that employ less than 500 workers and whose annual turn over does exceed not 50 million euros (Ifm, 2007a
sales and employ hundreds of thousands of workers, SMES are equipped per definition with much lesser resources.
employment to 70.9%of all employed persons in 2006 (Ifm, 2007b. In absolute terms German SMES provided employment and/or apprenticeship to 20.42 million people in 2006
As on 31.12.2006 large firms (with 250 employees or more) constituted a miniscule 0. 33%of all enterprises.
date an overwhelming 3, 204,519 were SMES (with less than 250 employees. 2 These data exemplarily demonstrate the key-role which SMES play in Germany†s economy.
confirm, or extend the data base with experts from the selected industries like firm representatives, representatives of industry associations and cluster
47,998 engineer job vacancies in 2006 resulting in a loss of 3. 5 billion euros (Koppel 2007
employees were found to be suffering more from this scarcity (60%)than did large firms
Inc. cited troubles in obtaining work visas for its prospective employees as a reason to set
Furthermore, some employees in the R&d units at the headquarters tend to see the new
and should provide their employees involved in international activities with cross-cultural training. This sensitization to
senior management but also by other employees, especially in R&d departments, as well as a profound analysis of business environment conditions of the target offshore country
•Liberalise the hiring of qualified foreign workers •Enhance co-operation between schools, entrepreneurs and branch organisations
and encourage the employees to participate not only in innovation and learning activities but also be a part of
employees not exceeding 150 full time employees. The instrument of the study was based on the innovation (process
training their employees in this regard. The results indicate that on all accounts SMES surveyed were involved less in
R&d activities except for the training of employees V. CONCLUSION The present study was conducted to find out the role of
of their employees through various trainings. The results also suggest that the manufacturing companies are involved more
management skills of individuals in the senior management team and developing in-house coaching capacity; developing a marketing strategy or raising external finance
If any of the persons identified is an independent expert participating in the evaluation of the proposals for
legal consultants; 2. the professional consultants were prepared better to deal with SME specific challenges 3. cross-border information about IPR issues would be easily available on
the internet and 4. National Intellectual Property Offices (NIPOS) would provide better IPR services to SMES
support SMES to contract universities, R&d service providers or private consultants to either conduct small innovation projects or to explore the feasibility of larger ones.
to business consultants, and to develop the market for innovation management consulting by enhancing quality and quantity of supply the IMPÂ rove platform had initially been developed
scientists and qualified workers in third countries To capture the growth opportunities notably in developing countries and emerging economies
This action will support the use of appointed independent experts for the evaluation of project
The experts concerned will be qualified highly, with specialist expertise in the field of financial instruments such as bankers, venture capital (VC) and other risk-capital fund
attract experts of sufficiently high calibre, a special allowance of â 450/day will be paid to
Experts (expert evaluators, experts groups monitors 0. 92 of which 0. 10 from 02.040203 and 0. 82
such as those affecting labour markets, tax design competition, financial markets and bankruptcy laws. The  OECD 2004 9
competition, the regulatory framework, the tax system, labour markets, financial markets and bankruptcy laws should take account of the way these areas
the US ratio between number of employees and self -employment, it is estimated that the self-employed women
Figure 1. Female employers and own-account workers Percentage of total employers and own-account workers
Source: United nations Economic commission for europe, Gender Statistic Database %50 45 40 35 30 25 20 15 10
â Increase the ability of women to participate in the labour force by ensuring the availability of affordable child care and equal treatment in the workplace.
Regulations and supervisor arrangements designed to safeguard the soundness of financial systems can affect the
business consultants to have a good understanding of the intellectual property system, including its strategic use by
2. For Canada, 50-299 employees instead of 50-249 and 300 or more instead of 250 or more.
with 100 or more employees. For The netherlands, 50-199 employees instead of 50-249. For Switzerland
5-49 employees instead of 10-49 and 5 or more employees instead of 10 or more.
For Mexico, Businesses with 21 or more employees, 21-100 employees instead of 10-49,101-250 instead of 50-249,151-1000 instead
of 250 or more 3. Internet and other computer-mediated networks Source: OECD, ICT database and Eurostat, Community Survey on ICT usage in enterprises 2002, May 2003
consultants or academics. Both these groups have the advantage of being less clearly subject to â€oecapture†and being
than 99 per cent of active firms (out of 4 million) have fewer than 250 employees (95
per cent have fewer than 10 employees, see Figure 2) . If there were a positive relationship between innovation activity †including R&d †and firm size, the size
employees were included, whereas smaller firms were selected using a sampling design stratified by geographical area, industry, and firm size.
90 per cent of the whole sample, imposing a threshold of 250 employees, in line with
for both groups of firms, with an average of around 50 and 53 employees respectively
We require that sales per employee be between 2000 and 10 million euros, growth rates of employment and sales of old and new products between-150 per cent and 150 per cent, and R&d
and excluding firms with fewer than 20 employees, for comparability the samples used by Griffith et al (2006) for France, Germany, Spain and
for the year 2000 belong to the smaller class size (20-49 employees), a figure much
R&d per employee than small firms (the 11-20 size class), and this is particularly true
where yi is labor productivity (sales per employee, in logs), ki is investment intensity our proxy for physical capital, PRODI and PROCI are knowledge inputs, proxied by
fewer than 20 employees and included firms with more than 250 employees. 13 Using this sample, we are able to compare our results to those for France, Germany, Spain
per employee than firms in other countries. Although the firms in our sample, like Italian industry as a whole, exhibit a negative labor productivity growth during the
Number of employees: mean/median 49.45/32 53.48/36 Group (in%)20.07 16.25 *Units are logs of euros (2000) per employee
24 Table 2 †Descriptive statistics, high tech and low tech industries Period: 1995-2003 High tech firms Low tech firms
Number of employees: mean/median 54.17/35 47.46/30 Group (in%)25.26 17.89 *Units are logs of euros (2000) per employee
25 Table 3 †R&d intensity (STEP 1: OLS model. Dependent variable R&d intensity R&d Expenditure per employee All firms High tech Low Tech
in logarithms D (Large firm competitors) 0. 062 0. 197-0. 028 0. 073)( 0. 109)( 0. 098
Investment per employee 0. 125***0. 050 0. 120***0. 047 0. 129***0. 051
sales per employee in logs)( 1)( 1a)( 2)( 2a)( 3)( 3a Predicted probability of 2. 624***0. 193 2. 742***0. 664 2. 797***0. 063
Investment per employee 0. 099***0. 073***0. 109 ***in logs)( 0. 010)( 0. 015)( 0. 015
†Units are logs of euros (2000) per employee. This table is based on tables in Griffith et al. 2006.
Figure 1 †Value added per employee. Percentage change, annual rate (1995-2000 and 2000-2005.
more than 10 employees 31 Appendix Variable Definitions R&d engagement: dummy variable that takes value 1
R&d expenditures per employee, in real terms and in logs Process innovation: dummy variable that takes value 1
real sales per employee, in logs Investment intensity: investment in machinery per employee, in logs
Public support: dummy variable that takes value 1 if the firm has received a subsidy during the three years of the survey
Employees: number of employees, headcount Age: firm†s age (in years Size classes: 11-20,21-50,51-250 employees
Age classes:<<15,15-25,25 years Industry dummies: a set of indicators for a 2-digits industry classification
Time dummies: a set of indicators for the year of the survey 32 Wave dummies:
R&d per employee (for R&d-doers, mean) †6. 9 5. 2 4. 3 3. 6 2. 9 2. 4
Investment per employee (mean) †6. 0 8. 3 8. 3 6. 3 8. 0 7. 9
†Units are logs of euros (2000) per employee 34 Table A2 †A nonparametric selectivity test
Dependent variable Prob (R&d>0) R&d expend. per employee D (Large firms) 0. 150***0. 305
***per employee (0. 011)( 0. 013)( 0. 011)( 0. 013 Log capital stock†0. 098***0. 041
***per employee (0. 013)( 0. 014 Step 2-Product Innovation Predicted R&d intensity 0. 652***0. 656***0. 655***0. 658***0. 661
per employee (0. 011)( 0. 017)( 0. 015 Log capital stock†0. 108***0. 111***0. 101
***per employee (0. 016)( 0. 007)( 0. 010 Log likelihood-27,119. 9-27,110. 0-26,979. 0-26,908. 5-26,901. 3
recommendations to enhance SME competitiveness and the ability of MEP consultants to assist SMES in this endeavor
dynamic knowledge management portal that MEP consultants can access to share ideas across the entire MEP network on the most effective methods to bring about change
members in senior management positions over hiring outside professional managers, which can lead to poor management decisions and generational transition problems (Crosetto, 2004.
SMES have fewer employees, each with multiple roles (Yap et al. 2005), but they may be able to
Employees of SMES interact more often with their counterparts and may have shared or swapped tasks with them.
employee-owned company in Pennsylvania, now operates transfer lines for customers such as Caterpillar, SKF and Siemens that previously owned these lines (Anonymous, 2006.
management of SMES and the consultants that can help them 3. 2 Why Add Services
Often, where customers and employees are in relatively constant contact interpersonal experiences are critical to the delivery of service products (Tidd and Hull
employees and/or physical resources or goods and/or systems of the service provider which are provided as solutions to customer problems.
-workers capable and committed to the firm†s mission, which can have a larger influence on the
Finally, training, employee attitudes, and perception of management support also moderate the effectiveness of adoption of
service ideas come from a close interaction between customers and employees. Thus, although product and service innovation are thought often of as â€oethe sameâ€,
individual employees and the quality of service can vary greatly depending on the training and experience of employees.
As a result, it is critical that personnel training is conducted properly regardless of whether the solution is a product,
achieved by affinity diagrams (a sorting process conducted by the firm†s employees), or customer sort (ask customers to sort the needs.
, employees, lead users), groups (e g.,, brainstorming), external search (e g.,, patent search, new use of existing products/services, competitors, upstream and/or
service-centered business requires a transition strategy as well as management of employee motivation and supporting organizational structure and culture
all employees, and provide the resources to assure that the path is taken. In addition, each part of
establish a separate reward structure that rewards employees for culture-supportive behavior Employees in this unit will need to be motivated to relate to customers differently than those in
manufacturing units. Dialogue is essential for success. These employees may need to be trained to relate to customers
or selected according to certain criteria. Similarly, it is probable that there will be conflicts between product and service departments,
important that employees understand their function within the company and how it relates to the
Values, norms and beliefs shape the firm and drive employee behavior Some companies will have a tougher time with the transition to a service-centered culture
shows that unrealistic and unattainable goals result in unmotivated and cynical employees Gebauer et al. 2005).
) When employees can see that their task contributes to the overall strategy and goals of the firm,
satisfaction, employee satisfaction and business success (Gebauer et al. 2005). ) In a product -centered firm, customer satisfaction is based on the product,
based on service delivery, employee friendliness, value-added, flexibility, customization, etc Thus, customer satisfaction may be more difficult to achieve in service firms.
management must motivate the employees to reach their goals and be rewarded. Employee motivation can be described in terms of
employee-push and-pull (Gebauer et al. 2005). ) Employee-push refers to management†s desire to motivate employees to engage in the service business.
On the other hand, employee-pull refers to employees†enthusiasm and self-motivation to commit to the new service initiative
resulting from understanding the benefits and results of pursuing services. Although employee -push might be sufficient initially,
the goal in service firms is to stimulate employee-pull in order 45 Attribute Definition le Statements
Alignment The degree to which the interests and actions of each employee support the clearly stated and
communicated key goals of the organization â€oewe have clear aims and objectives which everyone understands;
we build consensus around key objectives; we recognize and reward loyalty†Communication The degree to which there is planned
and random interaction between functions and divisions at all levels of the organization â€oei am kept in the picture on how we are
Empowerment The degree to which each employee feels empowered by managers and the organization â€oeas a manager,
Honesty The degree to which each employee has total confidence in the integrity ability and good character of other
employees and the organization regardless of their role â€oei trust the people I work with;
organization, employees and managers take risk â€oei am encouraged to experiment; we take calculated risks; we encourage trial and errorâ€
we use consultants in focused roles†Support The degree to which new ideas are encouraged from all sources and
to get employees involved. Internal marketing is one way that firms â€oesell†the service concept to
their employees in order to get them to â€oebuy-in†to the new initiative Management should provide excess human resources
underway so that employees are free to engage in service exploration. Once the change process takes off and employee-pull is set in motion,
employees will become the driver of new ideas During shifts from product-focus to service-focus there are often conflicts between departments
because of perceived status, either increased or decreased. For instance, production personnel may feel downgraded because of the new interest in service sales.
Once employees are motivated and united to achieve service-centered goals, they will need to be equipped with training that will help them meet their objectives.
increase the creative and problem-solving capacities of employees. In product-centered firms sales people view products as the main source of revenue and services as add-ons that are
chooses to hire new employees it is critical that the new hires fit with the new service-centered
It is imperative that employees believe the internal marketing before they can get involved in
employees to sell services. External marketing is about portraying the firm†s image to customers, but before employees can make that portrayal they must be sure of its existence, a
47 belief that relates back to the firm†s internal marketing. Once the employees are assured that
the internal marketing is credible (i e.,, the firm will be able to keep the promises it makes), they
the transition, it is likely that its customer/employee interaction includes advertising, sales promotions and publicity.
Front-line employees, the ones who commonly work the most closely with customers, need to be in-tune with customer needs,
These employees also need to be committed and able to come up with possible ideas and solutions for customer problems.
which entails engaging the customer in serious dialogue where the employee listens intently and asks questions to make sure he
Exceptionally creative employees can listen to customer problems, generate their own ideas and solutions, and share them with others to stimulate maximum problem-solving ability.
ideas with employees, stimulate communication within the organization, and provide leadership to motivate employees (Johne and Storey, 1998.
All too often service firms view their people simply in terms of an approach to deliver the product, i e.,
of the inseparable nature of services, front-line employees shape the quality of a customer relationship. de Brentani (2001) concludes that having a highly trained workforce that has an
Often, new service initiatives do not sufficiently involve input from front-line employees. In this case, the employees who should play a critical role in the process are uninformed and
underutilized and will build resentment to the new initiative. As a result, co-workers can be the
employee involvement, and ensuring communication among the different functional areas (e g 48 production, process design, IT, service delivery and marketing) to drive service innovation (de
When workers experience autonomy, they feel less constrained to explore opportunities and to generate ideas.
information sharing among employees should be encouraged so as to generate more ideas to satisfy unmet customer needs (de Jong and Vermeulen, 2003.
having employees cross-trained and able to perform other company tasks) also helps to broaden
Thus, if an employee took the initiative to generate ideas for solving a customer problem and failed,
as long as the employee (and the firm) learns from the mistakes. An open culture should value experimentation and should
) Employees should understand that learning from failures is often a key to success Susman et al.
Flat structures allow employees to see â€oethe big picture†and minimize distortion by reducing the levels through
structures also encourage an â€oeopen door policy†where employees have easy access to top management.
This helps employees to be able to contact people in other functions directly without going through and/or clogging other channels.
Employees should be permitted to seek advice from those who have authority based on knowledge as well as position.
Information should also be shared with employees at all levels e g.,, service, production, financial, marketing) by publishing newsletters or using other
minimize symbols or signals of status differences so that some employees don†t feel less valued
it is important that employees feel equal with their peers 5. 2 Phase II: Services Provided to the Installed Base
The skills of the firm†s employees now must extend beyond accurate diagnosis and speedy repairs,
include employees creating a friendly and helpful atmosphere for the customer. In addition regular contact with customers via opportunities such as newsletters, users†clubs, chat rooms
Firms should encourage employees who are in regular contact with customers to share ideas with other employees concerning optimal use of the product, and
observe points of pain and frustration that customers experience in using the product. These ideas and observations,
In this phase, employees should be immersed in their customer†s business. Employees should be able to see the points of pain (Gustafsson and Johnson, 2003),
or frustrations that customers have with existing offerings, and generate ideas for new solutions. Since the employees are very close
to the customer, the solutions generated from this type of encounter are often very valuable to the
if the relevant consultant skill set can be tapped. Before suggesting how this might arise, it is necessary to understand the current focus
Consultants rarely refer to the success stories posted on the website for information and insight.
Our assessment of the current resources and experiences of the MEP outreach consultants indicate that, before these changes can be transferred to the SMES seeking to expand, there needs
and techniques deployed by these consultants. Indeed, they themselves may not be able in most cases to absorb
TQM, lean manufacturing, etc. there is a limited supply of consultants who have the appropriate knowledge, skills,
It is therefore unlikely that, at least on a local or regional basis, current consultants within the
•Adding new skills via focused training of those local consultants who have the propensity
would stimulate consultants nationwide to offer advice, cases, and possibly direct involvement Recommendation 2 †Develop new skills
Our analysis shows that there is a major shortage of appropriate skills in the MEP consultant network.
it is necessary to expand the population of consultants versed in such skills We recommend the development and provision of a training program for existing MEP linked
consultants to provide them with the skills to excite MEP targeted SMES in the opportunities for
The consultants would learn how to use tools specifically designed for tackling the challenges faced by SMES.
-training program for MEP consultants. The target should be one consultant from each location identified and qualified by the MEP team at that location
Recommendation 3-Analyze use of the current MEP database We recommend a web-survey of existing MEP centers to determine
•Expert knowledge creators, when asked to codify their knowledge, embed significant tacit information using more abstract concepts than novices can comprehend
•Experts do not remember how they learned and hence set expectations too high †novices
•Experts tend to emphasize their most recent experiences to the detriment of the earlier
Experts do not work in isolation and, responding to a specific need they are more likely to offer tacit information as well as tapping into their own extended expert
networks. The challenge therefore becomes alive as each contributor builds on the knowledge of the others.
offices and approved and relevant consultants who are able to address the new issues confronting
•Bios and contact information for the consultants 59 The aim of these tools and support data is to prime the outreach function at the MEP offices on
consultants and experts may be able to help The â€oecase†is posted then and all the selected possible experts are mailed e with a password to
access that case and invited to comment, suggest help, guide to materials, etc. This dialog is
open to the selected community as well as the company executives so that they can also participate in the knowledge exchange
projects as the links can be used to tie in the experts for future cases 60 7. 0 REFERENCES
Discusses the advantages to having employees understand their function in the company and how it relates to the rest of the company.
Employees that understand their part in the firm are more likely to engage in behaviors that support the firm's strategy
percent of R&d and R&d employees per sale. They also had fewer patents than large
Discusses the effect of managerial influence on employees'willingness to adopt innovation Lindman, M. T. 2002."
from papers prepared for the OECD by a number of experts, in particular: David Audretsch, Bart Clarysse
factors, many experts predicted the demise of SME competitiveness as globalisation increased. While many SMES have succumbed indeed to a deterioration of competitiveness,
and inter-country labour mobility. But in order to answer how these 1. During the last five years, SMES were responsible for more than 80%of the jobs created (European SME co
During the 1980s, one in about 25 workers lost a job, and in the 1990s the figured has risen to one in 20 workers
9. Much of the policy debate about globalisation has revolved around a trade-off between maintaining higher wages at the cost of higher unemployment versus favoring higher levels of employment
yet the number of workers who can contribute to producing and commercialising new knowledge is limited to a few areas in the world.
Furthermore, demand for less skilled workers has decreased dramatically throughout the OECD, while demand for skilled workers has exploded. 6
11. Given the shift in comparative advantage towards more knowledge based economic activity many scholars have predicted the demise of SMES.
employee than do large firms. Audretsch (1995) identifies SMES as contributing 2. 38 times more
innovations per employee than do large firms. Other studies identifying different types of output measures
consultants, and (2) R&d boutiques. As shown in table 1, the technology developing companies tend to be
new economic knowledge include a high degree of human capital, a skilled labour force, and the strong
and other knowledge workers †as agents endowed with new economic knowledge 34. When the focus shifts from the firm to the individual as the relevant unit of observation, the
a knowledge worker may choose to exit the firm or university where the knowledge was created initially.
and in a worker. The firm is created endogenously through the worker†s effort to appropriate the value of his knowledge through innovative activity
consultant Tom Peters claims that, "Old ideas about economies of scale are being challenged. Scale itself is being redefined.
An executive of a company that makes laboratory equipment explained that the typical Mittelstand strategy,
%while five-year employee growth was 9. 8 %44. One of the keys to the success of the German Mittelstand has been their strong commitment to
Indeed, non-marketing employees in the German Mittelstand engage in direct contact with customers at twice the frequency as in the largest
and financial employees in order to make sure innovative activities truly meet customer needs WK1 15 The Network and Flexible Production Strategies
which employees perform a wide variety of different tasks 15 Porter (1990) provides examples of Italian ceramics and gold jewelry as industries in
new economic knowledge embodied in skilled workers tends to raise the propensity for innovative activity to spatially cluster throughout all phases of the industry life cycle.
which are made easier by the mobility of workers and technicians, the activity of technical consultants,
and commercial activity of capital equipment suppliers interaction with equipment manufacturers, which is repeated intense and socially embedded,
employees Technology Developers 1-3%of the SME population(>5 employees Non-Innovative SMES about 40-45%of the SME
population(>5 employees Potential Innovators about 40%of the SME population(>5 employees I III IV
II Source: Clarysse and Duchã ne, 2000 70. Both technology developers and technology users who have a sufficient R&d capacity are able to
successfully apply for R&d-grants or subsidies under the traditional technology policy structures. A recent
technology programmes, technical consultants are permitted frequently not to participate as contractors, so this category of SME is excluded often national R&d grant programmes, further limiting the number of
Firm size (employees) 47 43 73 R&d budget as%of turnover 21,7%32,1%10,9 %Growth during 1996-1999
in terms of employees 89%46%17,9 %R&d grants, as%of R&d budget19 11%27,6%16,8 %Source:
These organisations are typically technical consultants and count R&d as a â€oenon-core†activity Looking at firm growth rates during the three-year period preceding the study,
educated labour force. Public agencies have strong incentives to adapt their strategies to meet the needs of
engineers (or have a network of technical experts) who are trained to perform technological due diligence.
<250 employees and independent 25 Including CRAFT-projects (14,5%without CRAFT-projects 26 In respect of Belgian (Flemish) definition of the SME:
less than 200 employees 27 SME according to the Anvar-classification: less than 50 employees 28 Only related to equity financing organised by the main R&d granting institute
WK1 26 budget in the following years. R&d grants seem to have substantial additivity to the size of the R&d
A typical such SME might have three employees out of thirty who spend part of their time on R&d activities,
Technical experts in public research bodies or institutions are not of much assistance as their speciality is
world of technical experts and that of entrepreneurs is so large, there need to be mechanisms in place
In some countries such as the US, technical and business consultants are important carriers of innovation to SMES but their role in Europe remains limited so far
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