What Backs Entrepreneurial Passion in Influencing Entrepreneurial Engagement?

– by Abdella Kosa –

Designed by Snowing

Entrepreneurship provides small businesses with the ability to discover new business opportunities (Omisakin et al. 2016). Individuals decide to discover, evaluate, and exploit these opportunities because of different supportive factors. One of the individual conditions that determines entrepreneurial engagement is an entrepreneurial passion which plays a great role in the entrepreneurial process of discovering and exploiting profitable opportunities. Even if passion has a great impact on entrepreneurial engagement; it may not be successful without consideration of both the internal resources and external environment. Therefore, entrepreneurial passion is backed by the individual, institutional, and environmental conditions in successfully improving small firm owners/managers’ entrepreneurial engagement. More specifically, the adoption of entrepreneurial activity by small firm owners/managers depends on their passion, which is influenced by entrepreneurial resources, entrepreneurial background, government support and the unpredictability of the environment in which the business is operated.

Ethiopia is one of the developing sub-Saharan African countries in which small firms failed at an early stage. Even though the owners/managers’ engagement in entrepreneurship is not sufficient, the activity of exploring new market ideas, sourcing founding capital, and establishing and developing new products is undertaken by the owners/managers of established firms. That is why passion is important not only to enter a new business but also important for established firms to survive and grow. This interest was practiced by the owners/managers of established firms to grow their enterprises. Passion alone will not make the owners/managers engage in entrepreneurial activity. That is because the presence of human and financial capital, as well as government support, intensify the engagement of firms in entrepreneurship, while the unpredictability of the environment hinders the successful practice of entrepreneurship.

Most owners linked the poor entrepreneurial engagement with inadequate resources, poor marketing and production competencies, poor government support and environmental uncertainty. However, most of these problems can be solved when entrepreneurial commitment is there. In relation to this, individuals who engaged in entrepreneurial activity overcome these problems by continuously discovering and exploiting new business opportunities to grow their business, by involving in evaluating and exploiting opportunities to develop new products/services, by engaging in discovering, evaluating and exploiting new way of doing things to grow their enterprise, by engaging in identifying and differentiating their products from competitors, and by building a culture that encourages teams to work.

The entrepreneurial resources such as human and financial capital help to engage in discovering, evaluating, and exploiting business opportunities. That means financial affluent individuals are more likely to engage in entrepreneurial activity than firms who lack human and financial capital. When human and capital resources do not exist, it is difficult to turn the internal passion to entrepreneurial practice because it needs financial capital to search for a new market and produce new products. It is not only financial capital, but also human power is needed to innovate a way of doing things , generate a new idea that contributes to product innovation and large market share. Therefore, these resources are highly important in helping small firm owners/managers to exploit new opportunities and expand their business by practicing entrepreneurial activities.

Most owners/managers who are passionate and engage in entrepreneurship have a good entrepreneurial background from their families, are inspired by successful entrepreneurs in the area, or have previous experience in entrepreneurship. The owners/managers that developed experience previously, learned from their family occupation, or from the experience of successful entrepreneurs in the area, are all factors contributing to encouraging owners/managers to engage in entrepreneurship.

Similarly, government support in providing training, credit, working space, and technical advice for established firm owners/managers, possibly help to turn their passion into entrepreneurial activity, while the unpredictability of the environment can prevent firms to involve in entrepreneurial activity. In general, firms that take support from government are more passionate than owners/managers who did not get support from the government. This kind of support actually encourages owners/managers of small firms to be entrepreneurially passionate. Therefore, the owners/managers are successfully engaged in an entrepreneurial activity when the government provides support to them; otherwise, they face difficulty in accessing facilities that motivate them. Conversely, the presence of an unpredictable environment hinders the successful involvement of passionate firms in entrepreneurship because these firms fear the failures in this unpredictable environment. That is the presence of an unpredictable environment also influences the discovery, evaluation, and exploitation of new opportunities by firms.

As a recommendation, the government should expand its scope in developing small firms that contribute to the development of the economy. The policy makers also should improve on the policy of developing small firms by focusing on how to facilitate the access to resources and stabilize the unpredictable environment. The strategy that was developed should be helpful in facilitating a good environment for owners/managers of small firms, by removing unnecessary conditions that hinder the development of small enterprises. Finally, the small business owners/managers who are passionate should look to how to access resources and work with government institutions to transfer their passion to actual practice and engage on entrepreneurial activity since they become more motivated with the existence of resources and government support to engage in entrepreneurship.

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Abdella Kosa is a lecturer in the Department of Entrepreneurship and Business Management, Faculty of Urban Development and Engineering, Kotebe Metropolitan University, Ethiopia. He is a young research that published many papers on the subject matter of entrepreneurship, innovation, and strategy among small enterprises. Currently, his research interests lie in the area of entrepreneurship, business model and growth of small enterprises.

 

What do cities want?

– by Dr. Maksim Belitski & Dr. David Audretsch –

Photo by Philipp Birmes on Pexels.com

Regional economic development and entrepreneurship are driven by the quality of life in modern cities. Understanding what contributes to higher quality of life perception will help policy-makers to attract the most bright and highly-skilled workers and their families, retain existing human capital and young people to live and work in a city. To this end, understanding the link between subjective well-being and entrepreneurship in cities has been a priority for scholars and regional policy makers who aim to understand the drivers of entrepreneurship, innovation and regional prosperity.

Much of the debate on this topic has been over the factors which contribute to life satisfaction (Glaeser et al., 2001; Florida, 2002). Various attempts have been undertaken to develop comprehensive well-being indices such as the Gallup-Healthways index and the Gallup’s World Poll (Deaton, 2008) to monitor the social progress of society over time. From both a theoretical and methodological perspective researchers questioned whether subjective well-being can be summarized into one single index (Botterman et al. 2012).

A team of researchers from Indiana University Bloomington, USA and University of Reading, UK building on the European Perception of quality of life surveys (Eurostat, 2012) created an indicator by applying the comprehensive method to answer: what is the well-being in European cities? How does it vary across cities? How subjective well-being can facilitate economic growth through improving the quality of the city entrepreneurship ecosystem? (Audretsch and Belitski, 2017). Their study contributed to the ongoing debate over happiness, well-being and entrepreneurship in cities (Audretsch and Belitski, 2015).

They employ newly available data from a European quality of life perception Survey (Eurostat, 2014) to develop this pioneering subjective well-being index. Below are six domain with major findings and suggestions to policy-makers.

First domain is satisfaction with infrastructure represented by city amenities and available facilities. Cost of renting and buying a property in a city is used as a proxy for higher levels of amenities and better infrastructure with generally higher quality of life through amenities. Thus, housing costs also being a burden for tenants may illustrate other amenities and be positively associated with happiness. Developed infrastructure, museums, green areas, cinemas, coffee shops, pubs and restaurants all contribute and attract high skilled labour in a city. Transport infrastructure adds to amenities and its high-connectivity is important to commuting. Long commute to work and spending most of working time in transport is the most unpleasant activity of the day, hence affecting the level of satisfaction with transport quality and life.

Second domain is market agglomeration economies, demand for housing and labour. Job offerings and lifestyle are one of the leading factors why people move to leading cities. Job offering alone with financial security are important factors of life satisfaction. Former factors contribute to the Canadian Index of Well-Being, Nova Scotia GPI and the OECD Better Life Initiative Indices (Osberg and Sharpe, 2009). Economic security and market size that offers jobs drive both high and low-qualified labour in large cities.

Third domain is culture and norms that play an important role in subjective well-being. We demonstrate higher levels of happiness associated with a higher level of social capital and trust were in areas with relatively low population density. Trust fosters building a close relationship and developing necessary level of social cohesion that made people feel happier.
A cohesive community allows open discussion and resolution of difficult problems, and gives its members a sense of identity, and even more trust.

Forth domain is efficient administration framework and regulation that represent formal institutions (Audretsch et al. 2018). Size of a local administration shapes and distributes organizational and entrepreneurial resources facilitating or impeding entrepreneurs in their access to finance. Efficient regulation improves the living standards of a population, while efficient accumulation and distribution of economic and social services help improve living conditions among the most impoverished in the country making them feel happier and achieve higher life satisfaction.
Recent research suggests that efficient public resource management is highly appreciated by community when the administration is multi-dimensional.

Fifth domain of index construction follows Maslow’s hierarchy which states that food security, healthcare conditions, security and safety to be basic steps in human needs to be satisfied and hence direct impact life satisfaction and happiness. Security is often related to employment status, education, trust, but most often with a rate of crime, number of accidents in the area, and perceived neighbourhood security. The perception of safety can be altered to account for a possible natural and technological disaster due economic activity or environemental pressures.

Finally, sixth domain emphasises the role of IT infrastructure, information technology and access to digital platforms and high speed internet which has been largely ignored as a factor of life satisfaction earlier (Audretsch and Belitski, 2015). Facilitating IT infrastructure and Internet access as a one-point access to a global information system is crucial while moving from managed to a digital economy . This challenge is coupled with an increasing role of human capital and creativity in wealth creation with ICT as a driver for regional economic development. Higher Internet coverage and penetration at work and at home is positively associated with subjective well-being.

Most interesting we visualize the connection between City Ecosystem Index (CEI) and regional entrepreneurship development index (REDI) developed by Szerb et al. 2013.

Figure. The connection between REDI scores and the City Ecosystem Framework Conditions Index (2009-2013). Number of cities 75.
Source: Audretsch and Belitski (2015).

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References
Audretsch, D.B. and Belitski, M. 2015. Is Happiness Conducive to Entrepreneurship? Exploring Subjective Well-Being–Entrepreneurship Relationship across Major European Cities. Henley Business School Discussion Paper.
Audretsch, D. B. and Belitski, M. 2017. Entrepreneurial ecosystems in cities: establishing the framework conditions. The Journal of Technology Transfer, 42(5), 1030-1051.
Audretsch, D. B., Belitski, M. and Desai, S. 2018. National Business Regulations and City Entrepreneurship in Europe: A Multilevel Nested Analysis. Entrepreneurship Theory and Practice, 1042258718774916
Botterman, S., Hooghe, M. & Reeskens, T. (2012). One Size Fits All? An Empirical Study into the Multidimensionality of Social Cohesion Indicators in Belgian Local Communities. Urban Studies, 49(1), 185–202.
Deaton, A. (2008). Income, health, and well-being around the world: evidence from the Gallup World Poll. Journal of Economic Perspectives, 22(2), 53–72.
Eurostat, 2012. City statistics Urban audit; URL http://epp.eurostat.ec.europa.eu/portal/page/portal/region_cities/city_urban
Eurostat 2014. Perception surveys and Urban audit. Available at: http://epp.eurostat.ec.europa.eu/portal/page/portal/region_cities/city_urban/
Florida, R.L. (2002). The Rise of the Creative Class. Basic Books, New York.
Glaeser, E.L., Kolko, J., Saiz, A., 2001. Consumer city. Journal of economic geography 1, 27-50.
Osberg, L. & Sharpe, A. (2009). New estimates of the index of economic well-being for
selected OECD countries, 1980–2007. Report 2009-11. Ottawa, Canada: Centre for the Study of Living Standards.

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Dr. Maksim Belitski is an Associate Professor in Entrepreneurship and Innovation at the Henley Business School, University of Reading, United Kingdom. He is a Research Fellow at the Institute for Development Strategies, Indiana University Bloomington (US). He has worked for University of Bolzano (Italy), Loughborough University, University College London (UK), University of Leicester, University of Economics Bratislava, Belarusian State University. His research interests lie in the area of Entrepreneurship, innovation and regional economics, with a particular focus on Entrepreneurship as a spillover of knowledge and creativity. He is an Associate Editor of Small Business Economics: An Entrepreneurship Journal.

 

Dr. David Audretsch is a Distinguished Professor and the Ameritech Chair of Economic Development at Indiana University, where he also serves as Director of the Institute for Development Strategies. He is an Honorary Professor of Industrial Economics and Entrepreneurship at the WHU-Otto Beisheim School of Management in Germany and a Research Fellow of the Centre for Economic Policy Research in London. Audretsch’s research has focused on the links between entrepreneurship, government policy, innovation, economic development, and global competitiveness. He is co-author of The Seven Secrets of Germany, published by Oxford University Press. He was awarded the Global Award for Entrepreneurship Research by the Swedish Entrepreneurship Forum (Entreprenörskapsforum). He has received honorary doctorate degrees from the University of Augsburg in Germany and Jonköping University in Sweden. Audretsch was also awarded the Schumpeter Prize from the University of Wuppertal in Germany.

Protecting Design and Innovation in China: a case study

– The China IPR SME Helpdesk – 

designed by Jannoon028 – Freepik.com

Innovative technology that is used in consumer products can be protected under invention or design patents in China, but this will not offer 100% protection against others illegally using the innovations in knock-off products, particularly while the patent is still pending. However, when it comes to products with functional technology, consumers are sensitive to quality. It is therefore beneficial to think about other ways to convince potential customers that your goods are the best in the market. Updating designs can serve to compliment technical innovation and keep a product ahead of those trying to emulate or imitate.

Vogmask is a popular anti-pollution mask product available in China, using an innovative microfiber filtration fabric. Christopher Dobbing founded Vogmask China in 2013. Originally an education consultant, he found that most students he worked with mentioned air pollution as a major challenge for China in the next 10 years, and that many of them had breathing illnesses or carried an inhaler with them. While searching for a good quality mask that he could recommend to students, Christopher got in touch with Vogmask USA. Vogmask UK and Vogmask China were founded shortly after.

“Vogmask China was founded in 2013 and our business has grown rapidly since”, say Christopher. “The market for air pollution products is growing, and until we entered the market no good pollution masks for children were available in China”, he continues. “Our masks are available at hospitals, international schools and online. Because the design of our masks is adaptable we can be creative in branding. Vogmask is a combination of fashion and function.”

Not long after its market entry, Vogmask found counterfeits and unlicensed products on the Chinese online retail platform Taobao. Christopher explains: “We monitor the market carefully and conduct a weekly online check. There are two types of items we need to deal with online: the first is cheap copies of our masks, the second is unlicensed imports of real products, meaning that the seller imported the goods illegally in order to avoid paying 17% import tax.” Christopher indicates that the volume of infringing products is growing every week.

Through the EU SME Centre, Christopher got in touch with the Helpdesk, who provided information on how infringing goods can be taken down from e-commerce sites in China. “This has been very useful and we have a clear idea on how to act now”, Christopher says. “We registered our trade mark in China immediately when we entered the market, but as registration processes in China can take quite some time, we are still awaiting our trade mark registration certificate. We need this certificate to prove to Taobao that we own the brand, and only then can we start with the takedown procedure of infringing products”.

Other than the continuous battle with online infringers, Christopher has an adequate IP strategy in place. He states: “The filters used in our masks are made of a very specialized, patented material. As it is too advanced to be copied cheaply, the quality of infringing products is not nearly as good as the original. As people are aware of the health issues regarding air pollution, they won’t buy a cheap copy instead of the real product.” According to Christopher, the design of the masks changes frequently, so copycats can’t keep up with the changes: “The design of our masks changes every year, people want to keep up with new trends and would therefore not buy a copy of last year’s design.”

Furthermore, Christopher says that although Vogmasks are manufactured in Korea, the company works with a distributor in Singapore so there is always the chance of information being leaked to China. “We monitor our distributors and had to cut one off because they seemed to be leaking information. Other than that we’re good, but it’s important to stay ahead.”

As a recommendation to other SMEs operating in China, Christopher advises: “Monitor the market, keep track of the business environment and deal with challenges as they arise. Start the process of registering your trade mark as soon as possible, because the registration process in China is very time consuming. Things that take one hour in the UK can take six months in China, so you really need to assign time for all registrations in order to manage your business well.”

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The China IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to China, Hong Kong, Macao and Taiwan, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question@china-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.
The China IPR SME Helpdesk is co-funded by the European Union.
To learn more about the China IPR SME Helpdesk and any aspect of intellectual property rights in China, please visit our online portal at http://www.ipr-hub.eu/.

 

8 ways beside patents to appropriate the returns from innovation

– Giovanni Zazzerini –

Innovation per se doesn’t automatically translate into economic benefits. To profit from innovation firms need to convert it into viable products or services while also having the capacity to protect the innovation against imitators. This is the appropriability problem I’ll try to address in what follows.

Innovation is the main source for companies’ competitiveness. Through innovation SMEs can differentiate their offerings in the market, gain a competitive advantage and escape from the so-called commodity trap, i.e. low-price pressures that flow from emerging countries.

However, there are many factors that stifle investments in technology and innovation for SMEs. First and foremost, an overall lack of funds and financial resources poses a challenge for R&S investments. Secondly, as many SMEs are family-owned, they have a higher risk aversion that can be magnified by underlying conflicts of interest between family and company’s assets. These can also negatively affect investments in R&D and innovation. Finally, and this is the focus of the article, innovation can be compromised by the nature of knowledge itself. Indeed, “new” knowledge can be considered as a public good, that is not excludable, not rivalrous and therefore not appropriable.

Not excludable means that once produced, it is difficult to prevent anyone from “consuming” the new knowledge. The only way to exclude others from knowledge is to keep it secret – however, many forms of knowledge become evident through use.

Not rivalrous refers to the logic that the amount that one person consumes does not affect the amount that other people can consume.

Not appropriable refers to the impossibility or difficulty to capture all profits generated by an innovation because others can also take advantage from it.

These three characteristics, allowing free riding behaviours – using a good without paying for it – undermine incentives to invest in R&D and thus to introduce new innovations.

Under these circumstances, companies, and SMEs in particular, have to carefully design strategies to be adopted in order to appropriate the benefits of its investments in innovation, to protect their advantage by imitators, thus to obtain the returns on investments in innovation.

A possible solution comes from patents that according to the European Patent Office (EPO) definition are “a legal title granting its holder the right to prevent third parties from commercially exploiting an invention without authorization”.

Besides protecting the innovations, patents are also valuable because they can be used to develop a reputation, to negotiate or collaborate with other companies, to avoid or deflect legal challenges, to block investments in R&D by other companies (the so-called patent blocks) and as a proof of value for banks or investors like VC. However, the effectiveness of the patent system has been challenged because patents have some drawbacks:

• Competitors could invent “around” companies’ patents and by doing so limit their protection given to the owner.
• The patenting requires information disclosure that triggers a leaking of information.
• To apply and defend a patent can be prohibitively expensive. SMEs limited resources are often insufficient to monitor and implement patent legal expenses especially for international litigations.

This explains why, in many sectors patents are perceived as a necessary but not sufficient condition to protect innovation.

There are other ways that enable companies to protect against imitators and benefit from its innovation:

1. The industrial secret is an effective means of protection, especially for the process innovation where the reverse engineering is less efficient.
2. It is difficult to imitate tacit knowledge that is accumulated, in particular when integrated in specific regions or firms.
3. The time to market and the after-sales services are considered as major sources of protection against imitation, in particular for product innovation, they facilitate the creation of brand loyalty and credibility.
4. As a first mover a firm can enjoy lower production costs because of learning economies magnified by customer feedback and product improvements. This creates an effective entry barrier to imitators.
5. In order to commercialise an innovation, competencies and complementary assets in the sales and distribution are required. Those who have these assets often succeed.
6. Time, cost and competencies needed to copy complex products also represent a means of protection.
7. Establish a de facto standard. The widespread diffusion of a company’s product and the effect of network economies raises barriers against competitors.
8. Introducing innovations with features valued by customers can disrupt the market from the bottom up.

To sum up, SMEs should consider – beside patents – a strategy based on a combination of the eight above-mentioned factors to protect from imitators, improve the appropriabililty of innovation and fully benefit from R&D investments.

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Giovanni Zazzerini is the Secretary General of INSME – the International Network for Small and Medium Enterprises. He is also adjunct professor at the Department of Management of LUISS Guido Carli of Rome and contracted professor of Marketing at the Department of Economics of the University of Perugia. He works as an expert for the Italian Ministry of Foreign Affairs in development cooperation projects in China and Vietnam and he is regularly appointed by the European Commission to advise research projects on exploitation of research results, commercialization of innovation and business plan development. Giovanni also worked as a consultant in developing projects in the field of innovation, entrepreneurship and internationalization for SMEs for more than 15 years. Beside public institutions he has advised national and multinational companies (Vodafone, Sky, Ericsson, DHL, etc.). He holds a Ph.D. in Marketing from University of Perugia (Italy), a Master’s Degree in Technology and Innovation Management from SPRU, University of Sussex (United Kingdom) and a Bachelor Degree in Economics from University of Perugia.

 

The Challenges of Industry 4.0 for Small and Medium Sized Enterprises

– by Dr. Christian Schröder –

It is often lamented that small and mid-sized companies show greater deficits in the implemention of Industry 4.0 compared to big companies. We wanted to know if this impression is correct or not: we examined the relationship between different firm-specific factors and the degree to which small and medium-sized enterprises digitized their business processes in the manufacturing sector in the three German federal states North Rhine-Westphalia, Bavaria, and Baden-Wuerttemberg. We measured the degree of digital interconnection between the business units as well to external partners and the use of smart products because we understand Industry 4.0 as the digital interconnection of all entities which are involved in the value-added process. However beside this objective measurement we also asked the companies to assess their potential for digitization.

The results of our survey: almost one third of the 1400 respondents feel (very) good positioned in the digitization process. This opinion is especially shared by respondents of small companies. As a result, they see less potential to further digitize their business processes as compared to their larger counterparts.
How do you assess the potential for digitization in your enterprise? 

Source: IfM Bonn Survey 2016.

Small businesses overestimate their degree of digitization

In fact, this evaluation is misleading: our results show that especially small companies are comparatively less involved in exchanging data between their own departments and the departments of other companies. This becomes evident when considering firms that have not taken any steps to digitize their production department and, hence, can be seen as digital laggards: small businesses belong to this group of companies four times more often than medium and large sized companies do.

Digitization in small companies is mainly motivated by cutting costs. In most of the cases, the firms exchange data with suppliers and service companies, whereas sales, purchasing, and controlling departments are usually involved too. But only a minority of small and medium-sized companies is engaged in the implementation of data based business models or the production of smart products. In the survey they identified as main obstacles the organizational problems. This is one problem – but not the only one. Only a few small and medium-sized companies take specific activities or develop a strategy to deal with the increasing digitalization.

Digital strategies pay off

Of course, it is difficult to observe all the new technolgies besides the daily business. And it is also true that especially the small companies haven’t the same finance power than the bigger one. But for the future, it is mandatory for the small and also most of the medium-sized companies to develop a digital strategy if they want to safeguard their competitiveness. This strategy should encompass the intended future picture of the business model which builds on existing strengths as well as the transparent and open communication of this vision toward the company’s staff. The next step is to adopt the appropriate technology and to develop organizational structures and processes that support the digital business transformation. At the same time it is necessary to empower the staff by using this new technologies and to implement an innovation-friendly culture. In doing so firms are able to respond to new challenges in a fast yet flexible manner.

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Dr. Christian Schröder is project manager of the IfM Bonn (Institut für Mittel-standsforschung). He concentrates on doing research of digitization with his team since several years. Some other studies in his research field are “Disruptive Innovations: Chances and Risks for the German Mittelstand”, “The Challenges of Industry 4.0 for Small and Medium-sized Enterprises” and “Relevance of the Digitalization for the German Mittelstand”.

 

Most Common IP Problems when Operating Internationally: Focus on South-East Asia

– by South-East Asia IPR SME Helpdesk –

Underpinned by the fast development, South-East Asia is offering many business opportunities for European SMEs. At the same time, a clear vision of an IP strategy in South-East Asia can impact a company’s growth and prevent loss of revenue further down the road. Taking the time to collect IP information on local practice can help SMEs exploit opportunities or avoid pitfalls by taking informed decisions in a new market. During the latest International Helpdesks Annual Stakeholders Meeting in Brussels, IP experts discussed main IP related challenges in South-East Asia. This article summarizes main take-away messages for SMEs wishing to start a business in South-East Asia. EU SMEs are always welcome to use the Helpdesk’s enquiry helpline to receive first-line advice tailored to their needs, says Valentina Salmoiraghi, IP Business Advisor of the Helpdesk.

IP Landscape in South-East Asia and what to pay attention to

There is no regional and central IP legal system in South-East Asia, meaning that South-East Asian nations have their own domestic IP laws and regulations and separate jurisdictions. As a result, for example, a trade mark registered in Vietnam is not automatically valid in Indonesia or Malaysia, while registrations of the mark will be needed for all these. Nevertheless, IP laws and regulations in most of the South-East Asian countries can be considered in line with international standards, as many South-East Asian nations are members of major international IP treaties, such as the ones administered by the World Intellectual Property Organization (WIPO), or party to the Berne Convention for the Protection of Literary and Artistic Works, or to the Paris Convention for the Protection of Industrial Property or the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPs).

As a practical example, in those countries being part of the Paris Convention, EU SMEs that wish to achieve IPR protection in several South-East Asian countries can benefit from claiming the priority date under the Paris Convention for the Protection of Industrial property. This means that SMEs will have 12 months for patents and utility models and 6 months for industrial designs and marks from the first filing in member country to decide whether they would like to protect their rights in other South-East Asian member countries (please mind that among the countries of South-East Asia, Myanmar is not a member of the Paris Convention).

SMEs should, however, keep in mind that despite the fact that most South-East Asian Countries follow international IP standards, registration procedures and requirements still differ from those in Europe. In most South-East Asian countries, applications can be filed by foreign companies if they have an address for service in the country or by appointing a local agent, should they not have a legal entity in the country. Moreover, a Power of Attorney (PoA) is necessary to file an application; in some cases, a simple PoA is sufficient (Indonesia, Philippines, Vietnam), while in some countries the PoA must be notarized and legalized (Cambodia, Laos, Thailand).

Patent Protection in South-East Asia: Registrations and Challenges

Companies owning patents and doing or planning to do business in South-East Asia may wish to create long-term value by either finding investors who believe in the economic value of their invention or by licensing patents. It is crucial that SMEs apply for patent protection in those South-East Asian countries of interest to their business, as patents registered in Europe, being territorial rights, have no legal protection in any other country other than the country of registration. SMEs are strongly advised to become familiar with the local patent protection systems in South-East Asian countries.

SMEs can take advantage of the Patent Cooperation Treaty (PCT) which makes it possible to seek patent protection for an invention simultaneously in several countries by filing a single “international” patent application instead of filing several separate national applications. Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand, and Vietnam and are all members of the PCT. Myanmar, however, is not a member.

Invention patent applications can be typically filed in English in most of the South-East Asian countries, but SMEs should keep in mind that Indonesia, Thailand and Vietnam require the applications to be filed in their respective languages.

As of today, the timing for obtaining the grant of a patent in South-East Asian countries can be quite long (up to 5 to 8 years in Thailand, 3 to 5 years in Indonesia, 2 to 4 years in Brunei, 4 to 5 years in Laos), and therefore EU SMEs are recommended to put in place a well-thought strategy to maximize protection. Costs for obtaining a patent in the different South-East Asian countries vary in each country, and are in a range from EUR 2.000,00 to EUR 7.000,00.

Trade Marks: What SMEs need to know

In order to protect your trade mark in the countries of South-East Asia, registrations are recommended and required. Certain South-East Asia countries, such as Singapore, allow protection of unregistered trade marks based on laws which protect rights against passing off (i.e. someone misrepresenting their goods or services as being affiliated with your brand, even if your trade mark is not registered but has built up a reputation and goodwill) or rights against unfair competition. However generally speaking, registered mark enjoy more straightforward protection and, in some cases, local judges may still only recognize establishment of trade identity protection through national registration.

Among the ten countries of the ASEAN Economic Community, Brunei, Cambodia, Laos, Philippines, Singapore and Vietnam are members of the Madrid System administered by WIPO, which means that SMEs can opt to register their trade mark in many South-East Asian countries simultaneously by filing only one basic application and then designating the countries of their interest at the same time or at a later stage, with no time limitations for the extension. As of today, some major countries of South-East Asia are not yet party to the Madrid System, including: Indonesia, Malaysia, Myanmar and Thailand.
Additionally, Brunei, Indonesia, Philippines, Cambodia, Laos, Vietnam, Thailand and Singapore provide for a multi-class application system, but Malaysia requires separate trade mark applications for each class of goods and services.

For those EU SMEs interested in protecting their products and services in Myanmar, it is important to note that there is no trade mark registration system in Myanmar as of present; a trade mark owner can only make a Declaration of Ownership, register it with the Registrar of Deeds and Assurance and publish an English notice on a newspaper to make his trade mark “public”. Such registration lasts for 3 years. However, a Draft Trade Mark Law – made public in July 2016 – is about to be implemented in 2017 and it provides for a trade mark registration for the duration of 10 years from the date of application.

Similarly to patent applications, Indonesia, Thailand and Vietnam require the trade mark applications to be filed in their respective languages.

Enforcement: Challenging but not Impossible – Know before you go

Implementation of IPR laws across South-East Asia also tends to vary from one country to another, owing in part to the diversity of culture, history, economic and legislative development in the region. Thus, when enforcing IP rights, SMEs should keep in mind that private mediation might be more effective than judicial proceedings in some countries.

IP enforcement is generally rather challenging in South-East Asia, as in many countries criminal prosecution and civil action tend to be long and therefore costly procedures. Additionally, due to the limited experience and training of law-enforcement officers or judges, outcomes and decisions on IPR issues may be inconsistent and unpredictable especially for those SMEs that are used to doing business primarily in the EU or domestic markets. Lack of transparency and established criteria concerning the determination of compensation for damages, is also still commonplace in South-East Asia, further contributing to the unpredictability or inconsistency of the judgements.

To ensure timely processing of IP cases with accurate and consistent application of IP law, some South-East Asian countries have dedicated legal framework specifically for IPR enforcement typically involving the establishment of both a specialised court having competency in dealing with IP, and specialised procedural rules to be observed by such courts. Currently Malaysia and Singapore are among the few countries in the region with dedicated IP Courts and specialised judges.

Even though IP enforcement remains challenging in South-East Asia, it is not entirely impossible. Understanding local practices and implementing a strategy in advance are the key to IP enforcement in South-East Asia. EU SMEs seeking to protect their IP rights in the South-East Asian region should thus consult with legal service providers having local expertise and who would be able to navigate the practical and operational considerations in place in the country in order to best serve their needs for enforcement.

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The South-East Asia IPR SME Helpdesk supports small and medium sized enterprises (SMEs) from European Union (EU) member states to protect and enforce their Intellectual Property Rights (IPR) in or relating to South-East Asian countries, through the provision of free information and services. The Helpdesk provides jargon-free, first-line, confidential advice on intellectual property and related issues, along with training events, materials and online resources. Individual SMEs and SME intermediaries can submit their IPR queries via email (question@southeastasia-iprhelpdesk.eu) and gain access to a panel of experts, in order to receive free and confidential first-line advice within 3 working days.
The South-East Asia IPR SME Helpdesk is co-funded by the European Union.
To learn more about the South-East Asia IPR SME Helpdesk and any aspect of intellectual property rights in South-East Asia, please visit our online portal at http://www.ipr-hub.eu/.

 

Horizon 2020 SME Instrument – elements of our formula of success

– by Edita Bagdonaite –

How many participants of Horizon 2020 SME Instrument are in Lithuania? What are the elements of the formula of participation success? We searched for answers to these and other questions together with the clientele of the Agency for Science, Innovation and Technology (MITA), or more precisely with true like-minded people who managed to find their own formula of success and agreed to share their good practice.

We are pleased to introduce the participants in the debate and the elements of the formula of success discovered by them.

CLEAR VISION AND A BOLD FIRST MOVE

21 Lithuanian enterprises have been awarded a grant of 5,06 million Euros of Horizon 2020 SME Instrument for the execution of 25 projects. 47 applications have been submitted by Lithuanian representatives of SMEs in the cut-offs of SME Instrument in 2014, and, compared to frequency of participation in 2016 when almost twice as much (i.e. 90 applications) have been submitted, this was a bold move. UAB “FERENTIS“ and UAB “SAULĖS VĖJO ARUODAI“ were among the first successful participants of this instrument.
“Our enterprise had a new, original and unique technology, strong implementation team, high-level scientists and a clear vision of how we intend to commercialize the technology being developed” says Vygandas Juras, Director of Business Development of UAB “FERENTIS“. However, according to the interlocutor, in addition to these factors, it was important to understand how to prepare an application that is specific by its nature and differs significantly from the traditional business plan.
Ignas Šlapkauskas, Director of UAB “SAULĖS VĖJO ARUODAI“, advises the SMEs of our country to participate more courageously in the instrument and to implement innovations for problem solving at the European or global level, and to pay great attention to the preparation of the application, to attract talents and to spend a sufficient amount of time on this matter.

THE AIM TO DEVELOP A HIGHER SPEED TO INTERNATIONAL RECOGNITION AND LEADERSHIP

Applications of two phases can be submitted by the enterprises in the SME instrument. Applications during the first phase can be submitted to receive funding of the feasibility study and the assessment of innovation development and management skills of SMEs as well as the level of the effect of the product being developed. The European Commission (EC) grants lump sums of 50000 Euros for the applications of the first phase. Applications during the second phase are dedicated to the implementation of innovative activities and are sumbitted to receive funding of which the EC can grant from 0.5 to 2.5 million Euros. Statistics show that the success rates of participation are ranging from 3.8% to 5.3% in the second phase. This means that this instrument is very popular, many innovative SMEs compete and seek international development and leadership.
2017 was a very significant year for Lithuanian participants to the SME Instrument. According to the statistics, 5 applications have been submitted by Lithuanian representatives in the first cut-off of this year, 2 of them received funding and the success rate reached an unprecedented height: 40%. 2.76 million Euros were granted by the EC for the SMEs of our country. UAB “BALTIC ORTHOSERVICE“ received the biggest investment, i.e. 1.59 million Euros.
“We had a business idea of a European dimension, a prototype of product/technology developed, we paid a great deal of attention to the aspects of intellectual property and interdisciplinary knowledge, and the grant received made it possible to prepare the product/technology for commercialization at a greater pace within 2 years and to invest in publication of the innovation” says Dr. Gediminas Kostkevičius, Director of UAB “BALTIC ORTHOSERVICE“. The interlocutor adds that participation in the instrument was not only financially beneficial for the enterprise, but also significantly contributed to formation of its image. This is a certain “Sign of Quality“ which is highly appreciated not only by potential investors, potential partners of R&D activities, but also impresses customers of the enterprise.

BUSINESS PERCEPTION AND COOPERATION WITH CONSULTANTS

Vygandas Juras emphasizes importance of cooperation and consultations when he shares good practice. “The nuance lies in the fact that the winning applications are those applications which comply strictly with the criteria established by the assessors, not those applications which contain original answers. Therefore, you should imagine the way your application is being read by the assessors when you write it. It would be better to give it to the experts who wrote or assessed the applications of the European Union (EU) projects, as their critique would be invaluable in this case“ suggests Director of Business Development of UAB “FERENTIS“.
Dr. Gediminas Kostkevičius takes a different view. A healthy business perception, in his opinion, is the main element of the formula of success, not advices of consultants.

DISSEMINATION OF HORIZON 2020 INFORMATION

The EC has developed the network of National Contact Points (NCP) of Horizon 2020. The main function of NCP is to provide practical information and assistance to the applicants and participants of Horizon 2020.
“The NCP staff of our agency endeavours to inform promptly and adequately the clientele of the country on the terms and conditions of participation in Horizon 2020, to assess the suitability of the idea, to determine compliance of the level of readiness of the technology (TRL) that is being developed with the invitation requirements, to help search for the consortium partners, to advice on the issues of project management, business plan development, intellectual property protection, etc., to conduct pre-reading of the application and to submit comments and suggestions on the improvement of the application prepared” divulges the head of MITA.

We appreciate ideas and advices of the interlocutors of the debate and invite all readers to participate actively in Horizon 2020 programme and discover their own formula of success.

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References:
http://ec.europa.eu/research/participants/portal/desktop/en/home.html
https://ec.europa.eu/easme/sme-instrument-beneficiaries

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Edita Bagdonaite,
PhD in Biomedicine
MSc in Innovation Management

Edita has been working at the Agency for Science, Innovation and Technology (MITA) since 2011. She is National Contact Point for SMEs; NMBP – Nanotechnologies, advanced materials, biotechnology, advanced manufacturing and processing; SC1 – Health, demographic change and wellbeing; SC2 – Food security, sustainable agriculture, marine and maritime research and the bio-economy; & Biotechnology. She is a member of the “Horizon 2020” Programme Committee for SMEs, NMBP and SC2. She has worked 8+ years as a researcher and has over 6 years of experience in innovation management.

 

Study on the difficulties of using public instruments for Argentinian small and medium enterprises*

– by Héctor O. Pralong, Angel F. Hernaiz, José L. Sebastian –

Introduction

It is a duty of the Government to encourage horizontal links among institutions that are committed towards creating a structural base for the National System of Innovation (SIN) in each discipline. In order to let innovation happen there must be networks and connections between actors. Therefore an agile and proactive State is required. A State that promotes actions that make innovations possible instead of waiting until they occur. One that takes risks, that catalyzes and leads investments, creating working network systems that allow the inclusion of the private sector and the spreading of knowledge to create a Knowledge economy.

The development of the industry of the ICT, pharmacology, nanotechnology, etc. in the last three decades would have hardly occurred without the leading role of the State (Mazzucato, 2011).
According to the Argentine Industrial Union (UIA) it is necessary to go more deeply into the inclusion of SMEs in the system by improving their productivity and it is required to make proactive actions in three fields: the macroeconomic, the transversal sectorial policies and the aid programmes ones.

In the competitive strategy of Argentinian SMEs the more frequently financed actions are trainings, inclusion of technology, innovation promotion, internationalization and business professional management.

Besides, the UIA stated that to have a successful innovation program it is important to maintain a tight link with the enterprises, that the forms and access to the programmes have to be easy and a high diffusion of the programme should be achieved. (UIA in the Seminar “Innovation and SMEs in Latin America”, organized by CEPAL on the 11^th June 2015).

The Technology Commission of the Argentinian Confederation for the Medium Enterprise (CAME) proposed to give continuity to the policies supporting productive innovation and product development by facilitating the access to credit and innovation as well as by coordinating national productive interests and innovation policies.

According to CAME and the Central Bank of the Argentine Republic less than 7% of the enterprises accesses public funding. One of CAME´s suggestions was to segment productive credit to address the needs of micro, small and medium size companies. (CAME, circular N° 188/2015, 22^nd of May).

Development and conclusions

The goal of this article is to reveal the difficulties of using public instruments that support innovation offered by a public Agency promoting innovation at company level.

Among the projects submitted to the National Agency for Scientific and Technological Promotion (ANPCyT) within the last five years, sixteen proposals have been selected, were approved and reached the execution phase. Selected SMEs had to present a technological innovative project to the Agency including objectives, description of the Project, market potential, budget, human resources with their functions and time dedication, technical goals to be achieved in each development stage to get the technical approval. In addition successful candidates were invited to present the accounting and statute documents required for the legal approval.
The contribution covered up to 70% of the total budget and the project had to be executed in 36 months maximum.

Surveys and personal interviews – using a semi-structured questionnaire – were done.

According to Carlota Pérez, in order to access funding on a medium and long term, SMEs need to meet bank’s requirements that are focused on costs and guarantees. Another alternative is to resort to the stock market, but the entry requirements are usually high (Pérez, García, Jiménez, 2005). This situation is similar to the one presented by Sánchez-Serna and Giraldo-Ávila (2008) that analysed Colombian SMEs. They identified as main difficulty the access to credit – in particular to bank credit – due to the lack or low quality of financial information.

In order to better meet financial needs, public institutions have to consider these difficulties and offer more friendly tools to the productive system enabling SMEs to access financing instruments for their innovative projects.

The success of Argentinian SMEs in innovation programmes fostered by governmental institutions is related to a series of issues, such as simplicity of the procedure at the start, quickness of the evaluation, clarity of the forms and objectives of the programme (Pralong, Sebastián, Hernaiz, 2017). These issues represent a challenge for SMEs, in particular with regard to the access to the programme, that represents a first stage of the innovation process.

According to the data collected, almost the 70% of the consulted companies found that the approval of the submitted project required a long time that put at risk the execution of the proposal because it impacted on the importance or significance of the proposed innovation or due to the loss of value of the budget according to the high inflation of our market.

87% of the consulted companies stated that the execution problems of their projects were not related to the innovation activities carried out but they were connected to external factors, usually of administrative management.

56% of the companies identified difficulties in the execution of the project due to the lack of an advanced payments at the beginning of the project – these advanced payments are not considered by the funding programme. The reimbursement of the money invested by the companies at each stage of execution is delivered once the intermediate technical report is approved and the accomplishment of the goals at each stage is verified.

Some difficulties identified during the project execution are related to the long time between the presentation and evaluation of the receipt and the reimbursement of the amount required. This difficulty was observed by the 56% of the consulted companies.

Nevertheless only one company did not continue with the project while the others managed to conclude it or they are still executing it.

The survey shows that Argentinian SMEs face difficulties in accessing and executing public instruments that promote technological innovation. Thus it would be necessary to adapt these instruments to address SMEs’ needs.
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Spanish version

Un estudio sobre la apropiación de instrumentos publicos de innovacion por pymes argentinas

Introducción

Es responsabilidad del gobierno fomentar lazos horizontales entre instituciones tendientes a crear una base estructural para el Sistema Nacional de Innovación (SIN) en cada disciplina, ya que para que la innovación suceda es importante que existan redes y conexiones entre los actores. Por lo que se necesita un estado ágil, proactivo que promueva acciones que posibiliten innovaciones en lugar de esperar a que ocurran, que tome riesgos, que catalice y lidere las inversiones, creando sistemas de redes de trabajo que permitan la incorporación del sector privado y la difusión del conocimiento para crear una economía del conocimiento. En las últimas tres décadas el desarrollo de la industria de las TICs, la farmacéutica, nanotecnología, etc., difícilmente hubiera ocurrido sin el rol de liderazgo del Estado (Mazzucato, 2011).

Para la Unión Industrial Argentina (UIA) es necesario profundizar en la incorporación de la Pymes al sistema mejorando su productividad y para hacerlo es necesario llevar a cabo acciones proactivas dentro de tres ámbitos, el macroeconómico, en políticas sectoriales transversales y programas de apoyo. Dentro de la estrategia competitiva que las Pymes argentinas utilizan con mayor frecuencia se encuentran, la capacitación, la incorporación de tecnología, las actividades de innovación, la inserción internacional y la gestión empresarial profesional. Además, la UIA expresó que para tener un programa de innovación exitoso es importante mantener un vínculo estrecho con las empresas, que los formularios y el acceso al programa sean sencillos y que se alcance una alta difusión del mismo (UIA en el Seminario “Innovación y pymes en América Latina” organizado por CEPAL – 11 DE JUNIO DE 2015).

La Confederación Argentina de la Mediana Empresa (CAME), en su comisión de TECNOLOGÍA propuso dar continuidad a las políticas de apoyo a la innovación productiva y el desarrollo de productos, facilitando el acceso al crédito y a la innovación, así como, alinear los intereses productivos nacionales y las políticas de innovación.

En la mesa de debate de CAME con el Banco Central de la República Argentina se planteó que menos del 7% de las industrias acceden a financiamiento a través de programas públicos. Y una de las sugerencia de CAME fue la de Segmentar el crédito productivo para atender las necesidades de las micro, pequeñas, y medianas empresas (CAME, circular N° 188/2015 del 22 de mayo de 2015).

Desarrollo y conclusiones

El objetivo de este estudio es relevar dificultades de apropiación de instrumentos públicos de innovación propuestos por una Agencia de promoción a la innovación empresarial. Para ello se analizaron 16 casos que pudieron pasar la fase de presentación, de aprobación y alcanzaron la etapa de ejecución. Las empresas Pymes debían presentar un proyecto de innovación tecnológica a la Agencia incluyendo los objetivos, la descripción del proyecto, las potencialidades de mercado, un presupuesto, los recursos humanos con sus funciones y dedicaciones, las metas a alcanzar en cada etapa de desarrollo para la aprobación técnica, así como, la documentación exigida desde el punto de vista contable y estatutario para su aprobación legal. Se podía solicitar un subsidio de hasta un 70% del presupuesto presentado y ejecutarlo en no más de 36 meses. Se realizaron encuestas y entrevistas personalizadas bajo un cuestionario semiestructurado.

Para Carlota Pérez, las necesidades de las Pymes para acceder a financiamiento bancario a mediano y largo plazo se focalizan en cuestiones de condiciones, plazos, costos y garantías exigibles. Otra alternativa es acudir a los mercados de valores, pero los requisitos de entrada suelen ser elevados (Pérez, García, Jiménez, 2005). Situación concordante con la de las Pymes Colombianas que fue presentada por Sánchez-Serna y Giraldo-Ávila (2008) donde postulan como principales dificultades el acceso al crédito, el acceder a financiación bancaria por falta de información financiera o que esta es de baja calidad, las limitadas posibilidades de adquirir recursos propios, problemas para acceder a la financiación que ofrecen los mercados de valores y dificultades para conseguir fondos de inversión.

Por estas razones, los instrumentos públicos deben abordar estas dificultades y ofrecer al sistema productivo herramientas más amigables que permitan el acceso a financiamiento para actividades de innovación por parte de las Pymes
El éxito de las Pymes en la apropiación de los programas de innovación presentados por organismos gubernamentales radica en una serie de cuestiones, como ser, en la simplicidad de los trámites de inicio del proceso, de la rápida evaluación, en la claridad de los formularios y de los objetivos del programa (Pralong, Sebastian, Hernaiz, 2017). Estas cuestiones se visualizan desde las Pymes como dificultades de acceso al programa, que representa una primera etapa del proceso innovador. También se observan dificultades en la ejecución misma de los instrumentos cuando se han superado las barreras de entrada.

Dentro de los resultados encontrados se observa que casi el 70 por ciento de las empresas consultadas sostuvieron que los largos plazos asociados con la aprobación del proyecto presentado para solicitar el financiamiento puso en riesgo la ejecución del mismo porque pusieron en peligro la importancia o relevancia de la innovación propuesta en el proyecto o por el peligro de pérdida de vigencia del presupuesto presentado dada la alta inflación de nuestro mercado.

El 87% de las empresas consultadas sostuvieron que existieron problemas de ejecución de sus proyectos que no se relacionan con las actividades de innovación realizadas sino que se podían asignar a factores externos a la empresa y de índole de gestión administrativa.

El 56% de las empresas consultadas planteó dificultades de ejecución vinculadas a la falta de adelantos para el comienzo del proyecto, ya que el Programa de Financiamiento no los prevé. Las devoluciones de lo invertido por las empresas se realiza una vez aprobadas las rendiciones técnicas intermedias y verificado el cumplimiento de las metas preestablecidas.

Durante la ejecución también se presentaron dificultades con los largos plazos de cada etapa de evaluación y revisión de la Agencia para liberar los reintegros correspondientes y poder proseguir con el desarrollo del proyecto. Esta dificultad se observó en el 56 % de los casos.

De todas maneras solamente una empresa no prosiguió con el proyecto y las demás lo lograron terminar o se encuentran en etapa de ejecución.
Los resultados encontrados dan fuertes indicios sobre que las Pymes argentinas presentan dificultades para acceder y ejecutar instrumentos públicos que promueven la innovación tecnológica empresarial. Por lo que sería necesario adaptar estos instrumentos a las necesidades de las Pymes

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Bibliography/Bibliografía
CAME, circular N° 188/2015 del 22 de mayo de 2015.
Encuesta Nacional de Empleo e Innovación (2017). https://www.argentina.gob.ar/noticias/ii-encuesta-nacional-de-empleo-e-innovacion
Mazzucato, M. (2011). Demos. Magdalen House, (2013) Anthem, UK
Pralong, H. O., Sebastian, J. L., y Hernaiz, A. F. (2017). Innovation Vouchers: an application proposal – Bonos de Innovación: una propuesta de aplicación. En, Codner, D. y Garrido, C. “Consolidando acciones cooperativas para la relación de las Universidades con el mundo productivo en el espacio ALCUE” (pp. 182-192). Colección idea latinoamericana digital. Ciudad de México, México: Red Universidad-Empresa ALCUE – UDUAL.
Pérez-López, Carmen; García-Villanueva, Rocío & Jiménez-Naharro, Félix (2005, octubre). La valoración de pequeñas y medianas empresas. Revista Técnica Contable (679), 12-24.
Sánchez-Serna, A.; Giraldo-Ávila, N. (2008). Las necesidades de las pyme –pequeñas y medianas empresas– y el sistema de información contable y financiero como una estrategia para atenderlas. Contabilidad 25.indb vol. 9 / no. 25. Bogotá, Colombia, 5 (25):421-464 / julio-diciembre 2008
UIA en el Seminario “Innovación y pymes en América Latina” organizado por CEPAL – 11 DE JUNIO DE 2015.

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Héctor O. Pralong
Teacher and researcher, Universidad Nacional de Quilmes, UNQ, and Faculty of Psychology – Universidad de Buenos Aires, UBA, Buenos Aires, Argentina. Chemical Engineer, Universidad de Buenos Aires – UBA; Diploma in Specialized Services to support Innovation, Instituto Tecnológico de Estudios Superiores de Monterrey (México); Consultant of the Ministry of Science, Technology and Productive Innovation of Argentina. Vice Director on the Argentine side of the Argentine Brasilian Centre of Biotechnology.

Angel F. Hernaiz
Teacher, Universidad Nacional de La Matanza – UNLAM. San Justo, Argentina. Graduate in Physics, UBA. Member of the Area of International Cooperation with Enterprises – Ministry of Science, Technology and Productive Innovation of Argentina.

 

José L. Sebastian
Teacher and researcher, Universidad Nacional de Quilmes, UNQ.
Graduate in Hotels´ Management, Universidad Nacional de Quilmes – UNQ. Director of Observatory of Organizational Management – UNQ.

*The article has been received on the 30^th of December 2017.

 

Establishing a Culture of Innovation in Business

– by Sarah Daren –

The business landscape is always changing. Leading companies thrive by embracing and cultivating a culture of innovation that leads to evolved and improved operations, strategies, product offerings, service offerings, and processes.

American business leaders that acknowledge and encourage innovation find themselves ahead of the competition that refuses to establish a culture of innovation. Businesses across the country spend significant amounts of money in an attempt to foster the type of innovation that leads to success. In just one year the United States spends $499 billion in total on research and development.

There are four types of business innovation that are widely recognized. Here is a brief description of each.

Disruptive
This type of innovation occurs when smaller companies utilize existing technology to compete in their industry. They do so by recognizing and targeting overlooked segments in the market. For example, companies like AirBnB and Uber set a new standard for businesses across the globe with the sharing economy. More than 9,829 companies are a part of the sharing economy operating in 133 countries and 25 categories.

Architectural
Architectural innovation relies on introducing new technology to the industry. An example of architectural innovation occurred with the invention of the iPhone. The iPhone emerged with an abundance of new features that the Blackberry couldn’t match and took over the market.

Routine
Many times companies will inject innovation into their systems that already exist. This often happens at regular intervals to existing technologies and business models. Intel is an example. They routinely innovate by launching more powerful microprocessors that allow the company to retain its high margins.

Radical
Radical innovations can be as drastic as they sound. With this type of innovation, the company disrupts existing industries by combining new technology with a traditional business approach. This is precisely the type of change Amazon used when they brought an internet-based approach to selling books.

Why Should Companies Innovate?

There are several compelling reasons for companies to take innovation seriously. Here are some of the top reasons that companies embrace change.

Global Competition
Companies must compete with more than just their rival down the street. Globalization means that companies are competing with others all over the world. Innovation can mean the difference in staying ahead of the competition. Successful companies are learning ways to leverage global innovation to grow their businesses.

Digital Age
More and more people are spending time connecting digitally. Companies looking to reach consumers digitally should put marketing efforts into the digital space and constantly update their websites to reach younger consumers.

Consumer Voices
Innovation gives companies a way to give their consumers a voice and a way to connect. Customers can provide fresh ideas and different ways of looking at products and services.

IT Companies
Challenging traditional work models can pave the way toward launching a successful IT company. Investors and potential employees will follow innovators that streamline operations, improve strategies and processes, and evolve product lines.

Innovation Spurs Innovation
Companies that innovate are always looking at how to do things better. By cultivating a culture of innovation businesses can constantly improve technology and learn new ways to meet the needs of their customers.

Learning from Innovative Companies

We can learn how to establish a culture of innovation by looking at companies that are successfully doing it themselves. For example, Amazon is well-known for its innovative infrastructure. It starts with hiring great people with a passion for inventing. The company also uses an innovative process that develops people’s skills and ambitions.

Here are a few ways that companies can support and create innovation with their employees similar to the way that top companies are:

• Invest time in defining innovation.
• Use project management and seasoned project leaders.
• Allocate resources based on capability and not availability.
• Limit the number of partners and subcontractors.
• Don’t rely solely on technology to communicate.

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Sarah Daren has been a consultant for startups in business innovation and marketing. She implements her knowledge into every aspect of her life with a focus on driving innovation and helping companies create better work environments.

 

SMEs in Horizon 2020 with a focus on the new European Innovation Council (EIC)

– by Ines Haberl –

SMEs are the backbone of Europe’s economy, and substantially contribute to growth and job creation, due to their innovative role and growth potential. About 23 million SMEs are generating € 3.9 trillion in value added and employ 90 million people. Although their participation in the Framework Programmes (FPs) has increased during the past years, SMEs still need support for getting involved in projects that will bring their research to commercially exploitable innovative products and services and will therefore contribute to sustainable socio-economic value for European citizens.

A series of key findings of various impact assessments revealed a strong lack of strategic approaches of SMEs. Less than 50% of SMEs use publicly funded applied research projects strategically and only about 22% of SMEs participating in EU research programmes are strategic innovators. This is in line with experiences gained in dedicated strategy trainings and a mentoring and coaching support approach developed in the EU-funded project Fit for Health 2.0 (www.fitforhealth.eu).

Horizon 2020 is the first Framework Programme (FP), covering both, basic research and close-to-market innovation. With a total budget of about € 77 billion, 20% are awarded under Horizon 2020 Societal Challenges (SCs) and Leadership in Enabling and Industrial Technologies (LEITs) to SMEs. Horizon 2020 offers SMEs more attractive and less complex funding rates amounting up to 100% of their costs. Possibilities for SMEs are ranging from projects that are R&D driven with dedicated pre-defined topics for collaborative research projects to projects for high-tech, research intensive SMEs to projects that have a clear focus on the market opportunity for business innovation motivated SMEs. The participation of SMEs is possible in all three pillars of Horizon 2020. In Pillar 1 “Excellent Science” mobility and exchange of staff can be of interest for SMEs through the “Marie Sklodowska-Curie actions”, as well as participation in the activity “Future and Emerging Technologies”. SMEs are encouraged to participate in collaborative projects in Pillar 2 “Industrial Leadership” and Pillar 3 “Societal Challenges”, as well as in the SME instrument, which is embedded in both Pillar 2 and 3. Access to risk finance helps to overcome the gap that is identified before getting research results to the market.

Looking at key findings out of the Horizon 2020 interim evaluation, an unbowed interest of SMEs in participating in Framework Programmes is seen, and a strong EU-added value is offered through unique collaboration opportunities, competition and access to new knowledge. More private sector participations are seen in comparison to FP7, and 70% of SMEs aim at new-to-market innovations, generating jobs, growth and investments.

The European Innovation Council (EIC) as new pilot programme
The European Innovation Council (EIC) has been established on an initiative of Commissioner Carlos Moedas: “Europe has excellent science but we lack disruptive market creating innovation. This is what is needed to turn our best ideas into new jobs, businesses and opportunities“. This new pilot programme responds to the fact that though many start-ups are getting up in Europe, too few are succeeding in scaling up and offering high-skilled jobs to strenghten Europe’s economy. Thus, improved conditions for rapid scale-up of highly innovative companies were required, considering the substantial effort to foster breakthrough innovation as found in the Horizon 2020 mid-term evaluation.
The EIC will start as a pilot for the years 2018-2020 and should play a significant role in the upcoming Framework Programme, starting in 2021. It brings together several innovation support schemes like the SME instrument, Fast Track to Innovation, FET Open and Horizon Prices. With an overall budget of € 2.7 billion the pilot offers support for innovative entrepreneurs with potential to scale up rapidly on European and global levels without thematic restrictions. It addresses ideas that radically differ from existing products or services and that require significant investment to get to the market.

The SME instrument has already been part of Horizon 2020 since the beginning, supporting SMEs in bringing highly innovative new products, services or business models to the market, focussing on ground-breaking concepts, boosting the growth of companies. For-profit SMEs from any sector and established in an EU Member State or a Horizon 2020 associated country can apply, and single companies can benefit from funding. Briefly, the SME instrument comprises 3 phases, starting with a concept and feasibility assessment in phase 1, followed by a „concept to market“ phase with innovation activities to develop a market-ready product or service. Applications can be done for either phase 1 or phase 2 directly. Phase 3 is a commercialisation phase, without funding but offering support like partnering, networking and links to investors. Both, phase 1 and 2 of successful funded projects are accompanied by business coaching. Most important alterations of this support scheme for the years 2018-2020 are a bottom-up approach, a minimum of Technology Readiness Level (TRL) 6 for phase 2 projects and interviews for selecting best phase 2 projects for funding.

Fast Track to Innovation (FTI) has been part of Horizon 2020 as pilot measure for the years 2014 -2016 and after successful evaluation it will be part of the EIC. As a bottom up approach close to market innovations are funded. FTI projects require consortia, with 3 to 5 partners (established in EU Member States or Horizon 2020 associated countries). Participation of industry (private-for-profit organisations) is mandatory. Consortia with complementary backgrounds, expertise and skills and cross-sectoral cooperations comprising different disciplines are addressed, reaching trans-national value chains and European / global markets.

FET Open supports early stage science for high-risk, radically new future technologies, challenging current paradigms. The bottom-up programme addresses interdisciplinary consortia with at least 3 partners, and all types of organisations are addressed like universities, research centers and high-tech, research intensive industry. Essential characteristics of FET Open projects are defined by so called FET gatekeepers, like radical vision, breakthrough technological target and ambitious, interdisciplinary research.

EIC Horizon prices will be awarded to applicants who will most effectively meet defined challenges with regards to societal problems to be addressed. Innovators are asked for breakthrough solutions, solving challenges by 2021 at the latest, and specific characteristics are defined in so called rules of contest.

Recommendations and outlook for next Framework Programme
Findings in the Horizon 2020 interim evalution together with personal observations and out of the feedback from SMEs gathered in Fit for Health 2.0 show that competition in FPs is very high and success rates in Horizon 2020 are lower than in FP7. Thus, SMEs are advised to using FPs as long term strategy and not as ad-hoc funding opportunity. Megatrends like the ones identified in the Bohemia report scenarios and recommendations from the Lamy high-level group might contribute to the basis of FP9, expected to start in 2021. Europe’s competitiveness is increaslingly determined by investment and performance in research, innovation and education. Getting prepared for upcoming challenges requires to work on our innovation deficit in comparison to global trading partners and to address current problems now.

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Sources:

Impact assessments: https://www.researchgate.net/publication/257736360_Profiles_motivations_and_expectations_of_participants_to_EC_funded_research_in_Health_2002-2010_A_statistical_analysis
Horizon 2020 interim evaluation: https://ec.europa.eu/research/evaluations/index_en.cfm?pg=h2020evaluation
EIC-pilot: https://ec.europa.eu/programmes/horizon2020/sites/horizon2020/files/17._eicpilot_forprepublication.pdf
Report from BOHEMIA project: file:///C:/Users/HAI/Downloads/KI0417245ENN.en.pdf
Lamy Report: https://ec.europa.eu/research/evaluations/pdf/archive/other_reports_studies_and_documents/hlg_2017_report.pdf#view=fit&pagemode=none

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Ines Haberl is working for the Austrian Research Promotion Agency (FFG) as National Contact Point (NCP) for SMEs since 2006 and as coordinator of the EU-project “Fit for Health 2.0” http://www.fitforhealth.eu

As SME-NCP she assists Austrian companies for their participation in Horizon 2020 projects, in particular for the SME instrument and for Fast Track to Innovation. At FFG she works as trainer of the FFG-academy, conducting trainings for applicants and project implementation. In Fit for Health 2.0 she offered mentoring and coaching for European Life Sciences SMEs.

Ines is pharmacist by training and received a Ph.D. from the University of Vienna in Natural Sciences, worked as a researcher at the Medical University of Vienna, where she completed 2 post-doctoral trainings at the Departments of Surgery and of Oncology. She has prior experience as coordinator of several coordination and support actions under FP6 and FP7.