pool resources.
The territorial and sectoral dimensions of theproduction system are quite balanced, which can be demonstrated by the relevance