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 11th 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, 22nd 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.


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 30th of December 2017.

 

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Establishing a Culture of Innovation in Business

– by Sarah Daren –

Establishing a culture of innovation

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.

SDHeadshot-7_16

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.

 

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

– by Ines Haberl –

opportunity

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.


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

Ines foto_1024x1024_500KBInes 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.

 

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Montenegrin research and innovation landscape

– by Ljiljana Belada –

LandscapeResearch and innovation are key to tackling the economic and social challenges of Europe. They contribute to the use of new growth opportunities generated by knowledge, technological advancements, innovation processes and product innovation, and new business models that support economic development and help address social challenges.

Science, technology and innovation are important drivers for the Europe 2020 Growth Strategy.

In 20151, the Member States of the European Union spent all together almost €300 billion on Research & Development. The R&D intensity, i.e. R&D expenditure as a percentage of GDP, stood at 2.03% in 2015, compared with 2.04% in 2014. Europe 2020 Strategy sets out a vision of Europe’s social market economy for the 21st century and notably retained the 3% R&D intensity goal as one of the five headline targets to be achieved by the EU by 2020.
The business enterprise sector continues to be the main sector in which R&D expenditure was spent, accounting for 64% of total R&D conducted in 2015, followed by the higher education sector (23%), the government sector (12%) and the private non-profit sector (1%).

In 2015, the highest R&D intensities were recorded in Sweden (3.26%), Austria (3.07%) and Denmark (3.03%), all with R&D expenditure above 3% of GDP, closely followed by Finland (2.90%) and Germany (2.87%). Belgium (2.45%), France (2.23%), Slovenia (2.21%) and the Netherlands (2.01%) registered R&D expenditure between 2.0% and 2.5% of GDP. At the opposite end of the scale, seven Member States recorded a R&D intensity below 1%: Cyprus (0.46%), Romania (0.49%), Latvia (0.63%), Malta (0.77%), Croatia (0.85%), Bulgaria and Greece (both 0.96%).

Montenegro is a young country which became independent in 2006. Montenegro is situated in Southeast Europe covering the area of 13,812 km2 with total population of 620,0292 inhabitants that accounts for 0.1% of the EU population.
Since independence in 2006, Montenegro has undertaken a number of reforms aimed at creating a more suitable environment for research and innovation.
According to the latest data collected by MONSTAT (National Statistical Office), the total expenditures on research and development (GERD)3 in 2015 was at the level of 0.38% of GDP (€13,67M), which is significantly below the EU average of 2.03% of GDP, and far from Montenegro’s own target of 1.40% set up by 20164. The main source for funding of research and development (R&D) activities in Montenegro is the government budget, almost 50% as a share of GERD.

Montenegro, as small economy, despite different subsidies and incentives for private sector research, is still far behind the developed countries in terms of the technological capacity of its business sector.
Government of Montenegro, and in particular Ministry of Science, is conscious of serious efforts that are required to increase the level of investment in research, particularly from the private sector. Intense incentive measures for public sector investments are already offered, through enhancing public-private partnership for establishing the first Centre of Excellence in BIO- ICT, and Science and Technology Park “Technopolis”.
Over the past years, good progress has been achieved with the measures related to this area. A new Strategy on Innovative Activity (2016-2020) was adopted in July 2016, and the Law on Innovation Activities was adopted in June 2016. This law governs the organisation, conditions and manner of financing innovation activities.

Several other areas are under preparation including a Strategy of Scientific Research Activity 2017-2021 as well as a Smart Specialization Strategy 2018-2022. In this regard Montenegro has requested accession to the Joint Research Centre Smart Specialization platform. Montenegro also has a Research Infrastructure Roadmap (2014-2020) which defines and presents priorities in the field of research infrastructure. In this regard preparations are underway to establish a Science and Technology Park within the University of Montenegro, aimed at strengthening links between the academic and economic sectors and encouraging innovation. This would be seen as the central point, feeding BIO-ICT and “Tehnopolis”.

Despite many initiatives, new legislation, and adoption of strategies, it is evident that there has been still little tangible progress in the area of R&D capacity, technology transfer, and innovation in Montenegro. Undoubtedly, limited funding is a serious factor.
The Ministry of Science is the dominant funding mechanism in Montenegro. The financing of R&D is executed via annual national calls for research proposals published by the Ministry.
Apart from supporting the employment of young researchers, improving of university research laboratories and infrastructure of research institutions, expanding opportunities for mobility of researchers, programmes cover other instruments for enhancing science research activities, such as participation to COST and EUREKA programs, promotion of science and research in education and wider society, cooperation with science diaspora, master and PhD studies, supporting patent authors and innovation ideas, etc.

July 1st 2014. Montenegro became the first country from the region to join the EU Framework Programme for Research and Innovation – Horizon 2020. The national coordination body is the Ministry of Science.
Even though there were numerous info days, trainings and workshops organized by different institutions on Horizon 2020, its content, programmes, opportunities for beneficiaries, Montenegro is not satisfied with the results.

It is clear that the EU’s decision to open and temporarily close on the same day the Chapter 25 – Science and Research, approves the level of harmonisation of science-related policies and legislation on Science and Research with the Treaty on European Union and EU’s goals, guidelines and priorities in this area. It is also clear that this chapter contains very few community regulations, because science largely remains in the domain of the national governments.
Nevertheless, it doesn’t mean that Montenegro is in any way up to European standards in Science and Research. Rather, it should be understood as encouragement, and a positive signal for further negotiations.
The decision is conditional on Montenegro meeting three aims: raising the level of investments into science, stepping up bilateral and multilateral cooperation, and creating conditions for science to become the driving force of innovations in the country5.


1 Source: Eurostat Newsrelease, 30. November 2016
2 Source: MOSTAT, Census 2011
3 Source: MONSTAT, results of the Survey “Research and Development in 2014”
4 Set in the Strategy for Science-Research Activities of Montenegro 2008-2016, and its Updated version 2012-2016
5 EC Progress Report, Montenegro 2016

image001Ljiljana Belada currently works in the Directorate for Development of SME, Montenegro, within the Ministry of economy. She is the Head of Enterprise Europe Network Montenegro – EEN, the biggest entrepreneurship network in the world. She has been coordinating Montenegrin Consortium from 2010.

She has been working in the DDSME from 2001, engaged in coordinating institutional support mechanisms, promotion and development of regional and international cooperation.

Ljiljana Belada is the member/representative for:

  • COSME Programme Committee (EC Framework Program for Competitiveness of Enterprises and SME)
  • NCP for SME for Horizon 2020 (EC Framework Program for Research and Innovation)
  • President of the Board of directors of the first IT business incubator in Montenegro
  • Member of the WG on Innovation Law in Montenegro
  • Member of the WG on Innovation Strategy of Montenegro
  • Member of the WG on Smart Specialization Strategy Montenegro

She is involved in numerous national and international projects for SME development, research and innovation projects and initiatives.

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Polish (EU13) SMEs in the Framework Programme – Horizon 2020

– by Katarzyna Walczyk-Matuszyk –

Horizon 2020 gives an opportunity for innovative SMEs for market up-take of their solutions. Yet the successful participation is not an easy job in particular for EU13.

Background
As currently the largest Framework Programme with a budget of approx. 80 billion Euros offered by the European Union, Horizon 2020 focusing on research and innovation gives its priority to Small and Medium Sized Enterprises. SMEs provide the most jobs in the EU, ensuring the economic growth and innovation, what was as well recently proved by the economic crises.

The priorities are not only purely a declaration but are set as quantitative goals. 15% of the two main Horizon 2020 pillars i.e. Industrial Leadership and Societal Challenges should reach SMEs directly. A portfolio for the entities is as well open under Access for Risk Finance programme offering financial and debt instruments. Additionally, the first criterion for differentiation during the evaluation of the project proposals relates to the seize of the budget dedicated to SMEs in the project. But without a doubt the SME Instrument should be called a star of the Framework Programme.

For the first time, the instrument gives a possibility for highly innovative single SMEs to apply for grants up to 2.5 million Euros jointly with world-class business coaching and business acceleration services. The budget of the intervention designed at 3 billion Euros for 7,500 companies up to 2020, allowed within initial three years the support of 2,500 SMEs (out of 31,000 applicants) from 36 countries. The top success rate states for Iceland (20%), Austria (13%), Denmark (13%), Ireland (13%) and Sweden (12%), whereas the most applicants come from Spain, Italy, United Kingdom and Germany1.

Statistics for countries from EU13 ranked within the latest (2017) European Innovation Scoreboard as modest and moderate innovators reflect potential, however the region is still lagging behind the top 10 beneficiaries. Both in terms of success rate (the highest for Estonia at 9%) and number of beneficiaries (64 for Poland)2.


Barriers for Polish (and EU13) SMEs in Horizon 2020
The results of SME Instrument and Horizon 2020 (only 5% of the granted Horizon 2020 budget went to EU13 beneficiaries) prove the discrepancies between innovators towards EU. Main barriers for the region, Poland in particular, may be related to the innovation level of SMEs itself but as well to many other issues, such as significant funding available under EFSI dedicated to support of entrepreneurship and competitiveness being in selected cases a competition for FPs. Other barriers such as IP, weak visibility and internationalisation should be also mentioned. Structural challenges related to legal provisions cannot be forgotten. On the other hand, financial rules (without new regulation related to remuneration) are perceived as rather adopted to advanced partners. But a phenomenon of so called “closed clubs” presenting cumulative advantages and participation in Horizon 2020 of large, well-reputed advanced institution seems to have the greatest effect of the FP’s results3.

Newcomers, higher education entities from EU13 and SMEs in particular in regard to collaboration projects based on international consortia, with weak or lacking well-developed network do not stand the competition with advanced partners, and are more likely to fail. Additionally, successful participation is a matter of a learning process to which well-established partners with a history in Framework Programmes were exposed to for a significant period of time. Yet, the familiarity with administrative aspects, collaboration rules or lack of skilled resources shall be considered as a barrier in the application process.

Using synergies with EFSI
As the SME Instrument fully meets the market demand, which is proved by low success rates, the European Commission decided to grant above threshold proposals with the Seal of Excellence (SoE) certificate. Its holders should have an opportunity to apply either for national/ regional funding in a fast track procedure or go for private investments. As a reply to the EC initiative, Poland decided to implement the possibilities for financing polish companies with SoE from EFSI schemes. By September 2017, 26 companies (out of 59 Seal of Excellence certificate holders) received the funding for their innovative projects. Applicants with the results above threshold from Phase 1 were more willing to apply for the funding, whereas the most Phase 3 SoE holders decide to continue their efforts under Horizon 2020. This is related to EFSI financial regime with limited possibilities to support commercialisation activities, and above all EFSI undergoes simply the regime of state aid rules.

Whereas the implementation of the Seal of Excellence scheme might at a glance weaken a countries’ position in Horizon 2020 (re-submitted proposals are more likely for success), its real impact relies in strengthening the regional innovative eco-systems ensuring the market up-take of break-through innovation. Here however, the most crucial role is to be played by regions and regional operational programmes which are in a position of giving priorities to project implementing FPs results. Additionally, the portfolio of instruments should support the capacity building and international networking process.

Forecast
European Union continues its efforts in supporting SMEs, the new part of Horizon 2020 i.e. European Innovation Council with a focus on innovation, highlights the significant role of SMEs in strengthening the EU competitiveness advantage. Furthermore, the discussion on the EU13 (Widening) participation in the Framework Programme is accelerating trying to define main obstacles and design the most appropriate measures to avoid negative effects. The way of the EU13 applicants towards Horizon 2020 still remains a bumpy ride, nevertheless due to reasonable and tailored activities implemented at various levels (EU, country/ region and entity itself) it will not be for sure a dead end.


1Horizon 2020 SME Instrument impact report 2017 edition
2Ibidem
3http://www.sv.uio.no/tik/InnoWP/tik_working_paper_20170703.pdf


Katarzyna Walczyk-Matuszyk – Deputy Director in the National Contact Point for Research Programmes of the EU. Katarzyna is a member of the Programme Committee for SMEs and Access 2 Risk Finance and Strategic Committee at the European Commission. On a daily basis Katarzyna supports innovative SMEs, start-ups and large companies, Centres of Excellence and research institutions in obtaining funds for the development of innovation projects. Her fields of specialization are innovation, cooperation industry-academia, synergies between EU financial sources and international cooperation. She has a long-lasting experience in management and implementation of the European projects financed under Framework Programmes (7th Framework Programme, Horizon 2020), Structural Funds and Norway Funds. She holds a post of the Coordinator of the NCP_WIDE.NET project (financed under Horizon 2020).

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What Is the Role of the Founder in an Entrepreneurial Business?

– by Chuck Russell –

entrepreneur

Who wants to be an entrepreneur? Who can be an entrepreneur? There are more than 582 million people in this world in the process of starting or running their own business according to the latest Global Entrepreneurship Monitor that surveyed 65 different economies worldwide. The number of people who dream about being an entrepreneur is many times higher.

There are many people who want to be their own boss or to pursue their dream of what a business could be. They may have an idea and want to make it into reality. Technology and the Internet has made it possible for anyone to start a business. But, entrepreneurship is much more than that. The reality is that starting an entrepreneurial business is much easier than dealing with the challenges in making the business sustainable.

Businesses of every size require the same things:

  • Customers must be persuaded to buy goods or services.
  • Potential customers must learn about what the business has to offer through marketing and communication.
  • The goods or services must be delivered in a satisfactory way to the customers.
  • Any problems or customer dissatisfaction must be handled promptly and effectively.
  • Financial records must be maintained, and customers must be billed for the goods and services which they purchased.
  • Goods or services that are required to produce those being sold by the business must be purchased economically so as to enable the business to make a profit.
  • The performance of employees must be managed and problems dealt with promptly and in a positive manner.
  • New employees must be recruited and trained as the business grows.
  • Effective processes and procedures must be developed so that the business functions consistently and efficiently.
  • New ideas must evolve as the market changes or when new opportunities present themselves.

Whether the entrepreneur sells the latest technology or mangoes in a street market, some version of these things must happen. No one person can effectively perform all of these things well.

  • Maybe they can sell anything, but keeping track of financial details is hard.
  • Maybe they are brilliant in the application of new technologies, creating amazing products, but they cannot really manage other people.
  • Maybe they have a well-organized business with great products, but they are uncomfortable meeting new people.

In each of these cases, key parts of a successful entrepreneur are there, but something else is missing. The challenge is that entrepreneurs are usually so busy working to make their business survive that it is hard to see what the real problem is. These kind of shortcomings are explained away as “not having enough time” or “other things are more important right now”. Larger companies bring in consultants to help them with such problems, but that is usually too expensive for small entrepreneurs. Advice from their friends and family is not always helpful. There are online tools that enable entrepreneurs to inventory their own hard-wired personality strengths and abilities to see what is the best role for them and what else is needed for the business to prosper. At the least, the entrepreneur can list the key functions that are critical for the business to succeed. They can then rate those functions on a ten-point scale, with “1” meaning that the entrepreneur has little or no knowledge or experience with that function. A “10” indicates that the entrepreneur has strong knowledge or experience with that function. Recognizing the weak areas enables the entrepreneur to put a plan in place for strengthening that area with an additional employee, outsourcing that function or with additional training for themselves.

I welcome your feedback, questions or observations of your own at chuck@bestworkdata.com.


Chuck RussellMr. Chuck Russell is Chairman & CEO at BestWork DATA, United States of America. He is a thought leader in the business applications of predictive DATA that measure how people think, learn and behave. His first book, Right Person-Right Job, Guess or Know, showed how the information provided by the latest generation of assessment technology shattered the traditional paradigms of management, hiring, and training. Over the last ten years, he has developed a series of disruptive innovations within the assessment industry, combining state-of-the-art psychometrics with an easy-to-use system that eliminates the need for experts or special training. Using this DATA, each individual can be seen in terms of the job behaviors needed in any position or within any team through bias-free metrics, thus strengthening non-discriminatory hiring practices. Chuck has a degree in Economics from Spring Hill College, and is a member of Mensa.

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Financing Small Businesses: the Jamaican experience

– by Omar Chedda –

scala mobileSmall businesses tend to face higher risks globally, particularly in developing countries like Jamaica, due to their limited economies of scale, networks and capital base. Hence, many small businesses find it difficult to access appropriate financing at an affordable cost.

Studies have found that credit access in markets dominated by a few large banks tends to be lower for small businesses than in markets with a relatively larger share of small banks. It has also been found that, all else being equal, regions with a robust network of small local banks are home to significantly more small firms. Community banks tend to do much more small business lending than their big competitors. One reason for this is that big banks rely on formal models and procedures to determine whether to make a loan. Because the local market conditions and the circumstances surrounding each borrower and his or her enterprise are so incredibly varied, this standardized approach does not work very well when it comes to understanding the nuances of risk associated with a particular small business. Consequently, as large banks have consolidated the market, small businesses have had a harder time obtaining loans from these traditional sources. By drawing on qualitative information – getting to know the borrower, learning about the business, and understanding the market – small banks can better assess risk and successfully make loans to a wider group of small businesses.

The lack of adequate risk assessment methods has been found to be one of the main challenges to serving small businesses. Many traditional financial institutions do not have separate methodologies for micro and small enterprise risk assessment. Most of these institutions use their existing risk assessment tools for small business clients despite the fact that a different level of client analysis, including life cycle analysis, might be required.

Micro Finance Institutions

Many financial service providers have experienced stagnating loan portfolios with existing clientele and have recognized the growth potential of small business lending, which can yield higher returns over the short term. Consequently, financial service providers have established Micro Finance Institutions (MFI) as branches of their operations to better serve the needs of small enterprises. Additionally, new market entrants have established exclusively as MFIs. These MFIs usually focus on enterprises that are smaller than usual banking clients and which are often informal.

Unfortunately, most MFIs in Jamaica continue to offer standard loan arrangements for clientele, and have not given much consideration to alternative financing arrangements for small businesses, such as factoring. The main reason given for the lack of innovation in financing is the undeveloped secondary market for tradable instruments and assets, and the regulatory deficit.

The Jamaican Experience

Jamaica recognizes the economic significance of the Micro, Small and Medium Size Enterprises (MSMEs) as a major creator of employment and wealth. The Government has placed entrepreneurship and MSME development at the forefront of the country’s Growth Agenda. The goal is to provide the best business climate and support services for MSMEs in order to help them to achieve success, while positioning them to contribute in a big way to the growth of the Jamaican economy and strengthen Jamaica’s participation in global trade.

Jamaica’s labour force data indicate that the “Own Account” category (representing sole traders) accounted for 36.3 per cent of the average employed labour force in 2015. In addition, MSMEs make an important contribution to gender equity in the local economy, with women representing approximately 52 per cent of the labour force in Micro and Small Enterprises (MSEs). There is also a strong linkage between MSEs and the informal sector, as many MSEs operate informally. According to a study, if the contribution of the informal sector were taken into account, it would have increased the size of Jamaica’s registered GDP by a range of 40 to 44 per cent.

Almost half of all MSEs and informal enterprises are engaged in the wholesale and retail trade, with education, social work and other personal services accounting for 22 per cent. This has important implications for the local debate about targeting financing for small businesses engaged in “productive” activities in order to increase exports rather than distribution. With half of MSE’s involved in wholesale and retail, this is a sector that requires access to financing.

Some of the initiatives to improve financing for MSMEs include: addressing regulatory deficits so as to encourage innovation in financing; expansion of capacity development programmes; increased role of Credit Bureaus to provide risk ratings; improving competition in the financial services industry; and improving the tax framework for the financial services sector.

In order to encourage innovative businesses, the Government is putting in place the framework to encourage private sector investment in venture capital funds. A Venture Capital Programme was established with a mandate to develop the ecosystem for venture capital and private equity in Jamaica. This Programme seeks to increase the access of dynamic small and medium enterprises (SMEs), with high-growth potential, to early-stage and growth equity financing.

Conclusion

Micro, Small and Medium Enterprises comprise three different categories of businesses that require different staff capacities at lending institutions, management systems, and risk assessment tools. They also require different types of financing at different stages of their life cycle. Lenders need to understand the financing requirements of these three categories of businesses and the sectors in which they operate, in order to tailor lending instruments accordingly. Likewise, governments need to tailor the regulatory framework because one size does not fit all.

 


Omar Chedda2

Omar Chedda is Director of the Investment Branch at the Jamaican Ministry of Economic Growth and Job Creation. He provides support and advice to the government in the formulation of policies, creation of implementation strategies, and programmes that maximize the benefits of existing investments and that foster the expansion of investment opportunities in Jamaica. One of the officials in Jamaica leading discussions on investment climate reforms.

 

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