The Innovative SME

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By Edoardo Carlucci, Eurochambres

 

The business environment is increasingly complex and diverse. Innovation is a critical factor in a business’ competitive advantage and, on a macro level to economic growth, society and sustainability. At the organisational level, innovation is the catalyst for productivity, efficiency, quality and competitiveness. Companies need to find better solutions in order to retain a competitive advantage and innovation is the key to such solutions.

Respond to trends and competition

Innovation can help identify existing opportunities that are likely to emerge in the future. Successful businesses not only respond to their current customer or organisational needs, but often anticipate future trends and develop an idea, product or service that allows them to meet this future demand rapidly and effectively.

Encourage companies to be even better at what they already do

Innovation is not only about designing a new product or service to sell, but can also focus on existing business processes and practices to improve efficiency, find new customers, cut down on waste or increase profits.

Constantly innovating and improving business practices are also likely to help attract better new recruits and retain valued existing staff – something crucial to the long-term health and performance of a business.

Why the innovative capacity of SMEs is crucial for Europe’s competitiveness and growth

Small and medium sized enterprises (SMEs) are a major source of entrepreneurial skills, innovation and employment. Smaller companies often exploit technological niches and commercial opportunities that are ignored by larger companies. This strategic innovation is a key element in many SMEs’ competitive advantage.

In a context of continuously changing market conditions, SMEs need constantly to adapt or reinvent their businesses. This requires internal financial resources and technical capabilities that SMEs might lack. SMEs have been hit exponentially hard by the financial crisis, particularly in sectors where there is a strong competition component driven by lower-cost foreign companies. The recently published Eurochambres Economic Survey 2016, based on input from 59.000 businesses across Europe (the vast majority of which are SMEs), confirms that appetite to invest and general confidence levels remain subdued. The result is a reduction of innovation by European firms, having less capital to innovate.

For this reason, innovation policy at the EU level is especially targeted at SMEs. Instruments to address the innovative capacity of SMEs are important in boosting growth and jobs in Europe.

Innovation policy supports SMEs through direct financial support and also indirect support. The core of the policy is to increase SMEs’ innovation capacity. This reflects the need both to provide support to research, development and innovation, while also ensuring a general environment that is favourable for SMEs and innovation. This covers a wide range of policy areas beyond just financing – skills, internal market, internationalisation, intellectual property, fiscal policy, regulatory compliance and administrative burden reduction, energy/environment to name just some.

How diversity can drive innovation and entrepreneurship

Immigration can play an important role in stimulating innovation and entrepreneurship. In terms of quality, skilled migrants can bring a substantial contribution to established businesses. Moreover, diversity in the workplace can stimulate innovation, driving market growth and encouraging “out of the box” ideas and creativity.

Immigration and entrepreneurship are at the very top of national and international agendas. The economic and social impact of both migrants and entrepreneurship is substantial. The recent massive increase in the number of migrants – many of whom are refugees – has added a significant new dimension to this policy discussion. In fact, migrants can contribute actively to the economy of the destination country.

In many host countries, it has been noticed that foreign-born workers are more likely to create a business than native born workers. This attitude may be explained through the migrants’ tendency – in many cases through necessity – to take greater risks. In addition, low-skilled migrant workers can overcome barriers to entering the labour market as an employee by creating their own work as an entrepreneur.

Nonetheless, in starting and running a business migrants face greater obstacles than native peers. In addition, they encounter more difficulties in accessing credit from financial institutions. This reduces the full potential of migrant entrepreneurs to improve the employment and boost competitiveness in the host country.

At the European Union level, a lot of work has to be done. The European Commission recognised the contribution of migrants to the economy in the European Agenda for the Integration of Third Country Nationals. Eurochambres is also in active discussions – both internally with its members and externally with EU policy makers – to define and deliver a coherent strategy for the economic integration of migrants, from the country of origin to the country of destination, via transit countries both inside and on the borders of the EU. This will not be easy, but it is crucial in ensuring that the massive influx of migrants contributes positively to Europe’s socio-economic development and thus helps to ensure that their integration is smooth.

This article was originally published on the print edition of The New European #7. You can read it here. 

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Welcome to The New European, the online magazine of UNITEE, the New European Business Confederation, dedicated to highlighting the great contributions New Europeans bring to our societies.

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