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 he Forum, held in Vienna last November, was the climax of a wide-ranging debate involving key actors from the worlds of business, finance, research and government. It gave leading entrepreneurs from high-growth European SMEs the opportunity to define policy measures which - by improving access to technological and business competences, to finance and to markets - would stimulate the creation and development of more such companies.
The proposals presented to the Forum are detailed in `Innovation, Creation of New Businesses and Jobs: Proposals for Actions', available from the RTD Help Desk. A shorter version is available in the December 1998 Special Edition of Innovation & Technology Transfer, which also summarises the Forum's main conclusions |
The consultation process had been initiated by Edith Cresson, Member of the European Commission responsible for research and innovation, at the December 1997 Paris Round Table(1). There, leading entrepreneurs, investors, researchers and public authorities discussed ways to realise the full potential of new high-tech companies as a source of high-quality employment.
They established three working groups to determine key barriers and weaknesses, to identify examples of good practice, and to propose remedial policy actions. The groups reported back to the May 1998 Luxembourg conference(2), whose participants focused on specific bottlenecks in the areas of competences, finance, and markets, and on possible ways of making the business environment more conducive to innovation and entrepreneurship.
Now, the time had come to convert the conclusions of this year-long exercise into concrete recommendations for action.
Action
"Political authorities must be prepared to listen, and the process by which measures are drawn up must be more participative and more user-friendly," said Mrs Cresson, introducing the proposed actions. These arose out of a dialogue with business people, investors and researchers, and the conference would help to refine and prioritise them. "I intend to take the proposals on which consensus is reached here into account in the Fifth Research Framework Programme, and will fully support the Austrian Presidency when it presents them to the Council of Ministers in December."
She noted enthusiastically the first concrete implementation of one of the proposals - the formal creation, during the conference, of the European Federation of High-Tech SMEs (see below). Such bodies would establish a network of mutual support for Europe's most dynamic enterprises, she said. They would promote the entrepreneurial role models needed to foster a culture of innovation, and provide a channel for on-going dialogue between policy-makers and Europe's high-tech, high-growth businesses.
Innovate or Perish
Europe faced a stark choice, Mrs Cresson told delegates. "If it is to combat unemployment, maintain its industrial independence, and regain the creativity and enterprise on which its past economic and social success was founded, Europe must innovate. In the past two years, high-technology businesses have generated 40% of the United States' economic growth, and made a crucial contribution to its overall competitiveness. Europe meanwhile, which had five of the world's 25 leading computer firms in 1991, by last year had only one. Europe has a structural trade deficit in high technology products of over 10 billion per year. The stock market valuation of the US chip-maker Intel is now twice that of all Europe's car manufacturers put together."
The consultation process of the past year had suggested a number of specific measures. These included the development of stock options as a cost-effective means of rewarding highly qualified staff, the improvement of the fiscal and social status of entrepreneurs, public-private partnerships for the creation of start-up capital networks linked to research centres, and the promotion of entrepreneurial skills and attitudes in schools and universities.
"The scale of state intervention is, rightly, shrinking," Mrs Cresson said. "It therefore needs to be more efficient, making better use of experience through improved co-operation and the dissemination of good practice. This is particularly the case in relation to innovation, business creation and technology transfer, which involve a large number of players, acting at local level."
Consensus
In the course of the two-day conference, a broad consensus emerged in support of certain priorities (see 'Key Conclusions', below).
Speakers and delegates were clear that public investment in academic research will continue to be an essential source of intellectual capital. But research should no longer be conducted in isolation from market pressures. Researchers should fund a greater proportion of their work through its commercial exploitation, working closely with entrepreneurs. New tax incentives should be introduced to encourage private investors to bear the risks of such commercialisation.
SMEs must be given greater access to public funding of close-to-market research - the mandatory channelling of 5% of all public research expenditures to SMEs was even proposed. But government's primary function is to establish a fiscal, regulatory and business environment in which the market itself will stimulate and reward innovation.
Too much direct public intervention tends to stifle innovation, distorting the market and creating dependency. Nevertheless, public funding can be of enormous value as a catalyst. For example, public-private partnership schemes to reduce the risks of early-stage investment in high-tech companies can stimulate venture capital financing of innovation.
Wide differences remain between the conditions for innovation in different Member States. The Commission's support for the reduction of regional disparities in access to venture capital and to professional benchmarking, intellectual property management and technology transfer services, and for the identification and dissemination of good practice, is still needed.
FP5 and Beyond
Spurred on by the European Commission, Member States are rationalising business regulation, a vigorous European venture capital industry is forming, and research institutes and private companies are beginning to do business together on a more regular basis.
It is to hasten the emergence of a new technology-oriented entrepreneurialism in Europe that FP5 has been structured to optimise the participation of SMEs - both in research itself, and in the exploitation of its results. The horizontal programme `Innovation and SMEs' will take central responsibility for SME participation, and for ensuring that work within each of the thematic programmes is geared towards innovation.
The Vienna Forum again raised Europe's expectations for its high-tech SME sector as a source of employment, competitiveness, and economic growth. Three case studies presented at the Forum are summarised on the pages which follow. As they demonstrate, it also set out the sector's own expectations - for recognition, for support, and for the freedom to flourish.
(1) See `Innovation, Entrepreneurship and Jobs', edition 2/98.
(2) See `Turning Mice into Gazelles', edition 4/98.
Contact
 Key Conclusions
The need for on-going policy measures in support of innovation, at both national and EU levels, was broadly endorsed. Innovative enterprises are key contributors to economic growth and employment. The spread of good practice, and the testing and promotion of new approaches through pilot actions at Community level, remain high priorities.
There was consensus on a number of specific instruments and priorities, including:
- tax measures favouring the use of stock options by young, technological enterprises
- mechanisms at European level for the transfer of pension rights by researchers wishing to start new companies
- rapid improvement, at European level, of the system for the protection of knowledge - in particular the patent system
- renewed efforts to raise awareness about intellectual property rights among entrepreneurs and researchers, and a scheme of `small entity' fees to encourage their use of patents
- an Internet-based virtual college of entrepreneurship
- the facilitation of technology transfers to industry by universities and research centres
- improved access to economic and technological intelligence gathered by public bodies
- the establishment of a register of business angels
- a venture capital network of expertise, and an inventory of methods for the analysis of high-tech business plans
- a European initiative to showcase successful examples of local support for innovative companies, including industrial and university spin-offs.
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The European Federation
of High-Tech SMEs
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Commissioner Cresson with Francisco Marin and other founding members, at the signature of the Federation's Articles of Association.
(Picture: Simon Blackley, ESN) |
"Young high-tech companies find it hard to break out of their national markets," says Emmanuel Leprince of Comité Richelieu, one of eight associations of high-tech SMEs which have formed the first such grouping at European level. "The Federation's aim is to help them become European companies, exporting to other Member States as the first step towards global competitiveness."
The Federation's founders represent nearly 1,500 SMEs in sectors such as aeronautics and telecommunications, but it hopes to represent 5,000 such companies by the end of 2001. Membership is open to both private associations and public agencies, but Francisco Marin of Aentec emphasises that the approach will be bottom-up. "Like our own organisations, the Federation will be driven by entrepreneurs," he says.
Companies such as Aerospatiale and Siemens are also involved, and both men stress that the Federation is in no way against large firms. "SMEs have a lot to gain from working with market leaders," says Marin. "And they need SMEs' speed of response."
"We want to improve the synergy between them," agrees Leprince. "The Federation has already run 12 partnering events, leading to over 70 contracts - many of them licensing or co-development agreements between large companies and SMEs. We would like to see the Commission doing more to promote participation in its research programmes by consortiums involving both large and small companies."
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INNOVATION POLICY
