Factors affecting SME growth and policy options for internationalisation
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Presentation by Prof. Jay Mitra, Business Enterprise and Innovation, University of Essex at the Launch of the SME Policy Index Western Balkans and Turkey 2016. 28 April 2016 - OECD, Paris, France
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Factors affecting SME growth and policy options for internationalisation
- 1. Factors Affecting SME Growth and Policy Options for Internationalisation Jay Mitra University of Essex United Kingdom Policy Session 2 Enhancing Entrepreneurial Skills and Innovation Capabilities to better integrate SMEs in the Global Market Good Practices in SME Policy: Panel Discussions Launch of the SME Policy Index and Western Balkans and Turkey 2016 OECD OECD Conference Centre, Paris France 28 April, 2016
- 2. + Demand Side Perspectives An Agenda • Opportunity identification • Innovation, • Resource Mobilisation • Opportunity Realisation • in the International Market Place
- 3. A Measure of Actual International Activity Smaller SMEs are less internationalised than bigger SMEs, 80% of SMEs with 50 to 249 employees are operating at an International level, 66% of SMEs with 10 to 49 employees are international
- 7. Source: OECD,(2014). SME Internationalisation: Characteristics, Barriers and Policy Options Barriers and the Policy Response
- 8. 1 2 3 Arm Ltd. and Licensing The Air Spindles Story: Westwind/Air Bearings SMEs and Internationalisation: Three Case Studies Nutella’s GVCSource: adapted from P.Marsh, 2012 Source:A.Barrell,U.ofCambridge,2012
- 9. The Demand Side in the Western Balkans Environmental Factors Competitiveness
- 11. Internationalisation Innovation and Skills Turkey SBA Performance in Turkey, 2007-15 Source:ECSBAFactSheet,2015
- 12. • 25.3% - one key founder; • $52 billion in sales • Employed 450,000 workers in 2005 • High representation in • Semiconductor, computer, • communications • Patent applications up from 7.3% in 1998 to 24.2% in 2006 • Chinese – largest group of inventors An Envious Glance at the USA Remittances: African migrants sent at least $40 billion in remittances to African countries in 2010. Trade & investment flows: Trade Diversity: Migrants have a preference for their native country’s goods and services, thus supporting “nostalgic trade” in ethnic products. Migrants facilitate bilateral trade and investment flows Diaspora bonds: possible through the issuance of a diaspora bond, a retail saving instrument marketed to diaspora members. Skill and technology transfer: Diasporas may also provide origin-country firms access to technology and skills through professional associations Source:IMF,2011 Diaspora Assets The Diaspora: The Missing International Thread
- 13. Framing Demand Focused Heterogeneous Policy Organisational Differences & Relationships Adaptation of Engagement Developed and Emerging Economies Large Firm SME Achieving mutual independence Redressing power balance Developed Emerging Proactiveness Exploit existing markets Exploring market niche Creating ecosystem/infor mation asymmetry (structural trust) Creating dialogue/informa tion asymmetry (social trust) Existing ecosystem/inter mediaries Substituting lack of institutional support Innovation Incremental/dow nstream/ scale Newness/upstrea m Technology platforms/ network complementariti es Corporate incubators to select new ventures/ SME mini ecosystem Partnering innovations using exitingVC in accelerators Partnering innovation to build newVC or corporate risk capital Risk-Taking Status enhancement lack of flexibility Status attainment v legitimacy deficit High transaction costs for large firms /partner selection Managing defection (large) Safeguarding IP (SMEs) Intense legitimate competition restricting market potential Intense dysfunctional competition restricting market potential Systems Routines/existing Experimentation Enhancing network based systems for MNEs Open Innovation systems/ project based activity Enabling global production networks Participating in upstream/downst ream global production systems SME Policy Index 1 1 8 8 & 9 9 & 10 9 &10 Source: adapted from Buckley & Prashantham, 2016
- 14. Contact Professor Jay Mitra Professor of Business Enterprise and Innovation Essex Business School University of Essex Wivenhoe Park Colchester CO4 3SQ Essex United Kingdom T: +44 (0) 1206 874859 M: +44 (0) 7801552469 E: jmitra@essex.ac.uk
Notas del editor
- Good morning and thank you for inviting me to talk about factors affecting SME growth through internationalisation and their policy implications.
- I will aim to reflect on the demand side (what happens to firms) with reference to the SME Policy Index examining specifically entrepreneurship skills,
- Looking at reality we see that while international activity appears to be buoyant, the percentage of SMEs involved in all types of international activity remains low. Only the larger SMEs are more internationalised. Commercial & technical coopn, + subcontracting are the big activities but note the difference between G7 and BRIC SMEs which outscore the former Iin all strands
- Accessing new markets, know-how & technology product diversification – typical innovation variables among high impact firms – score highly. Efficiency drivers associated with consolidation & legitimacy provide routes to excellence.
- Relatively good news about going digital and especially smaller firms in UK, Korea, and interestingly Japan., suggesting real changes in landscape. Corroboration of digital presence comes from e-ecommerce participation especially in business & professional services, manufacturing & wholesale. Wherever logistics plays big part.
- GVC participation suggests openness to trade but note difference between OECD & non-OECD countries & variations in backward & forward particpation)
- Given large variations what have we found to be the main firm level and non-firm barriers with the former being the more difficult challenge.
- All very well looking at macro data but what happens to firms. 3 examples of exemplary international activities. Arm Ltd as licensing experts, Air Spindles – story of niche excellence in global value chain & Nutella’s non technological value chain. Bottom line is about achieving singularity of excellence
- Note the correlationship between what constituted to be the most important environmental factors an the most important competitive factors
- A composite picture shows how levels of internationalisation are related to problems with innovation and skills as summarised by the performance matrix.
- What we are really missing is the story of migrants and diasporas. Note OECD average & migrant entrepreneurial pool.
- Demand sensitive policy ,making addressing a) relationship between MNE & SME; b) mutual independence & harnessing unique capabilities; c) cooperation & competition