A talk with Mr. Sergio Arzeni, Former Director of the OECD Centre for Entrepreneurship, SMEs and Local Development and current President of INSME – The International Network for SMEs. With the 13th INSME Annual Meeting on “Improving SMEs Productivity and Their Role in Global Value Chains” coming up, Mr. Arzeni offers his views on the current state of small and medium enterprises in the global environment and explains the opportunities and challenges related to internationalization and the importance of an effective participation of SMEs to Global Value Chains.
Q. SMEs have been hit hard by the global recession. In your opinion, could internationalization impact on SMEs strategies and improve their performance?
A. Small and Medium sized Enterprises are the backbone of the global economy. A sound business case shows that SMEs impact considerably on innovation, job creation and social integration. If we take the current situation of SMEs in the European Union into account, we see how they make up 99.8% of all enterprises, 60% ca. of value added, and ca. 70% of employment and this demonstrates how economic growth in the EURO area mostly depends on SMEs. Despite this, SMEs face daily challenges to survive and need to be able to adapt rapidly to the changing surrounding environment. Internationalization of SMEs represents an opportunity to survive the tumultuous water of an unknown future. SMEs that go international, first of all gain significant benefits in terms of innovation as they need to develop new products/processes to enter the new market or to build a competitive advantage in foreign markets. Furthermore, internationalization – or more generally the collaboration with foreign partners – enable SMEs to access new knowledge/technology, know-how and talents, all fundamental elements to remain competitive on a global scale. Nevertheless, it is undeniable that SMEs also need to overcome significant challenges related to the internationalization process. These barriers are nowadays related mainly to the lack of financial resources or to an hostile business environment, which inevitably influence also their effective participation to global value chains.
Q. How can an effective participation of SMEs in Global Value Chains enhance their productivity?
A. To be competitive SMEs need to adapt to new production processes that are more and more organized along global value chains. There is no doubt that an integration in GVCs can represent the key for SMEs competitiveness, but it is indispensable that SMEs enhance their managerial skills and upgrade the internal processes and technology. Participation in GVCs can support productivity and the expansion to new markets, but to be effective this participation needs to be integrated with a vital element: innovation.
Q. What role can policy makers and intermediaries play to stimulate a larger involvement of SMEs in GVCs?
A. Governments and policy makers also have a role of paramount importance as they are the ones entitled to create the most suitable environment for the promotion of SMEs in global value chains. All involved stakeholders or networks like INSME need to ensure a conducive business climate by establishing mechanisms supporting SMEs to compete on global markets. Data show that only between 10% to 40% of micro, small and medium companies are direct exporters, thus a stronger commitment of all stakeholders is needed to create an environment supporting firms to connect easily with foreign partners, access new knowledge and technology as well as improve the conditions of entrepreneurship with a special attention to young firms.
With the aim of establishing a successful collaboration among relevant players to more effectively support SMEs in improving their competitiveness, the International Network for SMEs – INSME, a not-for-profit Association established back in 2004 under the umbrella of the Italian Ministry of Economic Development and with the moral sponsorship of the OECD to support intermediaries in providing better services to the SMEs they assist, with the precious support of INADEM and the Organization of American States point in this direction with an international event on “Improving Productivity in SMEs and Their Role in Global Value Chains” to be held in Puerto Vallarta, Mexico from the 15th to the 17th of May 2017.
The 3-day event is a unique opportunity to engage policy makers, innovation practitioners and INSME Members in a constructive dialogue to brainstorm and exchange good practices and find solutions to common challenges related to the participation of SMEs in GVCs. It will be a must-attend event with a strong focus on networking opportunities to create stable linkages among participants for the launch of future joint activities.
Sergio Arzeni is President of INSME – International Network for SMEs based in Rome and Vice President of Friends of Europe, a Brussels based Think-Thank.
Former Director of the OECD (Organisation for Economic Cooperation and Development) Centre for Entrepreneurship, Small and Medium-sized Enterprises (SMEs) and Local Development (CFE) and Tourism in Paris where he was a Senior Economist for 33 years.
An international specialist in the field of SMEs and entrepreneurship has been a responsible for a vast number of publications in this field and a contributor to international media. He is visiting professor at the Essex Business School, in the UK.
He holds a First Class Honours Degree in Political Science from the University of Rome and specialised in Industrial Economics at the International University Institute of Luxembourg and in International Economic Relations at the Brookings Institution in Washington D.C., USA.