1. Forum on Cross-Border Integration The production systems’ internationalisation (Main Conclusions) iCON: Competitiveness of SMEs through Innovation and Collaborative Entrepreneurship Corrado Campobasso corrado.campobasso@informest.it corrado.campobasso@informest.it Gorizia/Gorica, 30.11.2010

2. The production systems’ internationalisation General outline and Sources Context of the internationalization of production systems in Europe, with a focus on Italy and Slovenia and their SMEs in the post-crisis scenario. Main characteristics and mode (trade, FDIs, sub- contracting agreements, technology cooperation agreements). Publications and databases: Eurostat, UNCTAD, DG Enterprise and Industry, EFIGE Project, Reprint-ICE

3. The production systems’ internationalisation What matters most in internationalization? 1. Business characteristics: firm size, productivity, skill intensity, ability to innovate (FP7 EFIGE project; ongoing) 2. Industrial structure and size of the domestic market* 3. Policies and Reforms (regional, national and EU) 3  1: Policies and Reforms can modify internal barriers to internationalization. Internationalization – competitiveness - growth link is a “two-way with threshold” process. If it is not reached a sufficient level of resources and capabilities internationalization is not a realistic option. *If Italy and Spain had the same industrial (sect. Empl.)/size structure of Germany they would register an increase in the export value of +37% and +24%.

4. The production systems’ internationalisation Firm size’s & Internationalised activities EU-27Micro (A) SmallMedium (B) A/BSMEs Import28%39%55%2,0%29% Export24%38%53%2,2%26% Subcontractor7%11%17%2,4%8% Contractor7%12%16%2,3%7% Technological cooperation7%12%22%3,1%7% Foreign Investment2 %6%16%8%2% At least one activity43%58%73%-44% Source: EIM/GDCC survey, Informest calculations

5. The production systems’ internationalisation Member States & Internationalised activities LMSNCBeneluxCEBR Import24%34%38%33%43% Export23%32%33%28%19% Subcontractor6%19%10%12%17% Contractor6%23%11% Technological cooperation6%17%13% 10% 15% Foreign Investment2%4%5% 1% 2% Source: EIM/GDCC survey, Informest calculations

6. The production systems’ internationalisation Member States & geographical areas Source: EIM/GDCC survey, Informest calculations

7. The production systems’ internationalisation Member States & geographical areas Source: EIM/GDCC survey, Informest calculations

8. The production systems’ internationalisation Member States & Internal Barriers to Internationalisation (important and very important) Source: EIM/GDCC survey, Informest calculations

9. The production systems’ internationalisation Member States & External Barriers to Internationalisation in EU/EFTA (important in the relationship) Source: EIM/GDCC survey, Informest calculations

10. The production systems’ internationalisation Member States & External Barriers to Internationalisation extra EU/EFTA (important in the relationship) Source: EIM/GDCC survey, Informest calculations

11. The production systems’ internationalisation Slovenia: a small Country with small firms? (Ciszewska-Mlinarič; Mlilnarič (2010)) NumberMicroSmallMediumLarge UE – 2791,8%6,9%1,1%0,2% Slovenia92,7%5,7%1,3%0,3% Italy96,0%3,2%0,7%0,1% Added ValueMicroSmallMediumLarge UE – 2721,0%18,9%18,0%42,1% Slovenia19,9%18,6%21,3%40,2% Italy29,3%18,7%14,6%37,4% SBA Fact Sheet 2009, based on Eurostat Structural Business Statistics

12. T he production systems’ internationalisation Internationalisation is a 2-way process… but there are strong differences between inward/ outward FDIs both in Italy and Slovenia 19901995200020052009 Outward FDIs UE 11,314,541,441,955,0 Italy 5,39,416,416,527,4 XVIII/L Slovenia..3,54,59,218,0 XX/T Inward FDIs UE 10,6%12,5%27,5%34,1%45,5% Italy 5,3%5,8%11,0%12,6%18,6% Slovenia..12,6%17,0%20,2%31,4% Source: UNCTAD FDI/TNC (www.unctad.org/fdistatistics)

13. The production systems internationalisation The most stringent constraint in the period March-September 2010 Lack of Demand Competition pressure Financing Production & Labor Costs Micro31%15%17%10% Small24%15%16%13% Medium27%18%11%12% SMEs28%15% 11% Availability of skilled workers & experienced managers Regulation Issues Other Don’t know / No aswer Micro9%7%8%3% Small15%6%8%3% Medium17%6%8%3% SMEs13%7%8%3% Source: ECB/EC

14. The production systems’ internationalisation Main Conclusions/Scenario Depressed EU demand in 2011-2012 (restrictive fiscal cycle) & selective recovery of exports  big and medium firms favored over small and micro more oriented towards the domestic market Gross Added Value (% year growth)200920102011 Big Enterprises-6,5%1,1%2,4% Medium Enterprises-6,4%1,0%2,2% Small Enterprises-5,7%0,8%1,0% Micro Enterprises-4,6%0,9%1,7% Source: ECB/EC

15. The production systems’ internationalisation Main Conclusions/Scenario Crisis is not over for Fvg. The 2 nd quarter: export is still contracting in Manzano district and Inox valley (Pordenone); recovery in Livenza, Maniago and San Daniele districts. Slovenia. Slovenian large companies have reacted positively to the crisis (Splosna Plovba; Kolektor Group; Hidria; Iskra). Internationalization remain a strategic priority: sales promotion by the network of affiliates; defense and / or increase in markets diversification. But crisis also caused MBOs failures, building sector crisis.

16. The production systems internationalisation Main Conclusions/ Recommendation Single Market Completion SMEs face the costs of participation in a single market still incomplete, particularly in services, "running out" their chances and resources for internationalization in the European area Bottlenecks hinder cross-border activities, despite the legal existence of the Single Market, cause of : a) the failure of the interconnection of networks and b) the inconsistency in the rules of the market. Often companies are dealing with 27 different legal systems for the same transaction While EU companies, especially SMEs, are faced with fragmentation and conflicting rules, the Chinese competitors, U.S. or Japanese use of the advantages conferred by their large domestic markets

17. The production systems Internationalisation Main Conclusions/Recommendation Spreading the culture of cooperation SMEs underestimate the benefits of cooperation and overestimate the disadvantages (working together with a competitor). A cooperative attitude is necessary for build a business network internationalization strategy. Trust-building  commitment  common identity  joint products and goals Good practices: i) the Agreement on internationalisation between Udine Chamber of Commerce and FVG Saving Bank provides for a 15% discount if the internationalisation activities aggregate at least 3 enterprises. ii) the cooperative approach and the networking is supported by GZS (Slovenian Chamber of Commerce and Industry) promoting the creation of Slovenian Houses, meeting point of Slovenian business abroad.

18. The production systems Internationalisation Main Conclusions/Recommendation Connection between medium and small / micro businesses Financial constraints prevent micro business to get proper information  biased perception (barriers); incomplete information (public support; markets opportunities) Often medium business “go alone” in foreign markets, also in the Districts, without satellite business Identification of functions / figures of Connection between medium and small / micro businesses  a) sunk-costs sharing; b) internationalization potential stepping up

19. The production systems internationalisation Main Conclusions/Recommendation A single Agency for innovation and internationalisation? 47% of internationally active SMEs in 2006-2008 introduced new products or services 29% of internationally active SMEs in 2006-2008 introduced new products or services by themselves Innovation is a strategy for SMEs planning for international activities. In a “crisis time” 21,6% (Fvg enterprises) implemented planned investments and designed new ones, 57,5% implemented planned investments and just 20,9% stopped all investments in innovation. 12,6% enterprises had a R&D unit (5,5%), 19,8% rely on technical personnel skills while just 67,% do not implement R&D activities (Fondazione Nord Est Survey, February 2010)

20. The production systems Internationalisation A single Agency for innovation and internationalisation? Main Conclusions/Recommendation Internationally active SMEs LMSNCBeneluxCEBRUE SMEs introduced new products or services by themselves 63%58%62%41%6%61%.. consequence of activi- ties in foreign markets 19%23%33%13%20%22 %.. consequence of competition of foreign companies on home market 32%34%33%37%60%35 % … to access new markets in other countries 30% 27%25%30 %32 % Legenda: LMS=Large Member State; NC=Nordic Countries; CE= Central – Eastern EU with. Poland; BR= Bulgaria and Romania

21. The production systems’ Internationalisation A single Agency for innovation and internationalisation? Main Conclusions/Recommendation SMEs planning to become Internationally active will introduce new prod./serv. XMFDITech. Coop. Sub- Contr. Contr. … to access new markets in other countries 56% 54% 65% 48%38%46%.. consequence of activi- ties in foreign markets 21%38%51%35%20%29% … consequence of com- petition foreign companies on home market 43% 60% 52% 53%48% 44% Source: EIM/GDCC survey, Informest calculations

22. The production systems’ internationalisation Promoting Internationalisation Awareness and Knowledge MT attitude towards internationalisation MT internationalisation knowledge Level of SME internationalisation Prior international experience Ext.& int. Barriers Perception Procedures; tech. Aspects; organisational routines..... MT: Manager or Management Team Main Conclusions/Recommendation

23. The production systems’ internationalisation Promoting Internationalisation Awareness and Knowledge An example of good practice The Government program to promote the enterprises internationalization for the period 2010 – 2014 (Program Vlade RS za spodbujanje internacionalizacije podjetij za obdobje 2010 — 2014) includes : Academy of internationalization (internationalization processes’ approaches & trends, strategies and operational tactics in different mkt, different approaches to research and mkt analysis, entry strategies, cultural diversity and corporate communications, selection of marketing strategies) Individual assistance for specific needs of enterprises Attraction of new FDI aimed at increasing the added value in specific areas and a decrease in barriers to FDI inflows Training for international operations  "First access to market / first internationalization"

24. The production systems’ Internationalisation Promoting Supporting Programme Awareness (awareness of PSP that could be used by enterprise) Source: Survey 2009, Internationalisation on European SMEs EIM/GDCC

25. The production systems’ internationalisation Supporting programmes use The picture presents light and shade effects… … But the “net effect” on Internationalisation is too low Internationally active SMEs Financial Public Support Non-financial Public Support Slovenia4% (14-th position)23% (1-st position) Italy9% (6-th position)11% (6-th position) UE9% (47%-1%)7% (23%-0%) Would not have go without international support Slovenia2% (av. CEE whitout Poland) Italy3% UE11% Source: Survey 2009, Internationalisation on European SMEs EIM/GDCC

26. The production systems’ internationalisation A preliminary step for a potential cross-border extension of production chains: mapping of actual sectoral synergies Comparative analysis (inter-regional; inter-sectoral) of the programming of Slovenia, Fvg, Carinthia  Complementary operational priorities  joint development strategies with financial coverage  Cross-border Operational Program (?)

27. Forum on Cross-Border Integration Thank you for listening Contacts: Corrado Campobasso corrado.campobasso@informest.it Tel: +039 0481 597 446 Projekt iCON sofinanciran v okviru Programa čezmejnega sodelovanja Slovenija-Italija 2007-2013 iz sredstev Evropskega sklada za regionalni razvoj in nacionalnih sredstev. Progetto iCON finanziato nell'ambito del Programma per la Cooperazione Transfrontaliera Italia-Slovenia 2007-2013, dal Fondo europeo di sviluppo regionale e dai fondi nazionali. Ministero dell'Economia e delle Finanze