1. Results of the field research IΟΒΕ – ΕΒΕΟ / ΕΜΠ Field research supported by PUBLIC ISSUE 13/12/11 FOUNDATION FOR ECONOMIC AND INDUSTRIAL RESEARCH NATIONAL TECHNICAL UNIVERSITY OF ATEHNS SCHOOL OF CHEMICAL ENGINEERNING INDUSTRIAL & ENERGY ECONOMY LABORATORY European Union European Social Fund With the co-funding of Greece and the European Union Changes in regional productive systems and local labor markets

2. Structure of the research team Project Management Yannis Stournaras, General Director IOBE Scientific Responsible : Y Caloghirou, Professor, National Technical University (NTUA) Research Responsible: A. Tsakanikas, Head of Research ΙΟΒΕ, Assistant Professor National Technical University (NTUA)

3. Greece: Need for highly competitive firms based on well educated employees In the midst of the economic crisis and in search of a new growth model for Greece, the role of the private sector and the institutional set up is decisive We are in need of viable firms capable to compete in international markets even under a credit crunch conditions, In modern knowledge economies, we should focus on firms’ resources and human capital qualitative performance Changes and adaptation: need for education, (re)qualification and training

4. Aim of project: A foresight mechanism Monitoring and mapping changes in production systems, labor markets, firms’ performance and behavior: Analysis of existing business models coordination of resources / skills, deployment of plans that drive business development Impact assessment studies in order to capture the impact of changes on business, professions, skills and work structure Focus on the existing pool of companies, but also highlighting features of the new entrepreneurship, especially the one that can be named as knowledge-based entrepreneurship

5. Benefits of the mechanism Better information that will allow predictions and develop early warning indicators of changes in production systems in the Greek economy Contribution to the p ublic consultation with targeted policies Design of the necessary policy measures that will be integrated into business strategies and public policies that support / influence these changes Improvement of decision making process bearing in mind sectoral specialties, needed qualifications and skills, shortages of qualified human capital today and potentially in the future

6. Methodology Desk research Conduct of a field research in the largest 2000 Greek firms companies through telephone interviews Panels of experts Business executives, institutional representatives Innovation and human resources development experts, Senior researchers Academics Policy makers

7. Expert panels Energy production Management & Energy Conservation Bioagrofood Environmental IndustryConstruction Industry Clothing & Textile Industry Packaging industry Information and Communication Technology Health

8. Field Research in 2000 largest Greek firms The largest firms at the national and regional level (in terms of emloyement) Respondent: General Director Period: from 30/3/2011 to 5/7/2001 Stepwise approach: first 1000, next 1000 and so on (~ 4200calls) Total responses: 2025 Employment: 317.000 persons Average number of employees: 140 people Total turnover 2009: € 68 billion

9. Sufficient sample from all regions Regions Responses % Attica 71535,3% Central Macedonia 27013,3% Thessaly 1557,7% Crete 1447,1% Eastern Macedonia and Thrace 1276,3% Western Greece 1226,0% Central Greece 1105,4% Peloponnese 984,8% South Aegean 924,5% Epirus 613,0% Western Macedonia 542,7% Ionian Islands 452,2% North Aegean 321,6% Total 2025100,0%

10. Industries and Wholesale / Retail Trade: 75% of responses SectorsΑπαντήσεις % Wholesale / Retail Trade 74036,5% Manufacturing 68834,0% Hotels and restaurants 1437,1% Construction 1095,4% Business Services (financial, real estate, telecoms, transport) 984,8% Primary sector 723,6% Consulting services 703,5% Other services (entertainment, recreation, education, health services) 542,7% IT Companies 512,5% Total 2025100,0%

11. Size: 46% employ over 50 employees Companies% 1-10 employees 24812,2% 11-49 employees 84941,9% 50-249 employees 71335,2% Over 250 employees 21510,6% Total 2025100,0% So in fact more than half of the largest firms at the national and regional level in Greece employ less than 50 persons

12. Technological Capabilities Knowledge networks Human Resource Development Information Management Systems Quality management Conceptual Framework: Business Development InvestmentsInnovationExports Business Performance

13. Main Results of the Survey

14. The role of investments Good financial results support investments: Two out of three companies that invest> € 1 million in 2011-2012 made large investments also in 2009-2010 73% of companies that invest in 2011-2012 had profits in 2010 63% of companies that invest in 2011-2012 over € 1 million estimate that in 2011 sales will rise or remain stable Exports lead to investments because companies have to keep up with global competition 70% of exporting companies invested in 2009-2010, primarily in capital equipment Links with universities, research centers and participation in research projects boost investments 14

15. The role of investments Investments support innovation of any kind (product, process, marketing) 71% of companies that introduced product innovation... 73% of firms that introduced process innovation and... 63% of companies that introduced organizational innovation...... Made significant investments in the two previous years

16. The role of innovation Innovation and especially process innovation supports exports Basic requirements / conditions are: Increased technological capabilities of firms High response in changes in demand, flexible production, modernization Action research plan Networks with research centers, participation in research programs Knowledge of demand Cooperation with suppliers, customers, competitors, etc.

17. The role of exports Exports boost financial results (sales and profits) All exporting companies that estimatean increase in exports in 2011 declare an increase in sales as well Exports are facilitated by Their size of firms (60% of exporting companies are large firms) Their organizational structure Use of management systems (information systems, project management mechanisms etc.) 79% of exporting companies use information management systems Quality management systems and environmental approvals 68% of exporting companies use quality management systems

18. 18 Evaluation Forecast Financial Results Decline (2010/2009)Negative forecast (2011): Further reduction in sales  Decrease in Sales by 11%  Limited profits in most businesses, large losses in few  Further decrease in sales by 7% in 2011 52.3% of companies estimate further decrease in sales Only 18% of companies estimate an increase in sales Exports Still plenty of room for improvement Positive forecasts for 2011  About 45% of firms have exports (70% in the manufacturing sector) The volume of exports is amounts 30% of total sales  54% of exporting companies estimate that they increased exports in 2011 87% of them however believe that the increase will me less than 10%

19. 19 Evaluation Forecast Investments Significant volume of investment (2009-2010) Decline in investments (2011- 2012)  5,16 billion Euros have been invested Mainly for purchasing new or replacing existing equipment Highest average investment (7.6 million €) in manufacturing  Significant decline in investments, both in terms of plans and in terms of volume Investment plans are only half of the precious years, total investments reduced by 40% Smaller decrease in investments in manufacturing (-29%)

20. 20 Innovative performance Product Innovation  50% of the firms made a product innovation (2009- 2010) Type of innovation: new to the firm (69% of the firms) or new for the Greek market (50%) 13% of total sales comes from those innovative products Process Innovation  One company out of three have adopted process innovation mainly on production processes (70%) and ICT (50%) Organizationa; / Marketing Innovation  38% of companies mainly on selling methods (70%)

21. 21 Capabilities Technological CapabilitiesGeneration of new knowledge  Rapid response to changes in demand (2 out of 3 companies) More difficult the switch among different products Less than half the sample are flexible enough for the production of different products Good technological background on production  More than 50% can significantly advance their technological base but they use technology as a commodity: turn key solutions from abroad  Poor results in R&D activities Although half of the firms respond that they undertake some sort of R& D activities, most of them do not have a unique special R&D department Basic sources of knowledge in most businesses: customers and suppliers  Low involvement in research projects, working with consultants, conferences, etc

22. Human Resource Management EmploymentHR Policy  37% of companies bear difficulties in finding suitable candidates Mainly because the candidates do not meet the requirements of the position  36% of companies face skill deficits in the existing staff. Basic lags in: Initiatives and risk taking Technical knowledge required for the job  ¾ of companies implement training programs Mainly internal programs training, but also financed seminars outside the company So, there are not only soft skills missing, but also real technical knowledge related to the workplace responsibilities

23. Degree of exposure to the crisis’ characteristics : common problems in the majority of sectors 23 Because suppliers/customers face liquidity problems (48,7% of the firms responded that they feel exposed to the specific factor ) Because banks do not approve new loans (36%) Because demand from the main customer has been reduced (mainly in the construction sector) (29%) Due to a shift in demand towards cheaper categories (hotels – restaurants) (23%) Liquidity lack Due to increased pressure from foreign suppliers for cash payments (mainly in manufacturing) (22%)

24. Firms’ response to the crisis in the next 12 months 24 Restraint/ decrease of employees’ wages (69% of the firms will probably follow the strategy ) Reductions in premiums and bonuses (44%) Reduction of employees’ indirect benefits (43%) Adjustment of working time (34%) Actions Price reductions (34%) Reduce personel (28%)

25. Typologies of Business Behaviors

26. Classification : Economic Performance TypologyCategory A: the «established» Category B: the «in crisis» (mixed trends) Category C: The «problematic» Identification Profits 2010/2011 and sales’ increase in 2011/2010: 573 firms (28,3% of the sample) Β1: profits 2010 or/and 2011, but sales’ decrease (19,7%) Β2 : profits in 2010, (32,3%,): 1052 firms(52,0% of the sample) Losses in 2010 and 2011: 400 firms (19,8% of the sample) Differences 55% export-oriented 61% expect exports’ increase in 2011 10% bank financing problems 54% product innovation, 37% process, 43% organizational 45% export-oriented 53% expect exports’ increase in 2011 20% bank financing problems 49% product innovation, 31% process,, 39% organizational 38% export-oriented 42% expect exports’ increase in 2011 40% bank financing problems 42% product innovation, 25% process,, 32% organizational

27. Classification: Technological Performance & Innovative TypologyCategory A: the «high innovation-intensive» Category B: the «middle innovation- intensive» Category C: the «low innovation-intensive» Identification Product innovation and process innovation: 443 firms (21,9% of the sample) 984 firms (48,6% of the sample) No innovation 598 firms (29,5% of the sample) Differences 61% large firms 86% applies vocational education and training 30% conducts some R&D in house 46% large firms 79% applies vocational education and training 25 % conducts some R&D in house 33% large firms 60% applies vocational education and training 14 % conducts some R&D in house

28. Classification : Human Resource Education & Training Typology Category A: the «high education- intensive» Category B: the «middle education- intensive» Category C: the «low education-intensive» Identification Appliance of all kinds of formal and informal education: 591 enterprises (29,2%) Mainly informal education forms: 933 enterprises (46,1%) No educational program at all: 501 enterprises (24,7%) Differences 50% export- oriented 59% exports’ increase in 2011 6,4% exports’ decrease in 2011 16% bank financing problems 48% export-oriented 55% exports’ increase in 2011 8,3% exports’ decrease in 2011 22% bank financing problems 41% export-oriented 45% exports’ increase in 2011 14% exports’ decrease in 2011 28% bank financing problems

29. Firms’ size a determinant for … The innovation performance of each type Exports Investments The level of exposure to the economic crisis and the ways of response to it The implementation of management practices and the possession of quality certificates The EXCELLENCE ( ? )

30. The “excellent ones” ( ΑΑΑ !!): 70 firms Economic Performance (Group A) Technological Capabilities (Group A) Human Resource Development Policies (Group A) ΑΑΑ 70% large firms Use of integrated information systems half of them in Attica mainly manufacturing Official staff assessment procedures Smoother reaction to the crisis, mainly through wages’ restraint Wider use of management practices Wider use of quality management systems

31. Conclusions

32. Conclusions... The current crisis is decisive for the strategic identity of the largest firms in the country Increasing pressure from shrinking domestic demand, credit crunch, lack of liquidity in the whole value chain of the firms Poor economic performance that threatens firms’ viability Growing uncertainties Result: Investing climate deterioration, constant efforts for operational cost reductions

33. Conclusions... Enterprises intensify their efforts to support their revenues through exports But : extroversion is not easy Knowledge of markets, quality, flexibility, technological skills and advanced human capital are required Investments in technology, modern equipment and “difficult” innovation are required Synergies with other businesses of complementary or similar sectors for scale economies Focus on market niches at the global level

34. Main question today Under a fiscal consolidation process, what are the requirements for a restarting of the growth of the economy? Beyond the macroeconomic management, is it necessary to develop a connection between technology/innovation, institutions’ quality and productive structures We seek for qualitative development focusing on knowledge, technology, innovation, focusing on knowledge-intensive entrepreneurship and the support of an intelligent, effective and Public Sector. A new social deal, a coordination of public policies and strategic management of the implementation

35. Growth policy: Towards a new Social Deal based on knowledge and technology Systematic use of the new knowledge produced. Incorporation and operational use of ICT technologies everywhere, Coupling the production process with environmental protection and efficient use of resources (energy, raw materials, materials, etc.). Encouragement of the entrepreneurship based on quality, research and use of knowledge and innovation. Strengthening of production and technology ecosystems. Promotion of the extroversion of the Greek economy through a strategy of focusing on market niches at a global scale, escpecially for manufacturing SMEs. The public sector as a smart user: procurements based on innovations, “green” and smart solutions, etc.

36. Growth policy: Towards a new Social Deal based on knowledge and technology Development of network digital infrastructures of the next generation. Systematic effort to attract foreign investments at the production and infrastructure level that will allow the efficient use of innovation and knowledge Promotion of innovation as a way of thinking and acting (knowledge transfer networks and experience encoding, innovation competition, etc.) Treatment of side effects and gaps (social, technological, educational, peripheral etc.) that arise as results of productive restructuring and technological modernization

37. Beyond the sectoral approach at the perception of the “ecosystem” The transfer of the ecosystem at the analysis of value chain and related socio-economic processes. Technical-socioeconomic ecosystems. The role of actors and stakeholders. Broad range. Interactions between organizations and symbiotic relations for the creation of knowledge. The role of actors and the exigent demand. Platforms, learning, knowledge and innovation networks.

38. Examples of ecosystems The ecosystem of Information and Communication Technologies The agro-bio-nutritional The environmental The constructions’ (projects, materials, insulators, bioclimatic, smart buildings..) Energy (production and demand management..) 38

39. The organization and the strategic management of the implementation matters a lot Policy system. Consolidation and integration of measures, interventions and actions. Timing. Public debate agenda configuration. Development is a process of mobilization of resources, humans, groups etc. Strong coordination but decentralized implementation 39

40. Thank you for your attention For information concerning the project : Aggelos Tsakanikas atsakanikas@iobe.gr atsakanikas@iobe.gr Tel: 210-9211265