ENHANCING THE COMPETITIVENESS OF SMEs IN THE GLOBAL ECONOMY : STRATEGIES AND POLICIES Workshop 1 ENHANCING THE COMPETITIVENESS OF SMEs THROUGH INNOVATION

Highlights • For SMEs in the OECD, economic globalisation has created new competitors, especially in low labour cost countries, but also greater incentives and opportunities to access the various markets and knowledge sources needed to build lasting competitive advantage through continuous innovation. • SMEs are a heterogeneous population of firms whose contributions to the innovation system are wide ranging and include not only R&D based new products and services, but also improved designs and processes and the adoption of new technologies. • Strategies to enhance the global competitiveness of innovative SMEs should take into account that:-New information and communication technologies facilitate global reach and help reduce the disadvantage of scale economies which small firms face in all aspects of business.-Flexible specialisation has proven to be a particularly successful model of industrial organisation: through close cooperation with other firms SMEs can take advantage of knowledge externalities and rapidly respond to market changes.-Despite economic globalisation and the ability to transmit information rapidly and cheaply, geographic boundaries still matter. Clustering is particularly important to gain access to new ideas and tacit knowledge, especially in young industries.-Specialisation in a market niche compensates for some of the disadvantages of small scale.-While there are more hurdles to overcome for a small firm setting up affiliates abroad, the benefits in terms of access to new markets and knowledge can be immense. • Despite the fact that globalisation reduces the degrees of freedom governments have in their policy responses, they can still play an important role in encouraging SMEs to innovate and to implement the strategies required to effectively meet the globalisation challenge, through appropriate regulation, incentives, and institutional learning. • However because of the heterogeneity of the SME population, any policy to increase their innovative capacities must be targeted to meet the needs of a variety of user groups, have different objectives, and use multiple approaches and tools. • For " High-tech " SMEs (the technology developers or lead technology users), which make up less than 15% of the total SME population, the most important goals are to promote the development of the private venture capital industry and associated services, and to adjust accordingly the management and objectives of public R&D granting programmes. • For the vast majority of SMEs (the technology followers), novel technology and innovation policies should better address their needs, especially in regards to: non-financial innovation advice such as consulting services; recruitment of university …