Inclusive Innovation Policies for SMEs and Start-Ups

Several countries have implemented innovation policy programmes to promote enterpreneurship among disadvantaged groups and stimulate innovation among laggard SMEs and start-ups. This page presents a range of relevant examples. Additional interesting facts and figures can be found here.

Please click on the images to find the full policy cases.

European Progress Microfinance Facility Programme – Lithuania

2007-2013

Objective: Foster women’s entrepreneurship by facilitating their access to financial services.

Target: Self-employed women or micro-enterprises and SMEs either owned by women or employing a majority of women.

Instrument: Micro-loans (with favourable conditions on credit provision and repayment).

H2020 SME Innovation Associate – European Union

2016-2018

Objective: Support SMEs in recruiting highly skilled researchers from other countries in order to turn their innovative idea into a viable project.

Target: SMEs and start-ups with innovative ideas.

Instrument: Grant to cover costs of employing a researcher for up to one year (including salary, travel expenses and others); training package to maximise research outcomes and impact for both the SME and the researcher.

Innovation vouchers programme – Hungary

2016-2018

Objective: Support SMEs innovation performance by helping them to connect with universities and research institutions to support their innovation projects.

Target: Micro, small and medium enterprises (MSMEs) seeking to develop an innovative product, service or process.

Instrument: Non-repayable grants to finance innovation consultancy or innovation support services provided by universities and public research institutes.

Innovation vouchers programme for the design sector – Ireland

2015-present

Objective: Assist SMEs in gaining the knowledge needed to explore a targeted business opportunity, sourced from higher education institutes and public research bodies.

Target: SMEs in the design sector.

Instrument: Innovation voucher for SMEs to explore a business opportunity or solve a problem with the assistance of a registered public knowledge provider.

Competitive Start Fund for the design sector – Ireland

2015-present

Objective: Provide young companies in the design sector with critical early-stage funding to help them reach key commercial and technical milestones and launch new products and services in the international marketplace.

Target: SMEs in the design sector.

Instrument: Equity investment of up to EUR 50 000 for a 10% shareholding in the company.

Centers for Creative Economy and Innovation – Korea

2014-present

Objective: Promote business start-ups and innovation by small and medium-sized companies, and build conditions for innovation in different cities and provinces across the country.

Target: Small and medium-sized enterprises, and potential start-ups.

Instrument: Business consultation services for start-ups; creation of networks including SMEs and innovation actors; assistance in (among others) R&D and marketing.

Commission for Corporate Partnership – Korea

2010-present

Objective: Improve the relationship between large enterprises and SMEs, reduce social polarisation, and strengthen national competitiveness.

Target: SMEs and large enterprises.

Instrument: Identification and dissemination of successful win-win growth models, and of best practices for corporate partnership. Identification of types of activities that are suitable for SMEs.

EuroAgri Foodchain – Eureka Countries

2014-2018

Objective: Increase the competitiveness and innovativeness of the European agri-food industry by supporting R&D projects.

Target: SMEs, large companies, research institutions and universities in the agri-food sectors that intend to introduce an innovation.

Instrument: Support varies depending on the case; it can include the provision of grants as well as advisory services, and promotion of products and technologies across countries.

Innovation Fund for SMEs – China

1999-present

Objective: Enhance the S&T and innovation capabilities of SMEs.

Target: SMEs nation-wide.

Instrument: Financial support (grants, loan interest subsidies for new product development and pilot production, and equity investments); and advisory services.

Did you know...?

While some start-ups and SMEs are an important source of new ideas, technologies and business models, the bulk of SMEs in most countries are active in mature, traditional or low-technology sectors, characterised by low knowledge intensity and weak innovation capacities. Those firms may be a drag on productivity, and frequently experience problems surviving in a globalised worldwhere technological changes (namely, changes brought about by digitalisation) are constant and rapid. 

SMEs’ poor innovation performance often stems from the barriers that particularly SMEs and start-ups led by individuals from disadvantaged groups and/or located in lagging areas face. These include:

  • Barriers to mobilising financial resources – Due to the high uncertainty linked to innovation projects, early stages of innovation are often costly and generate no immediate profits. SMEs and start-ups may not dispose of sufficient internal resources to finance such projects. High amounts of required collateral or little proof of previous performance may prove to be barriers for SMEs to access credit. When investments required are substantial, access to external investment can be critical. Investors, however, may not have confidence in the project’s potential, may not be able to assess the entrepreneurs’ ability to manage the project and its risks, or simply may not be aware of the existence of the project.
  • Difficulties in attracting skilled human capital – Access to skilled labour is key for innovation in firms. Skilled individuals can help generate new knowledge and innovations; are more able to recognise the value of knowledge created elsewhere, absorb it and apply it to new commercial ends (Cohen and Levinthal, 1990); and can support firms in identifying business opportunities and help them adapt to changing environments. SMEs sometimes have difficulties attracting and retaining highly skilled individuals, as larger firms can prove more attractive if they offer better salary and career prospects, including opportunities for job progression and advanced training. Reputation factors might also play a role.
  • Little access to new technologies and technological as well as managerial expertise – In general, SMEs are slower to adopt new technologies and new organisational methods. Managers may not be aware of new technologies or organisational innovations that could be useful to them; may not recognise the potential benefits of adopting them; or may lack the managerial or technological capabilities to implement them.
  • Barriers to access domestic and foreign markets – There are a range of factors that may hinder the opportunities SMEs have to enter domestic markets, such as burdensome entry requirements (“red tape”), bankrupcy regulations that are excessively punitive for failed companies, and high costs of hiring and firing, among others. Additional barriers arise for accessing international markets, this includes difficulties in contacting foreign costumers and the high costs of establishing and maintaining foreign distribution channels and marketing networks, among others.

In addition to these barriers, the current context in which digital innovation prevails might prove challenging for these small firms. Digitalisation is a source of scale economies and winner-take-all market structures which may challenge small companies’ market participation (Paunov and Guellec, 2017; OECD, 2016).

 

References

OECD (2016), The Productivity-Inclusiveness Nexus, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264258303-en.

Paunov, C. and D. Guellec (2017), Digital innovation and the distribution of income, unpublished mimeo.