RAND is not-for-profit nonpartisan, and committed to the public interest RAND€ s publications do not necessarily reflect the opinions of its research clients and sponsors
ICT information and communication technology ISP internet service provider MOOC Massive open online courses (MOOCS NBIC nanotechnology, biotechnology, information technology and cognitive science
economy, governance and power, and society. RAND Europe†s assessment of likely global societal trends
RAND Europe is an independent not-for-profit policy research organisation that aims to improve
2. 1. Social computing is transforming communications, but the extent of global interconnectedness may be expected less than...
environment in which the Union is navigating. In the long term, this may challenge the Union†s
†the long-term, international and domestic, political and economic environment facing the European Union over the next 20 yearsâ€.
Easier access to information, increasing global scientific collaboration, economic growth and interconnectedness †together with rising levels of education in many parts of the world †have enabled a
between labour and capital, and returning manufacturing capabilities to developed national contexts United states, Canada, Northern europe) in the case of 3-D printing (Desmoulin-Canselier 2012;
2030, this Research Report will concentrate on trends within information and communication technologies (ICTS), as it is the individual area that is likely to have an impact on the everyday lives of
global communication with individualised expression†13 exercise conducted for this study suggested that divides are not likely to be determined by access to the
Finally, technology may act as an accelerator, exacerbating existing inequalities between those who can afford access to it
increasingly socialised in ICT environments, previously existing income-determined barriers of access to political participation and education could be overcome (see discussion on e-participation and e-learning
the same time producing expanded opportunities of political participation and empowering others Hacker et al. 2009.
innovations †the present turmoil and technological progress offer new opportunities to harness these initiatives to promote social-policy goals
provide opportunities for new types of social innovation through the †network effect†of collective
OECD. In addition, tools such as multicriteria decisionmaking and social return on investment analysis may allow policymakers to take explicitly into account the social innovation aspect of their decisions
better public services including improving cross-border service provision and e-government services 2 Social innovation is defined in this context as new responses to pressing social demands by means that affect the process of social
interactions (BEPA 2010 15 2. 1. Social computing is transforming communications, but the extent of global interconnectedness may be expected less than
The presumption of sustained technological progress and expansion of broadband coverage globally underpins beliefs about the sustained growth in the use of platforms for creating and sharing user
rising profits from progress in the fields of cloud computing and new business models associated with data
) Microblogging is the use of social network services specifically created for the sharing of brief entries and
services are perceived as global platforms, 84.2%of Facebook relationships and a large percentage of Twitter relationships were found to be clustered along country lines (Gonzalez et al. 2011;
in ICT environments) is highly likely to influence outcomes in all human social activities †political
social capital and cultural identities (Ellison et al. 2011; Oh et al. 2014; Steinfield et al. 2012. These
and individual users and stakeholders find themselves increasingly locked in to specific technologies, business models and social identities
22 Source: Cave et al. 2009 23 Chapter 4. Education will have to address challenges posed by the financial crisis, emerging technologies and the net
and informal settings, presenting a novel form of competition for traditional establishments (Ally 2009 24
the course of the project has focused on the demand for a novel paradigm for provision of education made
suggest that the demand for ICTS in education by young people is not increasing as dramatically as these
Governments are likely to make increasing use of technology-related applications †in particular e-services
Big data analytics and network-based open policymaking †in decisionmaking and providing services to the citizen.
applied in general and by specific sectors for delivery of essential services (United nations, 2012 27 Figure E. 4. 1:
social network services may be a tool for the empowerment of minorities. However, minorities and young people †whose participation indicates that these services have a prodemocratic effect †are usually
unprivileged citizens who tend to consume less news through more traditional venues online and off (Gil
applied in general and by specific sectors for delivery of essential services (United nations, 2012 28 institutions in the coming decades.
or provide information on Google†s services 30 Figure E. 4. 4: Percentage of user-data requests filed by governments where Google provided at
success indicators, demand for systematic incorporation of SI in the policy toolbox, replacing public sector services with grassroots initiatives
Medium Online and informal forms of education will have increasing impact on access to education and outcomes
demand on labour market for certain skills ++Medium term Need to make educational systems responsive to these developments
unmet skills demand Medium e-government and online engagement potentially empower citizens Technological progress and
benchmarking), demand for services e-government benchmarking data (EU UN +Short to medium term Unequal accessibility and ubiquity of
services and citizen engagement across Member States and between strata of society, responsiveness of the
democratic system and process to demand for interaction with citizens High 32 Trend Drivers Indicators
Evidence-base 0 /+/Time horizon Outcomes for the EU Uncertainty low/medium /high Growing surveillance and
computing on the EU information society and economy,"JRC Scientific and Technical Report EUR Vol. 24063,2009
of Ambient Intelligence Environments: The Right to Multiple Identities and the Rise of the Aivatars
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International Journal of Education and Development using Information and Communication Technology IJEDICT), 2008, Vol. 4, Issue 2, pp. 144-158
The role that Information Communication Technologies (ICT) plays in improving the efficiency and effectiveness of healthcare delivery has been established well.
The role Information Communication Technologies (ICTS) play in improving the efficiencies and effectiveness of healthcare delivery has been established well.
complexity, time delays and competitive stakeholder viewpoints. ICTS offer a platform for health education which plays a major role in the prevention of many diseases
health services management, the coverage rate in Uganda is generally still low (less than 60%)WHO, 2001
lead to the delivery of poor health services, inefficient use of resources and failure to meet the
that are able to provide information that is critical for evaluation of services, policy design and
Ugandan healthcare environments, although most of the major hospitals and the medical schools use computers for administrative purposes.
stakeholders (Fraser and Mcgrath, 2000. The use of ICT technologies may increase the quality of health service delivery by providing reliable information and efficient use of
The availability of information and communication techniques and tools enable rural communities to access health care services which otherwise
would be difficult under conventional healthcare systems In order to understand and conceptualise the healthcare immunisation system in
3. Who are real stakeholders in the immunisation system 4. How should such an immunization system work
5. What kind of ICTS may be used to enhance delivery of healthcare services 6. How can ICT tools
interactive environments and self managed e-learning Healthnet one of the most widely implemented computer-based telecommunications systems
local telephone nodes to access services such as physician collaborations (Mozambique Tanzania, Uganda. Data collection (Gambia), healthcare delivery (Ethiopia), research
are being used by healthcare staff for communication (e-mail), demographic studies and surveys, consultations and treatment guidelines (Kasozi and Nkuuhe, 2003
personnel and effectively coordinate laboratories and specialist services. SATELLIFE PDA Project, 2002. Nambaziira (2006) designed an online tool for ordering, distribution and
stakeholders. It is evidently that the issues that pose most challenges are systemic in nature
communication Figure 2, illustrates the intricate and complex relationships among factors affecting immunization coverage from a healthcare system perspective and a number of feedback loops
services are resources (health centres, facilities) and level of service which results from the motivation of health workers
demand for immunisation. Loop B2 is a balancing loop, which represents the limiting factor resulting from increased demand as far as the effectiveness of the healthcare system is
concerned. An increase in demand results in increased workload which reduces health worker motivation resulting in reduced level of service
services. An effective health system requires management of resources, effective monitoring and reporting as well as well-motivated health workers
for improved health service delivery and minimizing missed opportunities due to stock outs 2. Health worker motivation.
The provision of immunization services requires highly motivated health workers who are trained well, remunerated, facilitated and with
health units that provide immunization services 4. Mobilization and health education-There is need to have continuous mobilization and
can be attained through well-planned campaigns, multiple channels of communication community participation, media and through the delivery of content that is relevant to
stakeholder to prioritize and set policies. The different ICT requirements and information systems that need to be developed for the improvement of immunization coverage can then
Healthcare services in developing countries such as Uganda, in particular immunization services are provided through a decentralized system consisting of geographically spread
health centres, regional hospitals which are categorized into health districts and health sub -districts with various roles (Barenzi, et al.
different health centres/hospitals offering immunization services work in a cooperative environment and be able to exchange data and information on service delivery.
In order to improve the efficiency and effectiveness of immunization health services provided in such a distributed structure, it is vital that information is shared
since it is a vital resource to the management of any organisation. Effective data collection and sharing of information can be
enhanced through the application of information and communication technologies Health care services like any other business involve a lot of transactions such as importation
and delivery of medicines; construction of hospitals and clinics; hiring and deploying staff processing and payments of staff salaries.
Various stakeholders who are important as far as the immunisation system is concerned were interviewed. The following themes were
organisations or agents, key processes, activities, stakeholders and flow of information. The system diagram does not show the influences
services •Healthcare service sub-system: responsible for the provision of immunisation services to the population •Immunisation management sub-system:
responsible for the management, monitoring and supervision of immunisation services at the national level •Vaccines maintenance sub-system:
responsible for the management and delivery of quality vaccines The key external agents include the government
In a resource constrained economy like Uganda, the responsibilities for planning, resource mobilization and allocation, management immunization services, storage and distribution of
vaccines, supplies and equipment to the units under their supervision, maintenance of cold chain and training are done at the district
which provide services for other systems of the organization (Broadbenta et al. 1999). ) For Broadbenta et al.
infrastructure, hardware platform, base software platform), ICT shared services (as communications services), ICT applications (as WEB services), the human operators and the
managerial expertise to guarantee reliable services The paper suggests the following ICT innovations (Figure 5) for effective management of
resources, monitoring and reporting and level of service towards the improvement of immunization coverage Child:
Proposed ICT Framework for the Immunization Services District level: At the district level, data can be used to prepare forecasts, analysis and plans
Some of the benefits that would be provided by adoption of ICT services in the healthcare
Communication for the ACM, vol. 47, no. 7, pp. 21-24 Musa, P. F.,Meso, P,
Communications of Associations for Information systems. Vol. 15, pp. 33 Nambaziira, S. 2006. An online tool for Monitoring and tracking vaccines and vaccine
Application of information and communication technology ICT) in health...Journal of Librarianship and Information science; vol. 38, pp. 45-55
IN THE GLOBAL ECONOMY: STRATEGIES AND POLICIES Workshop 1 ENHANCING THE COMPETITIVENESS OF SMES THROUGH INNOVATION
SME INNOVATION IN A GLOBAL ECONOMY...3 Introduction...4 Globalisation Challenges...4 Globalisation...4 The Emergence of Knowledge as the Source of Comparative Advantage...
The Foreign Direct Investment Strategy...18 Policy implications: Broadening Government Support and Coping with the Diversity of Needs...
The Needs of Technology Developers †Looking Beyond Seed Capital...21 The Added Value of R&d for Lead Technology Users...
SME INNOVATION IN A GLOBAL ECONOMY â This paper serves as the background document for the Workshop on â€oeenhancing the Competitiveness of SMES
countries, but also greater incentives and opportunities to access the various markets and knowledge sources needed to build lasting competitive advantage through continuous innovation
and include not only R&d based new products and services, but also improved designs and processes and the
--New information and communication technologies facilitate global reach and help reduce the disadvantage of scale economies which small firms face in all aspects of business
--Flexible specialisation has proven to be a particularly successful model of industrial organisation: through close co-operation with other firms SMES can take advantage of knowledge externalities
the total SME population, the most important goals are to promote the development of the private venture capital
industry and associated services, and to adjust accordingly the management and objectives of public R&d
nonfinancial innovation advice such as consulting services recruitment of university graduates and skilled personnel; awareness of new ideas and technologies;
products to the needs of customers. This explains why economists have reopened the debate on whether
some market and systemic failures disproportionately affect small firms, and why governments have generally increased the priority attached to policies directed towards SMES while focusing them more on
These policies must take into account the challenges and opportunities that new technologies and globalisation raise for small firms.
2. This paper first identifies the challenges and opportunities that globalisation raises for SMES as
3. Both scale economies and research and development have become more important instruments for competitiveness in the global economy.
Since SMES seem to be at a disadvantage for both these factors, many experts predicted the demise of SME competitiveness as globalisation increased.
broad range of economic activities in a disparate set of industries across different countries 4. This section briefly explains
what triggered the wave of globalisation reshaping the economy at the end of the 20th century.
of production, such as land, labour and capital, towards knowledge-based economic activities. The ability of SMES in the OECD to create,
been the shift in economic activity away from a local or national sphere toward a much more international
The measures of transnational economic activity which prove there has been a strongly positive trend toward greater global activity include:
investment, international capital flows, 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
machines and electronic communication superhighways, The Economist recently proclaimed â€oethe Death of Distance†on its front page. 2 While the telecommunications revolution has brought the cost of
vastly expanded the ability of many to participate in global communications and to use transmitted
7. Confronted with lower cost competition in foreign locations, producers in the high-cost countries
into knowledge-based economic activities 8. While some firms fell victim to the first strategy, many of the firms from OECD countries that
Substituting capital and technology for labour, along with shifting production to lower-cost locations has resulted in waves of corporate downsizing throughout Europe and North america.
This alternative involves shifting economic activity out of traditional industries, where the high-cost countries of the OECD have lost their comparative advantage, and into
high levels of employment †knowledge based economic activity. Emerging comparative advantage that is 2 â€oethe Death of Distance, †The Economist, 30,september 1995
3 â€oethe Downsizing of America, †New york times, 3 march, 1996, p. 1 WK1 6 compatible with high wage levels is based on innovative activity.
The global demand for innovative products in knowledge-based industries is high and growing rapidly;
By contrast, the rest of the economy experienced fairly steady growth at around 3%over this period. 5 Innovative activity of in the United states has jumped, as evidenced
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. But in fact, the share of economic activity accounted for by SMES has risen in most OECD countries.
While some SMES, like their larger counterparts, have fallen victim to globalisation, still others have deployed strategies to maintain
competitiveness in a globalizing economy. This background paper discusses some of the strategies open to SMES as they try to become more productive and shift more knowledge-based activities
products and adapting existing products to the needs of customers. Small firms account for a disproportionate share of new product innovation given their low R&d expenditures (Acs and Audretsch
Investment in innovative activities seems to be on the rise in SMES. The National Science Foundation (1999) shows that total expenditures for industrial R&d by SMES has increased by almost
â€oethe Valley of Money†s Delights, †The Economist, 29,march 1997, special section, p. 1 5 Kortum and Lerner 1997, p. 1
and introduce new products and services. Rothwell (1989 suggests that small firms can have an innovative advantage due to differences in management structures
Innovative activity also flourishes in environments free of bureaucratic constraints (Link and Bozeman, 1991. A number of SMES have benefited in fact from the exodus of researchers thwarted
enterprises make their impressive contributions to innovation because of several advantages they possess compared to large-sized corporations.
up much excitement over such small fish, nor can they accommodate small ventures easily into their
SMES operate in medium to low technology environments and innovate without using formal R&d inputs
This is consistent with economic theories of innovation and technical change where inputs to the innovative process are understood to be heterogeneous
and not limited to formal R&d investments 20. In a more systematic approach to understanding innovation in SMES, the European community
that the pattern of innovation in SMES is mostly non-R&d investment based. Only as firm size increases
does the importance of R&d investment in innovation increase too. For SMES, non-R&d inputs are more
1) capital equipment or input-embodied innovation, and (2) design innovation. In capital equipment based innovation firms acquire new process technologies or intermediate
which opens large opportunities to improve products Traditional accounts of R&d largely under-evaluate the subtleties of innovative design which require a
growth firms and research oriented consultancies which include engineering services, technology consultants, and (2) R&d boutiques.
services, high tech8, R&d services. 50%are technical service companies (ICT, R&d Both from manufacturing and
services, but less from the high tech sectors Low tech manufacturing industry; rarely from services
industries AGE Younger companies than average (33%are less than 5 years against 24%for all
participants in FP 59%were created over 10 years ago 64%of were created more than 10 years ago
SMES are thus a large and very heterogeneous group of firms whose investments in and use of
the majority of SMES manage the transition to a global, knowledge based economy Competitiveness Strategies
which may or may not involve own investments in R&d â'The information technology strategy, which makes innovative uses of information technology
large enterprises in order to improve their ability to access and absorb innovations â'The cluster strategy, in which SMES locate in close proximity with competitors in order to
â'The foreign direct investment strategy, in which SMES exploit firm-specific ownership advantages abroad
input is inherently different than the more traditional inputs of labour, capital and land because the value of
new economic knowledge include a high degree of human capital, a skilled labour force, and the strong
For example, if the unit of observation is countries, the relationship between R&d investments and patenting is very strong.
also tend to undertake high investments in R&d. By contrast little patent activity is associated with
therefore able to appropriate some of the returns accruing to investments in new knowledge made
given industry†s underlying technological conditions, scale economies, and demand. Where scale economies are important,
the revolving door model is more common. While start-ups and new entrants may not be deterred by the presence of high scale economies,
a process of firm selection ensures that only those firms that grow will be able to survive beyond more than a few years
mechanism-the extent of scale economies-may ultimately be forced to exit out of the industry.
untapped in the economy The Information technology Strategy 37. A second strategy SMES can use to improve their competitiveness in global markets involves the
and the microprocessor, help mitigate economies of scale and the gains traditionally associated with large-scale production.
reach scale economies. This notion has received considerable attention in the popular press. Management consultant Tom Peters claims that,
in certain activities--from plant watering to specialised legal services--better than a giant corporation.
10 Tom Peters,"New Products, New Markets, New Competition, New Thinking,"The Economist, 4 march, 1989
manufacturers and final customers. But to properly take advantage of such internet-based financial and accounting systems, SMES typically need to modify
â€oein the physical world, scale economy and standardisation plays a major role. The digital world enables individual product customization†The
customers will directly interact only with the intermediary, which provides the appearance of having a
Some enterprises, especially small and medium-sized firms, choose to pursue increasingly specialised markets or innovative niches,
you have to find customers for your speciality all over the world in order to recoup your R&d investment
"11 "The Little Guys Are Making It Big Overseas,"Business week, 27 february 1989, pp. 67-69
Foreign direct investment plays a central role in these companies. And their five -year revenue growth was 16.2,
They investment abroad in plant, equipment, and technology, and they investment in people. Even when a high initial investment may not be justified in terms of short-term returns, the small
and medium-sized enterprises consider it important to undertake such global investments because of the demonstration effect--to show potential customers and business partners that they are committed to the
local economy. The Mittelstand companies also espouse a strategy whereby they insist on the same high
standards in the host market as they do in the home market, particularly in servicing their production
through the creation of strong and reliable service networks. It is through such an aggressive strategy of
expansion of production in foreign markets that these German Mittelstand companies have been able to overcome the inherent size disadvantage.
Nevertheless, the small-and medium-sized enterprises of Germany have not been able to overcome the risks inherent in a high degree of specialisation, and
careful devotion to consumer needs, that makes a strategy of foreign direct investment so central to the
order to provide services, such as training, to customers. While such services could be contracted out, the
asset specificity of the product, combined with its high technological sophistication, virtually bundles the service component with the manufactured product
when the technology dominates the enterprise and scientists and engineers are the driving force in the enterprise,
customer satisfaction tends to suffer and demand shifts elsewhere. Conversely, when the marketing department is the driving force behind the
enterprise, technological sophistication is affected. While customers may be satisfied in a static sense, the enterprise is not engaging in dynamic product development,
which leaves it vulnerable to competition from more technologically advanced companies. Customers eventually reward technological leaders that can
provide them with unanticipated product innovations and improvements. In this sense, balancing conflicting customer demands is a delicate strategy that only a very flexible enterprise,
which has both technological competencies and sensitivity to consumer needs, can accomplish. Ideally in SMES scientists
and engineers should have a deep understanding of what their customers actually need, but this can only be
nurtured through close and frequent contact with the customers. Such direct and repeated contact between
customers and the engineering department is particularly important, so that the latter do not underestimate the problems of applying technology to commercial needs.
Indeed, non-marketing employees in the German Mittelstand engage in direct contact with customers at twice the frequency as in the largest
German corporations. This is typical of the importance placed in German SMES on having customer interaction with engineering, manufacturing,
and financial employees in order to make sure innovative activities truly meet customer needs WK1 15 The Network and Flexible Production Strategies
and cooperate with other firms be they other SMES, large enterprises, or a combination of both.
relations and venture capital firms †provide technical, financial, and networking services which the region†s enterprises often cannot afford individually.
These networks defy sectoral barriers individuals move easily from semiconductor to disk drive firms or from computer to network
makers. They move from established firms to start-ups (or vice versa) and even to market research or consulting firms,
established, and new enterprises are decentralised conceived†This and fluid environment also promotes the diffusion of intangible technological capabilities and understandings. †13
region, and (2) the degree of monopoly versus local competition 49. One model suggests that a concentration of firms within a particular industry in a geographic
identical types of activities, the costs of communication and transactions are minimised, and there is a
externalities, ultimately innovative, activity and economic growth. 14 50. There is also theoretic debate about the effect of competition on innovative activity.
The Marshall-Arrow-Romer model predicts that local monopoly should be superior to local competition
13 Saxenian (1990, pp. 97-98 14 For an extension of this see Vernon (1994) and Vernon et al.
because it maximises the ability of firms to appropriate economic value accruing from their investments in
competition is more conducive to the generation of knowledge externalities than is local monopoly. 15 Not
only does a large number of firms result in greater competition for new ideas, but it also facilitates the
entry of new, specialised firms since complementary inputs and services are more likely to be available in
a diversified competitive environment, than in one dominated by large, vertically integrated producers 51. Evidence seems to indicate that diversity
and local competition did positively influence industry growth rates in US cities from 1956-1987 (Glaeser et al.
economic activities, but who share a common science base, is more conducive to innovation than a more
In addition, the results of this study indicate that local competition for new ideas within a city is more conducive to innovative activity than is local monopoly.
demands. But doing so requires skilled labour, and high investments in human capital â'Continual innovation.
Both the nature of the products, as well as production and organisation methods, are continually being improved â'Clustering.
Groups of enterprises working in the same product are seedbeds for the exchange of new ideas.
Formal and informal links between enterprises, including subcontracting relationships, facilitate economic specialisation of firms as well as superior access to
Knowledge created within an enterprise spills over for use by other enterprises 53. There is considerable evidence supporting the hypothesis that flexible production systems
actually outperform those based on mass production. One of the most striking examples of superior economic performance is provided by Emil Roaming,
than large enterprises. In these specialised industrial districts an agglomeration of producers within an industry work in close physical proximity.
The narrow division of labour common to large enterprises has been replaced by an organisational structure in which employees perform a wide variety of different tasks
customers, manufacturers, and capital good suppliers in Italy has created an environment that pushes innovation forward.
Manufacturers make sophisticated and ever changing demands, which push suppliers to provide a continuous stream of incremental innovations.
The same is true of the close relations between manufacturers and customers, the latter providing rapid feedback on technical solutions.
These links have been supported by national and local government policies as well as by a rich network of private economic
with other enterprises afforded by geographic proximity, in order to better access new ideas and knowledge. This strategy may be especially important in young industries or industries where strategic
and cyberspace, where the cost of communications has plummeted. But there is an important distinction to be made between knowledge and information.
While the marginal cost of transmitting information across geographic space has been reduced drastically with the telecommunications revolution, the marginal cost
of transmitting knowledge, and especially tacit knowledge, actually rises with distance 58. Von Hipple (1994) demonstrates that high context, uncertain knowledge,
nature, and knowledge developed for a particular application can have economic value in very different applications.
An emerging economics literature demonstrates that knowledge spillovers are indeed geographically constrained. Data constraints can be overcome to study the extent of knowledge spillovers
experienced high levels of investment into process technologies, particularly in manufacturing automation NC, CAD-CAM,
The Foreign Direct Investment Strategy 62. There is considerable evidence that the transnational economic activities of SMES have been
increasing over time. Not only has the absolute value of foreign direct investment activities by small and
medium-sized enterprises increased over time, but so has their share of the total foreign direct investment
at least in several countries including Italy, The netherlands and Japan 63. The effectiveness of a foreign direct investment strategy for enhancing SME competitiveness is
shaped by three fundamental sets of factors. The first is that the enterprise must have an endowment of
capabilities in foreign markets that are superior to those of firms located in other countries.
Such firm -specific assets, which can be called ownership advantages, are principally are intangible assets like proprietary knowledge or a position of market leadership or human capital.
The second factor is that the benefits accruing to the SME for exploiting its firm-specific ownership advantages must exceed those it
market opportunities. These benefits from the extending the enterprise†s activities abroad must exceed the
management contracts, franchises, technical services agreements, turnkey projects, and subcontracts Finally, the third set of factors are those
In particular, SMES are disadvantaged clearly by scale economies and other size related ownership-specific advantages. Similarly, they may have more difficulty obtaining inputs on favoured
exposed to different consumer demands, networking with foreign collaborators, and above all accessing novel sources of knowledge, clearly makes FDI an important element of the panoply of strategies open to
SMES who want to remain innovative in a global economy Policy implications: Broadening Government Support and Coping with the Diversity of Needs
More specifically, regulatory policy, competition antitrust policy, and the public ownership of business are on the decline.
Examples of this new policy approach include measures to encourage R&d investment venture capital creation, and the rapid establishment of start-up firms.
In many OECD countries improvements can be made to the financial sector in order to create the large and liquid risk capital markets
As for SME specific measures, a great emphasis is placed now on promoting investments in innovation.
available for access to or investment in innovation and new firm creation. Perhaps best known is the Small
venture capital. Thus the government has a strong impact on innovative SMES. Significantly, the SBIR and
most public programmes fund early stage research, a stage which is ignored generally by private venture
academia to entrepreneurship; and demonstration effects which encourage entrepreneurship. A similar commitment to increased funding for SME research can be found across the OECD, at regional, national
and supranational levels of government 69. However, lead technology developers make up less than 5%of the total SME population (See
policies in order to broaden the population of small and medium size enterprises who can benefit from
organisations that perform development or engineering activities for larger enterprises. In most national technology programmes, technical consultants are permitted frequently not to participate as contractors, so
The Needs of Technology Developers †Looking Beyond Seed Capital 73. Several studies have shown that public funding in the form of R&d grants plays a decisive role
cheap sources of seed capital and the sums received can total several Million euros in their start up stage
Muldur (1999) further explored the profile of these enterprises and found that 41%of these SMES were
knowledge intensive services non-high tech manufacturers Source: Clarysse and Duchã ne, 2000 75. The SMES participating in the Fourth Framework Programme are not representative of the total
Governments should encourage such a trend by improving the conditions for private capital investments to
Public R&d grants were the only viable source of seed capital in Europe during most of the
First, the amount of European seed capital from non -government sources has been rising constantly. Although these sources of seed capital are much more
expensive than a public R&d grant or loan (EVCA figures show that seed capital funds earned in 1998
about 36%on their invested capital per annum), they are obtained easily and can be spent with great
flexibility (within the limits of a business plan. Furthermore, venture capitalists speak the language of the entrepreneur, in contrast with the bureaucrats disbursing public funds
1. Closer collaboration with the Venture capital industry. In those countries such as Belgium France, and Germany where venture capital markets are booming,
there should be better collaboration between the R&d granting institutions and the private or semipublic VC
in The netherlands) are indeed cooperating with the local venture capital industry, and they do so for two main reasons.
first in order to develop a technology or prototype, and only later resort to private capital sources for business development needs.
Second, public agencies employ a large numbers of engineers (or have a network of technical experts) who are trained to perform technological
organisation (business plans vs. audit reports) is mutually beneficial. Furthermore this WK1 24 collaboration simplifies the administrative burden of the technology developer by allowing
for the exchange of audit reports, business plan evaluations, firm cross-references, and experience 2. Grants for business plan development and for nontechnical activities.
Since R&d grants are project based and often oriented towards the development of new technologies, SMES often
technology based firms are need especially in of business support †such as business plan development, venture coaching--rather than simply public financing (Chiesa & Piccaluga
2000). ) Public bodies might provide support for such nontechnical aspects of the innovation process, as SENTER
and Enterprise Ireland have begun to do 3. Pure equity financing. Some countries go one step further in their strategy adjustment
companies,(Enterprise Ireland. Equity finance mechanism can complement classic public R&d grants and business development grants
Financial institutions, as well as government bodies, have difficulty assessing the risk-profit trade offs of innovative ventures.
Uncertainties about the technical feasibility, the time period of development, the total financing needed, and the probability of commercialisation and possible market size, make financial
institutions hesitate before funding venture projects To overcome the information gap between entrepreneurs and financing bodies †and thus increase the
rating that would help reduce the uncertainty that limits private sector investments in high risk innovation
DTI Enterprise Ireland (°1998 Yearly Budget 3, 75 billion 5de FP 1998-2002 156 million
investments of leading technology users (i e. they do not substitute the existing R&d budgets 82.
look for new technical opportunities, and explore new production methods. Public financial support is WK1 27 necessary since these firms do not have the cash flow or capital to initiate R&d activities,
but are able to continue and even increase such activities once they are running 86.
and R&d support is that enterprises under-invest in R&d because they cannot fully capture the rents of their efforts.
and provide a greater financial incentive for private investments in R&d. The problem is that technology followers do not under-invest in R&d,
-investment in R&d. Instead, public support should be used to â€oelegitimise†the role of innovation agents
describes the types of consultancy services innovation agencies can offer, using Business Links as an
Types of services, including consultancy that are offered by Business Links 19,4 6, 3 2, 5
Venture capital Finance & accounting Exports Sales & marketing General business advice Information technology Grant advice Direct access
evaluate the costs or demands of the service provider as a relatively neutral third party. SMES
the main vehicle by which one meets new SME-customers â'Organisation of workshops. Workshops about specific technologies or organisational changes
group of SME who are already regular customers â'Distribution of business information. All sorts of information dissemination is possible
such as scanning or consulting services â'They need help recruiting university graduates and other skilled personnel
positioned to provide these services. First, these bodies often operate at a national or regional level and
innovation services are most effective when decentralised and local. Second, these institutions are bureaucratic and technical,
and multidimensional, services should be offered by organisations that combine business and technical WK1 30 skills.
emergence of private capital sources reduced the necessity of public grants for this group. Since R&d
if no seed capital is available, its development should be stimulated 98. The second group, the leading technology users, has benefited the most from the recent SME
engineering knowledge available (from public research institutes, customers, suppliers) and their own day -today business activities.
the regional innovation centres offer services of varying quality; governments are unsure how long or even whether they should be subsidised;
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