Specificity of knowledge intensive entrepreneurship in central and - PowerPoint PPT Presentation

Specificity of knowledge intensive entrepreneurship in central and eastern Europe Prof. Slavo Radosevic Triple Helix Webinar 1 July 2015 @ 18:00 CET

Some of the CEE success stories …… 2

… that still do not translate into technology based growth • Growth is still driven by medium tech and ‘blue collars’ skills and FDI • Central European automotive cluster • CE as ‘skilled workshop’ and part of the core manufacturing cluster in the EU 3

……as demonstrated by export structure… What Estonia exports? 4

Or what Czech R exports…. 5

In CEE... non-R&D innovators dominate Source: Arundel, A., C. Bordoy and M. Kanerva (2008), ‘Neglected innovators: how do innovative firms that do not perform R&D innovate? Results of an analysis of the Innobarometer 2007 survey No. 215’, 6 INNO-Metrics Thematic Paper

but ….. Fast growing investments in R&D due to EU Structural Funds RDI push Changes in shares of GERD/GDP in percentage points of GDP 2002-2012 Changes in shares of GERD/GDP in percentage points of GDP 2012-02 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 Estonia Slovenia Czech EU_CEE Poland Hungary Slovakia Latvia Lithuania Bulgaria Romania Croatia Republic -0.2 -0.4 7

Despite successes stories …..the dominance of replicative / imitative entrepreneurship • Entrepreneurs in CEECs have fairly low employment growth ambitions: • They expect to employ approximately one employee in a 5-year time horizon of start-up operation, compared to the sample average of 2.5 employees (GEM) > (0.64 jobs/ROM – 1.9 jobs/LV) low growth ambitions • Access to markets govern entrepreneurial aspirations of firms in the CEE. A limited access to foreign markets represents much bigger obstacle for technology upgrading of entrepreneurial science-based technology firms. • Science-based technology firms and niche technology firms are largely oriented towards the domestic market but are able to respond very quickly on buyers’ requests in terms of performance and quality. In order to access export market these firms would need more supportive institutional policy framework 8

Turnover from innovation as percentage of total turnover 2004 2006 12.5 12.4 EU 10 New 12.5 13.5 EU15 Old • Similar innovation dynamics but ... within different mode of innovation

Relationship between embodied investments and labour productivity in European countries ... Innovation at behind the frontier is about acquisition of machinery 1.35 Luxembourg GDP in PPS per person employed relative to US = 100, 2006 1.15 Ireland 0.95 Belgium Netherlands Denmark 0.75 Greece Malta Slovenia Cyprus 0.55 Portugal Lithuania Croatia Hungary y = -0.0084x + 1.1105 Czech R Poland Turkey Estonia R² = 0.5608 Lithuania 0.35 Romania Bulgaria 0.15 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0 Share of expenditures for acqusition of machinery, equipment and software in total innovation expenditures, 2006

Three types of firms in CEE based on success factors: networkers, NTBFs, and organisation capabilities oriented New Customer oriented technology organisational Networker based firms capabilities Links with scientific organisations 0.754 0.313 -0.071 EU Framework programs and other EU support 0.749 0.086 0.095 Government support 0.681 0.239 0.172 Alliances/partnerships with other firms 0.639 -0.108 0.185 Links with previous employer 0.139 -0.179 0.489 Uniqueness of product/ technology/knowledge 0.062 0.076 0.813 Patents and licences 0.400 0.716 0.028 People and training 0.245 0.410 0.369 Knowledge of customers needs -0.023 0.230 0.663 Management 0.396 0.014 0.603 Capability to offer expected services/products with low 0.014 -0.146 0.601 cost Quality -0.115 0.376 0.576 Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. 11

Factors discriminating between more and less successful innovators in CEE • Understanding of user needs and user involvement • Understanding of market Less important • Successful R&D collaborations • Successful innovation collaborations • Source: Slavo Radosevic and Esin Yoruk (2012) SAPPHO Revisited: Factors of Innovation Success in Knowledge-Intensive Enterprises in Central and Eastern Europe 12

The importance of coupling as well as relative independence of markets, technology and networks in the formation of new firms. (Based on sample of 60 KIES in four CEECs in software and machine tools) Factor analysis for ‘Importance of factors for the formation of company’. Market and financial Technical Network opportunities knowledge experience Knowledge of the market 0.791 -0.146 -0.100 Availability of finance 0.688 0.026 0.323 Opportunities from a public procurement initiative 0.718 0.328 -0.004 Technical/engineering knowledge in the field -0.112 0.465 0.528 Design knowledge 0.019 0.734 0.164 Software knowledge 0.111 0.839 -0.121 Work experience in the field -0.040 -0.022 0.865 Networks built during the previous career 0.354 0.028 0.609 Note: KMO measure of sampling adequacy=0.61; Bartlett's test of sphericity significant at 0.002 level; Cumulative % of variance explained is 61.38%. 13

Internal know how and clients are the most important source of innovation Importance of sources of knowledge for developing new products/processes (% of firms expressing the sources of knowledge as ‘important’ and ‘very important’) SW MT All firms 1. Innovativeness via value chain and networks Clients 73.3 50 61.7 Suppliers 20 30 25 Competitors 23.3 20 21.7 Trade, fairs, conferences and exhibitions 26.7 20 23.3 1. Innovativeness via external R&D 6.7 6.7 6.7 Government or public research institutes 10 6.7 8.3 Universities or other higher education institutes 13.3 6.7 10 External commercial labs/R&D firms Scientific journals/trade/technical publications 23.3 10 16.7 including patent disclosures 1. Innovativeness via in-house R&D In-house know-how (R&D unit in your firm) 83.3 63.3 73.3 14

Autonomous or corporate driven entrepreneurship exploiting existing knowledge based on previous experience and recognising market opportunities and oriented towards developing new/distinctive products; • 90% of SW firms are independent start-ups, 60% of MT firms are corporate-spin-outs • Work experience in the activity field is highly important for almost 90% of the firms. 47% of the firms value networks built in the previous career as very important. • 50% of the firms have introduced more than 10 new products/processes/services onto the market during the last three years. No differences between the two sectors. 50% of the firms have more than 50% share of 'innovative sales' during the last three years 15

Other key features of CEE knowledge intensive entrepreneurship …….. • Risk taking is constrained by weak demand and markets, technology risks, and skills shortages as well as by regulatory impediments. • Corruption is present but unevenly. • Financial constraints are not the major obstacles. 16

……..A combination of individual start-ups as well as corporate spin- outs whose establishment and growth are closely interdependent with a variety of networks or network related factors • CEE firms are spinoffs who have inherited specific knowledge from parent firms (similar to Klepper and Sleeper (2005) and Klepper (2009)). • They are either organizational spinoffs (MT) or new start-ups (SW) but whose founders brought accumulated work experience and network capital built during their previous career. • This autonomous or corporate driven entrepreneurship is geared towards exploiting existing knowledge based on previous experience and recognising new market opportunities. • New KIEs are repositioning themselves in terms of markets or products, but not in terms of technology. • In that respect, CEE entrepreneurship is of a cumulative and evolutionary rather than disruptive nature 17

Institutional barriers in setting up and operating a company are present but far less than would be expected. • The range of regulatory barriers for setting up and operating a company are assessed as not important by more than 60% of the companies while corruption and discriminatory treatment of companies as barriers are quite divided between companies. • Institutional barriers still exist but they are weaker than expected and seem to be more firm - rather than sector or country - specific. • The major barriers are related to demand and market constraints, technology risks and skills shortages, i.e. barriers are more developmental than institutional. • Finance is much less a problem in firm formation but is more present in firm growth. The finance factor is one of the major barriers for growth of 20-40% of firms 18