Innovation Promotes Internationalization of Small and Medium-Sized Enterprises

In recent decades the internationalization of small and medium-sized enterprises (SMEs) has increased significantly, especially in manufacturing industries. Yet in contrast to large, multinational corporations, not much is known about the international activities of SMEs. Data on East German SMEs show that size and innovative capacity have a significant influence on a company's international involvement, as measured by exports and relocating production or other operations abroad. Furthermore, external factors also impact the international activities of SMEs. Particularly significant in this regard is a company's competitive situation and locational factors such as spatial proximity to research institutions and support from regional authorities and organizations. Regional policy aimed at increasing the presence of SMEs in international markets should therefore foster firms' innovative capabilities and support regional companies with good services and guidance programs

Locational Conditions, Cooperation, and Innovativeness: Evidence from Research and Company Spin-offs

This paper has two goals. First, it analyzes the extent to which the innovativeness of spin-offs, either born from a research facility or from another company, is influenced by locational conditions. Second, it provides evidence on how important local cooperation links are in comparison to nonlocal ones. Using a sample of approximately 1,500 East German firms from knowledge-intensive sectors, we estimate a structural equation model applying the partial least squares method. We find that proximity to local research institutes and universities is the most influential factor for the cooperation intensity of spin-offs. Furthermore, the higher the cooperation intensity, the greater the innovativeness of a firm. Moreover, the results indicate that it is not the local but the nonlocal cooperation ties that are more conducive to innovativeness of research spin-offs. The findings also highlight that the innovativeness of research spin-offs with solely local links is strongly depends on support from various authorities and institutions.Research and Company Spin-Offs, Locational Conditions, Cooperation Intensity, Innovativeness, Structural Equation Modeling, Partial Least Squares Approach

How Innovative are Spin-Offs at Later Stages of Development? Comparing Innovativeness of Established Research Spin-Offs and Otherwise Created Firms

The literature argues that research spin-offs (RSOs)-enterprises originating from a university or research institute-appear to have higher innovative potential and capabilities than other start-ups, at least in the early stages of their development. Yet, little is known about the innovative performance of these companies at later development phases. Thus, the main goal of this study is to investigate whether there are any differences in R&D and innovation behavior between established and/or mature RSOs and otherwise created firms and, if so, to what extent they are driven by networking and cooperation activities as suggested by some scholars. To this end, we employ probit regression analysis and a matching approach using survey data on more than 6,000 East German firms, among which are 179 RSOs. Our first findings suggest that established RSOs engage in R&D and innovation activities more frequently than companies whose genesis was of another type. Nevertheless, the results obtained when accounting for collaboration measures show that the precedence of RSOs in further development stages over otherwise created firms in terms of innovativeness is related to their higher intensity of cooperation activity and close, face-to-face interactions with universities, and not to type of firm creation. Moreover, our findings reveal that cooperating in various fields may be of different importance for specific inputs and outputs of the innovation activity. Finally, based on our results, we draw some implications both for practicing managers and public policymakers

Innovationsfinanzierung im Mittelstand: Zugang zu Krediten erleichtern!

Viele kleine und mittlere Unternehmen (KMU) können Forschung und Entwicklung (FuE) nicht allein aus Eigenmitteln finanzieren. Die Fremdfinanzierung risikoreicher FuE-Projekte mit Krediten ist ihnen aber auch nur begrenzt möglich. Die Förderprogramme des Bundes, der Länder und der EU sind deshalb eine wichtige zusätzliche Finanzierungsquelle für FuE sowie Innovation im Mittelstand. In einer Analyse von rund 1 500 innovativen KMU im verarbeitenden Gewerbe konnten drei Unternehmensgruppen identifiziert werden, die in unterschiedlichem Maße staatliche Fördermittel zur Finanzierung von FuE-Aktivitäten nutzen. Es zeigt sich, dass mittelgroße KMU, die neben der staatlichen Förderung auch auf private Fremdmittel angewiesen sind, am ehesten Schwierigkeiten mit externer Finanzierung von FuE und Innovation haben. Deshalb sollte der Zugang von KMU zu günstigen Krediten für FuE-Aktivitäten erleichtert werden. Die externen Rahmenbedingungen werden von den geförderten KMU im Großen und Ganzen positiv bewertet. Hemmnisse sehen sie vor allem beim Fachkräfteangebot sowie mit deutlichem Abstand bei den Wettbewerbsbedingungen und der Marktregulierung.Many small and medium-sized enterprises (SMEs) are unable to finance research and development (R & D) using only their internal resources. However, they have limited access to external financing loans for high-risk R & D projects. Therefore, funding programs initiated by the German government, the Länder, and the EU are an essential additional source of financing for R & D and innovation in small and medium-sized enterprises. In an analysis of around 1,500 innovative SMEs in the manufacturing sector, it was possible to identify three groups of companies accessing public funding to varying degrees for their R & D activities. It emerged that medium-sized enterprises dependent on both private external and public funding are most likely to have difficulties with external financing for R & D and innovation. Consequently, there is a need to facilitate SME access to lowinterest loans for R & D activities. SMEs receiving funding are generally positive about the external conditions. They see obstacles primarily with the supply of skilled personnel and then, to a much lesser extent, competition conditions and market regulation

Technology Neutral Public Support: An Important Pillar of East German Industrial Research

Industrial research in East Germany mostly takes place in small and medium-sized Enterprises (SMEs) and non-profit external industrial research institutions, whereas in West Germany industrial research mainly takes place in large companies. The German Federal government, along with Länder governments, subsidize industrial research in East Germany-within the framework of technology neutral public support programmes-spending about half a billion EUR annually. This approach, which subsidizes a broad spectrum of product and process innovations through project grants, has been proven, by and large, successful. Publicly supported industrial SMEs increased employment, gained access to new markets, as well as improved their productivity and profit situation. This is the finding of a study for the Federal Ministry of Economics and Technology conducted by the German Institute for Economic Research (DIW Berlin). In order to promote the growth of East German businesses, priority should be placed on research and development (R&D) and innovation. For this reason, the German government-which has expanded SMEs support to West Germany-needs to continue preference to East Germany.East Germany, Manufacturing, Innovation, R&D, Research policy

Locational conditions, cooperation, and innovativeness: evidence from research and company spin-offs

This paper has two goals. First, it analyzes the extent to which the innovativeness of spin-offs, either born from a research facility or from another company, is influenced by locational conditions. Second, it provides evidence on how important local cooperation links are in comparison to nonlocal ones. Using a sample of approximately 1,500 East German firms from knowledge-intensive sectors, we estimate a structural equation model applying the partial least squares method. We find that proximity to local research institutes and universities is the most influential factor for the cooperation intensity of spin-offs. Furthermore, the higher the cooperation intensity, the greater the innovativeness of a firm. Moreover, the results indicate that it is not the local but the nonlocal cooperation ties that are more conducive to innovativeness of research spin-offs. The findings also highlight that the innovativeness of research spin-offs with solely local links is strongly depends on support from various authorities and institutions

Financing patterns of innovative SMEs and the perception of innovation barriers in Germany

We analyze the role of public support in the financing pattern of R&D in German SMEs and their assessment of financing conditions in the context of other framework conditions for innovation. In Germany, there is a diversity of overall well-funded technology-neutral and technology-specific programs providing grants to R&D and innovation projects. Different types of SMEs access public funding for R&D and innovation activities to varying degrees. Using an extensive sample of 2,700 German SMEs that participated in public R&D promotion programs during the 2005-2010 period, we identify four groups of companies with different patterns of public and private sources of R&D finance, such as own capital, grants, private and subsidized loans. The firms in our sample are generally positive about public financing of R&D in Germany in 2010. Despite the different funding patterns, we find only slight variations in this assessment across the four groups of subsidized SMEs. Nevertheless, medium-sized R&D companies (often with external equity investment) that have to finance the market introduction of innovations without a track record, appear to suffer from deficiencies in the provision of loans. Further, the companies perceive obstacles to innovation primarily in the non-financial sphere, namely the supply of skilled personnel, market regulation and competition conditions. Therefore, future work on innovation policies for SMEs should put greater emphasis on the non-financial external framework conditions for firm R&D and innovative activities

Knowledge, location, and internationalization: Empirical evidence for manufacturing SMEs

This paper investigates the links between locational conditions, innovative capabilities and internationalization of manufacturing SMEs. Two modes of foreign market servicing are explored: exporting activity and relocating of selected business activities abroad. The empirical analysis employs two probit models based on survey of about 3,000 firms. The results reveal that the outputs of SMEs' innovative activities-i.e., product innovations and patent applications-enhance exporting propensity as expected. Nevertheless, the input-side indicator-R&D intensity-appears to exert no impact. Further, the locational factor proximity to research institutions promotes SMEs' engagement in exporting. Regarding the determinants of selective relocations abroad, the findings show that SMEs with a high degree of R&D are less likely to separate production from other operations and relocate it abroad. Moreover, manufacturing SMEs assessing the proximity to research facilities, as well as support from various regional authorities and other bodies as important and good-quality locational conditions, exhibit a significantly lower likelihood to relocate selected activities abroad. Indeed, emphasizing the role of institutional setting in firm activity, our findings coincide in this respect with the previous literature focused on innovative milieu, learning regions and regional innovation systems

Technology neutral public support: An important pillar of East German industrial research

Industrial research in East Germany mostly takes place in small and medium-sized Enterprises (SMEs) and non-profit external industrial research institutions, whereas in West Germany industrial research mainly takes place in large companies. The German Federal government, along with Länder governments, subsidize industrial research in East Germany-within the framework of technology neutral public support programmes-spending about half a billion EUR annually. This approach, which subsidizes a broad spectrum of product and process innovations through project grants, has been proven, by and large, successful. Publicly supported industrial SMEs increased employment, gained access to new markets, as well as improved their productivity and profit situation. This is the finding of a study for the Federal Ministry of Economics and Technology conducted by the German Institute for Economic Research (DIW Berlin). In order to promote the growth of East German businesses, priority should be placed on research and development (R&D) and innovation. For this reason, the German government-which has expanded SMEs support to West Germany-needs to continue preference to East Germany