SMEs as key actors for economic resilience, productivity and inclusiveness - Sandrine Kergroach
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This document summarizes a presentation given at an OECD conference on small and medium-sized enterprises (SMEs) and their role in urban areas. It discusses trends in SME performance, opportunities and challenges facing SMEs in a digital global economy, and the importance of innovation. SMEs are a major driver of employment but often create low-paying jobs. While digitalization provides opportunities, many SMEs lag in adopting new technologies. Better data is still needed to understand links between SMEs, business environments, and policies. Overall SMEs will be key to achieving sustainable development goals through greening processes, local services, and innovation.
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SMEs as key actors for economic resilience, productivity and inclusiveness - Sandrine Kergroach
- 1. SMALL, MEDIUM, STRONG THE VALUE OF SMES OECD conference on SMEs and the Urban Fabric 15-16 April 2019, Trento (Italy) Sandrine Kergroach, Senior Economist OECD Centre for Entrepreneurship, SMEs, Regions and Cities
- 2. • SMEs, who they are? Or what do we think they are? • Trends in SME performance and business dynamics: insights from the new OECD publication on OECD SME& Entrepreneurship Outlook • What make SMEs strong? Opportunities and threats in an increasingly digitalised and globalised world • Looking forward: SMEs, Sustainable Development Goals (SDGs) and measurement challenges Outline
- 3. Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme 3 Micro (1-9) Small (10-49) Medium (50-249) Large (250+) Employment % by firm size “Almost everything”? • Nearly 99% firms in most OECD countries • The typical SME employs 5 workers. 0 20 40 60 80 100 GRC ITA SVK LUX DNK DEU CAN JPN USA EU countries Non EU countries
- 4. The SME sector, overall common across the OECD and stable over time • Top five sectors accounting for 60% of SME employment (remains unchanged btw 2010 and 2016) • Hiding a high heterogeneity (country, sector etc.) • SME employment is concentrated in market services Lower requirements in terms of capital, skills and assets for operating on the market. Wholesale and retail trade ~20-40%% Construction ~7-18% Professional services ~5-15% Manufacturing ~10-30% Accommodation Food ~2-22%
- 5. What determines SME performance? Market conditions Institut. & regulatory framework Infrastructure Access to finance Access to skills Access to innovation assets Strategic resources Business environment SMEs and Entrepreneurship policy governance Source: Conceptual framework of the OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme
- 6. A broad and complex range of drivers Regulation Court and lawsTaxation Competition Public governance Institutional and regulatory framework Land and housing Logistics Energy R&D and innovation Internet and ICT Infrastructure Self-funding Financial system Alternative instruments Access to finance Debt Adult literacy Entrepreneurial culture Education Training Access to skills Labour market Technology Data Organisation & processes Marketing Access to innovation assets R&D Networks SME performance Domestic market Public procurement Global markets Trade and investment Market conditions SME & entrepreneurship policy governance Source: Conceptual framework of the OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme
- 7. SMEs are a key driver of employment growth… Change in employment btw 2010 and 2016 (%) -100 -80 -60 -40 -20 0 20 40 60 80 100 Services Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme
- 8. In SME dominated sectors… Change in employment btw 2010 and 2016 (%) Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme -100 -80 -60 -40 -20 0 20 40 60 80 100 Construction
- 9. And in manufacturing in some countries as well Change in employment btw 2010 and 2016 (%) Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme -100 -80 -60 -40 -20 0 20 40 60 80 100 Manufacturing
- 10. New firm creations are back to pre-crisis levels Annual levels (index 2012=100) 0 50 100 150 2001 2005 2010 2012 2017 2007 2010 2012 2017 2000 2005 2010 2012 2017 2002 2005 2010 2012 2017 CAN DEU FRA GBR 0 50 100 150 2000 2005 2010 2012 2017 2000 2005 2010 2012 2016 2000 2005 2010 2012 2017 ITA JPN USA Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme
- 11. But firms are born smaller (likely less productive) and new jobs are created in low-productive sectors Jobs created by births in sectors with above-median productivity, % total jobs created by enterprise births Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme 0 5 10 15 20 25 30 35 40 45 50 2016 or latest available year 2006 25%
- 12. Low productive jobs translate into low paid jobs • Btw 2010 and 2016, percentage of new jobs created in activities with below average wages: Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme Close to 90% 2/3 France Germany UK Over 3/4 USA New light on unprecedented wage stagnation in OECD countries Concerns about people’s access to education/training, willingness to adopt new technologies etc.
- 13. Innovation is key Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme -20 20 60 100 140 180 2005 2008 2012 2015 2008 2012 2016 2012 2015 2016 2005 2008 2012 2016 2008 2012 2016 2008 2012 2016 2008 2012 2016 2005 2008 2012 2016 2005 2012 2016 2005 2008 2012 2016 2009 2012 2016 2008 2012 2016 AUT BEL CHE CZE DEU DNK ESP FIN FRA GBR GRC HUN Micro (1-9) Small (10-49) Medium (50-249) -20 20 60 100 140 180 2005 2008 2012 2015 2008 2012 2016 2005 2008 2016 2008 2012 2016 2005 2008 2012 2016 2005 2008 2012 2016 2005 2008 2012 2016 2008 2012 2016 2008 2012 2016 2007 2012 2016 2005 2008 2012 2016 2012 2015 IRL ITA LTU NLD NOR POL PRT ROU SVK SVN SWE TUR SMEs can outperform large firms, e.g. in professional, and S&T activities Productivity gap to large firms (=100)
- 14. SMEs can be more innovative but struggle combining larger portfolio of assets Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). www.oecd.org/cfe/sme Percentage of innovative firms by size class and innovation mode (%)
- 15. Digitalisation = unprecedented opportunities for SMEs to take part in innovation Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). 15 … Altering client behaviours and production processes • Greater product differentiation and customer-centric business models and enhanced customer experience (big data) • Reducing distance and time to markets (1st mover advantage, reactivity) • Operating in integrated system of smart supply chains and factories • Open innovation with large firms within business accelerators, innovation labs, open sourcing. • Data is the new gold. Data management is strategic (capture, storage, protection, exchange). Technology Data Organisation & processes Marketing Access to innovation assets R&D Networks
- 16. Digitalisation can support internationalisation, with benefits for SMEs Source: OECD SME& Entrepreneurship Outlook (2019, forthcoming). Firms trading internationally % of all firms, July 2017 – April 2018 16 0 10 20 30 40 50 60 70 AUS BEL BRA CAN CHL CZE DEU ESP FRA GBR GRC HUN IND IRL ISR ITA JPN KOR MEX NLD POL PRT ROU RUS SWE TUR USA ZAF Using online tools Not using online tools • SMEs are more active in indirect exports (as suppliers to direct exporters) than direct exports • Achieving scale without mass • Operating local, selling global (digital platforms) • Integration into GVCs o Reducing input and trade costs o Niche markets and specialisation o Accessing technology, knowledge & finance within supply chains
- 17. 2017, Percent of enterprises per size class 0 50 100 Large Medium Small Businesses purchasing cloud computing services Source: OECD, ICT Access and Usage by Businesses (database) 17 But SMEs lag behind in the digital transition Source: OECD (2019 forthcoming), Data Analytics in SMEs 2017, Percent of enterprise per size class Source: OECD, ICT Access and Usage by Businesses (database) Businesses using ERP software 0 10 20 30 40 50 60 70 80 90 100 Large Medium Small 2018, Percent of enterprises per size class Source: Eurostat (no financial sector) Businesses using Data analytics in the EU 0 50 100
- 18. Businesses providing ICT training to their employees, % by size, 2012 vs. 2017 And little progress has been made in increasing ICT training Source: OECD (2017) ICT Access and Usage by Businesses Database, http://dx.doi.org/10.1787/58897a61-en. 0 20 40 60 80 100 NZL NOR FIN BEL IRL AUT SWE LUX DEU DNK SVN GBR ISL ESP NLD PRT CZE FRA HUN SVK ITA EST GRC POL LTU LVA % Small firms 2012 0 20 40 60 80 100 NZL NOR FIN BEL IRL AUT SWE LUX DEU DNK SVN GBR ISL ESP NLD PRT CZE FRA HUN SVK ITA EST GRC POL LTU LVA % Mediumfirms 0 20 40 60 80 100 NZL NOR FIN BEL IRL AUT SWE LUX DEU DNK SVN GBR ISL ESP NLD PRT CZE FRA HUN SVK ITA EST GRC POL LTU LVA % Large firms
- 19. SMEs could be the “weak” node in complex systems • World mobile broadband subscriptions x5 in 8 years. • New generation of 5G mobile networks to come (optimised data transfer). • Smart cities: increasingly integrated and automated utility systems into hybrid infrastructure (physical +digital). • SMEs are less likely to have appropriate cybersecurity and data protection strategy. Source: OECD Broadband and ICT Access and Usage by Businesses databases, 2018. Hyperconnectivity increases the vulnerability of digital infrastructure
- 20. Better understanding the links btw SME sector structure, performance, business environment and policies • Increased need for granularity but significant data gaps remain: – Wages in services sectors – Greater need for information on GVC participation and profile of trading SMEs – Take up of digital tools – and investment rates by SMEs – Gender – National versus subnational data • Overcoming confidentiality constraints and business burdens Looking forward: the measurement challenges 20
- 21. Looking forward: SMEs and SDGs, going beyond the most “economic” of the SDGs
- 22. For ex. SMEs can be key actors in the transition towards a low-carbon economy • Local actors with environmental footprint => Greening of processes and products • Proximity: Circular economy, health and healthcare services • Agents in smart cities and smart grids • Key R&D actors in biotechnology , nanotech. and pharmaceuticals
- 23. THANKS! Contact: Sandrine KERGROACH Senior Economist, OECD Centre for Entrepreneurship, SMEs, Regions and Cities sandrine.kergroach@oecd.org