This paper has three purposes. The first purpose is to analyze the technological levels of Korean SMEs. For that purpose, this study did not only interviews with people in industry associations and individual firms but also a questionnaire survey on 108 firms. As the result, it was found that the technological levels of Korean SMEs had improved a lot but were still far from the world top levels. The second purpose is to find the relationship between the technological levels of individual firms and their willingness of participating in a Korea-Japan business cooperation program. As to this it was found that the higher the technological level of a Korean firm was, the more actively the firm was willing to participate in a technical training program in Japanese firms. The third purpose is to draw policy implications from the analysis as to the directions for the enhancement of Korean SMEs` technological competences and the cooperation between Korean firms and Japanese firms. Several implications as to this were suggested in the final section of the paper.