This paper primarily probes the nature and dimensions of R and D activities carried out in small-scale industries in Karnataka. Quite a number of small firms are informally engaged in R and D in the region. External factors like competitive pressure, technological change and customer needs have driven most of these firms to undertake R and D to achieve quality improvement, cost efficiency and competitiveness. Thus 'incremental innovations' are the primary feature of R and D in small firms and they spend hardly 1 per cent of their turnover for R and D.