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Nordic SMEs and Regional Innovation Systems

  • Published 07/03/2003
  • Last updated 10/03/2011

Frontpage report

SMEs, innovations and innovation systems

The ability to innovate is key for the competitiveness of Nordic SMEs in a globalizing economy. Especially because of the high wage level, innovation provides a more promising strategy than competition aimed at achieving the lowest costs. Understood in a broad context, innovativeness is not restricted to high-tech industries alone but can also be achieved by traditional low-tech sectors.


Due to their small size, SMEs often innovate through interaction with other firms and universities and research institutes (i.e. systems of innovation). SMEs collaborate with systems of innovation on regional, national or even international levels, dependant on their knowledge and competence needs.


SMEs that innovate through science-driven R&D (e.g. in biotech) tend to collaborate with partners across the world in search for new and unique knowledge.


SMEs that innovate through engineering based user-producer learning tend to collaborate with nearby partner. Here, innovation often involves the application of existing knowledge or new combinations of knowledge.


SMEs, clusters and cluster life-cycles

Collaboration between SMEs in a cluster raises their innovative performance and competitiveness by combining resources and processes of interactive learning. Through vertical collaboration firms co-operate with suppliers and customers throughout the value chain. Through horizontal collaboration firms develop co-operative arrangements with competitors. One of the most important features of clustered firms is the ability to combine competition and collaboration.


Large firms can play very different roles for clustered SMEs. For example, they can be important and demanding customers. This puts them into an ambivalent position towards the supplying SMEs. On the one hand they can push the innovative performance of the SMEs by requiring high quality standards. But they can also destabilize co-operation structures in the cluster. Additionally they can function as a spring-board for new firms through spin-off formation.

Clusters tend to witness different stages in their life cycle showing different characteristics in terms of collaboration networks, technology upgrading and demands of skilled labor and venture capital. This research has made a distinction between: Embryonic clusters: in a very early stage of development; Stagnant clusters: mature or even declining clusters; Rejuvenated clusters: having seen periods of threatening decline, but proven able to renew them selves.


Social capital and trust: cornerstones for regional collaboration in innovation

Understanding innovation as interactive learning implies that cooperation is necessary for the competitiveness of SMEs. Therefore, social capital is one of the prerequisites of a working cluster or regional innovation system. It is defined as features of social organization, such as networks, norms, and trust, that facilitate action and cooperation for mutual benefit.


In a Nordic cluster context, especially initiatives on social networking arrangements have been particularly successful to boost and secure social capital nd trust. Examples of such social networking initiatives are the Professional Forum for Food and Drink in the Rogaland food cluster or the Skive carpenter’s guild in the Salling furniture cluster.


A prerequisite however is that SMEs recognize the added value in taking part in such arrangements in order to invest time, effort and financial resources. Yet, the dynamics in network participation seem to be of a cumulative kind: the more firms become members, the more want to join.


SMEs and the regional knowledge infrastructure

Research collaboration between SMEs and regional R&D institutes and universities is still a relatively new phenomenon in the Nordic countries and certainly no cure-all to increase firm innovativeness. The partners are often involved in an ongoing effort to learn to actually co-operate. Furthermore it is critical to consider the partners’ knowledge base: successful cooperation in innovation requires a fine-tuned and difficult to achieve match between academic knowledge and the concrete practice of SMEs. Most opportunities in this field seem to lie in science based university-firm linkages.


Especially in high-tech industries, an efficient vehicle for capitalizing on academic knowledge is through spin-offs from university. This creates directly innovative, knowledge-intensive SMEs. However, researchers often lack the managerial skills needed to successfully run a business.


MEs are highly dependant on the skill level of their workforce for their innovative capacity, especially in a collaboration context. In general, regional supply of skilled labor is probably the most important innovation support that universities can provide to SMEs.

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