Synopsis: Entrepreneurship:

Science and Public Policy August 2011 0302-3427/11/70521-20 US$12. 00 Beech tree Publishing 2011 521 Science and Public Policy, 38 (7 august

In recent years, the European commission has provided highly informative company-level analyses of R&d investment with data related to 2004 (European commission, 2005) and to 2009 (European commission, 2010.

1 The situation is even worse in software and computer services. SAP was the only European company spending more than €1 billion for R&d,

or in the small group of successful startups, such as Google, e-Bay or Amazon, surviving the new economy bubble,

or in the top list of companies offering IT-related services on a global scale.

On the other hand, EU leads in aviation and in communication technology. European commission, 2007: 54) Looking at patent data, it appears that in the patent class computer and automated business equipment the share of the EU-27 (the current 27 members of the EU) increases

and using the larger definition of information and communication technologies (ICT), the Key Figures 2008 2009 Report showed that the share of EU-27 of the world ICT patent applications decreases from 31.0%in 2000 to 24.8%in 2005 (European Commission, 2008: 68).

In this paper we focus our attention on the narrow definition of IT (excluding communication technology),

Examples include SAP in enterprise software, Autonomy in unstructured search and Sage in accounting and customer relationship management software for smaller businesses.

the slowdown in productivity in the European economy since the mid-1990s and the opening of a wide productivity gap with the USA since then.

In turn, the productivity gap is considered to be the main source of the gap in rates of growth between the two economies.

Andrea Bonaccorsi is professor of economics and management at the University of Pisa Italy. His main research interests include:

the deepening of ICT capital and the increase in total factor productivity originated from the production of ICT goods. O'Mahony

the resurgence of productivity growth in the United states appears to have been a combination of high levels of investment in rapidly progressing information

and communications technology in the second half of the 1990s, followed by rapid productivity growth in the market services sector of the economy in the first half of the 2000s.

Conversely, the productivity slowdown in European countries is largely the result of slower multifactor productivity growth in market services, particularly in trade, finance,

and business services. A related body of literature has investigated the complementarity between investment in ICT and organizational change in companies

again pointing to a gap between US and Europe (Bloom et al. 2007; van Reenen and Bloom, 2007.

whose impact on the economy is pervasive, transversal, and deep (Bresnahan and Trajtenberg, 1995). Ten Raa and Wolff (2000) identified the sectors that are most responsible for the growth in total factor productivity in the period 1958 1997 in the USA,

including services (Mamuneas, 1999). For these reasons the weakness of the European industry is considered generally with concern.

But why did the US economy adopt ICT earlier and more productively, first in the manufacturing sector, then in the market service sector?

insofar as it insulated IT business units from harsh competition in global markets (Becchetti, 2001). Vertical conglomerates in countries with rigid labour markets tend to keep obsolete technologies alive for longer periods.

This does not translate at all linearly into new products and services. Much more than that, it nurtures the ecology of ideas

eventually transformed into huge worldwide market opportunities. There is another useful piece of information in Table 1. With the (partial) exceptions of the early pioneering ideas of John Von neumann and of the invention of the internet at CERN,

This does not translate linearly into new products and services. Rather it nurtures the ecology of ideas and visions that feed innovation Table 1. Origins of most important ideas in computer science and technology Top ten ideas in computer science 1. Turing machine

Historical reconstructions are absolutely clear about the dominant role of private companies, the importance of demand from the military and the civilian business,

and marketing investment by large companies such as IBM (Flamm, 1988; Chandler, 1990; Langlois, 1992; Mowery, 1996;

By virtue of their relatively‘open'research and operating environment that emphasized publication, relatively high levels of turnover among research staff,

but benefit from an environment in which new ideas are generated and debated on a continuous basis. Without such an academic background it would not be possible to explain the hacker movement,

The role of military procurement for the growth of computer technology cannot be understood only on the basis of a demand pull mechanism.

in the heroic period until 1959 they were involved directly in full-scale design and prototype production of computers,

As early as 1948 a prototype of the first completely electronic storedprogram computer, conformed to the Von neumann architecture,

but his contribution was understood not well by the scientific environment (Moreau, 1984). The first machines were realized in the 1950s.

The Bull Company's prototype of Gamma 2 was shown at the international exhibition in Paris in 1951,

These short summaries also make it clear that the early era of computer technology saw the deep involvement of the academic environment.

Initially, universities were involved directly in the production of prototypes. With the advent of the 1960s, the heroic period of prototype building was over

and large computer manufacturers emerged. However, a sharp difference seems to emerge between the evolution of the technology in the USA and Europe.

In Europe, the academic environment was leading head-to-head with the US one until the 1960s,

This explains why fundamentally new ideas on technology are often the product of academic environments,

The computer originated in the academic environment. Zuse and IBM are special cases. From the Moore School and the University of Iowa, from Aiken and Wilkes to Algol, the vast majority of the essential steps were achieved on academic grounds.

whereby, at any point in time, there have been several diverse research trajectories, sometimes also in competition, rather than convergence on a few research programmes (Bonaccorsi and Vargas, 2010).

Building up an attractive scientific environment requires obsessive attention to quality criteria in recruitment and promotion of academic staff,

Also, deep and radically new ideas often originated in academic environments, were incubated for some years,

This gives an extremely accurate view of the type of tough competition in this community: it is almost impossible to rank high in the computer science field without a Phd from either the USA or Europe,

2. 3 University of Illinois 22 2. 6 12 2. 6 University of michigan 20 2. 3 9 2. 0 18 2. 8

University of Edinburgh 13 1. 5 University of Pennsylvania 13 1. 5 University of Massachusetts 8 1. 8 University of washington 7 1. 5 University

because there they have the opportunity to meet and to work with the best scientists.

0. 9 2 0. 4 9 1. 4 Linguistics, literature 4 0. 5 4 0. 9 Economics 2 0. 2

students with a background in human sciences (literature, linguistics, psychology) and social sciences (economics) may combine their domain expertise with advanced computer science.

The European tradition of Phd education is one of subordination to established disciplinary boundaries, rather than of open competition on the basis of research proposals.

and there is competition to attract them. Competition for scarce academic staff of top quality may be considered a layered game:

only highly ranked institutions can compete for very top people, and very top people carefully select their appointments

in order to increase their opportunities to learn, to have good colleagues and students, to strengthen their CV

Competition, however, is multidimensional. Among people of the same stratum of quality, secondary factors in selecting an affiliation

The dynamics we observe are the result of intense competition among universities to attract the best young researchers, then the best young professors.

Without strong competition among universities, Table 7 Ranking of top 15 affiliations (only academic positions) in total number of positions over career Institution Number MIT 174 Stanford university

166 University of California at Berkeley 102 Carnegie mellon University 102 University of Illinois 59 University of maryland 58 Cornell University 52 University of washington 45 University of Pennsylvania

On the other hand, top scientists have large opportunity costs: if they lose opportunities the value they lose is very large,

so they will not accept offers that they consider below their opportunity cost. The higher the reputation, the larger the opportunity costs.

In other words, we may think of this career pattern as a dynamic equilibrium, in which all talented scientists are allocated to universities that make best use of their talent,

and all universities allocate their budget in the best possible way. If top scientists receive better offers,

Rapid career opportunities are the outcome of this dynamic. Patterns of international mobility Finally for a subsample of 786 scientists we have been able to track the countries in

2007), insofar as US innovators move more systematically towards cities where opportunities are larger, while Europeans try to develop innovations starting from their existing locations.

and between companies and large (public and private) customers. On the side of industry, what is crucial is the working of mechanisms that also permit largescale experimentation,

competition based on peer review, a competitive Phd education system, cross-disciplinary mobility and industry academia mobility (Bonaccorsi, 2011).

Computer science has been based on a fierce competition for students and researchers worldwide. Knowing how severe these demands are,

top class universities fight to attract the best students and try to offer the best conditions to professors.

although complex and nonlinear, relations between industry and the academic environment. The search regime in computer science is based on a massive and fast effort of exploration of many competing directions,

The firms created in these periods had to survive in a harsh competitive environment, to access the risk capital market and eventually the stock exchange market,

The entrepreneurial process started much later in Europe, partly because of the lack of competition, partly because of the poor ecology of ideas.

The recent EU Industrial R&d Investment Scoreboard states clearly that: the EU's innovation gap is a consequence of its industrial structure in

Implications for productivity and the role of services There is a large policy debate in Europe on the causes of the growth deficit with respect to the USA.

that US companies in the IT industry started to work with large service firms as potential customers as early as the 1960s.

also by public shareholders from Italy and France. In the 2010 Scoreboard it is registered as incorporated in Netherlands. 2. Citeseer was developed in 1997 at the NEC Research Institute, Princeton, NJ.

Europe and the information and communication technologies revolution. In The Economic Challenge for Europe, J Fagerberg, P Guerrieri and B Verspagen (eds..

The 2005 EU Industrial R&d Investment Scoreboard. Volume II: Company Data. Brussels: Directorate-General Joint Research Centre.

The 2010 EU Industrial R&d Investment Scoreboard. Brussels: Directorate-General Joint Research Centre. Flamm, K 1988.

U s. economic growth in the Information age. Brookings Papers on Economic activity, 1, 125 211. Kargon, R, S Leslie and E Schoenberger 1992.

Far beyond big science: Science regions and the organization of research and development. In Big science. The Growth of Large-scale Research, P Galison and B Hevly (eds..

External economies and economic progress. The case of microcomputer industry. Business History Review, 66,1 50.

In Research and Innovation Policies in the New Global economy. An International Comparative Analysis, P Larédo and P Mustar (eds..

Spillovers from publicly financed R&d capital in high tech industries. International Journal of Industrial Organization, 17 (2), 215 239.

Economic policy, 18 (36), 9 72 Norberg, A l 2005. Computers and Commerce. A Study of Technology and Management at Eckert-Mauchly Computer Company, Engineering Research Associates,

Quantifying the impact of ICT capital on output growth: A heterogeneous dynamic panel approach. Economica, 72 (No 288), 615 633.

Corporate technological specialisation in the European information and communication technology industry. International Journal of Innovation Management, 2 (3), 339 366.

Engines of growth in the US economy. Structural Change and Economic Dynamics, 11 (4), 473 489.

Does information and communication technology drive EU US productivity growth differentials? Oxford Economic Papers, 57 (4), 693 716.

Economic growth in Europe: A Comparative Industry Perspective. Cambridge, UK: Cambridge university Press. Triplett, J E and B P Bosworth 2004.

Productivity in the US Services Sector. New Sources of Economic growth. WASHINGTON DC: Brookings Institution. Van Ark, P m O'Mahony and M P Timmer 2008.

The productivity gap between Europe and the United states: trends and causes. Journal of Economic Perspectives, 22 (1), 25 44.

Quarterly Journal of Economics, 122 (4), 1351 1408. Watson, T Jr 1990. Father, Son & Co.:

and resource efficiency 4. Tackling social inclusion and demographic challenges 5. Implementation of local and territorial development aimed at promoting economic growth These funds provide financial basis for Hungary's medium and long-term development

Investments will focus on enhancing innovation activity and competitiveness of enterprises in order to increase their added value and integration into the international value chain also through better access to financing.

They will also stimulate growth, create jobs and improve the performance of the research, development and innovation system, including through matching the labour market demand through high quality higher education supply, cooperation with the business sector and increased private investment.

One further feature of Hungary's development goals is its shift to a low carbon economy,

which means improving energy efficiency in buildings and enterprises, sustainable management of natural resources and an increasing share of renewable energy sources in the overall energy structure.

Investing in human capital and helping people enter the labour market will be a top priority in Hungary with a focus on issues highlighted in the country specific recommendations.

A strong emphasis is placed on combating youth unemployment. The funds will finance initiatives to improve the quality of education

and training systems in view of ensuring a better match with labour market demand. Vocational education and early childhood care and education also constitute important areas for investment.

The funds will continue to finance projects that help people in difficulty and those from disadvantaged groups to get more support to have the same opportunities as others to integrate into society.

Children, marginalised Roma communities or people with disabilities are all among those who should benefit the most.

Beyond rail investments emphasis will be put on improving urban and suburban transport connections and enhancing regional connectivity to the Trans-European Transport Networks.

In the waste and water sectors, some investments are needed still to make sure EU environmental requirements are fulfilled.

Aquaculture providing environmental services will be supported also in the framework of the environmental management programme. Hungary has chosen to finance investment under all 11 thematic objectives defined in the Regulations.

Details on thematic objectives are presented in Table 1. Chosen expected results Investments are aimed at addressing key challenges ahead of the country where development gaps are significant.

The ESI funds will assist Hungary in strengthening social economic and territorial cohesion and in particular achieving national targets of EU2020 and its flagship initiatives:

and enterprises and facilitate achieving the target of 14.65%share of renewable energy in total energy consumption by 2020 (9. 6%in 2012).

The funds aim to improve the Hungarian business environment by reducing administrative burden for businesses

competitiveness of enterprises (TO3) and low carbon economy (TO4) in relation to allocation account for 58.9%at national level.

TO4) the country will spend 13.25%of the ERDF allocation to promote the low carbon economy further to the EUR 845 M dedicated from the Cohesion Fund.

and environmental related actions planned under TO4 (low carbon economy), TO5 (climate change) and TO6 (environment protection and resource efficiency),

Human resources Development OP) 2 national OPS co-financed by ERDF and CF (Integrated Transport OP, Environment and Energy efficiency OP);

1 national OP co-financed by ESF and CF (Public Administration and Services OP; 2 territorial OPS co-financed by ERDF and ESF;

-carbon economy in all sectors; 1 425 387 797 0 845 597 151 532 278 345 5 000 000 2 808 263 293 (5) promoting climate change adaptation,

0 0 888 196 396 126 551 958 0 1 014 748 354 (6) preserving and protecting the environment and promoting resource efficiency;

authorities and stakeholders and efficient public administration. 0 684 855 782 0 0 0 684 855 782 Technical assistance 0 0 193 449

OP ERDF, ESF, YEI 7 684 204 174 Public Administration and Services OP ESF, CF 794 773 905 Environmental and Energy efficiency OP

Dublin Institute of technology ARROW@DIT Articles School of Marketing 1996-01-01 Perceived Barriers to Innovation in Small to Mediume Enterprises (SMES) Thomas Cooney Dublin

to innovation in small to mediume enterprises (SMES). Irish Marketing Review, Vol. 9, pp. 87-97

The Policy Brief was prepared by empirica Communication and Technology Research, Bonn, Germany. The principal author is Stefan Lilischkis.

and serve as a starting point for further discussion of related issues among stakeholders, in particular at INNO-Grips workshops.

and Philipp Koellinger, Assistant professor in Economics, Erasmus University Rotterdam, Netherlands. Disclaimer Neither the European commission nor any person acting on behalf of the Commission is responsible for the use

Oxfordstr. 2 53111 Bonn, Germany innogrips-contact@proinno-europe. eu European commission Directorate-General Enterprise and Industry D/1"Policy Development for Industrial

An INNO-Grips Policy Brief by empirica Communication and Technology Research. Principal author: Stefan Lilischkis.

36 4. 2. 1 Entrepreneurship...36 4. 2. 2 Access to finance...39 4. 2. 3 Internationalisation...

policies to back venture finance...68 5. 4 Japan: Diversification and clustering of SMES for future growth...

growing enterprises as they are seen as a key driver of economic growth and employment. Europe has performed relatively badly in generating high-growth innovative companies that quickly become global leaders.

In Canada, combined SME support through R&d programmes and venture capital increased the number of high-growth companies considerably.

Key definitions The OECD defines high-growth enterprises as firms with average annualised growth in employees or in turnover greater than 20%a year, over a three-year period,

Gazelles are born newly high-growth enterprises not older than five years. These definitions have become prevalent in publications on this issue.

The OECDEUROSTAT Entrepreneurship Indicators Programme found that in 2006, the USA were ahead of most European countries for

%A recent study found that the share of young enterprises among large innovative companies was much larger in the US

Section 3. 2.)Theoretical arguments for SME support Policies promoting high growth of innovative SMES should be in accordance with principal insights of economic theories.

and growing enterprises may also produce negative externalities. State failure theory deals with possible failures in governmental decisions and policy making.

and related policies The answer to the question why enterprises grow is complex. Many factors can trigger enterprise growth and, vice versa,

possible barriers to growth are manifold. In recent years, research has substantiated widely the importance of high-growth new companies for job creation.

The number and share of high-growth enterprises is small, but the number and share of jobs they create is disproportionally large.

However, the number of studies about policies to support high-growth enterprises is still small.

Related EU-wide programmes include Eurostars and the growth facilitator of the European Investment Fund.

Section 4. 1.)Specific policy issues Entrepreneurship: Certified coaching may help grow SMES and cross the chasm between pilot markets and mass markets.

However, many SMES do not take advantage of coaching opportunities, and there is, as of yet, no appropriate infrastructure to encourage the replication of coaching networks throughout EU Member States.

Improving access to venture capital (VC) may be a priority policy objective when supporting high-growth SMES.

aiming at establishing a European venture capital market. Section 4. 2. 2.)Internationalisation: Companies seeking to grow quickly need large international markets.

However, the benefit of participating in platforms such as the Enterprise Europe Network (EEN) may not be tangible enough for SMES,

Canada provides insights about the combination of government-funded research and venture capital; Israel is of particular interest due to its current innovative and economic performance.

Since the high tech bubble burst there has been a drastic drop in capital financing, especially for venture capital (VC.

The government's 2009 New Growth Strategy identifies SMES as an engine for future high economic growth.

Section 5. 5.)Findings from the IW Future Panel According to the IW Future Panel, a survey of several thousand German enterprises,

Further important reasons were that the company supplies to a growing market and successful introduction of new products or services.

Company growth is apparently mainly the consequence of entrepreneurs taking active advantage of business opportunities.

The most important reasons for non-growth stated by non-high-growth enterprises were an unfavourable development of the business cycle and strong competition.

but may partly be influenced by European Directives, Recommendations and Communications; items 7-10 take a European perspective

it appears to be worthwhile to support high growth of enterprises in order to leverage the positive impact of these enterprises.

Since high-growth enterprises can be found in any industry and since business ecosystems, which are important for companies'sustainability and growth,

for example, be related to investment regulation, start-up regulation, market entry barriers, labour law, bankruptcy law, taxation, and also to SME policies rewarding staying small.

The Commission's main role could be to drive the further expansion and improvement of the Single Market, e g. for venture capital,

rather than launching specific measures for high-growth SMES. 8. Enhance coaching opportunities: Since many SMES do not take advantage of coaching opportunities

and may not know where to find qualified coaching, an infrastructure to encourage the replication of existing successful coaching networks throughout EU Member States could be set up.

From a European perspective, this means e g. to realise a single market for venture capital. 10:

Improve internationalisation opportunities: Since high growth requires tapping larger markets, and national markets may be too small,

This may include further work towards single markets in Europe as well as enhancing the European commission's Enterprise Europe Network.

and around the world to foster fast growing enterprises sometimes labelled gazelles or, when having reached considerable size,

gorillas. 1 These enterprises are seen as important drivers of economic growth, employment and social wellbeing. There is also an increased interest of policy makers in fostering innovation,

compared to the US and also to some Asian economies. For example, while the US are home to companies such as Google, Microsoft and Amazon

Therefore Europe is eager to find effective ways to promote high-growth enterprises. In particular, Europe seeks to strengthen growth of enterprises that are yet small

or medium-sized but possess high potential to grow fast in order to become the Googles, Microsofts or Amazons of tomorrow.

The European commission's Innovation Union Communication of October 2010 one of seven flagships of the Europe 2020 Strategy, directly mentions the support of high-growth SMES as a political objective. 2 Study objectives

Is it more efficient (in terms of economic growth and job creation) to support all SMES"a little bit, "or to concentrate efforts on those with the highest growth potential?(

An annual performance scoreboard of the EU is to include an item 3. 1. 3 High-growth enterprises (with more than 10 employees) as%of all enterprises,

Policies for high-growth innovative SMES v1. 6 9 (4) Entrepreneurship access to finance, SME internationalisation,

as well as opportunities and risks of sectoral policy approaches are dealt special issues with here. The Policy Brief will prioritise specificity over broadness.

It suggests answers to these questions based on evidence from literature analysis, case studies, an enterprise survey and expert interviews.

Chapter 4 analyses current policy developments, focusing on European and national policy approaches as well as specific issues related to entrepreneurship, access to finance, internationalisation and industry focus.

Chapter 6 summarises findings about reasons for growth and non-growth from an enterprise survey.

Policies for high-growth innovative SMES v1. 6 10 2 Research concept 2. 1 Definitions of key terms Type of enterprises focused in this study This Policy

which defines high growth enterprises as follows: Highgrowth enterprises, as measured by employment (or by turnover), are enterprises with average annualised growth in employees (or in turnover) greater than 20%a year, over a three-year period,

and with ten or more employees at the beginning of the observation period. 4 A size threshold of ten employees is suggested to avoid the growth of micro enterprises distorting the picture.

Excluded from this definition are companies that were born three years ago or less which are nevertheless relevant here

because they may quickly surpass the formal thresholds as well as companies that underwent a merger or takeover.

i e. enterprising human action in pursuit of the generation of value through the creation or expansion of economic activity. 5 A certain share of high-growth enterprises are defined so-called gazelles

as high-growth enterprises born five years or less before the end of the three-year observation period. 6 This means that this Brief also deals with gazelles,

Animal metaphors have some popularity in literature about high-growth enterprises there is also the notion of gorillas for companies that grow quickly from small start-ups to large international players in high-technology markets. 7 In fact the notion of large

since the definition of gazelles includes for example new companies that grow from ten to 18 employees within three years reaching a size that does still not make much difference from a regional or national economy point of view.

this Brief does not consider just any high-growth enterprises, but only innovative high-growth enterprises.

This focus can be justified with empirical findings: Innovative companies in Europe were found to be more likely to perform over 20%growth in three consecutive years than non-innovative companies (25%versus 14%).8 However,

Finally, this Brief considers small and medium-sized enterprises (SMES), defined as companies with less than 250 employees.

Exhibit 2-1 visualises the share of enterprises which this studies targets. Exhibit 2-1:

high growth innovative enterprises high growth innovative SMES innovative SMES gazelle-SMES high growth SMES all SMES hightech SMES all

enterprises Note: Circle sizes do not reflect the actually existing number of companies. In particular, high-growth enterprises and innovative enterprises are in reality just a small share of all enterprises.

Not shown: There are gazelles that are not SMES. Source: empirica A definition of innovation The OECD's Oslo Manual is accepted a commonly source for definitions of innovation.

or economy outside the government. 13 Policies include, but are limited not to, taxation, regulation, expenditures, legal requirements and prohibitions,

Matrix of main data sources for INNO-Grips Policy Brief 2 Quantitative focus Qualitative focus Primary data collection Representative enterprise survey (CATI

study guide for this Policy Brief. 13 Deardorff's Glossary of International Economics, policy, accessed 2 may 2010.

entrepreneurship/SMES (most relevant), economic and public policy, and innovation. Research in publications lists of major relevant public organisations such as the OECD and business associations.

Internet research with key search words such as high-growth enterprises, gazelles. Data from various secondary sources is used here not only for exhibiting numbers of high-growth enterprises but also for other indicators such as venture capital provision.

Primary data collection The description of examples of successful support of high-growth innovative companies is a key element of this Policy Brief.

One with OECD economist Jonathan Potter, one with US venture capital and innovation policy advisor Burton Lee,

Targeted questions were included in a primary enterprise survey by the Institut der Deutschen Wirtschaft, the IW Zukunftspanel (directly translated from German:

Canada (http://www. allanmartelconsulting. com). Allan Martel Consulting specialises in coaching SMES and also larger enterprises to develop

Philipp Koellinger, Assistant professor in Economics at Erasmus University Rotterdam. He is associate editor of the Small Business Economics journal

and has research interests and a sound publication track record in the fields of entrepreneurship and innovation.

These experts had agreed to review drafts of this policy brief and contributed to the workshop where the results were discussed.

and grow (motivation), access to markets (output) as well as infrastructure and economic stability (framework). 14 This framework is conducive to the analysis of barriers to innovation

The critical resources for innovative and growth-oriented companies are knowledge and capital: Knowledge. Technological and business knowledge including skills can be separated as follows:

issues of human capital, access to specialised technology and business consulting, R&d clustering, technology scouting to identify R&d projects with commercial potential, technology transfer,

High-growth finance includes primarily the availability of venture capital through business angels, specialised private companies, other corporations or public funds,

Venture capital should correlate with companies'growth stages. As regards real estate, innovative start-ups may benefit from business incubators as well as science and technology centres.

Incentives to innovate and grow a company may originate in individual and social aspects: Individual incentives include first of all income,

Markets are indispensable to sell innovative products and services on the output side: Business start-up regulation may be an initial barrier to formation, growth and innovation.

Demand conditions may sound trivial as a determinant, but consumers play a huge role in fostering

Favourable framework conditions for innovation and growth require a sound infrastructure as well as economic stability. Infrastructure includes physical infrastructure for transportation, communication (e g. broadband), energy/water as well as institutions for security, health education and the legal system.

Economic stability and growth are conducive to future revenues and thus foster companies'investment into growth. 16 Last but not least

the right timing, e g. related to market opportunities, is important for firms and for government assistance.

Timing is an issue for any company, but in high-growth firms things move very fast and lengthy approval cycles are tolerated not.

Determinants of enterprises'innovation activity and growth the innovation and growth triangle Resources Knowledge/skills Technological:

Dept, venture capital Real estate: science & technology parks Incentives Individual benefits Income: direct, e g. taxation, bankruptcy regulation;

e g. company leadership Social recognition from peers, e g. at universities from society at large Innovation & growth triangle Markets New business regulation Trade conditions Demand conditions (Internal

) Market rules Standards Framework conditions Infrastructure Facilities for transport, communication, energy/water Institutions for security, health education, legal system (e g. employment and bankruptcy law) Economic stability Right

But the kind of political measures that should be implemented to make the determinants more conducive to enterprise innovation and growth,

the composition of effective policies and the types of enterprises that should be supported are all controversial issues. 17 In the Policy Brief,

Many of these preconditions that foster the development of high growth enterprises are thought generally to be understood;

removing barriers to competition etc but what is not so clear is what combination of conditions works best and, indeed,

literature Although the subject of high-growth enterprises is of fairly recent interest, a considerable and further growing amount of literature is available. 18 For this Policy Brief,

Major studies about high-growth SMES for the European commission In recent years the European commission charged three studies about high-growth enterprises which brought forward the following main results:

In December 2010 the OECD published a report named high-growth enterprises: what governments can do to make a difference.

Key findings include that high growth can occur in the life of virtually any enterprise

Articles about high-growth SMES in entrepreneurship journals 2008 2010 For this Policy Brief, the volumes of 2008 2010 of major economic journals were scanned for articles about high-growth SMES.

There are more than 40 English-language journals dealing with entrepreneurship subjects. Top journals and second-level journals have been scrutinised (see Annex 1). Altogether 19 articles were found to deal with high-growth SMES.

The most notable initiative to make international data on entrepreneurship available may be the joint OECD-Eurostat Entrepreneurship Indicators Programme (EIP) launched in 2006.

OECD The EIP provides data about high-growth enterprises which may be taken as a proxy for data about highgrowth innovative SMES.

and services. 19 The most recent data available at the time of authoring this Policy Brief were for 2006.

For this year, Bulgaria was on top for both manufacturing (8. 6%high-growth enterprises)

and services (8. 2%)see Exhibit 4. The following countries were Italy (8%/7. 9%),Estonia (7. 1%/5. 6),

while some European countries, notably from Eastern europe, outperformed the US in terms of high-growth enterprises, the USA were nevertheless ahead of most other European countries for

which data about high-growth enterprises were available, including Hungary, Sweden Spain, Norway, Luxembourg, Finland, and Romania.

Unfortunately this picture is only a fragment as four of the six largest European economies (Germany, France, UK,

Share of high-growth enterprises (employment definition) in%of enterprises with ten or more employees 0123456789 10 Manufacturing*(2006) Services**(2006)* Mining and quarrying;

Transport, storage and communications; Financial intermediation; Real estate, renting and business activities.*****Employer enterprises with fewer than 250 employees.

Source: OECD (2009), p. 29. The picture is similar for gazelles. Among the countries for which data are performed available,

%and New zealand (0. 4%/0. 5%).The USA had a relatively low share of gazelles, approximately 0. 2%for both manufacturing and services.

A Policy Brief by Bruegel, a Brussels based think-tank, in 2009 examined the age of the companies with the highest R&d expenditures among the largest enterprises from the US, Europe and other countries. 21 Of the US enterprises,

and of the enterprises from other countries, 9%were founded after 1975 and 58%before 1925.

only 2%of the European enterprises were founded after 1975, while 86%were established before 1925. Exhibit 3-3 shows the related data. 21 See Veugelers (2009),

and the largest enterprises from other countries from EU-IPTS non-EU R&d scoreboard companies.

The sample for the US included 80 enterprises, the EU sample 86 enterprises and the sample for other countries 60 enterprises.

Share of enterprises with highest R&d expenditure by age class and world 0%20%40%60%80%100%Pre-1925 1925-1950 1950-1975 Post

Veugelers (2009), p. 2. Thus the share of young enterprises among large innovative companies is much larger in the US

If large innovative enterprises are young, they must have passed through a period of high growth. In other words:

smaller global leaders, some in niche markets, enterprises that may be established long but largely unknown to the public due to their specific products and services,

The current economic crisis hit the US, home to many big young global leaders, worse than many European countries

the faster unsuccessful companies in the same industry shrink. 24 These results shed light on the crucial importance of business dynamism for generating high-growth enterprises

p. 2. Policies for high-growth innovative SMES v1. 6 22 3. 3 Theoretical foundations of SME policy On the importance of a theoretical foundation for economic policy

such policies should be in accordance with principal insights of theories of economic policy. Otherwise such policies run the risk of wasting scarce resources

externalities, imperfect competition and imperfect information. 26 An externality is an impact on a party that is not directly involved in a transaction.

First, innovative enterprises introduce new products, services, production processes or business methods that enhance consumer welfare.

Third, enterprises can contribute to industrial clusters and ensuing agglomeration benefits for other firms. A specific type of positive externalities is a public good.

Furthermore, growing enterprises may also produce negative externalities: First, they may destroy the rents, market shares or employment of established enterprises.

Second, when there are strong first mover advantages for market entrants, the result may be an undesirable contest with too much rent seeking and investment from the society's perspective.

Finally, high growth can potentially lead to high failure, turning positive externalities into negative ones.

Imperfect competition means that one or a few agents in the market are able to shape the equilibrium allocation by their own investment, pricing or quantity decisions.

Imperfect competition may be due to entry barriers e g. in the form of high sunk costs or increasing returns to scale which may lead to monopolies.

Markets with only one or a small number of firms generally imply that the firms can exploit their market power to 25 The following elaborations have been adapted from European commission (2009),

Policies for high-growth innovative SMES v1. 6 23 increase their profits which does not correspond to socially efficient allocations.

if any, examples of perfect competition, so that there are many arguments in favour of state regulation

Imperfect information may lead to inefficient investment decisions. For example imperfect information related to market conditions and resource availability can lead to suboptimal investments.

A particular type of imperfect information is asymmetric information, i e. one side is informed better than the other about a certain subject

and holds up investment because of uncertainty. Access to growth finance is an example of asymmetric information:

and lobby groups maximise their individual utility and the profits of their members, respectively. Governments may have different objectives.

Some schools of economic theory assume that governments act in their own interests. For example governments may seek to increase the probability for being reelected

National regulations may distort competition in favour of domestic firms. Thus one may favour to allocate decision rights 27 See also the critical statements at the workshop related to this Policy Brief in INNO-Grips (2011.

Second, as competition can be interpreted as a discovery process, the relationship between nations can be interpreted as a beneficial competition to search for most effective policy solutions.

These may then be implemented in other nations too. As regards asymmetric information, state failure in international relationships may also be due to institutional separation between decision makers enacting policies

and SME growth policy Many determinants of enterprise growth opportunity seeking crucial A crucial question for evidence-based and effective policies to foster enterprise growth is:

Why do enterprises grow? Or rather: Why do some enterprises grow while others do not?

This is a general question that requires a complex answer. 28 Hölzl (2008) found that there are many factors

or allow the firm to react more quickly to market trends, the social capital of the entrepreneur, the use of unique opportunities.

These include wave ventures, new product in new category ventures, new product in existing category ventures and idea transfer/transplant ventures. 29 The wave strategy reflects the dynamic forces that can come out of early-stage companies.

Companies like Microsoft Genetech, Google and Facebook not only grew rapidly but also stimu-28 For recent studies on the issue of determinants of firm growth see Moreno/Casillas (2008);

highlighting the importance entrepreneurs from around the globe place on taking a perspective of proactive opportunity

highlighting that Europe is largely lacking such opportunity-looking entrepreneurial spirit. Possible barriers for high growth of enterprises in the EU As there may be evidence that Europe generates less high-growth SMES or at least less young global leaders than other major economic regions in the world,

the question arises why this is the case. Referring to the innovation and growth triangle presented in section 2. 3

will be particularly hard hit by malfunctioning financial markets. 31 Access to finance may also be hampered by unfavourable regulations related to investment and company shares:

and a lack of qualified coaching and business services an issue that will be dealt with more detailed in Section 4. 2. 1 of this Policy Brief.

this argument becomes less strong considering the relatively large shares of high-growth enterprises in the Nordic countries of Denmark,

p. 6. 33 See Baughn/Sugheir/Neupert (2008) who found that labor flexibility is a significant predictor of the prevalence rates of high-growth entrepreneurship.

See also Minniti (2008), p. 787, suggesting that in developed countries labour market reforms may be particularly conducive to support the growth of high-performance ventures. 34 Quotation from INNO-Grips Newsletter October 2010

A population survey of the Global Entrepreneurship Monitor 2010 in 21 innovation-oriented countries asked

In fact, the largest share of answers of yes for company start-up is an attractive professional option was found in The netherlands (86%).37 High-growth enterprises are very important for employment creation...

The number and share of high-growth enterprises more precisely: of those enterprises with persistent high growth is small,

but the number and share of jobs they create is disproportionally large. 38 A study by the World Economic Forum published in 2011 claims to present the first extensive evidence that covers both revenues and headcount growth

A study by the Finnish Ministry of the Economy published in 2011 found that in the period 2006-2009,691 newly founded companies fulfilled the OECD criteria for high growth,

for high-growth innovative SMES v1. 6 27 A Kauffmann Institute study of the US economy in 2010 with data for 2007 contained 5. 5 million firms.

and only in large diversified metropolitan regions. 42 Several studies by the Finnish economist Erkko Autio published in 2007 substantiated the importance of a small share of high-growth enterprises for overall

in order to promote economic growth, therefore, what really is needed are new jobs and new growing firms...but high growth can be misperceived a indicator Policy makers should

Davidsson/Steffens/Fitzsimmons argue that growth is often not a sign of sound enterprise development.

This does not only apply to high-growth SME policies but to entrepreneurship policy in general: Economic research can as yet give no clear answers to the question

what entrepreneurship policies are particularly conducive. 47 While many authors are cautious about entrepreneurship policy interventions,

some argue that governmental policy for promoting technological entrepreneurship can contribute to the vitalisation of the national economy through the generation of new jobs

and innovation. 48 Among the most prominent studies about policies for high-growth enterprises are the ones by the OECD (2010) and Autio (2007).

The OECD report report suggests a set of combined elements to foster high-growth SMES:

improve the business environment, encourage entrepreneurial attitude, support the provision of training in young and small enterprises,

improve access to debt and equity finance when necessary, and promote innovation and internationalisation activities of new and small firms.

Autio et al. produced a comprehensive analysis of policies for high-growth enterprises. The study team mentions the following lessons and good practices from a study about policies for high-growth SMES in the nine countries of Australia

when choosing participating enterprises and entrepreneurs because only a very small share of them are willing and able to achieve rapid growth.

agencies can actively scan the environment for potential high-growth firms in order to develop customised support for them.

involving experienced managers. 53 The authors conclude that the time for generic entrepreneurship policy has passed,

and implementation in order for economies to take full advantage of their entrepreneurial potential. 54 The study

Principal differences between general SME policy and high-growth SME policy SMES Policy High-Growth Entrepreneurship Policy Policy Goals Objectives in relation to entrepreneurs

operational environment Facilitate the environment for small business operation Facilitate the environment for entrepreneurial firm growth Resource Provision Source Mostly from public sources Combination of public and private sources Type

business angel finance, venture finance, IPOS Dominant service Basic (standard) advice for firm creation, business planning, small business operation Experience-based

advice for venture finance; strategic planning, internationalisation; organisational growth Resource distribution principle Ensure equal access for everyone (resource spread) Select promising recipients (resource focus) Regulatory Emphasis Life cycle focus Remove bottlenecks to new

improving the business environment, promoting entrepreneurship, facilitating access to markets and disseminating good practices. 55 While there is no support programme of the European commission directly

and explicitly targeting highgrowth innovative SMES, there is a European programme named Eurostars that needs to be mentioned in this context.

some scope for further improvement also remains. 58 The European Investment Fund's high growth and innovative SME facility The European Investment Fund (EIF),

whose shares are held by the European Investment Bank (61.2), %the European commission (30%)and financial institutions (8. 8%),is a specialist provider of SME risk finance across Europe and a major player in the European venture capital market.

Its investment strategy has focused historically on early stage VC funds and the promo-55 See http://ec. europa. eu/small-business/policy-statistics/policy/index en. htm. 56 See http://www. eurostars-eureka. eu/.57

See http://www. eurekanetwork. org/about-eureka. 58 Laperouze/Autio (2010), p. 5. Policies for high-growth innovative SMES v1. 6 31 tion of European technology but it currently seeks a more diversified portfolio.

In 2009, the EIF combated the fall out of the financial crisis for venture funds in their fundraising efforts.

Since 2007 the European Investment Fund's operates A high Growth and Innovative SME Facility (GIF), providing risk capital for innovative SMES.

It offers two funding opportunities: 60 GIF1 risk capital for innovative SMES in their early stages:

EIF can usually invest 10 to 25%of the total equity of the intermediary venture capital fund or up to 50%in specific cases;

EIF can invest 7. 5 to 15%of the total equity of the intermediary venture capital fund or, exceptionally, up to 50%.

%SMES seeking equity investment from these schemes need to contact funds that have signed an agreement with the EIF.

These funds decide about their investments based on normal commercial criteria. The GIF's indicative budget for 2007-2013 is 550 million euro.

turnover growth and return on investment was indicated yet because the programme was implemented not fully yet

66%of the enterprises stated they would not have set up the business without GIF support. 62 The share of highgrowth SMES (more than 20%growth in three consecutive years) in GIF was 48%.62%of the GIF beneficiaries

given the current scarcity of VC in Europe. 64 They conclude that GIF is relevant to the needs of European SMES

59 See http://www. eif. org/what we do/equity/venture/index. htm. 60 See http://ec. europa. eu/enterprise/policies/finance/cip-financial-instruments/index en

lang=-en. 61 See Centre for Strategy and Evaluation Services/EIM (2011), p. 48.62 See Centre for Strategy and Evaluation Services/EIM (2011),

p. 67.63 See Centre for Strategy and Evaluation Services/EIM (2011), p. 58-59.64 See Centre for Strategy and Evaluation Services/EIM (2011),

p. 109.65 See Centre for Strategy and Evaluation Services/EIM (2011), p. 142, also section 4. 2. 2 of this Policy Brief about access to finance.

Policies for high-growth innovative SMES v1. 6 32 global stars) and it may be difficult to assess

whether a policy actually targets high growth of SMES or not. Second policies may target high-growth SMES as one of several groups of SMES.

, Finnish Growth Company Service, Vigo) and Norway (Incubator Grant, Seed capital scheme, Nyvekst. Further European countries with such policies include Estonia (Estonian Development Fund), France (Gazelles Programme, France Gazelles fund), Ireland (High tech Startup programme), Netherlands (Growth Accelerator Groeiversneller),

and Spain (Neotec Fund). Beyond Europe, relevant policies were identified locally in Australia and the USA as well as in China, Singapore and South korea.

One of the most prominent and recent national policy activities for high-growth enterprises is the Startup America initiative by the US government. 66 In the following, some policy approaches in Europe

fast-action and internationally focused business development programme for small companies and entrepreneurs in Denmark. 68 Its objective is to provide knowledge, tools and access to networks of customers,

The process includes contacts to customers and industry experts as well as support to find the necessary resources, above all funding and employees.

and business model, go-to-market strategy and pitch training. The programme seeks to bridge the gap between start-up and larger international venture capital funding.

Accelerace's services are sponsored for free and by the state investment fund Vaekstfonden, the Region Hovedstaden (Denmark's capital region), Region Midtjylland (Denmark's Middle-Jutland Region) and the European commission's Regional Development Fund.

Operations: The programme runs twice a year with starts in January and August. Each time the Accelerace team, made up of twelve employees,

selects 10-15 companies to be supported. The team applies eight selection criteria, including for example market potential, sustainability of the business model,

the quality of the 66 See http://www. whitehouse. gov/issues/startup-america. 67 There may be further European policy approaches which were introduced newly or changed since 2007

and whether the company may be a venture case. Timing is essential, says Accelerace senior management consultant Rebecca Scheel the applying companies need to be at the right development stage

The Accelerace team has a wide network including for example venture capitalists, entrepreneurship organisations, technology transfer offices,

after three months it may turn out that the company is not a venture case. After the programme it will be clear

These companies then do a pitch to Accelerace's investment committee which makes the final decision.

The investment committee is made up of several investors, industry experts as well as Symbion's CEO. The initial pitch to enter the programme resembles a typical investor pitch,

while the final pitch includes validated information for customers and industry experts, an actionable operational plan,

It also tracks baseline data for its performance, such as employees, revenue growth and number of customers.

Policies for high-growth innovative SMES v1. 6 34 omy together with Finland's most important R&d&i funding agency Tekes and Veraventure, a venture capital investment company

serving as the hub for public early-stage venture capital investments. VIGO is a type of incubator that focuses on young enterprises with high growth potential.

VIGO is meant to bridge the gap between early stage technology firms and international venture funding.

The backbone of the programme is formed by the Vigo Accelerators, carefully selected independent companies run by internationally proven entrepreneurs and executives.(.

The Accelerators are not consultants--they are co-entrepreneurs who invest in the companies they work with to guarantee common goals

and passionate development effort. 72 The Accelerators and other programme participants use their networks to funding sources,

potential customers and partners to accelerate the growth of the target companies. The Accelerators select their target companies

and negotiate the agreements with them independently. The incentive for the Accelerators is the growing value of the target companies

which the Accelerators can realise when exiting their investments. The Accelerators can also charge a monthly acceleration fee from the target companies

which can be covered by Tekes. The acceleration period lasts 18 to 24 months. At the end of this period

the target company should be able to perform fast international growth. The Accelerators were selected from the best applicants in their respective fields in a public procurement process.

In mid-2011 there were six Vigo Accelerators. There is a Tekes funding programme for young innovative growth companies in.

In 2008 and 2009 in total 50 enterprises were funded. This funding is intended for small early-stage enterprises with impressive plans and the resources necessary for international growth.

For example, funding was provided to two companies that in January 2010 received the prestigious red herring global 100 award for the world's most promising technology industry companies:

Severa (http://www. severa. com/int), a provider of enterprise resource planning systems, and 7signal (http://www. 7signal. com), a wireless quality advancements specialist.

The Growth Company Development Service initiative, established in 2003, is operated by several agencies: Tekes, Finnvera (a specialised financing company owned by the State of Finland and the official export credit agency of Finland), Finpro,

and Centres for Economic Development, Transport and the Environment. 73 The development process can be launched with, for example,

In 2009 the growth company development service covered around 400 enterprises. 74 Enterprise Finland is a business service for foreigners

In January 2011 it organised the first Enterprise Finland Venture Forum, connecting 37 national and international financiers with 25 Finnish growth companies. 75 At the beginning of 2008 the innovation department of the Ministry of Employment and the Economy established a division for growth ventures.

The rationale behind creating this division was that the needs of growth companies may substantially differ from others,

which requires a special growth ventures policy 76.72 See http://www. vigo. fi. 73 See Murray/Hyytinen/Maula (2009),

Services are provided for at least two years. Companies in the target group can have dedicated a Innovation Norway team allocated for a given period to act as a promoter and sparring partner.

The programme offers no new special services but a tailored package of existing services beneficial for growth companies.

The target group also includes SMES seeking to strengthen their domestic market position against international competition.

Services may also be offered to large companies. The companies conclude a contract with one of Innovation Norway's offices abroad for delivery of a tailored advisory project and pay a contribution.

and other relevant professional environments within the organisation so that the company has one point of access to all expertise within Innovation Norway.

Three international consultancy services are offered: international market advice, practical assistance in international markets, and access to foreign expertise.

Maltaenterprise offers extended services to SMES, also mentioning growth-oriented SMES, but without an explicit focus on high-growth SMES. 78 77 See TEKES material at http://www. tekes. fi/en/community/Results and impact/468/Results and impact/1283.78 See http://support

which has an investment branch focusing on companies that are targeting markets that are very large and profitable

by virtue of its Lottery endowment. 80 NESTA investments can thus not be classified as governmental policy.

However, such policies are planned (see section 5. 5). 4. 2 Special policy themes 4. 2. 1 Entrepreneurship Overview of entrepreneurship policies Entrepreneurship is the act of starting

so that entrepreneurship policies can be defined as political measures to support the start or growth of a company.

Hence policies to support highgrowth SMES are a special part of entrepreneurship policies. Both general entrepreneurship policies and high-growth entrepreneurship policies may use instruments related to the innovation

and growth triangle as described in section 2. 3, i e. they may be related to facilitating access to resources, incentives and markets.

nesta. org. uk/investments/our approach/investments criteria. 80 See http://www. nesta. org. uk/home1/assets/features/government grants nesta full independence.

Policies for high-growth innovative SMES v1. 6 37 Finnish Vigo Accelerators are even more than coaches,

exemplary activities exist but no EU-wide replication As the evaluators of the supportiveness of the Finnish innovation system for high growth enterprises state, most first time,

and will need necessarily to have access to human capital and further levels of professional advice consistent with the growth needs of the enterprise. 81 A special means of accessing knowledge in the course of running

and growing a business is coaching a way to provide managerial competence at arm's length. Studies confirm the importance of coaching for growing a company.

200 start-up enterprises received the CTI start-up label, and 85%of them are still operating,

The business model is focused often on unique solutions for pilot customers. With this business paradigm high growth is rarely achievable.

Management often does not understand how to make the transition from customised products for pilot customers to scalable products for larger markets.

networks change, new investment rounds are necessary, business plans and a new business strategy need to be developed,

core competencies and organisation structure need to be aligned with emerging business processes. In such a situation, experienced coaching may be crucial.

For example, the label of The swiss CTI Start-up coaching programme has become an important determinant in attracting venture capital, angels'investment and other financing partners

2007), p. 85.82 See Centre for Strategy and Evaluation Services/EIM (2011), p. 65. See section 4. 1. 1 of this Policy Brief for GIF. 83 See http://www. ctistartup. ch. 84 This paragraph is largely based on statements from Allan Martel,

In spite of these initiatives, many SMES do not take advantage of coaching opportunities, and there is yet no appropriate infrastructure to encourage the replication of innovation-focused coaching networks throughout EU Member States.

In terms of economic theory coaching is a private good so that public support for facilitating coaching cannot necessarily be grounded on market failure.

Companies with considerable growth perspectives may be looking for venture capital i e. professional equity co-invested with the entrepreneur to fund an early-stage (seed and start-up) or expansion venture. 92 Venture capital is a subset of private equity.

Other sources of finance include leasing, factoring, hire-purchasing and trade credits. Finally, companies may use public subsidies in the form of direct grants, reduced interest rates for bank loans or deficit guarantees.

Discussions and analyses about high growth of companies often focus on venture capital. There are empirical indications that a well-functioning venture capital market is conducive to growth not only of single companies but also of national economies:

Venture capital injects economic dynamism: An increase in VC investments of 1 of GDP is associated statistically with an increase in real GDP growth of 0. 30 pp.

Early-stage investments have an even bigger impact of 0. 96 pp. The direction of causality is not always easy to establish.

Yet, tests for Granger-causality in the biggest market, the US, suggest that causality runs from VCINVESTMENTS to growth.

There is also substantial micro-evidence that supports this view. 93 Yet, bank loans are preferred the source of growth finance for European companies.

often reliable data are not even available at the country level. 96 92 Definition of the European Venture capital Association,

p. 9. 95 See http://ec. europa. eu/enterprise/entrepreneurship/financing/publications documents. htm. 96 See OECD (2010), p. 11.

Policies for high-growth innovative SMES v1. 6 40 Difficulties in the availability of Finance companies have to acquire funds in a complex and changing financial environment, in an environment that is particularly difficult in the ongoing financial crisis

%and Italy (12%).97 The economic and financial crisis has had starkly deteriorating effects on the venture capital market.

While private equity investments in Europe had been tripling from 24.3 Billion euros in 2001 to 72.9 Billion euros in 2007

investments fell to 23.4 Billion euros in 2009, even below the 2001 value, and recovered to 42.6 Billion euros in 2010 see Exhibit 4-2. This decline

it is still difficult for high-growth oriented companies seeking venture capital to find adequate funding.

Private equity investments in Europe 2000 2010 35,0 24,3 27,6 29,1 36,9 47,1 71,2 72,3 54,3 24,0 42,6 03000 6000 9000

EVCA (2011) The level of development of venture capital markets and thus the difficulties to obtain VC are very different among European countries see Exhibit 4-3. The UK is the single largest VC market in Europe;

private equity investments made up 1. 123%of GDP there in 2010, followed by Sweden (0. 893%)and Switzerland (0. 365%).

Private equity investments as%of GDP in Europe in 2010 0, 0%0, 2%0, 4%0, 6%0, 8%1, 0%1, 2

EVCA (2011) Policies to improve access to finance Unclear economic foundation of policy interventions The origins of imbalance between demand for finance enterprises

p. 153.99 See http://ec. europa. eu/enterprise/policies/finance/financing-environment/index en. htm. 100 As announced by the European commission on 13 april 2011,

Business angels and investment readiness: The Commission's policy is to identify and spread good practices that can help improve the conditions for business angel investment. 104 Early stage investment:

Financing through the high growth and innovative SME facility is available to small businesses in their early

or expansion phase under the Competitiveness and Innovation framework Programme (CIP) for the years 2007 to 2013.105 Single market for venture capital investment:

At present, there is no integrated European venture capital market-the regulatory situation varies widely from country to country(..

The EU is seeking to unify the venture capital market(..To achieve this, it is promoting cross-border venture capital investments. 106 However,

while there is a consensus among Member States on promoting mutual recognition of national frameworks, no significant measures have been taken yet that would make fundraising

and investing across borders easier. 107 Growth stock markets provide listing opportunities with simplified requirements. The EC believes that easier EU-wide access to growth stock markets is needed in order for firms to be able to become listed easily

and Venture capital Association (EVCA) suggests to adapt and refine the existing structures of public support for venture capital

in order to increase its competitiveness, attract private investment and also to lead to a phased reduction of its dependence on public money. 109 The EVCA suggests a Venture capital Action Plan 2010-2020 for the EU,

following the EU's Risk capital Action Plan of 1998. According to the EVCA, the European VC market is fragmented highly

and has a serious funding gap in that Europe's large institutional investors consider VC as too small for allocating investment expertise and resources to this asset class.

The EVCA thus sees a need for greater VC intermediation, but there are too few funds-of-funds operating in this field. 110 Furthermore,

GIF provisions could be tuned more towards business angel investments. GIF1 includes the option that intermediaries with co-investment arrangements with business angel networks may receive an additional and separate commitment for co-investments.

By the end of 2010, such investments were made 103 See http://ec. europa. eu/enterprise/policies/finance/financing-environment/sme-finance-forum/index en. htm. 104 See http://ec

. europa. eu/enterprise/policies/finance/risk-capital/business-angels/index en. htm. 105 See http://ec. europa. eu/enterprise/policies/finance/risk-capital/start-up

-finance/index en. htm and section 4. 1. 1 in this Policy Brief about GIF. 106 See http://ec. europa. eu/enterprise/policies/finance/risk-capital/venture-capital/index en. htm. 107

See http://ec. europa. eu/enterprise/policies/finance/risk-capital/venture-capital/index en. htm. 108 See http://ec. europa. eu/enterprise/policies/finance/risk-capital

/index en. htm. 109 EVCA (2010), p. 3. 110 See EVCA (2010), p. 4. Policies for high-growth innovative SMES v1. 6 43 with business angel

Website informing entrepreneurs about where to seek finance for certain stages in the life of an enterprise in a certain region may be helpful

including the support of business ventures through dedicated funds fuelled by domestic and overseas sources as well as by investing in a fund of funds.

The government also plans to encourage venture capital investment from overseas funds, oil money, and other sources.

114 In light of the economic crisis, Singaporean business associations started the Financial Facilitator Programme (FFP) in January 2009,

This was stated to be crucial for high-growth SMES that required high loans for survival, investment diversification and possible expansion.

the Canadian experience suggests that a government focus on high-tech SMES combined with adequate levels of venture capital financing holds the greatest potential for creating gazelles and that these firms show unusual resiliency.

the identification of reasons for this success was beyond the possibilities of this case study. 111 See Centre for Strategy and Evaluation Services/EIM (2011),

partners and customers in other countries. Internationalisation may first of all refer to sales, i e. to offering products and services in other countries.

In a broader definition it may also refer to other business functions such as procurement, hiring employees and financing abroad as well as to cooperation in R&d, production and innovation activities with international partners.

and raises financial barriers to innovation. 123 The importance of the Single Market for enterprises'growth opportunities was raised also in the workshop related to this Policy 116 Murray/Hyytinen/Maula (2009),

2007), p. 86.118 See Centre for Strategy and Evaluation Services/EIM (2011), p. 71.119 See Reinstaller et al.

The lowest level of agreement was for the statement that legislation ensuring that ICT companies can sell to customers EU-wide needs to be improved (29%each for

the Enterprise Europe Network At EU level the link between innovation and internationalisation has been recognised fairly recently. 129 A key initiative is the Enterprise Europe Network (EEN), supported by the European commission,

which links innovation and internationalisation policies. Its mission is helping small companies make the most of the business opportunities in the European union, 130 bringing together 580 member organisations in 47 countries.

For the period 2007-2010,257 million euro were committed for EEN, for example for operating the website and search tool,

for promotional and informational local events as well as for advisory services e g. about EU 124 See for example the statements from Gabriella Cattaneo in the workshop proceedings,

See also public consultation Small Business, Big World-A new partnership to help SMES seize global opportunities, http://ec. europa. eu/enterprise/newsroom/cf/itemlongdetail. cfm?

item id=5119.130 See http://www. enterprise-europe-network. ec. europa. eu/about/mission. Policies for high-growth innovative SMES v1. 6 46 projects and intellectual property rights.

According to DG Enterprise and Industry, since the establishment of EEN in early 2008 by the end of 2010 more than 2 million SMES tapped into the network.

when looking for support services, the EEN was the only provider they had found. Of the remaining 41%which had also found alternative service providers

more than half (57%)said they preferred the EEN because of the opportunity of accessing European networks. 131 Two thirds of the respondents (68%)said they were satisfied

and it provides advice on developing an international strategy to the enterprises. A 2010 study evaluating the results of the merger found that the merger helped to establish the international perspective within the organisation,

which are targeting high-growth companies are oriented towards internationalisation (see section 5. 2). 131 See Centre for Strategy and Evaluation Services/EIM (2011), p. 75.132 Remarks at the INNO-Grips workshop about innovation

different compositions in terms of companies'sizes and ages, different age of the industries as such, different value systems, different levels of internationalisation and innovativeness and different opportunities for high growth of innovative SMES.

leaving relatively many opportunities for new market leaders. At the workshop related to this Policy Brief, the importance of business ecosystems as well as clusters for SME growth was highlighted in particular. 136 However

Furthermore, empirical evidence suggests that high-growth companies can be found in any industry. 137 Targeting specific industries may mean missing emerging opportunities for high-growth in other industries emerging opportunities which policy makers

Sector-focused approaches might miss these opportunities. 138 Insights from other policy types A possible focus on specific industries is also an issue in other types of policies for

DG Enterprise and Industry issued a study to assess sectoral policy approaches and to identify good practices in these initiatives. 139 The study found that sectoral initiatives were not necessarily more effective than other programmes.

First, improved involvement of stakeholders, nota-136 For ecosystems see the related statements by Martin Fransman, INNO-Grips (2011), p. 4,

The sectoral focus is a facilitator as it drives to the involvement of stakeholders and experts with sectoral background and reputation.

Policy examples The Finnish activities to support high enterprise growth apparently have no industry focus (see section 4. 1. 2). The Danish Accelerace programme has no specific industry focus either,

So the general lesson is that policies for high-growth of SMES may seek to diversify a national economy's key sectors.

The Canadian experience (see section 5. 3) of linking governmental R&d funding with venture capital investment suggests to focus high-growth policies on technology-based industries

office and workshop space in incubators and technology parks, support for intellectual property protection, tax exemptions, export support,

This may for example mean to focus policies on improving access to venture capital instead of access to micro credits. 142 How are policies for innovative high-growth SMES distinct from general SME policy?

Is it more efficient (in terms of economic growth and job creation) to support all SMES"a little bit, "or to concentrate efforts on those with the highest growth potential?

Some economists take the opinion that only the market can determine what the optimal amount of entrepreneurship is.

At the workshop related to this Policy Brief, Luc Hendrickx, Director for Enterprise Policy and External Relations at the European Association of Craft, Small and Medium-Sized Enterprises (UEAPME), suggested

focusing on improving the business environment for all enterprises rather than aiming to create specific incentives for growth.

Fast growing enterprises could be taken into account, but not at the expense of other SMES.

This position is supported by US economist Scott Shane: Getting economic growth and jobs creation from entrepreneurs is not a numbers game.

It is about encouraging the formation of high quality, high growth companies. Policy makers should stop subsidizing the formation of the typical start-up

and enhancing economic growth. 145 141 For example, the case study about Korea in this Policy Brief (see section 5. 1) mentions that the Korean government developed more than 100 different SME policy measures,

Canada is often in the shadow of its big neighbour, the USA, in terms of economic policies, but deserves attention with regard to high-growth SMES.

These countries are however very different in terms of population, economy and the prime criterion here SME policies:

It is one of the few developed countries that could avoid a longer recession during the economic crisis,

Increasing European interest in Korea has also become evident in 2010 by establishing five contact points of the European Enterprise Network there,

is heavily suffering from the economic crisis and the 2011 Earthquake, and has dedicated no policies for high-growth SMES.

South korea Entrepreneurship (start-up and growth of SMES) Yes Singapore Internationalisation of SMES Yes Canada SMES'access to finance Yes Japan General SME policy No Israel General SME policy No Policies

shifting SME policies towards competitiveness and growth In Korea the SME sector, accounting for 99%of enterprises and 88%of employees, is considered as ensuring sustainable growth for the future.

has been a major policy player in promoting growth of SMES and the Korean economy at large. SMBA applies more than 100 SME promotion measures.

Furthermore, a new category of mid-sized enterprises with 300 to 1, 000 employees is to be introduced for policy purposes.

and thus their competitiveness and the policies have supported the growth of the venture business. However, some of the traditional SME policies have been criticised for inefficiency and ineffectiveness.

SMES account for 99%of all enterprises and 88%of all employers. The traditional Korean policy perception of SMES is that they are need weak

is an enterprise with less than 300 employees and with sales less than 8 billion won (approximately 6. 6 million US dollar).

enterprises with more than 300 employees are regarded as large firms under strict government regulation and cannot receive any support.

As a result, many enterprises do not grow. Although the weakness concept is still dominant,

policies for entrepreneurship, SME innovation and Policies for high-growth innovative SMES v1. 6 54 SME internationalisation.

Entrepreneurship policies Recent activities to foster business start-ups In order to mitigate the negative effects of the economic crisis

the venture businessmen's special lecture programmes on entrepreneurship at universities; the youth start-up education programme;

improved support to spin-offs by executives and employees of large enterprises; enabling start-ups at home and expanding the infrastructure for one-person creative enterprises;

establishing a support system to link excellent technology ideas with start-ups; financial support and training for entrepreneurs'clubs at universities;

First, public organisations and large firms voluntarily announce demand for products that SMES may develop.

Matching funds for SMES for developing new products with the help of universities, research institutes and other enterprises.

they can receive Enterprise Joint Tech Development funds. The Production Environment Innovation Tech Development programme provides funds to improve efficiency of the production line and product quality.

While most of the financial support is for technology R&d, product commercialisation is encouraged greatly as well. Specifically, the government has encouraged R&d investment in response to the contraction of SME investment potential due to the recent economic slowdown.

In April 2009 the government prepared a Five-Year SME Technology Innovation Plan which encompasses, for example, continuous expansion of SMES'R&d investment and support for technology innovation R&d of global leader enterprises.

The government also initiated the SME-type Promising Green Technology Roadmap in June 2009. The overall number of beneficiaries in R&d programmes has been reduced recently,

Inno-biz and measures to strengthen venture capital investment The Korean government intensively fosters the programme inno-biz (acronym for innovative business.

innovative firms, ventures and firms with outstanding managerial innovations. The programme does not explicitly aspire to high growth

but at least the venture category implicitly carries the high growth objective. A company may belong to two or three categories at the same time.

Ventures, according to the SMBA definition, are firms in which venture capital is invested, which invest in R&d and

which commercialise new technology. 147 SMBA continues to promote the venture sector as a new growth engine.

The government is supporting business ventures, through the support of a one trillion won private fund, by investing in a Fund of Funds in 2009 as well as through a two trillion won fund with inducement of further funds

from the fiscal administration, the Korea Development Bank and foreign and private funds by 2012.

The government also plans to encourage venture capital investment from overseas funds oil money, and other sources.

It intends to allow joint fund operation between overseas investment in-146 See http://eng. smba. go. kr/pub/poli/poli04010802. jsp#cer02 for the SMBA's criteria of inno-biz certification

. 147 See http://eng. smba. go. kr/pub/poli/poli040108. jsp#cer01 for the SMBA's venture certification criteria.

while providing preferential treatment by increasing the investment equity ratio for foreign funds to 50%from the present 30%.

%In addition, the government plans to facilitate venture investment by institutional investors, the post office, insurance firms, universities,

The government intends to review the methods of equity investment in the Fund of Funds more than three times a year

and to rapidly respond to demand in the investment market. Since the Korea Venture Fund has confirmed other investors,

small investments of less than one billion won are allowed at any time. In April 2009, the government created a venture ecological system that integrates the capabilities of newborn venture companies and of the leading venture companies in the market.

Under this system the government intends to create a ten billion won fund and support joint R&d and overseas marketing for ventures.

Business incubators The SMBA supports business incubators which are operated usually by universities and public research institutes.

This programme is designed to promote the survival and growth of newly established venture companies. SMES are, for example, provided with land, consulting services,

and marketing education. Internationalisation policies New directions of SME policies for globalisation SME globalisation is an important part of SMBA's policies.

Korea's overseas market development policy has transformed the country from being poverty-stricken into the world's 15th largest economy.

Now Korea is in a transitional period in terms of SME policy in response to the global economic challenges

and to the necessity of revising the traditional policy paradigm. Globalisation of SMES in the past was the basis of participating in global value chains.

one within the existing framework and the other with the new concept of the mid-sized enterprise.

which was oriented towards large enterprises in the past, to SMES. The new focus is on the promotion of Global Star SMES as the backbone of the economy.

The Korea Export Import Bank (Eximbank) launched the 300 Global Stars Programme in 2010.148 For three years,

The selected enterprises will be supported by a comprehensive support package; examples of this support include technology,

Korea Eximbank Promoting the mid-sized enterprise Korea is concentrating on the advancement of mid-sized enterprises with more than 300 and up to 1,

000 employees, responding to global competition and developing initiatives to foster hidden global champions. The introduction of policy schemes for supporting this group of enterprises will probably impact the Korean economy dramatically in the coming years.

Introducing a related law (Mid-sized Enterprise Promotion Act) and the institutionalisation of this structural change are complicated issues and currently under discussion.

The government already extended and strengthened some existing SME programmes in this direction. In addition the government is supporting the transformation of SMES focusing on domestic demand into export-oriented enterprises.

Identifying promising export companies, up to 2, 400 firms, and nurturing them into small but strong global enterprises is the policy focus.

An Example of a company with Korean government support: Donghwa Entec Donghwa Entec is a manufacturer of heat exchangers for ships, power plants, food factories and agriculture as well as of air coolers for Diesel engines.

In 2002 the Korean government recognised Donghwa Entec formally as a venture and an Inno-Biz in terms of government support schemes,

The Korean government provided capital for continuous R&d from 2004 until 2008, enabling the firm to occupy market niches early

They comprise an increase of SME's R&d activities, an expansion of venture business, and various impacts on different areas of SME performance.

Trends in SME's R&d Investment 2000 2002 2004 2005 2006 2007 No. of SMES conducting R&d(%in all manufacturing SMES) 10,748 (12.0) 18,101 (18.1

Expanded venture business All related indicators confirm the high growth in the venture business from 1998 to 2008,

For example, the number of certified ventures increased from 2, 042 firms in 1998 to 15,401 firms in 2008,

and there are now five graduate schools specialising in the venture business. However, figures for 2009 may indicate a decline caused by the worldwide economic crisis.

Exhibit 5-4: Development of the venture business in Korea 1998-2008 Indicator 1998 2008 Creation of venture firms Number of certified venture firms 2, 042 15,401 Thereof:

established by professor or researcher 582 1, 555 Number of graduate schools for venture business 0 5 Venture capital (in 100 mio.

KRW) New venture investments 7, 870 12,041 Newly established venture funds 4, 929 11,954 Foreign venture funds 30 702 Source:

SMBA Impacts on particular areas Korea's SME policies can be ascribed impacts in the following,

Overseas investment: Not only large enterprises, but also SMES invested in foreign countries aggressively. SMES'share of overseas investment reached 54%in terms of the number of cases and 26%in terms of amount.

The majority of Korean SMES invested in China. Negative side effects of SME support Over 100 SME policy measures resulted in application congestion in SME administrations,

duplicated efforts and SME managers distracted from real business. The rigid definition of SMES resulted in the undesirable behaviour that SMES do not increase sales

Although, for example, more than 30,000 enterprises were designated as innovative SMES, the designation system itself seems less practical.

they have been reproached for not having been equally active in actual investment. Lessons learned Positive assessment of the new SME policy concept The new directions of SME policy in Korea for nurturing global players and institutionalising policies for midsized enterprises

are a new development that is attracting attention. The replacement of the traditional concept of weak SMES by a new concept of small but strong SMES is considered as promising in Korean public opinion.

References This case study has been conducted by Yoo Soo Hong, Director of the Institute for Global Innovation Economy (IGIE),

/Korea Institute for Industrial Economics and Trade (KIET: http://www. kiet. re. kr/kiet/eng/index eng. jsp.

and has launched initiatives towards developing high-growth enterprise clusters. Two Singaporean government agencies are involved directly in supporting high-growth SMES:

SPRING (Standards, Productivity and Innovation for Growth) Singapore and A*STAR with a sub-programme named Get-Up (Growing Enterprises through Technology Upgrade.

SPRING explicitly seeks to grow dynamic and innovative growth-oriented enterprises. GET-Up supports long-term pre-competitive R&d.

thus implicitly aspiring to generate high-growth enterprises. While the government has attributed the successful recovery from the word-wide economic crisis to the numerous opportunities SMES have been provided with,

there are no evaluation studies available that could substantiate the impacts of the government's SME policy.

According to Statistics Singapore and the Economic Development Board, 99%of all enterprises are micro, small and medium-sized enterprises.

These employ 60%of Singapore's workforce and contribute an approximate value-added of 40%to the local economy.

Governmental policies have been a vital factor in sustaining Singapore's business-friendly environment. Singapore's economic success has largely been built on the strength of its manufacturing and financial services sectors.

Singapore has launched an array of initiatives towards developing highgrowth enterprise clusters. The aim is to generate new creations, new products, new services and technology through the careful analysis of emerging markets, technologies, business perspectives and global trends,

as Francis Chu, Manager at the Infocomm Development Authority (IDA) of Singapore, explains. Two of the Singaporean government agencies are involved directly in supporting high-growth SMES:

SPRING (Standards, Productivity and Innovation for Growth) Singapore and A*STAR with a sub-programme named Get-Up (Growing Enterprises through Technology Upgrade.

IE Singapore promoting the internationalisation of potential high-growth enterprises and the Jurong Town Council providing real estate and connectivity infrastructures for high-growth SMES.

& Develop Clusters SPRING Singapore Create Enterprises Nurture and Grow SMES IE Singapore Create Markets Develop access to overseas markets A*STAR Create Knowhow Attract

& develop R&d Talent Jurong Town Council Create Space Develop industrial land and buildings Budget Capital Flows ($) Source:

This signified a shift of its goals towards creating an innovative environment. SPRING Singapore is an enterprise development agency with a focus on supporting the growth of local Singaporean enterprises.

SPRING explicitly seeks to grow dynamic and innovative growth-oriented enterprises i e. to support high-growth SMES.

SPRING Singapore is also the national body for standards and conformance seeking to elevate foreign trust in Singapore's enterprises, products and services.

Exhibit 5-6 shows SPRING's scheme for developing companies from start-up to large enterprises.

Exhibit 5-6: SPRING's enterprise development concept Source: SPRING Singapore Policies for high-growth innovative SMES v1. 6 63 In the financial year 2009/2010, SRING Singapore was allocated an operating budget of 54.5 million Singapore dollars (approximately 27.3 million euro),

making it a considerably powerful organisation. SPRING collaborates with trade development agencies to assist promising local businesses with government funding, capability and management development, technology and innovation enhancement, and internationalisation.

evidence of products or services and independent third-party investors. The government considers its funding mechanisms as an investment

when reviewing potential high-growth SMES. Business capability development programmes SPRING Singapore operates three key SME business capability development programmes for all SMES:

and the Enterprise Internship Programme (EIP) to assist the development of high-growth SMES. MAP works with high-growth SMES to attract,

Policies for high-growth innovative SMES v1. 6 64 The Design Engage Initiative helps local enterprises build strategic-design thinking capabilities.

SPRING Singapore's industry development programmes encompass a wide range of sectors, for example biomedical and healthcare services, electronics, chemical and engineering services, logistics, precision engineering, and retail.

Financial Facilitator Programme In light of the economic crisis Singaporean business associations started the Financial Facilitator Programme (FFP) in January 2009.

This was crucial for high-growth SMES that required high loans for survival, investment diversification and possible expansion.

Get-Up Programme with A*STAR The GET-Up programme, short for Growing Enterprises through Technology Upgrade,

supports long-term pre-competitive research and development (R&d) and enhances the technology competence of potential enterprises. It is a joint initiative led by the Singapore Agency for Science, Technology and Research (A*STAR), in collaboration with the Economic Development Board,

A*STAR's Science and Engineering Research Council helps enterprises in the Get-up programme pair up with research partners to enhance their technology Edge in fiscal year 2009/2010

thus implicitly aspiring to generate high-growth enterprises. There are four support initiatives under the Get-UP programme in support of innovative high-growth SMES:

Technology for Enterprise Capability Upgrading (T-Up) is a multi-agency effort involving sending Research Scientists and Engineers (RSES) to local enterprises.

Technical Advisory Support (TA) provides advisory services from senior research staff at research institutes. A*STAR Facility Sharing Programme (A*FSP:

potential high-growth enterprises may leverage on the Research Institutes laboratory facilities for their R&d related activities.

By the end of 2010,3 million Singapore dollars, in grants, had been extended to 34 promising local enterprises. 149 See http://www. a-star. edu. sg/Industry/Programmesforsmes/GETUPPROGRAMME/tabid/220

Eligible angel investors committing a minimum of 100,000 Singapore dollars equity investment in a qualifying start-up can claim a 50%tax deduction on the investment at the end of a two-year holding period.

This deduction is subject to a cap of 500,000 Singapore dollars investment per year. Catalysing growth investments through co-investment:

1. 5 billion Singapore dollars of growth capital for companies by seeding a range of funds over ten years, with contributions of up to half the capital.

Impacts of Singapore's policies for high-growth SMES No policy evaluations or assessments identified At the 2010 National Day Rally,

In light of this recent economic resilience, the government has attributed the success to the numerous opportunities SMES have been provided with

In keeping with the growing demands of its customers, Greenpac expanded its analysis and consultation services,

reengineered its packaging systems and analysis of shipping efficiency to include kit packing, programme management, warehouse services,

professional packing services, rigging services and contract packing. The company's lists of loyal clients comprise some of the world's largest multinational corporations.

services for multinational corporations. The company was incorporated in 1999 in collaboration with an India-based technology company that had years of experience in running niche distribution for internet-based products and solutions.

http://www. greenpac. com. sg, IDC Government Insights Asia/Pacific Example from Get-UP Technology for enterprise capability upgrading for Resin

and Wuxi (China) headquarters that serve the global market of international polymer customers in the electrical and electronics,

Lessons learned Government initiatives as well as investments in infrastructure and education are strong in Singapore. Considering the dominance of micro

small and medium-sized enterprises in Singapore and the traditional strength of the manufacturing and finance sectors, the government is seeking strategic investments to groom potential high-growth enterprises and drive the diversification

of the local economy. Consequently, investments by Singapore's government are expected to rise steadily. However, as there are no evaluations of government support available,

the actual impact of these policies cannot be assessed here and it is difficult to draw lessons for European policy.

In any case, success of Singapore's companies is based on an entrepreneurial environment in the country and a critical mass of qualified technical and managerial manpower.

Related services include for example law firms specialising in intellectual property and new ventures, human resources headhunting, consulting and market research,

and investment banking services for merger and acquisition activities. Such preconditions may be conducive to high growth of SMES in any region in the world.

/Singapore Budget 2010-Towards An Advanced Economy: Superior skills, Quality Jobs, Higher Incomes<http://www. mof. gov. sg/budget 2010/download/FY2010 FLYERS FOR BUSINESSES. pdf>Singapore's National Day Rally 2010, Part 2:

/SPRING Singapore-Building Growth Enterprise http://www. spring. gov. sg/Aboutus/AR/Documents/ar2009 2010/pdf/9-building-growth-enterprise. pdf

'Entrepreneurship and SMES in Southeast asia'.'Singapore: Seng Lee Press, 2004. Economic Stimulus and Expansionary Budgets:

Updates to Government's Response to the Economic downturn in Asia/Pacific (IDC#AP633103S, December 2009.

policies to back venture finance Summary The Canadian experience suggests strongly that a concentrated focus by governments on high-tech based SMES combined with adequate levels of venture capital (VC) financing holds by far the greatest potential

These results suggest that a focus on high-tech SMES within the proper support environment can stimulate gazelles creation significantly.

Recently, the US venture capital sector has been lobbying hard to change the access rules to SBIR funding for SMES controlled by venture capital firms.

and the interest in VC fund investment is problematically low. Background and objectives of VC funding and government assistance Canada Current situation in venture funding The Canadian experience suggests strongly that a concentrated focus by governments on high-tech based SMES combined with adequate levels of VC

capital financing holds by far the greatest potential for gazelles creation and that these firms, once created, show unusual resiliency as measured by low failure rates

when a combination of venture capital 150 See Cooper (2009). Policies for high-growth innovative SMES v1. 6 69 and IRAP assistance is available,

There is currently a critical shortage of capital for technology based firms. The VC market in Canada collapsed from a peak of 5. 9 billion CAD placed in 2000 to just over 1 billion CAD in each of the past three years. 151 Many technology-based

firms at the development stage with high burn rates have had to cut back activities. Even with these cutbacks, many of these firms have only one year or less left of funds available to them from earlier financing rounds,

In Canada total bio investments increased from 210 million CAD in 2009 to 300 million in 2010.154 Description of Canadian capital Financing Market Business Angels Angel financing is dispersed widely across most regions

According to the Canadian Angel Investment Network their members are currently investing over CAD 3 billion in Canadian businesses each year. 155 Venture capital:

VC investments by the VC community in Canada have decreased from a peak of CAD 5. 9 billion dollars in 2000 to just over CAD one billion dollars for each of the past three years (2008-2010.

With the relatively poor ten year returns for VC funds and the availability of other more attractive retail alternatives (such as income trusts), investment by individuals in VC funds in Canada has dried all but up.

The other major investment source has been pension funds, but these funds have become risk-averse and have cut back their interest in high tech VC investments preferring to go to infrastructure investments instead.

Foreign VC flow has been an important source of financing for technology firms. Indeed for placements of over CAD 5 million dollars over 75%of the funds come from foreign sources.

USA Venture capital: The US experience is similar to that of Canada, in terms of the collapse of financing since the bubble burst in 2000 where VC dropped from a peak of 100 billion USD to just 18 billion USD in 2009.

there were state government sponsored VC funds in 22 states with 2. 3 billion USD in venture funds

but there is no data available to measure the investment performance of this group of funds.

However, a study by Cooper of 2, 240 firms which had received venture capital (CAD 18 billion dollars) between 1995 and 2005 showed much higher levels of gazelles creation at 12%in the 1, 500 technology based firms,

However, enterprises with the majority of their VC funding (but less than 100%)coming from government VCS have significantly worse exit performance than enterprises with private VC funding.

Government programmes often have multiple agendas, e g. local employment and regional development. Therefore governments should take note of this key finding. 161 In a 2010 study for CVCA Gilles Duruflé undertook a review of government assistance for firms in eight countries that showed that there was a positive role played by government supported VC funds

with an historic heavier weighting in ICT and Bio. 2. Linking government assistance (IRAP) with subsequent VC financing leads to less shareholder dilution

The Effects of Government-Sponsored Venture capital: International Evidence. 162 See Government involvement in the venture capital industry International comparisons,

http://www. cvca. ca/files/Downloads/Government involvement in the vc industry intl comparisons may 2010. pdf. 163 See Hellmann 2005 study. Policies for high-growth innovative SMES v1. 6 73 ticular interest in the richest program.

The Effects of Government-Sponsored Venture capital: International Evidence. CVCA, Canadian Venture capital Association (2009: Why Venture capital is Essential to the Canadian Economy-The Impact of Venture capital on the Canadian Economy.

Available at: http://www. cvca. ca/files/Downloads/CVCA VC IMPACT STUDY JAN 2009 FINAL ENGLISH. pdf 2010 October. CVCA (2010) and Kirk Falconer (2010) Thompson-Reuters. See http://www. cvca. ca/files/News/CVCA Q4 2010 VC PRESS RELEASE FINAL FEB 16 2011. pdf and http://www. canadavc. com/files

/public/Reseau%20capital 02-11 %20english. pdf Cooper, Denys (2009: High Growth and Survival of Government Funded SMES with Venture capital in Canada.

APEC SME Innovation conference 2009, Seoul. Duruflé, G, Government involvement in the venture capital industry International comparisons. http://www. cvca. ca/files/Downloads/Government involvement in the vc industry intl comparisons may 20 10. pdf. Gompers/Lerner (2004:

The Venture capital Cycle, Chapter 13, http://www. google. ca/#hl=en&biw=958&bih=444&q=lerner+impact+sbir&aq=f&aqi=&aql=&oq=&gs rfai=&fp

=23e 9afdc1c4696ce, Hellmann, Ilyaszade and Lee, 2010 An Evaluation of the Venture capital Program in British columbia, http://strategy. sauder. ubc. ca/hellmann/pdfs/Hellmann%20schure%202010

%20venture%20capital%20report. p df. Hellmann, Egan, and Brander, A Comparison of Exit Values across Canadian provinces and US States October 2005.

Ten Years'Lessons from the Canadian Labour-Sponsored Venture capital Corporations. NAS 2009: Awards-U s. Small Business Administration Tech-Net Database;

http://www. nasvf. org/pdfs/VCFUNDSREPORT. pdf). Venture Impact: The Economic Importance of Venture capital Backed Companies to the U s. Economy, 2008, June at http://www. asiaing. com/venture-impact-the-economic-importance-of-venture-capital-backedcompanies-to-the-u-s-ec

. html Wessner, Charles W. ed.)(2009: An Assessment of the Small Business Innovation Research Program at the Department of defense.

http://mikevolker. com/2010/09/b-c-investment-tax-credit-program/Policies for high-growth innovative SMES v1. 6 74 5. 4 Japan:

Diversification and clustering of SMES for future growth Summary Although the fall out from the 2008 Lehman brothers collapse continues to skew the Japanese government's SME (small and medium-sized enterprise) policies towards finance and employment safety net issues,

Through these overlapping diversification and clustering policy initiatives, the government's 2009 New Growth Strategy (Basic Policies) Toward a Radiant Japan identifies SMES as an engine for future high economic growth.

Key characteristics of SME policies in Japan The key concept guiding Japan's SME policies through much of the post second world war era has been to rectify the gap between SMES and large enterprises in terms of productivity.

(i e. corporate groupings) in stimulating the domestic economy. The new concept guiding SME policies became to develop

1) supporting self-help efforts for business innovation and start-up,(2) strengthening of management base and (3) facilitating apt responses by enterprises to abrupt environmental change.

4) finance and taxation and (5) consideration for small-scale enterprises. These five new policy systems have shifted public discussion from protection to promotion of SME business activities;

revised in July 2010, specifically identifying SMES as one of the main drivers of the economy.

First, Japanese companies should leverage their strengths in the areas of environment and energy (green innovations) as well as Policies for high-growth innovative SMES v1. 6 75 health.

Second, they should pioneer new frontiers, especially in the areas of inbound tourism and local economy revitalisation.

Although the post-Lehman economic downturn has led the government to focus on legislating remedial measures to support struggling SMES (e g.,

, Emergency Guarantee Programme and the SME Financing Facilitation Act), a commissioned Survey of Fund Raising by Small and Medium Enterprises finds that a more fundamental problem hindering innovative SMES is the corporate tax burden

and then in the later commercialisation stages they prefer bank loans over equity finance, venture capital,

According to the Survey of Fund Raising by Small and Medium Enterprises, a major bottleneck in financing is due to a perception gap between financial lenders and innovative SMES,

On the other hand, the Survey found SMES are weak in formulating business plans for innovative products and services.

with improving the capacity of SMES to develop feasible business plans. Since writing a business plan is as much an art as a science, in coordination with the METI Industrial Cluster Plan,

the SMRJ often introduces an innovative SME to local clusters of small and medium manufacturers

and support their business plan. Addressing barriers in commercialising new products Access to finance is important in launching SMES on pathways to innovation;

White paper on Small and Medium Enterprises in Japan: Pulling Through the Crisis. Tokyo: Ministry of Economy, Trade and Industry (www. meti. go. jp) White paper on Small and Medium Enterprises in Japan:

Finding Vitality Through Innovation and Human resources. Tokyo: Ministry of Economy, Trade and Industry (www. meti. go. jp)( p40 70 in 2009wp) Ministry of Education, Culture, Sports, Science and Technology (MEXT.

2009. White paper on Science and Technology: Towards Japan's Own Innovative Science and Technology: Across the Threshold of Global Transition.

Survey of Fundraising by Small and Medium Enterprises. Tokyo: commissioned by SME Agency Survey on Market Capture and Intellectual Property.

Policies for high-growth innovative SMES v1. 6 77 Organisation for Small and Medium Enterprises and Regional Innovation (SMRJ.

such as patent fee reductions, loan guarantees, capital investment loans, and loans for facilities. Funding recipients should have less than 300 employees or capital below JPY 300 million.

The majority of schemes target venture companies and SMES. The number of projects awarded to participants over time has been relatively stable.

According to their mission statements, the MOIT focuses on the promotion of economic growth in Israel and the OCS oversees all Government sponsored support of R&d in the Israeli industry.

Technological Incubators Programme("Hamamot":"Incubators have been a major tool in the Israeli policy for support of R&d in SMES over the last two decades.

The Hamamot programme has been underway since 1991. The programme supplies entrepreneurs with physical premises, financial resources, professional guidance and administrative assistance,

and acts as a venture capital fund in the early stages. An incubator company receives a development grant of up to 500,000 US dollar for a period of two years.

Over the last decade, the Technological Incubators Programme has gone through a process of privatisation during

which the ownership of the different incubators passed to private hands, while the OCS is still maintaining an administrative and supervising role.

Today, 21 incubators are active. Over the 19 years of the programme's existence, 1, 209 companies"graduated"from the incubators,

and about 37%of them have survived and are still independently active. An evaluation of the programme in 2009 pointed out that the programme played a crucial role in building the entrepreneurial spirit that exists in Israel today,

as it enabled entrepreneurs who had no real experience in business to realise their ideas without taking very high personal risks."

"This programme aims at encouraging technological innovation and entrepreneurship by granting limited financial support to new industrial projects during their very first steps.

1) new entrepreneurship projects, with innovative technological ideas;(2) projects to upgrade traditional industry, aimed at developing new technology or products;(

3) cooperation with international enterprises, aimed at developing joint technological projects;(4) green momentum for SMES, aimed at developing technologies or products related to water and green energy;

and writing a business plan. In 2009, the supports given by the programme amounted to approximately 4, 600,000 US dollar.

The companies that received Magneton support come from different high tech fields, such as communication, biotech, software, new materials.

and implements international, cooperative, industrial R&d programmes between Israeli and foreign enterprises. Matimop implements international technological cooperation programmes with international agencies, bodies and organisations;

and other public authorities to promote joint Israeli-EU R&d ventures within the EU's R&d Framework Programme.

Kaufman Dan, Gore oz,(2009) Preliminary Evaluation of the Israeli Technological Incubators Programme, Jerusalem Institute for Israel Studies.

An Evaluation of the Israeli Technological Incubators Programme and its Projects, The Samuel Neeman Institute of advanced Studies in Science and Technology.

the consulting branch of the Institut der deutschen Wirtschaft (IW, Institute for the German Economy).

164 The IW Future Panel is a survey of German enterprises which was established in 2005 with the objective of identifying trends and challenges of structural changes of the economy.

The surveys include companies participating in previous waves, companies not responding in the previous wave

Only enterprises from manufacturing and manufacturingrelated services (such as wholesale, transport services, research and development, consulting) are included in the survey.

Breakdowns In all surveys of the IW Future Panel the enterprises are asked about their growth by employment and turnover;

%or more in each of the previous three years and a size of more than nine employees at the beginning of the period, classifying them as high-growth enterprises as defined by the OECD (see section 2. 1). For 1,

510 enterprises this information about their growth is available. 59 enterprises (4%)were found to having performed high growth in the past three years,

and thus fulfilled the OECD criteria for high-growth enterprises; 26 of them were SMES.

Of the 59 high-growth enterprises, 71%stated to have introduced new products, services or processes in the past two years and can

thus be classified as innovative. 52%of the 59 high-growth enterprises are exporting. The survey also provides the age of the enterprises,

allowing to identify gazelles, i e. high-growth companies that are not older than five years.

However, the number of gazelles was only 22, going down to 9 when excluding micro companies with fewer than ten employees and large companies with more than 250 employees.

Policies for high-growth innovative SMES v1. 6 82 Questions Those enterprises performing high growth in the past three years were asked about the reasons for this growth.

open option allowing the enterprises to fill in further reasons as appropriate. Those enterprises stating that they did not perform growth in the past three years were asked about the reasons for not growing.

They were offered also eight items with similar subjects as the growing companies as well as one open question for further reasons of non-growth.

Since this survey is restricted to German enterprises, it does not necessarily allow conclusions for other countries to the extent that specific national circumstances are concerned.

-growth enterprises The single most important reason for high growth quoted was that management actually targeted growth (see Exhibit 6-1). 71%of the high-growth companies stated that this was an important reason for growth.

Further important reasons were that the company supplies to a growing market (49%)and successful introduction of new products or services (43%.

%Taking these three items together, one can conclude that company growth is mainly the consequence of entrepreneurs taking active advantage of business opportunities growth-oriented entrepreneurs targeting growing markets with new products

and services. Recent third-party research findings confirm this conclusion. 165 It also indicates that growth is primarily an issue internal to the company, not externally related to issues like the business cycle, consulting or public promotion.

whether the company had made actually use of coaching services, and if so whether the company was satisfied with it. 59%of the high-growth companies stated that unproblematic access to growth finance was no reason for growth.

extended distribution opportunities after being acquired by a trust (mentioned twice), withdrawal of competitors, severe winters. 167 Exhibit 6-1:

or services Successful expansion of supply to international markets Important reason for growth Less important reason for growth No reason for growth N=59 companies stating employment or turnover growth

Policies for high-growth innovative SMES v1. 6 84 The findings for high-growth enterprises in total are similar to the findings for high-growth enterprises with 10-250 employees,

Findings for non-growth enterprises The most important reason for non-growth stated by the non-growing enterprises was unfavourable development of the business cycle.

Another important reason was apparently that competition was too strong; 21%of the companies said that this applied fully, 45%partly.

Unfavourable development of the business cycle Our company supplies to a shrinking market Themanagement did not target growth of the company Bad external consulting Difficult access to finance Competition was too strong The company was not innovative enough The company's innovations

for others it was strong competition, for a few it was difficult access to finance, a shrinking market,

The variety of answers to the open-ended question about reasons for non-growth was even larger than for growth, many of them specifying unfavourable development of the business cycle and strong competition.

and additional regulation (six times), competition from low wage firms or low wage countries (mentioned five times),

lost customers (four times), financial crisis and automobile market crisis (four times), raw material costs (three times), deliberate drawback or consolidation (three times) and difficult infrastructure (twice.

Findings for gazelles Results for gazelles indicate particularities of newly founded high-growth enterprises. There are several differences to the results for the total of high-growth enterprises (see Exhibit 6-2): 168 The most important differences include:

The assessment that the management targeted growth of the company applied to 82%of the gazelles,

%Similar values for both groups were also found for new marketing methods, new products or services and export orientation.

All in all, entrepreneurs pursuing business opportunities appear to be pronounced an even more reason for gazelle growth than for growth of older high-growth enterprises. 168 Differences should be considered cautiously

Reasons for growth of young high-growth enterprises (gazelles) in the IW Future Panel 23 55 82 0 32 27 42 24 55 27

or services Successful expansion of supply to international markets Important reason for growth Less important reason for growth No reason for growth N=22 companies not older than five years

whether publicly sponsored direct support for promising innovative SMES see examples in section 4. 1. 2 of this report are more effective and efficient than indirectly supporting growth-oriented entrepreneurship training programmes.

The dynamic character of high-growth enterprises suggests that static policies i e. policies aimed at all SMES,

or not will not work to facilitate growth for enterprises which grow quickly: In fact, such policies may put a break on growth, particularly on the fastest growing and most successful firms,

ventures are created not and obviously the keenly sought high growth ventures are realised not either. 173 Justification dilemma:

The crucial argument against direct and selective promotion of high-growth SMES is: Why promote those SMES that are successful anyway?

Policies for high-growth innovative SMES v1. 6 88 tribute the bulk of new jobs in a national economy, it would be a waste of resources to foster specifically those companies that would grow anyway.

when considering that enterprises'strategies may have to change in the face of changing economic environments. 175 Speed limitations:

If government looked at support as an investment and used risk-reward criteria for approvals

Even if policy achieved an increase of the numbers of highgrowth enterprises, the downside may be an equal increase of high failure. 177 Is Europe ready for this type of business dynamism as in the US?

the promising high-growth enterprises of today can be the big losers of tomorrow. In conclusion of these dilemmas, it appears to be advisable for policy makers to not seek to pick winners

subsidiarity and international competition. 178 The subsidiarity principle stipulates that central authorities should have a subsidiary function,

International competition: In general, competition can be interpreted as a discovery process, meaning that competing companies search for solutions to best please the needs of consumers

which leads to solutions which were unknown at the outset and which could thus not be implemented at the outset by a central agency.

Similarly, the relationship between nations can be interpreted as a beneficial competition to search for most effective policy solutions.

entrepreneurship, access to finance, and internationalisation. Enhanced entrepreneurship policies Establishing a network of certified coaches across Europe There have been several initiatives to establish professional coaching networks for SMES in Europe,

also by the European commission (see section 4. 2. 1). However, many SMES do not take advantage of coaching opportunities,

many may not know about the benefits of coaching or where to find reliable high-quality coaching,

These suggestions do not necessarily imply that coaching services as such would need to be subsidised.

Promoting serial entrepreneurs Entrepreneurship policies may not have to consider the question how to identify SMES with high growth potential.

Findings from an enterprise survey in the context of this Policy Brief (see Section 6. 2) suggest that company growth largely depends on the management's willingness to grow

and to pursue market opportunities. Thus, entrepreneurship policy may, more basically, have to seek to ensure that there are entrepreneurs who are able to generate companies

and take them through the troubled waters from idea to the market. Here the question of serial entrepreneurs comes in.

and their importance may not yet be understood fully by policy makers. 179 In order to foster the emergence and proliferation of serial entrepreneurship,

-growth innovative SMES v1. 6 90 Enhanced access to finance Enhancing the European venture capital market The European venture capital market is fragmented highly

and lacking intermediaries (see section 4. 2. 2). Opportunities for companies with high growth aspirations to find venture investors are thus suboptimal.

and regulatory environment for VC and remove impediments to attract international institutional investors to VC funds,

and venture capital Case studies conducted for this report indicate that governmental policies may support access to finance for high growth SMES indirectly.

see also EVCA (2010), p. 13.181 The EC launched a consultation on a new European regime for venture capital in June 2011.182 Statement from Allan Martel, member of the advisory board for this Policy Brief.

A suggested enhancement of the Enterprise Europe Network The Enterprise Europe Network (EEN) provides opportunities for SMES to enter into joint development arrangements with appropriate partners across Europe,

Furthermore the EEN also offers cooperation opportunities with Technology Offers and Technology Requests. Those are not Framework Programme (FP) cooperation

but alternative or complementary opportunities for SMES and appropriately linked to FP topics can be a way to complete FP consortia with specific expertise.

The opportunity finder would then return a list of open call topics not just open calls

This semantic based search concept would offer to the SME the opportunity to conduct a quick scan of relevant topics, short descriptions and related EEN technologies in a very efficient way.

and open opportunities without having to process extensive data and information from various sources. In this way, the EEN could contribute more to SME growth and possibly high growth.

Comprehensive entrepreneurship policy(..should(..()be multilayered. Policies addressing one level alone may not lead to successive outcomes,

Measures aimed at providing funding for high-growth new ventures may find little opportunity to fund growth

is likely to make a difference for high-growth entrepreneurship. Balancing SME policies with economic policies at large The question of balancing policies for general and high-growth SMES may have to be asked even broader:

How should SME policies be balanced with enterprise policies at large? Economists suggest that policy should not principally favour SMES.

Which type of enterprise generates most innovations and growth depends on many factors, e g. market size, stage of market development, industry, and many more.

Since these factors and their interplay are difficult to monitor, policies favouring specific types of companies are prone to producing more economic damage than benefit. 189 7. 4 Concluding overview Ten policy implications Research for this Policy Brief leads

to the following ten policy implications. Items 1-5 are on a general level and apply to policy making on European, national or even regional level;

but may partly be influenced by European Directives, Recommendations and Communications; items 7-10 take a European perspective

Since there are empirical findings supporting the importance of high-growth SMES for employment in developed national economies,

it appears to be worthwhile for EU policy makers to support high growth of enterprises in order to leverage the positive impact of this type of enterprises.

however, that the positive impacts of high-growth entrepreneurship in themselves are no ground for political activity;

Furthermore, governments should also not aspire to eliminate new venture failures. 192 3. Policies for general SMES

Arguments from market failure theory on which policies for innovative high-growth SMES can be based also apply to non-growing, larger and non-innovative enterprises.

Since high-growth enterprises can be found in any industry and since business ecosystems, which are important for companies'sustainability and growth,

They may for example be related to the research and education system, investment regulation, start-up regulation, market entry barriers, labour law, bankruptcy law, taxation,

e g. for venture capital. 8. Enhance coaching opportunities: Qualified coaching may help grow SMES and cross the chasm between pilot markets and mass markets.

Since many SMES do not take advantage of coaching opportunities, an infrastructure to encourage the replication of existing successful coaching networks throughout EU Member States could be set up. 192 See Minniti (2008), p. 788,

Improve internationalisation opportunities: Since high growth requires tapping larger markets, and national markets may be too small,

This may include further work towards single markets in Europe as well as enhancing the EC's Enterprise Europe Network.

and in further education Specific high-growth business services and professional coaching Capital Finance Develop single European market for VC European Investment Bank instruments for high

and Innovation Centre Network Develop growth-oriented science parks and incubators Incentives (motivation) Income Direct National regulation no specific role for EU except opinion leadership Design

and bankruptcy law conducive for high growth Economic stability Economic stability and growth European monetary policy (No difference between general SME policies and high-growth SME policies) Right

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Venture growth new findings from a multilevel perspective Guest Editors'Introduction to the focus issue on growth.

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Main characteristics of technological entrepreneurship and the impact of governmental policies in Korea. In: International Journal of Entrepreneurship and Innovation Management, Vol. 12, Nos. 3-4, pp. 311-329.

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The Gorilla Game: An Investor's Guide to Picking Winners in High technology. Harperbusiness. Moreno, Ana M.;

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The Measurement of Scientific and Technological Activities. Third edition. A joint publication of OECD and Eurostat.

OSÉO (2008: Supporting growth and innovation for SMES. October. Download at http://www. oseo. fr/oseo/oseo in english2 (accessed 19 october 2010.

Small Business Economics, 2010, vol. 35, issue 2, pp. 203-226. Reinstaller A. coord. Hölzl, W.,Janger J.,Stadler,

European commission, DG Enterprise and Industry. Available at http://www. proinnoeurope. eu/sites/default/files/newsroom/2010/12/Innogripsii report barriers. to . internationalisation. a nd . growth 0. pdf. Shane, Scott (2009:

Small Business Economics, Volume 33, Number 2, pp. 141-149. Simon, Hermann (2009: Hidden Champions of the Twenty-first Century:

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Small Business Economics, Vol. 32, pp. 351 374. Yim, Hyung Rok (2007: Quality shock vs. market shock:

Deardorff's Glossary of International Economics, search term policy, URL: http://wwwpersonal. umich. edu/alandear/glossary, last accessed 2 may 2010.

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EUREKA, http://www. eurekanetwork. org/about-eureka, last accessed May 2011. EUREKA's Eurostars Programme, http://www. eurostars-eureka. eu, last accessed May 2011.

http://ec. europa. eu/enterprise/policies/finance/index en. htm, last accessed May 2011. Policies for high-growth innovative SMES v1. 6 102 European Investment Fund, http://www. eif. org/what we do/equity/venture/index. htm,

last accessed May 2011. European Investment Fund, GIF 1-GIF 2 Investment Policy: http://www. eif. org/what we do/resources/european commission/GIF INVESTMENTPOLICY IMPLEMENATIO n guidelines. htm?

lang=-en, last accessed May 2011. Enterprise Finland Venture Forum: https://www. efvf2011. b2bmatchmaking. com/p index. php, last accessed May 2011.

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Interviews Jonathan Potter, OECD, Senior Economist, Local Economic and Employment Development. 1 june 2010. Burton Lee, Innovarium Ventures, 17 august 2010.

Rebecca Scheel, Accelerace programme, Business Advisor, 5 january 2011. Policies for high-growth innovative SMES v1. 6 104 Annex 1:

Journal articles on high-growth SMES 2008-2010 The study team scanned the following entrepreneurship journals and other journals for articles about highgrowth companies.

Top level entrepreneurship journals Public policy journals 1 Journal of Business Venturing 2 Entrepreneurship Theory

& Practice 3 Small Business Economics 4 Journal of Small Business Management 1 Cato 2 Journal of Public Policy and Management Level 2 entrepreneurship

and Entrepreneurship 3 International Journal of Entrepreneurship and Innovation Management 4 International Small Business Journal 5 Journal of Developmental Entrepreneurship 6 Venture capital 7 International

Journal of Entrepreneurship 8 Journal of Enterprising Culture 9 Small Business and Enterprise Development 1 Harvard Business Review 2 California Management Review 3

entrepreneurship journals dealing with high-growth SMES in 2008-2010. Full references are included in the Reference section of this Policy Brief.

Articles on high-growth SMES in entrepreneurship journals 2008-2010 Year Author (s) Journal/Article title Top Level Journal of Business Venturing 2008 Hyung

Lessons from recently established rapidly growing U s. startups Small Business Economics 2010 Parker et al What happens to gazelles?

2009 Harms/Ehrmann Firm-level entrepreneurship and performance for German Gazelles 2009 Bianchi/Winch Supporting value creation in SMES through capacity building and innovation initiatives:

the danger of provoking unsustainable rapid growth Journal of Small Business and Entrepreneurship 2010 Baughn et al Labor Flexibility and the Prevalence Of high-Growth Entrepreneurial Activity 2009 Harms A Multivariate analysis

and Their Market International Journal of Entrepreneurship and Innovation Management 2010 Zhou et al Entrepreneurial innovation problems associated with the dynamic growth of university spin outs in China Policies for high-growth innovative SMES

A critical nordic tale about perceptions of entrepreneurial opportunities, goals and growth Small Business and Enterprise Development 2010 Hoxha/Capelleras Fast-growing firms in a transitional and extreme environment:

2010 Littunen/Niittykangas The rapid growth of young firms during various stages of entrepreneurship 2008 Zhang et al A quantitative analysis of the characteristics of rapid-growth firms and their entrepreneurs in China Source:

finance (f) successful new marketing methods (g) successful introduction of new products or services (h) successful expansion of supply to international markets

a) unfavourable development of the business cycle (b) our company supplies to a shrinking market (c) the company's management did not seek growth (d) the company was consulted badly (e) difficult access to finance (f) competition was too strong

Since the sample included only German enterprises, the original questions were in German. Policies for high-growth innovative SMES v1. 6 107 Annex 3:

The program gives you insights into your customers, competitors and markets. The goal is to give you the knowledge

During an intensive five-month process you will be in contact with customers and industry experts and we will help you find the resources necessary for your success-no matter

With help from our sponsors, we are able to provide our services for free. The program runs two times a year with program start in January and August.

/http://symbion. dk/sub sites/accelerace/engli sh/**Estonia Arengufond The Development Fund performs risk capital investments into the starting

and expert services for challenging development projects that help companies to promote international growth; rejuvenate their business;

and development-orientated small or medium-sized enterprise. Source: http://www. tekes. fi/en/community/Small businesses/548/Small businesses/1420) TEKES is the Finnish Funding Agency for Technology and Innovation. http://www. tekes. fi

by Enterprisefinland A key aspect of growth business policy is offered that by the Growth Business Service, part of the Enterprise Finland (Yritys-Suomi) project,

and immigrants provided by the Ministry of Employment and the Economy. http://www. yrityssuom i. fi***Vigo,

by Finnish Ministry of Employment and Economy The programme bridges the gap between early stage technology firms

The backbone of the programme is formed by the Vigo Accelerators, carefully selected independent companies run by internationally proven entrepreneurs and executives.

These Accelerators help the best and the brightest startups to grow faster, smarter, and safer into the global market.

The Accelerators are not consultants--they are coentrepreneurs who invest in the companies they work with.

The Finnish Ministry of Employment and Economy launched the Vigo Programme in 2009. PROFICT Partners Oy manages the execution of the program.

Grant funding is available to help entrepreneurs build an investor-ready business plan. Once a HPSU has developed a sound business plan

and identified http://www. enterpriseireland. com/en/funding-**Policies for high-growth innovative SMES v1. 6 108 prise Ireland investors,

you can apply to the Innovative HPSU Fund for an Enterprise Ireland equity investment. Having secured the necessary investment to start the business,

further supports are available to assist in the implementation of key aspects of your plan.

http://www. enterprise-ireland. com/en/fundingsupports/Company/HPSU-Funding/)Enterprise Ireland is the government organisation responsible for the development and growth of Irish enterprises in world markets.

Accelerator Groeiversneller programme (IP and Ministry of Economic Affairs. Objective: To support 100 companies in achieving a turnover growth of several million to at least €20 million in five years'time.

This high-tech and innovation co-investment facility was subscribed in February 2006 by CDTI, EIF and several other private investors, mainly Spanish blue chip companies.

EIF's investment represents just over 25%of the fund's final size of EUR 183m.

and private sector investors to boost investments in Spanish SMES which will foster innovation, research and development.

The target group also includes SMES seeking to strengthen their domestic market position against international competition.

Services may also be offered to large companies. Information provided to empirica by Innovation Norway**America USA Startup America Startup America is the White house initiative to celebrate,

inspire, and accelerate high-growth entrepreneurship throughout the nation.(.President Obama has called on both the federal government

Unlocking Access to Capital, Connecting Mentors, Reducing Barriers, Accelerating Innovation, Unleashing Market Opportunities. Second, leaders in the private sector have launched the Startup America Partnership, an independent alliance of entrepreneurs, corporations, universities, foundations,

and other leaders, joining together to fuel innovative, highgrowth U s. startups. http://www. whitehous e. gov/issues/startupamerica***USA Greater Louisville's High Impact Program The High Impact Program is a public/private partnership,

that have a disproportionately higher impact on the metro area economy. East asia China Zhongguancun Science Park (ZSP) Gazelles Plan The Zhongguancun Science Park (ZSP) in Beijing initiated a Gazelles Plan in July 2003 to subsidise qualified high

Enterprises with the highest credit grade enjoy the highest discount loan of 40%.(%Source: Cunningham (2008), p. 24.

http://city. chinaassisto r. com/Beijing/2007/12 12/1197441533 2939. html***Gazelle Valley by High-tech Incubator in Xi'an The High-tech Incubator in Xi'an set up a Gazelle Valley

in May 2007 to support the development of high-growth enterprises. Source: Cunningham (2008), p. 24.**

***Five-year Plan for Gazelle Enterprises, by Hangzhou Municipal government Hangzhou Municipal government announced a Gazelles plan in May 2008, the Five-year Plan for Gazelle Enterprises in Hangzhou (2008-2012.

The plan aims to invest in 500 high-growth enterprises by 2012 by providing special funds and increasing capital accessibility.

Illawarra Program is a business support program that has been designed to assist Illawarra-based entrepreneurs who are looking to drive their businesses to achieve increased profits and sustainable growth.

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