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Technology upgrading, diffusion and transfer:
Building capabilities for innovation in small
and medium-sized enterprises
Philip Shapira1,2
Congress on Innovation Policy and Technology TransferUniversidad de San Martin de Porres, Lima, PeruSeptember 6, 2011
1Manchester Institute of Innovation Research, Manchester Business School, UK2Georgia Tech School of Public Policy, Atlanta, USA
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Technology upgrading, diffusion and transfer: Building capabilities for
innovation in small and medium-sized enterprises
Overview
Proposition and concepts
SME innovation challenges & case for
intervention
Upgrading services and strategies
Program examples
Insights and design parameters
Key questions
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Proposition
...an effective set of innovation
support mechanisms for small and
medium-size firms (SMEs) is one of the foundation measures that nations
and regions seeking to improve their
economic standing need to have inplace.
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Key concepts
Economic
standing
Foundationmeasures
Innovation
SMEs 99% of enterprises (focus: 10-250 emp.) manufacturing, services, agri. lower productivity, use of technology
new ways of doing things product, process, service, business model new to market, new to firm
value-added / living standards equity, resilience, sustainability
free trade < performance, distinctiveness
innovation system policy mix broader economic & societal frameworks national and regional roles
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Constraints to SME innovation
Multiple barriers, including:
Finance: difficulty in accessing external finance, high innovation costsand therefore high economic risk
Know-how: limited internal know-how to manage the innovation
process;
Skills: shortage of, and limited access to, qualified personnel; limitedabsorptive capabilities
Markets: access to markets to meet customer needs and enter foreignmarkets;
Relationships: isolation and weaknesses in business relationships, valuechains, networks
Regulation: addressing laws and restrictions;
Strategy: challenges in identify new trajectories and means to achieve
them
Markets
Skills
Finance
Know-how
Relations
Regulation
Strategy
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Upgrading services
Expert guidance, brokering and outreach mechanisms inthe field to stimulate companies to improve their use of technology and to stimulate innovation
Also known as: technology extension, industrial extension,innovation services, real services
Typical mechanisms
Information provision
Benchmarking and assessment
Technical assistance or consultancy Training
Group or network services
Collaborative projects (R&D, implementation)
Strategy development; coaching and mentoring
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Upgrading services:
Rationales for Intervention
Market failures
Demand-side: SMEs lack information, knowledge, resources toimplement modern methods and new technologies
Supply-side: Large customers, vendors, consultants don’t or can’tsupport SMEs; Trade associations weak
Government and service failures
Gaps in public service provision for SMEs
Local economic development
Promote local and regional clusters of enterprises
Strategic concerns
Economic competitiveness – maintaining jobs while growing wages;
Expand exports
Develop supply-chains and clusters, for new rounds of technological
growth
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Orientation and integration
Enterprise Innovation Capabilities and Strategies: Product, process, and service innovation
Organizational and managerial innovation
Innovation in marketing or business models
Upgraded skills and capabilities
Approach:
Pragmatic approach to technology; step-wise change
Integrate technology with other enterprise needs and strategies
Complementary Policy Actions: Demand-side measures
Innovations in systems of innovation (public & private)
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+ Positioning upgrading services
Start up Existing Declining
LIFE CYCLE
Advanced
Mature
LimitedSBA/SBDCs/SCOR
E
Incubators,
SBIR, TLOs
TAA
TECHNOLOGYFOCUS
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Upgrading SMEs for innovation:
What it is not!
Not just about technology transfer from labs to firms
but about systemic measures to improve firms technological andbusiness capabilities for innovation
Not just about advanced technology
but about pragmatic improvements in operations and practices, usually with commercially-proven technologies
Not a short-term jobs program
Results will take time to materialize and require sustained efforts; andsome direct jobs may be lost as productivity increased
Not just a government program
but a process that is driven by industry needs and market opportunitiesand leverages existing resources
Not a resolution to crisis or radical economic transition
requires an existing, reasonably stable industrial base
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SME upgrading services:
Anticipated outcomes
Business improvement - above the line Capabilities
New knowledge and skills
Stronger relationships
Innovative products and services
Business performance - below the line Increased productivity (value-added / employee)
Increased quality, performance
Business stability and growth
Added sales, exports
Regional & national economic development Increased wages; may retain jobs (but this is not a quick-fix jobs
program)
Develop innovative regional clusters
Increase attractiveness for FDI
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SME upgrading program models
Varied models (in multiple countries)
Program goals, structure and operations
Services and strategies
Resources, customer relations, & evaluation
Five international examples
Fraunhofer Institutes (Germany)
Kohsetsushi Centers (Japan)FEDIT - the federation of technology centers
in Spain
Manufacturing Extension Partnership (US)
Innovation Vouchers (UK)
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1. Fraunhofer Institutes (Germany)
The model:
Non-profit association
Applied R&D; commercialization and transfer services
Scale: 59 Fraunhofer institutes, 40 cities in DE
€1.4B revenues, 40% industry
14,000 staff; 12,000 projects/year
Bottom line: Highly advanced capabilities, developing and transferring
new technologies to firms; project focus; requiressophisticated SME demand
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2. Kohsetsushi (Japan)
The model:
Public industrial technology and testing institutes,dedicated to SMEs, run by local governments under nationalframework
50% R&D; 50% transfer and field services
Scale:
180 centers in 47 prefectures (20 in Tokyo)
€0.8B revenues / very low fee income
6,000 staff; 50,000 SMEs/year
Bottom line:
Good in transferring “catch-up” R&D to SMEs; extensiveservice; field service; networking; public sector rigidities.
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3. FEDIT* (Spain)
The model:
Non-profit association of innovation & centers
Dedicated to SMEs
Scale: 67 centers – focused to regional SME clusters
€0.5B revenues / 60% private fee income
5,500 technology & other staff; 26,000 SMEs/year
Bottom line: Decentralized federation, local centers guided by local
industry associations. R&D (62%), innovation supportservices & technical assistance (25%), training
*Spanish Federation of Research and Technology Bodies
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4. MEP* (US)
The model: Public-private partnership to foster technology, innovation and
competitiveness in manufacturing SMEs
Decentralized network under federal (NIST) framework
Scale:
50 centers, 390 offices in all 50 US states; no R&D €200M (1/3 federal; 1/3 state; 1/3 private)
1600 field staff / 32,000 manufacturers (10% of total)
Bottom line:
Experienced field staff; mentor, develop strategies, resolve
problems, make qualified referrals for SMEs 1:1, supply chain, cluster, university, & group initiatives
Extensive evaluation: increase in productivity of participating v.non-participating firms
* Manufacturing Extension Partnership
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+
MEP Program Model
Development
OutcomesBusiness
Outcomes
Intermediate
Actions
Centers
Projects
Companies
MEP Staff Consultants
Managers
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MEP Services2009 Results> Created 17,721
jobs
> Retained 54,354 jobs> Increased $3.5billion in sales> Retained salesof $4.9 billion
> $1.3 billion incost savings> $1.9 billioninvested inmodernization,including plantand equipment,
informationsystems, andworkforce andtraining
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5. Innovation Vouchers (UK)
The model:
Incentives to forge new linkages between SMEs and
technology & knowledge providers
Voucher €3,600 - €8,500 to SME to engage qualified knowledge
provider – university, private sector, creative sector
Scale (through to 2010):
3,000+ vouchers / year; 20% SME match
12 regional development agencies, multiple local organizations
Bottom line:
Vouchers seek to incentivize SMEs to make new connections
with knowledge providers, then to develop deeper links and
services (with own funds)
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Upgrading Programs
Funding, Clients, Staff
0
10,000
20,000
30,000
40,000
50,000
60,000
$0 $500 $1,000 $1,500 $2,000
Gross budget in USD (millions)
C l i e n t s s e r v e d
INTIIRAP
MEP
Steinbeis
FEDIT
Kohsetsushi
Fraunhofer
In-house staff
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Universities
Technologycenters
Nationallaboratories Other public
programs
Suppliers
Collaborativefirms
TargetEnterprises
Customers
Arena for upgradingservices
Outreach and brokering
to enterprises
Privateconsultants
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Insights from program models: 1
Practices related to program goals, structure and
operations
Decentralized, local delivery systems
Capable and credible delivery
organizations
Value-added national role
Targeting
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Insights from program models: 2
Practices related to services and support strategies
Technology offerings pragmatically relatedto client capabilities
Servicing interrelated enterprise needs
Coordinating with regional innovationsystem partners
Go beyond immediate problem solving.
Competent, quality core staff, with anindustrial/business focus
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Insights from program models: 3
Practices related to resources, customer relations, and
evaluation
Scale, stability, and a long-term perspective
Leverage existing resources and partnering
with industry
Promote evaluation and strategic planning
to strengthen program capabilities
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SME technological upgrading
good practices … and current debates
Good practices
Embedded, sustainable business
models
Customised, intensive & flexible
support
Expert-led, long-term
relationships with business to
develop trust
Strong service networks
Strong brands, through quality-
led assistance
Current debates
Focus on high-growth potential
firms rather than blanket
support
Effectiveness of general versus
specialized business support
Regional networking and cluster
approaches
Linking SMEs to research base &
commercialization of ideas
Public procurement & promoting
innovation
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Benchmarking our upgrading services:
Ten key questions (1-5)
1. Do we have a coordinated offer of service – or do werun many small, overlapping programs?
2. Do we have scale and reach – are we servingenough firms to make a difference
3. Are we “segmenting” the market – access for allfirms, but focused assistance on firms withcapabilities and greatest potential
4. Are we providing technical assistance and field
service to mentor and engage SMEs to upgrade?5. Are we engaging & training capable staff with
business experience, who have the flexibility andcapability to customize services?
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6. Are we qualifying and upgrading 3rd party serviceproviders and consultants?
7. Are our programs decentralized, flexible, and linkedto local business clusters, working with supply
chains, clusters, universities, other regional resources
8. Are we building new capabilities in SMEs and in thesupport system?
9. Is the national level providing value-added services(rather than top-down control)?
10. Do we have evaluation & learning functions tounderstand our impacts and improve serviceperformance?
Benchmarking our upgrading services:
Ten key questions (6-10)
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Ongoing Challenge
...an effective set of innovation
support mechanisms for small and
medium-size firms (SMEs) is one of the foundation measures that nations
and regions seeking to improve their
economic standing need to have inplace.