Product design plays an important role within the overall process of innovation. It is through design that ideas and demands from the market are expressed in material form, and translated into hardware, thus allowing products to be introduced into the competitive environment. This article presents the result of a survey on product design capability, conducted in Paraíba state, North-east Brazil. It argues that this important aspect of innovation has been neglected in the development literature. Recognizing this innovative potential is crucial to the development of both urban and rural small manufacturing enterprises.