Employing Technology & Innovation in SME Development R. A. Attalage University of Moratuwa 1Employing Tech & Innovation in SME Dev

Context SMEs in SL accounts for 80% of all businesses SMEs are found in all sectors of the economy and responsible for the economic growth and this is recognized by the Govt. SMEs employ skilled, semi-skilled and unskilled people (35% of employment) SMEs cover Agriculture, Manufacturing and Service sectors (more than 90% of business establishment) SME policies target developing entrepreneurial skills and innovation 2Employing Tech & Innovation in SME Dev

Context…contd. Currently proposed policies of SMEs promotion is through skill & entrepreneurship development, quality of employment, tax concessions, marketing & access to finance Has potential for substantial employment growth and wealth creation in SL Appropriate and Inexpensive technologies are critical to SMEs 3Employing Tech & Innovation in SME Dev

Context…contd. In developing countries, university-Industry linkages are important means to transfer local knowledge and to supplement the acquisition and adaptation of international knowledge and technologies Developed countries employ intermediaries in tech development, transfer, research etc. Concept of Triple Helix manifesting technology transfer, incubators for creating technology based enterprises, science parks are essential for SME development Due to the nature of business of SMEs, Industry Associations, Cluster concept could play an effective role 4Employing Tech & Innovation in SME Dev

Some….Key Issues Low level of awareness on available technologies and access to them Low capacity in adapting modern, competitive, efficient technologies Low level of services provided in technology transfer and advice Limited access to finances Lack of national level synergetic, integrated, focused platforms for SME development 5Employing Tech & Innovation in SME Dev

Middle Income Trap Countries with per capita income between $ 5, ,000 said to be caught in the middle income trap. Around 100 countries have made the transition from low to middle income during the last years. But many could not make from middle to high income. A low income country can be relatively easily started- up due to advantages in labour, trade & financial and concessions. Moving from middle to high income is more challenging and difficult. 6Employing Tech & Innovation in SME Dev

Escaping Middle Income Trap Technology, innovation and knowledge are crucial drivers of development Technology, innovation and knowledge have enabled the BRICs and HPEs to develop Technology, innovation and knowledge are important in the transition out of the middle income trap and towards developed country status The role of universities is particularly important – as in Sri Lanka at present - technology and innovation increasingly drive economic growth. 7Employing Tech & Innovation in SME Dev

Escaping Middle Income Trap Economies have to move up the technology ladder and to find markets that can absorb the new openings. This means innovation, R and D and new export markets Universities could be possess potential reservoir of knowledge which the SMEs must leverage for innovation, R and D and new export markets In view of the SME’s role in the economy, its part w.r.t technology & innovation becomes essential than ever before 8Employing Tech & Innovation in SME Dev

Increasing importance of Innovation Pre Industrial Stage Pre Industrial Stage Initial FDI Engagement Tech Absorption & adaption Internalizing Skills and Technology Internalizing Innovation Subsistence agriculture Raw material export Aid dependency Subsistence agriculture Raw material export Aid dependency Full technology & innovation capabilities Create innovation & Technologies Global positioning of a range of product EU, Japan, USA here Full technology & innovation capabilities Create innovation & Technologies Global positioning of a range of product EU, Japan, USA here Simple manufacturing Some Processing of Raw Materials FDI in material Processing and service sectors Simple manufacturing Some Processing of Raw Materials FDI in material Processing and service sectors Export based growth increases OEMs Attracted Globally competitive value chains emerge Knowledge driven business Private investment greater than ODA Export based growth increases OEMs Attracted Globally competitive value chains emerge Knowledge driven business Private investment greater than ODA Management & Technology masterd Production of high quality goods Companies go to scale- globalise BRICS countries here Management & Technology masterd Production of high quality goods Companies go to scale- globalise BRICS countries here Thailand, Chilie, Malayasia- Sri Lanka entering this stage Importing Technology to Incremental Innovation Little Innovation 9 Source: SQW Employing Tech & Innovation in SME Dev

Innovation System in Transitional Countries Source: Innovation policies: A guide for developing countries. World Bank Employing Tech & Innovation in SME Dev

Universities with SMEs “Ultimately, most of the technological advances that have economic consequences can be traced indirectly or directly to universities, either through the training provided, the knowledge spillovers, or the actual research conducted or through UILs (University-Industrial Links) that enabled firms and faculty members to collaborate in the development of technologies.” “The vast majority of universities (in developing countries) are not in a position to engage in research or to forge links with industry other than those created by individual consulting assignments. They are too small or have too shallow a pool of research talent to create viable, effectively managed teams, or they are focused on teaching.” Source: How Universities Promote Economic Growth: Shahid Yusuf and Kaoru Nabeshima, Chapter 1, Policy Dimensions, World Bank, Employing Tech & Innovation in SME Dev

Model for Links with Universities 12Employing Tech & Innovation in SME Dev

Introduction of Technology and Innovations into the economy An economy gradually has to become able to produce its own technologies and innovations, and thus transit towards developed country status, focusing on its competitive advantages, identified markets, risk assessment Developing novel products and new ways of product and service delivery in developing countries for their use in both developing and developed markets. 13Employing Tech & Innovation in SME Dev

Need of an Innovation Eco System Innovation Eco system is needed as Businesses do not absorb technology, innovations and knowledge in isolation, but within a ‘system’ Education system, financial systems, and competition policy and Intellectual property rights, influence the ability of a firm to absorb and use technology, innovations and knowledge profitably. 14Employing Tech & Innovation in SME Dev

End of Presentation 15Employing Tech & Innovation in SME Dev