Employing Technology &
Innovation in SME Development
R. A. Attalage
University of Moratuwa
Employing Tech & Innovation in SME Dev
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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
Employing Tech & Innovation in SME Dev
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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
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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
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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
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Middle Income Trap
• Countries with per capita income between $ 5,00010,000 said to be caught in the middle income trap.
• Around 100 countries have made the transition from
low to middle income during the last 65-70 years. But
many could not make from middle to high income.
• A low income country can be relatively easily startedup due to advantages in labour, trade & financial and
concessions.
• Moving from middle to high income is more
challenging and difficult.
Employing Tech & Innovation in SME Dev
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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.
Employing Tech & Innovation in SME Dev
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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
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Pre Industrial
Stage
Initial FDI
Engagement
Tech Absorption &
adaption
Internalizing Skills
and Technology
Internalizing
Innovation
5
•
Middle Income
Trap
•
•
2
•
•
1
•
•
•
•
Subsistence
agriculture
Raw material
export
Aid dependency
Simple
manufacturing
Some Processing
of Raw Materials
FDI in material
Processing and
service sectors
•
•
•
•
3
•
4
•
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
•
Full technology &
innovation
capabilities
Create innovation
& Technologies
Global positioning
of a range of
product
EU, Japan, USA here
BRICS countries here
Thailand, Chilie, MalayasiaSri Lanka entering this stage
Source: SQW
Little Innovation
Employing
Tech & Innovation
Innovation in SME Dev
Importing Technology
to Incremental
Increasing importance of Innovation 9
Innovation System in Transitional Countries
Source: Innovation policies: A Employing
guide for
developing countries. World Bank. 2010
Tech & Innovation in SME Dev
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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, 2007
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Model for Links with Universities
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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.
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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.
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End of Presentation
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