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Empowering SMEs through innovation

Research shows that SMEs employing graduates have a better chance of innovating and hence thriving.

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As the backbone of the European economy, SMEs play a significant role in employment. They provide 2 out of 3 jobs in the private sector and contribute over 56 % of the value added created by businesses in the EU. According to the European Commission’s ‘Annual Report on European SMEs 2017/2018’, SMEs accounted for 52 % of the cumulative increase in employment in the non-financial business sector from 2008 to 2017. Considering their importance for the EU economy, there is a growing need to help SMEs cope with the challenges posed by globalisation, demographic change, the rise of robotics and artificial intelligence. A team of researchers involved with the EU-funded SMEthod project have concluded that innovation is key to dealing with these megatrends where graduates are a precious source. Quoted in a news release by project partner Lancaster University, Dr Carolyn Downs says: “SMEs are a major employer both in this country [the United Kingdom] and across the EU, and our research shows that the more graduates an SME employs, the greater the chances of developing a culture of innovation within that company. This, in turn, encourages growth both within the companies themselves and in the wider business sector.”

Green innovation

Dr Downs notes that innovation could also help with other key issues such as climate change. “One important area where SMEs have potential to lead the way is with green innovation, contributing towards combatting the climate emergency.” She adds that existence of innovative thinking could also be beneficial for SMEs in several other areas. “Traditionally, innovation funding has been targeted at new inventions and products, but it can help across a wider range of areas, such as increasing productivity and other decision-making and development spheres.” According to the same news release, the SMEthod’s policy proposals include “effective support to encourage SMEs to employ graduates; funding from government to provide graduate placements and internships; and grants to help pay for graduate salaries. Similar funding is necessary for group graduate training schemes, allowing small SMEs to deliver high-quality training that competes with that on offer from large corporations.” The researchers also recommend “an increase in management training and workforce development opportunities; the facilitation of easier collaboration between smaller SMEs; and an increased use of ICT, with training and financial support provided.” The ongoing SMEthod (Methodology for efficient segmenting innovating SMEs based on lifecycles, represented sectors and regional characteristics) project is expected to help Europe select SMEs with the highest innovation potential and choose the most effective types of support that need to be provided. Following the evaluation of existing methodologies for segmenting SMEs for innovation support, SMEthod will offer an improved methodology. This will be done by taking into account “enterprise lifecycle, industrial sectors, regional characteristics and innovation cycles,” according to the SMEthod project flyer. “Hence, SMEthod will deliver a methodology for segmenting (grouping/ categorizing) innovating SMEs in order to better guide decision-making process, rather than one particular scheme of segmentation for identifying the profile of SMEs that should be supported,” as noted in a work package report on the project website. For more information, please see: SMEthod project website



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