What Backs Entrepreneurial Passion in Influencing Entrepreneurial Engagement?

– by Abdella Kosa –

businessman-hand-stop-dominoes-continuous-toppled-or-risk-with-copyspace_1423-17

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.


Abdella Kosa

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.

 

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What do cities want?

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

low angle photo of four high rise curtain wall buildings under white clouds and blue sky
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.

Immagine

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

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.


MLP_3977-Maksim-Belitski

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.

 

audretsch_david

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.

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Protecting Design and Innovation in China: a case study

– The China IPR SME Helpdesk – 

Light bulb lamps

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.”


ImmagineThe 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/.

 

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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.


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.

 

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The Challenges of Industry 4.0 for Small and Medium Sized Enterprises

– by Dr. Christian Schröder –

ChallengeIt 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? 

gRAPHICS

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.


Foto_Christian Schröder

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”.

 

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

– by South-East Asia IPR SME Helpdesk –

background-3271904_960_720Underpinned 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.


South_East AsiaThe 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/.

 

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Horizon 2020 SME Instrument – elements of our formula of success

– by Edita Bagdonaite –

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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.


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

image001Edita 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.

 

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