REF 160614 In collaboration with A t. Kearney Fostering Innovation-driven Entrepreneurship in Europe 3 Contents Preface 3 Preface 5 Executive Summary 7 Section One:
putting at risk its outlook for productivity, growth, human capital development and job creation. This report, part of the World Economic Forum's Fostering Innovation-driven Entrepreneurship in Europe project, examines
in addition to 1, 132 survey respondents and numerous global and European experts from academia and civil society.
and in particular the project workstream leaders and advisory board members, for their generosity with their time, ideas and support for this work.
both by continuing to promote its work around innovation-driven entrepreneurship, and through a new research project focused on open innovation ecosystems in Europe.
then Scale up A European Agenda to Foster Innovation-Driven Entrepreneurship 11 22 44 57 1 Innovation Fostering Innovation-driven Entrepreneurship in Europe 5 Executive Summary
As a result of this collaboration, four central ideas have emerged from the Forum's work in this field. Fostering innovation-driven entrepreneurship in Europe requires a comprehensive view of the entire entrepreneurial life cycle. 1 Section two describes how the life cycle of an innovationdriven entrepreneurial venture can be divided into three phases stand up,
The Forum and its partners will continue to support this work, in particular through further research and dialogue on how to foster the development of a robust European Open Innovation Ecosystem.
and in the Eurozone in particular, where growth rates remain low and unemployment stubbornly high. Europe continues to struggle to increase its competitiveness and set its economy on a more solid footing.
SMES experience high levels of organizational and employment churn, symptomatic of the real but volatile growth,
innovation and employment opportunities they present. Figure 3 shows that SMES in different European countries have performed very heterogeneously,
and making a significant difference to growth and employment across Europe. 7 Figure 3: SMES Struggling to Reach
or Exceed the 2008 Level of Employment and Value Added5 Source: Project Team based on Eurostat This report focuses on the challenge of scaling innovative entrepreneurial organizations.
or join a market innovator start-up or SME as an employee Start up Assessing the success factors for an entrepreneur in establishing an innovative organization and making it a viable venture,
and number of employees, in particular identifying and realizing win-win opportunities for collaboration between market leaders and market disruptors Employment (2014e relative to 2008 level) Valueadded (2014e relative to 2008 level) 0. 9 1
. 4 1. 3 1. 2 1. 1 1. 0 0. 8 0. 7 0. 6 0. 7 0. 8 0
number of companies per country Increase in employment or value-added Decrease in both dimensions Increase in employment and value-added 10 Enhancing Europe's Competitiveness In the following pages,
including licensing, tax and labour market regulations. Market framework refers to the availability of necessary inputs
advisers and enablers who transfer know-how and create opportunities for growth. Figure 4: A Life cycle Model for Entrepreneurship6 Source:
and only 41%perceived them as somewhat or very favourable (see Figure 7). These results are more positive than many experts engaged in the project expected.
or the willingness and ability to take the risk of joining an innovative start-up as an employee. 12 Figure 10 details a conceptual model for the factors influencing
and have more control of one's work (67%of respondents), to create an innovative offering to take to market
engaging in entrepreneurial activities is less attractive in terms of job security (64), %financial benefits (29%)and long-term career prospects (26%).
%Concern about financial benefits is greater among respondents potentially joining an entrepreneurial venture as an employee (37%)than those starting their own venture (29%.
as well as those mechanisms that help protect against the employment and financial risks of creating or joining a new venture.
Employees of the Finnish start-up Rovio had developed 51 programmes, none of which was a commercial success. After going through this, their 52nd programme, Angry Birds,
and on job creation in organizations featuring programme participants. 17 This is strongly reinforced by the Forum's survey,
Self employment is a less popular option today than it was in 2009, with a clear majority in the European union (EU) now favouring work as an employee.
Another is the prevailing attitude towards entrepreneurs which, while favourable, lags the professions. While 79%of Europeans tend to agree that entrepreneurs create new products
%since 2007 The EU is home to 19.0 million micro companies (those with less than 10 employees),
Many European venture capital experts say the sector is stronger than the long-term data indicate. Today
considering their capacity to manage collaborations without compromising their core fields of work. Developing culture and organization Fostering a collaborative culture and organization Both a soft cultural and a hard organizational component need to be considered:
and monitoring degree of openness The not-invented-here syndrome that leads to external work being seen as competition
Martin Vollmer, Chief Technology Officer, Clariant Developing culture and organization Promoting an R&d setup with specific organizational structures integrating employees, partners and customers Barclays Open Innovation:
and Israel, led by a senior executive with enough credibility in the company to champion collaboration cases.
Second, BT involves senior executives early in the collaboration process, by organizing meetings with selected companies during dedicated off-site sessions.
Running an entire division aimed at providing digital services to UK SMES helps senior executives understand the perspective of smaller companies
connections between challenges and solvers Innocentive works with over 300 000 solvers from more than 200 countries,
A team of 15 ABB employees collaborated with Fastned to develop the concept. DSM/Provexis:
Could you estimate what proportion of SME employees in your country are working in innovation-driven SMES?
labour market interventions to improve access to talent, and projects to improve framework conditions for crossstakeholder or cross-regional collaboration between various actors.
The initiative will start in 2015 with a planned budget of €24. 9 million as indicated in the Innovation in SMES work programme.
and venture capital to SMES and will work in conjunction with Horizon 2020. In early 2013, the Commission launched a public consultation on how to foster the supply of long-term financing
grow faster and employ more workers. Fostering Innovation-driven Entrepreneurship in Europe 35 Toomas Hendrik Ilves President of Estonia The role of innovation-driven entrepreneurship in your economy:
Enterprise Estonia has established a network of salaried professional export advisers residing in major target markets,
The growth outlook and ambitiousness of enterprises is expressed by entrepreneurs'expectations concerning the increase in employee numbers as well as their ambitions on the international market.
expectations of early-stage enterprises concerning a fast increase in employee numbers (i e. more than 10 employees in five years and over 50%of growth) are lower,
remaining lower when compared with the respective indicators in Latvia and Lithuania. Key activities on an agenda to foster innovation-driven entrepreneurship in Europe:
Incentivizing co-creation, including programmes to support innovation clusters Entrepreneurship promotion: Promoting entrepreneurship as a career choice and raising general awareness on entrepreneurship Start-up Estonia programme:
poor links between universities and the labour market don't help. We should be giving tax incentives to start-ups.
they might encourage a corporate culture with spin outs and employee circulation; and they might view being located in a strong and innovative entrepreneurial ecosystem as a long-term value.
and entrepreneurship is the driving force behind employment and job creation in Portugal. A recent success in fostering entrepreneurship:
and Employment, introducing an assertive agenda along three key intervention areas (human capital, R&d and financing),
The adequate promotion of a consistent innovation-driven entrepreneurship policy requires us to focus on five defining factors to successfully reindustrialize Europe:
the promotion of research and innovation; the continued improvement of our European workers'skills and knowledge;
the access to adequately priced financing, in particular for SMES; the advancement of the EU internal market and access to international markets;
Recent successes by The netherlands in improving the conditions for innovation-driven entrepreneurship are the top sector approach, valorization grants and an action plan for skilled technical workers.
the importance of this issue decreases while the relevance of other difficulties increases, including severe competition, availability of skilled employees and managers,
and cost of production and labour. Key activities on an agenda to foster innovation-driven entrepreneurship in Europe:
Hire staff by reforming employment law, helping up to 1. 25 million businesses cut their employment costs,
and supporting apprenticeships. Develop new ideas by helping businesses accelerate innovation and by improving intellectual property protection.
Break into new markets, simplifying access to the £230 billion public procurement market, helping small businesses improve their online presence and supporting exports.
and momentum by connecting stakeholders better Together, focusing stakeholders on what works at scale, connecting actors and developing effective partnership approaches can lead to a more integrated innovation ecosystem that can contribute to growth in European industries
Strengthening this connection has an effect for both the next generation labour force and the education system. Teachers and professors can be trained as entrepreneurship developers to inspire
Partner to encourage active engagement in start-ups as employees and as founders. Individual attitudes and skills can be influenced effectively by direct experience in a start-up environment, for example through internship programmes or employment opportunities.
These experiences build on school-based programmes and often lead to employees founding their own businesses.
Connecting and partnering to help entrepreneurs start up As outlined above, a key challenge for European entrepreneurs is accessing critical resources,
and direct it towards venture markets Supporting entrepreneurs to access skilled employees to join their ventures Providing mentoring to new founders Providing more opportunities for potential entrepreneurs to obtain practical experience in an innovative business
Global Shapers Hub, Lisbon We should create a board of mentors and advisers for young European changemakers.
among members about immigration or labour market issues, and on identifying avenues for consensus with external partners on the protection of personal data?
Formal long-term employment contracts between individuals and corporations would become investment relationships in which individuals dedicate capacity and skills in a corporate ecosystem.
the first question for executives will be whether they can understand the direction and forces underlying current shifts.
The Forum welcomes your input on the work described in this report and your desire to be engaged in its upcoming research on Open Innovation.
please email europeentrepreneurship@weforum. org. 56 Enhancing Europe's Competitiveness Endnotes 1. The entrepreneurial life cycle is defined here as including the factors influencing an individual to turn an idea into economic activity or join a start-up as an employee,
while an equal number say it is challenging to find workers with the skills they need.
Papers, No. 9 Fostering Innovation-driven Entrepreneurship in Europe 59 Acknowledgements Adviser and Knowledge Partner:
A t. Kearney Kai Engel, Partner and MD, Germany, Lead Partner for Innovation and Research & development Management Eva Diedrichs, Managing director, A t. Kearney IMPROVE Holding Work Package
-YE Europe Alumni Research+Data Insights, a Hill+Knowlton Strategies company David Iannelli, President Amber Ott, Senior Account Supervisor YES Dimitris Tsigos, President
Gavin Patterson, Chief executive officer Jean-Marc Frangos, Managing director, External Innovation, BT Technology, Services and Operations European Institute of technology Daria Golebiowska-Tataj, Executive Board member
Global Agenda Council on Youth unemployment Mark Rutte, Prime minister of The netherlands Aymeric Sallin, Founder and Chief executive officer, Nanodimension, USA;
Young Global Leader Luis Alvarez Satorre, Chief executive officer, Global Services, BT, United kingdom Tobias Schmidtke, Senior Consultant, A t. Kearney, Germany Bohuslav Sobotka
, European Investment Fund, Luxembourg Fostering Innovation-driven Entrepreneurship in Europe 61 Jeroen Van der veer, Executive Member of the Governing board, European Institute of Innovation and Technology, Hungary;
Co-Director, Centre on China Innovation, China Europe International Business school (CEIBS), People's republic of china Krisztina Z Holly, Adviser, National Advisory Council for Innovation and Entrepreneurship
, USA Daniel Isenberg, Professor of Entrepreneurship Practice, Babson Executive Education, Babson college, USA Guriqbal Singh Jaiya, Director-Adviser, Innovation and Technology Sector, World
Intellectual Property Organization (WIPO), Geneva Eric Kacou, Cofounder, Entrepreneurial Solutions Partners (ESPARTNERS), USA Harkesh Kumar Mittal, Adviser and Head, National Science
4. How should such an immunization system work? 5. What kind of ICTS may be used to enhance delivery of healthcare services?
Healthnet one of the most widely implemented computer-based telecommunications systems in Sub-saharan africa, currently is being used in over 30 countries by around 10,000 healthcare workers to exchange ideas
Users mainly physicians and medical workers connect to the network through Enhancing healthcare delivery through ICTS 147 local telephone nodes to access services such as physician collaborations (Mozambique, Tanzania, Uganda.
In Uganda hand-helds (Epihandy) are being used by healthcare staff for communication (e-mail), demographic studies and surveys, consultations and treatment guidelines (Kasozi and Nkuuhe, 2003.
Levels of motivation of health workers which is associated with level of facilitation, remuneration, workload, provision of quality training
Efficiency of health facilities which is affected by the availability of financial resources, availability of equipment, promotional activities and number of skilled health workers and proper management.
The key variables that play a key role in the provision of healthcare services are resources (health centres, facilities) and level of service which results from the motivation of health workers.
An increase in demand results in increased workload which reduces health worker motivation resulting in reduced level of service
An effective health system requires management of resources, effective monitoring and reporting as well as well-motivated health workers.
and minimizing missed opportunities due to stock outs. 2. Health worker motivation. The provision of immunization services requires highly motivated health workers who are trained well,
remunerated, facilitated and with acceptable workload. 3. Effective monitoring of immunization activities by carrying out regular supervisions of health units that provide immunization services. 4. Mobilization
and plans but it is desirable that the different health centres/hospitals offering immunization services work in a cooperative environment
hiring and deploying staff; processing and payments of staff salaries. Other activities include the purchase
and delivery Enhancing healthcare delivery through ICTS 151 of food for patients; collecting and analysing disease spread data in a country,
Immunisation sessions which involve preparation of equipment, vaccines, safe injection practices, transport, management of human resource (health workers) and vaccine wastage.
mobilization of mothers, record keeping, routine supervision from the district officials, timely delivery of vaccines to avoid stock outs, training of community workers.
The majority of health facilities (5) stated that they needed to increase the number of health workers as well as training.
vaccine equipment, vaccine storage facilities, transport facilities, utilities, mobilization tools, laboratory supplies, staff housing, remuneration and allowances, recording facilities.
and tally sheets by the health workers. The tally sheets are forwarded to the health district level for entry into a computerized database Health Management Information system (HMIS.
Health workers will use the PDA to access immunization information (diseases, vaccines, side effects, immunization schedule, stock management) from the immunization content management system.
health workers as well as preparing requisitions and facilitate distributions of vaccines to the various health sub districts and health units.
management of staff and equipment as well as enhance decision making process for long term plans. National level: An immunisation content management system that has all the information pertaining to immunisation (diseases, vaccines, schedules,
side effects through online accessibility to the medical workers as well as the public improving their attitude towards immunization. 3. Timely reporting of disease outbreaks/epidemics will be made easier
CONCLUSION AND FUTURE WORK Simple low cost techniques that are sustainable should be developed based on the following strategies for overcoming barriers to the successful integration of ICT into the delivery of immunization healthcare systems.
A manual for operational level health workers. UNEPI/TRA. Borooah, V. K.,(2003. Gender bias among children in India in their diet and immunization against disease.
It draws from papers prepared for the OECD by a number of experts, in particular: David Audretsch, Bart Clarysse and Vincent Duchêne.
Highlights For SMES in the OECD, economic globalisation has created new competitors, especially in low labour cost countries,
recruitment of university graduates and skilled personnel; awareness of new ideas and technologies; and incentives and institutional frameworks for improving collaborations within networks and clusters, including local technical centres or technical colleges.*
and why governments have increased generally the priority attached to policies directed towards SMES while focusing them more on the promotion of innovation.
many experts predicted the demise of SME competitiveness as globalisation increased. While many SMES have succumbed indeed to a deterioration of competitiveness,
One of the most important implications of globalisation is that the comparative advantage of OECD nations is shifting away from traditional factors of production, such as land, labour and capital, towards knowledge-based economic activities.
and inter-country labour mobility. But in order to answer how these 1. During the last five years, SMES were responsible for more than 80%of the jobs created (European SME coordination unit, CEC, 1999.
and other production costs sufficiently to compete with the low-cost foreign producers,(3) substitute equipment and technology for labour to increase productivity,
Substituting capital and technology for labour, along with shifting production to lower-cost locations has resulted in waves of corporate downsizing throughout Europe and North america.
During the 1980s, one in about 25 workers lost a job, and in the 1990s the figured has risen to one in 20 workers. 9. Much of the policy debate about globalisation has revolved around a trade-off between maintaining higher wages at the cost of higher unemployment versus favoring higher levels of employment
at the cost of lower wage rates. Globalisation has rendered the comparative advantage in traditional moderate technology industries incompatible with high wage levels.
and into those knowledge-based industries where comparative advantage is compatible with both high wages and high levels of employment knowledge based economic activity.
In Silicon valley, for example, employment has increased by 15%between 1992 and 1996, even though the mean income is 50%greater than in the rest of the country. 4 In 1997 Silicon valley created more than 53,000 new jobs,
yet the number of workers who can contribute to producing and commercialising new knowledge is limited to a few areas in the world.
Furthermore, demand for less skilled workers has decreased dramatically throughout the OECD, while demand for skilled workers has exploded. 6 11.
Given the shift in comparative advantage towards more knowledge based economic activity, many scholars have predicted the demise of SMES.
For example, the Gellman (1976,1982) data base identified SMES as contributing 2. 45 times more innovations per employee than do large firms.
Audretsch (1995) identifies SMES as contributing 2. 38 times more innovations per employee than do large firms.
Third, it is easier to sustain a fever pitch of excitement in small organization, WK1 8 where the links between challenges, staff,
and research oriented consultancies which include engineering services, technology consultants, and (2) R&d boutiques. As shown in table 1,
rarely work with other companies; have no development activities; and rarely bring new products on the market.
with and without R&d capacity) Technology Followers SIZE Often small companies (40%have staffs<10;
23%have staffs>250) SECTOR Predominantly from the following sectors: ICT services, high tech8, R&d services. 50%are technical service companies (ICT, R&d) Both from manufacturing and services,
But knowledge as an input is inherently different than the more traditional inputs of labour,
Other key factors generating new economic knowledge include a high degree of human capital, a skilled labour force,
and other knowledge workers as agents endowed with new economic knowledge. 34. When the focus shifts from the firm to the individual as the relevant unit of observation
WK1 12 expected value of that knowledge, he has no reason to leave. On the other hand, if he places a greater value on his ideas than does his original firm,
a knowledge worker may choose to exit the firm or university where the knowledge was created initially.
and in a worker. The firm is created endogenously through the worker's effort to appropriate the value of his knowledge through innovative activity. 35.
What emerges from new evolutionary theories and the empirical evidence on innovation as a competitive strategy, is a picture of markets in motion with a lot of new firms entering
An executive of a company that makes laboratory equipment explained that the typical Mittelstand strategy"
%while five-year employee growth was 9. 8%.44. One of the keys to the success of the German Mittelstand has been their strong commitment to global expansion.
which leaves it vulnerable to competition from more technologically advanced companies. Customers eventually reward technological leaders that can provide them with unanticipated product innovations and improvements.
Indeed, non-marketing employees in the German Mittelstand engage in direct contact with customers at twice the frequency as in the largest German corporations.
and financial employees in order to make sure innovative activities truly meet customer needs. WK1 15 The Network and Flexible Production Strategies 47.
It is not simply the concentration of skilled labour, suppliers and information that distinguish the region.
But doing so requires skilled labour, and high investments in human capital. -Continual innovation. Both the nature of the products,
In these specialised industrial districts an agglomeration of producers within an industry work in close physical proximity.
The narrow division of labour common to large enterprises has been replaced by an organisational structure in which employees perform a wide variety of different tasks. 15 Porter (1990) provides examples of Italian ceramics and gold jewelry as industries in
which numerous firms are located within a bounded geographic region and compete intensively for new ideas. WK1 17 54.
These firms generally favoured decentralised manufacturing locations in close proximity to other firms within the network in an effort to preserve small effective work groups. 55.
On the one hand, new economic knowledge embodied in skilled workers tends to raise the propensity for innovative activity to spatially cluster throughout all phases of the industry life cycle.
which are made easier by the mobility of workers and technicians, the activity of technical consultants,
Globalisation has shifted clearly the comparative advantage of OECD countries away from traditional inputs of production land, labour, capital and toward knowledge.
Two-dimensional plot of SMES according to their innovative capacity Leading Technology Users 10-15%of the SME population(>5 employees) Technology Developers 1-3%of the SME population
(>5 employees) Non-Innovative SMES about 40-45%of the SME population(>5 employees) Potential Innovators about 40%of the SME population(>5 employees) IIII IV
In most national technology programmes, technical consultants are permitted frequently not to participate as contractors, so this category of SME is excluded often national R&d grant programmes,
15 40 Firm size (employees) 47 43 73 R&d budget as%of turnover 21,7%32,1%10,9%Growth during 1996-1999 (in terms of employees) 89
These organisations are typically technical consultants and count R&d as a non-core activity. Looking at firm growth rates during the three-year period preceding the study,
and employ a highly educated labour force. Public agencies have strong incentives to adapt their strategies to meet the needs of this population of SMES.
(or have a network of technical experts) who are trained to perform technological due diligence. The venture capitalists are more specialised in assessing business potential than technological viability.
<250 employees and independent. 25 Including CRAFT-projects (14,5%without CRAFT-projects. 26 In respect of Belgian (Flemish) definition of the SME:
less than 200 employees. 27 SME according to the Anvar-classification: less than 50 employees. 28 Only related to equity financing organised by the main R&d granting institute!
WK1 26 budget in the following years. R&d grants seem to have substantial additivity to the size of the R&d investments of leading technology users
A typical such SME might have three employees out of thirty who spend part of their time on R&d activities,
Technical experts in public research bodies or institutions are not of much assistance as their speciality is high end,
Because the mind set separating the world of technical experts and that of entrepreneurs is so large,
In some countries such as the US, technical and business consultants are important carriers of innovation to SMES
These firms perform some development and design work, often have an absorptive capacity that recognises
OECD. OECD, 1998, Technology, Productivity and Job creation: Best Policy Practices, Paris: OECD. OECD, 1998, Main Science and Technology Indicators, Paris:
We used the number of employees to account for the effect of differences in the size of the firm.
Larger firms may employ more skilled human resources be more knowledgeable, have more access to knowledge,
Tie and Network Correlates of Individual Performance in Knowledge-Intensive Work. The Academy of Management Journal, 47 (6), 928-937.
or a new organizational method in business practices, workplace organization or external relations (OECD, 2005).
the contribution of SMES to job creation and value added constitute a large share of both EU and Romanian economy.
and in 2012 employed over 86 million people providing for 66,5%of jobs from the total employment and contribute more than half of the total added value created by businesses.
this growth in number and importance combined with employment problem and job creation by SMES issues generated an interest in the study of entrepreneurship (Wennekers & Thurik, 1999).
Usually the attention and actions of policymakers and the business environment focused on large companies and overlook the importance of SMES especially in connection to innovation.
and a decrease in unemployment (Koellinger & Thurik 2012) so a more analytic approach toward the role SMES is required.
ensuring an important part of employment and innovation (Acs and Audretsch, 1990). Early theories regarded the small enterprises as being outside of the domain of innovative activity and technological change (Acs & Audretsch,
which is an encouraging fact the more than half of the Romanian SMES work to improve their products
Least mentioned was the lack of adequate human resources (8. 49%)(see figure 3). 3. 5 Use of IT in SMES.
such funds Difficulties in finding partnerships for R&d activites Difficult acces to information regading new tehnologies Lack of adequate human resources Nelu Eugen Popescu/Procedia
As Wennekers and Thurik stated possibilities for economic growth, job creation and innovation can come from SMES (Wennekers & Thurik,
Acknowledgements This work was supported by the strategic grant POSDRU/159/1. 5/S/133255 Project ID 133255 (2014), cofinanced by the European Social Fund within the Sectorial Operational Program Human resources Development 2007 2013.520 Nelu Eugen Popescu/Procedia Economics
and Finance 16 (2014) 512 520 References Acs, Z, . and Audretsch, D. 1990)" Innovation and Small Firms,"MIT Press Books, The MIT Press, edition 1, volume 1. Acs, Z. J. and Audretsch, D
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