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Absorption by SMEs of external knowledge in regional innovation policy - delivery mechanism


Means of supporting quicker take up by regional stakeholders of knowledge created regionally or in another region.

Written by Christian Saublens

Reviewed by David Walburn

 

The concept

How to implement it?

Step in the RIS3 process

What can be expected?

A quote

References

Experts' comments

 

The concept


Means of supporting quicker take up by regional stakeholders of knowledge created regionally or in another region.

 

How to implement it?


The absorption of knowledge in a region can be enhanced by supporting contacts and transfer between knowledge holders and potential users of such knowledge. Two approaches should be looked at, one for boosting intra-regional relations and one for enhancing transregional exchanges. Both approaches need to consider 4 dimensions of such a process (see graph below), i.e. the support to people, to a community of potential users, to enterprises and to technology transfer organizations.

It's worth remembering that SMEs are pushed to innovate under the pressure of their competitors or suppliers. Often small enterprises innovate by imitation. This of course requires capacity to identify competitors' new behaviour.

Regional Managing Authorities should make a more intensive use of draft article 60(2) of the Structural Fund Common Provisions Regulation regarding regional cooperation, which allows to dedicate up to 15 % of the Operational Programme to foster such types of projects.

 

Step in the RIS3 process


 

What can be expected?


  • Better impact of new knowledge. It can be breakthrough knowledge or knowledge new to the region;
  • Accelerate the take up of innovation by regional stakeholders, especially for the use of KETs or for innovation at the frontier of sectors;
  • Modernization of enterprises operating in traditional sectors;
  • Development of niche sectors;
  • Avoiding investment in reinventing the wheel or duplicating efforts to create new/similar knowledge;
  • Stimulating a culture of first innovation takers in the region.

 

A quote


"Absorptive capacity at the firm level is the firm's capacity to access the value of external knowledge and technology, and to make the necessary investments and organizational changes to absorb and apply this in its productive activities" - World Bank Knowledge Economy Forum, Ancona (IT) 17 -19 June 2008

 

References


Regional Policy for Smart Growth of SMEs

 

Mr Christian Saublens


 

Christian Saublens has more than 30 years of working experience in European trade organizations. Since 1992 he is the Executive Manager of EURADA, the European Association of Development Agencies, a network of 145 organisations. Christian has been involved in the organization of numerous conferences and meetings dealing with all matters related to regional development. He wrote several papers and working documents on business support schemes for SMEs. He played an important role for the dissemination in European regions of concepts such as benchmarking, business angels, investment readiness, proof of concept, clusters, open innovation, financial engineering, crowdfunding, … Several times Christian has been appointed as an expert by the European Commission and the Committee of the Regions.

christian.saublens@eurada.org

 

Experts' comments


This is a challenging topic for economic developers, and it is critical for achieving successful outcomes to interventions which depend on small firms doing things differently. The majority of small firms, whatever their circumstances, whether they are thriving or in decline, will never engage with public policy on economic development. They are wholly concerned with running their own affairs and have neither the knowledge nor the culture which would make them think of turning to a public sector agency. Experience in their trading will, as the main paper points out, bring external knowledge forcefully to all businesses which may well spark innovation and a competitive response. However, in many cases firms do not have the capacity to respond effectively to the external knowledge, to their benefit or detriment, and would not see access to the services of a public agency as an option open to them.

Success for economic development programmes therefore depends on reaching a small number of SMEs, whose performance is relevant to public policy objectives. This means getting the content of the programme right – this is the “external knowledge” - and marketing it effectively to the target audience.

This problem is well illustrated in the long standing concern of public policy to improve the availability of equity finance to SMEs with the potential for growth, firms which are likely to be at the forefront of innovation. Out of a total population of SMEs, only a very small proportion will ever be suitable recipients for external equity finance. Of that small group, only a much smaller number will be ready to receive such finance in any particular period.  If public policy is to be successful it has to engage with a greater proportion of that number than the market working on its own would reach.  This is a tough marketing challenge. One way of tackling the problem is for public policy to piggy-back on the deal flow of commercial suppliers of equity finance by offering venture capital companies extra support or incentives, but this approach is not always appropriate for all the objectives of public policy. Commercial providers of SME services may not be in sympathy with public policy objectives and so be inappropriate carriers of external knowledge.

The marketing challenge for development agencies is further complicated by the very broad range of potential activities and methodologies set out in the main paper – and this is by no means an exhaustive list.

Delivering external knowledge to SMEs requires sustained and effective marketing from development agencies. There is much documented experience and there is no reason now to take the added risk of re-inventing the wheel. Of key importance is the need for marketing to SMEs to be sustained of the long to medium term. This is the only way in which a sufficient number of suitable small firms will be reached over time, whether it is though continuing participation in networks such as cluster, or simply being at an appropriate stage of development when they are likely to be receptive to any particular external message.

This point has often not been understood by the European Commission in the many time-limited programmes it has promoted. Programmes of state aid, for example, may be based on the idea that public policy interventions can educate markets so that after a while they will change their behaviour to deliver the desired economic development benefits. Most market failures, however, have arisen for good and deep-seated reasons, and once the programmes come to an end the former patterns re-assert themselves.

The majority of situations in which public policy seeks to influence the flow of external knowledge to SMEs arise from chronic market failures. The sustained application of the measures outlined in the main paper – and others – is the only way to achieve worthwhile outcomes over time.

 

Mr David Walburn


After a career in business David Walburn joined Greater London Enterprise in 1986 where he was responsible for venture capital and other small business support, before becoming Chief Executive of the organisation. He was the Chair of the London Business Angels Network and played a key role in the setting up of the European Business Angels Network. He has worked with the UK government and the European Commission on developing public policy initiatives to improve the financing of small and medium-sized enterprises. He was the Chair of Capital Enterprise, the umbrella body for organisations supporting micro business development in London, until 2012.

For the last ten years he has been a Visiting Professor at London South Bank University where he headed the Local Economy Policy Unit and was the managing editor of the journal Local Economy.

He has served as President of EURADA, and been a member of a number of advisory bodies of the European Commission.  He has been an active member of the International Economic Development Council in Washington DC and has a wide range of international contacts with economic development organisations.

He continues to write and lecture on small business finance and regional economic development.

davidwalburn@europe.com

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