26 th April 2007 Micro and Small Enterprise Development, innovation and public policy 2nd. International Workshop of the BRICS Project Ana Arroio Federation of Industries of Rio de Janeiro and RedeSist

Myths MSE are not enterprising MSE do not innovate MSE are not competitive

A question of size Brazilian Micro and Small Enterprise We are women, hear us roll – gender and MSEs The Second Economy Mapping innovation in Brazilian MSME Innovation overview Innovation co-operation Public support for innovation Innovation protection methods

Firm size - classification Annual gross income: Micro firm: annual gross income equal or inferior to US$ 201, Small firm: annual gross income superior to US$ 201, and less than US$ 992, Number of people employed: Micro firm: I) in industry and construction: 19 employees II) in commerce or service, 9 employees Small firm: I) in industry and construction: 20 to 99 employees II) in commerce or service, 10 to 49 employees

Distribution of firms, occupied personnel, wages and other remuneration according to number of personnel employed, Brazil, 2004 Source: IBGE, 2005

Firm closure

Exports Source: SEBRAE, 2005a, using information consolidated by the Central Bank statistical institution FUNCEX *“Special Micro and Small”, is a category used by FUNCEX that comprises firms with less than 100 employees but that have exports that are over US$ 2500.

Sustainable economic development The most dynamic states in terms of exports are not concentrated in the wealthier south and south- east of Brazil, as might be expected, but rather in the rich forest land of the northern states. Exploitation of natural resources is the main source of advantage for these enterprises, leading to issues concerning sustainable economic development and potential environmental impacts.

Gender and MSEs Source: IBGE/PNAD, 2001, consolidated by Melo and Sabbato, 2002.

Source: IBGE, ECINF Commerce and Repairs Civil Construction Industrial Transformation and Extraction Transports, Warehousing and Communications Collective, Social Personal Services Real estate, Rentals Services to Firms Lodging and Alimentary Education, Health and Social Services Undefined Activities Other Activities Informal sector enterprises

Mapping innovation in Brazilian MSME Industrial Survey of Technological Innovation, PINTEC, is the soundest statistical basis for the analysis of MSME innovation efforts in Brazil Profile by enterprise size and the structure by sector are the main factors influencing the rate and the pattern of innovation in the industries of each country. Limitations: –Innovation data is limited to the industrial sector –information regarding cooperation in both PINTEC and CIS3 is limited to formal partnership agreements.

The Surveys – overall results Total Sample: 72 thousand industrial companies in 2001; 84.3 thousand in 2003 Number of companies which altered their products or processes grew from 22.7 to 28 thousand, leading to an innovation rate of 33.3% for the period Increase in the total national industry innovation rate, from 31,5% to 33%, occurred particularly in firms occupying 10 to 49 people. Rate of innovation in micro firms grew from 26,2% to 31,1% Micro firms represent 80% of the firms researched in PINTEC 2003

Proportion of firms that implemented innovations, Brazil Source: IBGE, 2005.

Innovation co-operation Source: IBGE, 2005.

Public support for innovation Source: IBGE, 2005.

Innovation protection methods Source: IBGE, 2005.

45.4% firms experienced difficulties that caused innovation projects to be seriously delayed or abolished Main obstacles:  high innovation costs %  excessive economic risks %  scarcity of financing sources %  lack of information on technology %  inability to adjust to regulations or standards %  lack of information on markets %  Lack of interaction with other firms or institutions %  inadequacy of external technical services %  lack of qualified personnel - 13% Barriers to innovation

Policies – Finding a Common Ground Financing innovation efforts Education – Development of Capabilities and Educational System Entrepreneurship & Entrepreneurial culture Support services Simplification of Bureaucracy

Questions Dynamics of policies that foster innovation in small firms? And in Local Innovation and Production Systems? How to grasp and measure informal co-operative practices? What other indicators that also comprise intangible aspects of local processes of learning and innovation? how do issues related to women’s and other “minorities”, rights and needs differ according to local social, economic and cultural realities? How can these needs best be included in development plans?