The “Mammoth” and the “Gazelle” : What Place for a Typical SME?
by par Delphine Gallaud (UMR CESAER, Agrosup Dijon and RNI), Sophie Reboud (CEREN, ESC Dijon and RNI) et Corinne Tanguy (UMR CESAER, Agrosup Dijon and RNI)
Knowledge and innovation are now considered as the main sources of wealth creation. At the Lisbon Summit, the European Union has set the objective to become “the most dynamic and competitive knowledge-based economy in the world”. EU has also acknowledged regional innovation systems as the geographic scale on which innovations are the most likely to develop (1). This implies that it is possible to measure innovation and encourage regional actors to become more innovative. In fact, public financial support is currently quite significant. However, even if Europe already has a data collection instrument with the Community Innovation Survey (CIS), where data is collected at the national level, there is no data collection at the regional level. As a consequence French regions have started in 2008 to establish a way to analyze their innovation potential, according to the method proposed by Prager (2).
This method uses traditional indicators which give the possibility to measure the innovation capacity of companies: measurements of inputs and outputs and the link between the two. Traditional measurements of innovation within a country focus on inputs such as research and development expenditures or the number of research scientists employed. Outputs are the number of patents and of scientific publications as well as the introduction of innovations and the contribution of innovation to the annual sales of innovative companies.
Although these indicators demonstrate a certain level of diversity, the patent indicator is particularly frequently used in France, as well as in Europe and by OECD (3). Patent data has been collected since the 1950s and is available for international comparisons. It can be considered as limited though, because not all innovations are patented, differences in the use of patents are very significant across sectors, and not all patented inventions become innovations. This indicator is however often considered, despite its limitations, as a good proxy for technological innovation.
Large firms were responsible for 65 % of national R&D spending in 2006 compared to 18 % for companies with less than 250 employees (4). The selected indicators are essentially used to measure disruptive technological innovation in these companies and/or in high-tech sectors. In spite of this quantitative difference in terms of R&D spending, Small and Medium Enterprises (SME) innovate. But they have very particular characteristics: they do not usually do formal and continual R&D (5), but more often they do R&D on an occasional basis, by employing graduate and PhD students. As a result, when only indicators measuring national spending on R&D are used, total innovation activity in companies is underestimated. As a matter of fact, innovation is not limited to R&D, which actually only represents on average 20 % of the sum of total innovation-related expenditures.
R&D spending differences are also significant across sectors. Thus companies which manufacture electronic equipment – the leading sector in terms of spending – spent 5.3 billions Euros in 2005 compared to 500 millions Euros for the agri-food sector. But these differences especially expose the skewed vision that public policy has of innovation, because agri-food is actually an innovative sector, but mostly in organisation and marketing (6).
The indicators overestimate large companies “the mammoth” and the “Gazelles,” which are small and very innovative high-tech start-ups, while disregarding innovation activities of companies in traditional sectors, whose contribution to GDP and employment is significant, like for agri-food and SMEs, whose contribution to innovation is equally important. It is thus increasingly important to better measure organizational, marketing and environmental innovation activities (7), and to be able to do so at the regional level.
Finally, the construction of indicators tends to standardize data collection. And yet innovation activities are very concentrated in some regions of France. The Ile-de-France region alone represents 42.6 % of national R&D (8) spending, while Rhône-Alpes, the second largest region, only accounts for 12 %. Are current indicators going to widen the disparity between innovative regions and those which are labeled less-competitive? What will the possibilities of adjustment be for the less-competitive regions if public financing goes to the aforementioned regional champions? There is an urgent need to correct this biased image in favour of radical technological innovation and to rethink the importance of quantitative indicators to better take into account the diversity of regional trajectories.
(1) See RRI’s editorial of October 2009.
(2) PRAGER J. C., 2008. Méthode de diagnostic du système d’innovation dans les régions françaises, Étude réalisée par l’Agence pour la Diffusion de l’Information Technologique pour le compte de la Direction Générale des Entreprises, 130 p.
(3) For example the Eurolio project uses it. http://www.eurolio.eu
(4) CPCI (2008) in http://www.industrie.gouv.fr/cpci/rapportscpci.htm.
(5) Doing continual R&D means an employer has at least one researcher working full-time
(6) Measured in this way, 60% of agro-food businesses innovate compared to 40% in the manufacturing sector.
(7) This kind of innovation was added to the eighth version of the CIS.
(8) OST (2008)
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Title: Journal of Innovation Economics (JIE)
