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European research confirms linkages between SME research and competitiveness

by xavier last modified 2009-04-01 15:11

A research project examining the production of information and communication technologies by small and medium enterprises (SMEs) in the EU-25 has been concluded. One of the key findings of the study was to confirm the interlinkages between research, innovation and economic performance.

The study gives a very rich impression of small and medium sized business involved in ICT production: hardware as well as software in European Regions. Some of the (preliminary) main results are:

  1. The study confirms the link between research, innovation and economic performance. 80% of the innovative ICT SMEs in the sample have achieved high (over 10%) or medium (between 5 and 10%) sales and profitability growth in the last 3 years. Their sales growth is higher than the average growth of the ICT market in 2006 which was between 4 and 5 % according to EITO.
  2. The study shows that continuous innovators are more likely to be medium-large in size, to focus on EU-global markets rather than national/local ones, to perceive their markets as fast growing, and to have high research budgets. More importantly, continuous innovators are more likely to declare high or medium profitability growth. These SMEs are also are more likely to introduce multiple innovations, combining product/service innovation with organizational, and/or marketing, and/or process innovation The study shows the link between highly innovative enterprises and better performance, confirming the conclusions of economic literature about the relevance of innovation strategies for competitiveness
  3. The study shows the relevance of knowledge and skills for the business strategies of these enterprises which is confirmed by the selection of Human resources as the most important success factor, and at the same time as the most important barrier to growth (when there is a lack, of course). The other factor identified particularly by smaller SMEs as a high barrier is the lack of financial capital. Both are conditions for markets development which can and should be addressed by appropriate policies. Another critical barrier emerging from the study and directly influenced by policies is the existence of “imperfect market conditions”, claimed especially by larger SMEs.
  4. The study shows that National Reform Reports (Lisbon strategy) do not address directly the promotion of the ICT industry, except as far as the regulatory framework is concerned. Main areas for action are e-government, broadband infrastructure and digital literacy. According to the study most countries have specific policies for ICT SMEs (with the exception of Lithuania, Malta, Poland). However three countries (Cyprus, Czech Republic, Greece) mention only a national ICT innovation framework, where SMEs are mentioned but do not seem to have specific measures. Most of the policy measures quoted fall into the traditional field of R&D and Innovation Policy, rather than industrial policy, while R&D funding and technical transfer and networking are the most diffused instruments. Regional or Technical Cluster Policies are scarce and there are few specific policies targeting the main barriers mentioned by ICT SMEs (financial issues and lack of human resources). Venture capital schemes are currently implemented by the countries with an advanced and competitive ICT industry (Denmark, Finland, Sweden, UK). The Member States with a strong and competitive ICT industry have also a tradition of proactive policies for ICT SMEs development, characterized by continuity and regional development initiatives.

Source : Theo Dunnewijk, Kaushalesh Lal, Study of small and medium sized enterprises in the ICT sectors in the Regions of EU25, UNU-MERIT