Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P25

174 Chapter 1.12 EU SMEs and E-Business Innovation Anne Wiggins The London School of Economics and Political Science, UK INTRODUCTION Although motivating electronic business (e-busi-ness) adoption and implemention by small- and medium-sized enterprises (SMEs) is endorsed by policies and initiatives introduced by the European Union (EU), a number of challenges arise as the result of a limited conceptual understanding of the relationship between SMEs and information and communication technologies (ICTs). Relatively little is known about how SMEs respond to the opportunities provided by ICTs, and even less is known about why and how small businesses use ICTs (Dixon, Thompson, & McAllister, 2002). ,QWKH¿UVWVHFWLRQRIWKLVFULWLFDOUHYLHZRIWKH academic and government bodies of literature re-lated to EU SMEs, e-business and policy initiatives DQGGH¿QLWLRQVRI60(VDUHH[SODLQHGWKHXQLTXH characteristics of SMEs and entrepreneurial characteristics are outlined, and the case is made that there is a clear need for more comprehensive research on SMEs in the European Union. The second section concentrates on e-business. Many of the factors that compel organisations to adopt and implement innovation are pertinent to the adoption and implementation of e-business. These have hitherto largely been treated as sepa-rate bodies of literature, however. In this section, WKHEHQH¿WVRIHEXVLQHVVDUHH[SORUHGWKHIDF-tors that motivate or act as barriers to e-business adoption and implemention are outlined, and the organisational and management attributes that would seem to ensure the success of the innova-tion of adopting and implementing e-business are discussed. The third and penultimate section explores EU policy initiatives relevant to SMEs and to the promotion of e-business. The most wide-ranging and prominent initiatives directed at SMEs are H[DPLQHGKHUH7KH¿QDOVHFWLRQRIWKHSDSHUFRQ-cludes with suggestions for further research. BACKGROUND 7KHUHLVQRVLQJOHGH¿QLWLRQRIDQ60(EXW schemes that are targeted at SMEs usually adopt DYDULHW\RIZRUNLQJGH¿QLWLRQVGHSHQGLQJRQ Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited. EU SMEs and E-Business Innovation their particular objectives. The importance of the SME sector as the cornerstone of a country’s economic prosperity is widely recognised: SMEs comprise approximately 95% of the enterprises in most nations, and are responsible for employing between 60-70% of a nation’s workforce (OECD, 2002). Consequently, the SME sector is crucial to the EU’s competitive development, collectively and for each individual member nation (Mul-hern, 1995). SMEs contribute to local economic growth by providing local services, employment opportunities, and by enabling participation in the economic development of their own communities. They also play a vital role in innovation, as the intermediaries between the public research infra-structure and large organisations, as developers of new ideas, and as adopters of new technolo-gies. SMEs have the potential to act as vehicles for the industrial and economic change of entire regions, as entrepreneurship attracts many who would otherwise withdraw from the labour market. Entrepreneurship can provide a positive way out of unemployment, particularly in disadvantaged FRPPXQLWLHVZKHUHWKHSRWHQWLDOZLGHUEHQH¿WV RIHQWHUSULVHFDQEHHYHQPRUHVLJQL¿FDQW6PDOO businesses often stimulate productivity growth amongst rival businesses (BarNir & Smith, 2002; Jeffcoate, Chappell, & Feindt, 2002, 2004; Small Business Service, 2004), and their dynamism can stimulate competition and innovation throughout the economy as a whole. The unique characteristics of SMEs that set them apart from larger organisations create par-ticular issues, because in day-to-day business operations the organisational, entrepreneurial, familial, and social structures in SMEs differ from those of larger organisations. An understanding of the constitution and circumstances of SMEs is essential in order to be able to identify the fundamental differences between large and small organisations and the effects of these differences on innovation—especially e-business innova-tion—adoption and implementation (Cheney, Mann, & Amoroso, 1986). SMEs face both eco- nomic and organisational constraints, a lack of DFFHVVWRFDSLWDOFDVKÀRZGLI¿FXOWLHVOLPLWHG ICT skills, a chaotic organisational structure, and heavy workloads—all factors that may impede in-novation (Small Enterprise Telecommunications Centre, 2002). SMEs also have their own unique qualities in terms of their environment, struc-ture, psycho-sociological climate, management, and technology usage and adoption (Castleman, Coulthard, & Hewett, 2000; Smallbone, North, Vickers, & McCarthy, 2000; Thong, 2001). SMEs tend not to have the resources available to large organisations, and this lack of resources creates WLPH¿QDQFLDODQGH[SHUWLVHFRQVWUDLQWV)DFLQJ these constraints, SMEs are likely to be more cautious than large organisations to adopt new technologies (Huang, Hart, & Wiley, 2004). Entrepreneurial attributes such as creativity, ÀH[LELOLW\ DQG G\QDPLVP DUH DVVRFLDWHG ZLWK the SME sector. The importance of creating an environment rich with opportunities through the support of entrepreneurial characteristics cannot be overstressed. Entrepreneurship relies not only on individuals or groups possessing the skills to recognise and harness potential, but also on conditions that permit, encourage and sustain them in their endeavours. Governments FDQFUHDWHWKHHFRQRPLF¿VFDODQGUHJXODWRU\ framework, infrastructure and environment in which entrepreneurs and the organisations they found and run are able to recognise, realise and maximise potential competitive advantage. Al-WKRXJKIHZJRYHUQPHQWSROLFLHVDUHVSHFL¿FDOO\ directed at creating an entrepreneurial culture, cumulatively all government policies affect the long-term factors that create conditions that (can) foster entrepreneurs (HM Treasury, 2001). A stable DQGWUDQVSDUHQWHFRQRPLFDQG¿VFDOHQYLURQPHQW with steady economic growth can not only provide entrepreneurs with appropriate opportunities to foster entrepreneurial experiments, but also with a chance to convince the market of their potential contribution. 175 EU SMEs and E-Business Innovation Entrepreneurship is closely liked to the psy-chological and behavioural aspects of individuals, and it would seem that an entrepreneur’s personal initiative therefore dominates the potential for the success of many SMEs (Howarth, 2002; Kuem-merle, 2002; Quayle, 2002a, 2002b; Vrazalic, Bunker, MacGregor, Carlsson, & Magnusson, 2002). Entrepreneurs share a commitment to the consistent and methodological exploration of possibilities to improve a business’s potential (Drucker, 1998). Entrepreneurs also share the distinctive characteristics of feeling comfortable skirting the boundaries of propriety, assuming enormous personal risk, being willing to shift strategies quickly, being profoundly opportunis-tic, and doing whatever it takes to close a deal integrated studies, types of exporting activities, DZDUHQHVVRIEHQH¿WVW\SHVRIFXVWRPHUDQGLP-position by larger trading partners. These factors KDYHVHUYHGWRH[DFHUEDWHWKH³SDWFK\´QDWXUHRI much research (Dixon et al., 2002). 1RQHWKHOHVVHEXVLQHVVKDVSURIRXQGEHQH¿-cial consequences for business practice and re-search. Technology-driven change is revolutionis-LQJEXVLQHVVUHTXLULQJFRPSDQLHVWRUHGH¿QHWKHLU strategies, products and processes in a business-operating climate that has become increasingly competitive, turbulent, and uncertain (Goldman, Nagel, & Preiss, 1995). Organisations that have adopted e-business believe that it contributes to improved performance in four main ways: (Kuemmerle, 2002). Having examined not only a number of the characteristics of SMEs but also the issues pertaining to their operations, we turn now to examine e-business in more detail, as it is a form of technological innovation that can profoundly impact SMEs. • The development of new products and ser-vices; • The generation of new customers and busi-ness channels; • A reduction in costs; and • Improved productivity (HM Treasury, 2001). EU SMEs AND E-BUSINESS INNOVATION (EXVLQHVV SUHVHQWV VLJQL¿FDQW FKDOOHQJHV WR academic research. These challenges arise from its recent emergence, the rapid change that char-acterises the domain, the variation in behaviour in (apparently) similar contexts, the enormous media attention it has generated (with its resultant distortion of terminology and data), the lack of familiarity with e-business technologies by many management scholars, and the lack of established research approaches (Drew, 2002). It has been GLI¿FXOWIRUUHVHDUFKHUVWRLVRODWHWUHQGVLQWKH separate innovation, ICT, and e-business canons from more general economic and organisational change drivers. Moreover, research has often failed to examine the roles of size, age, sector experience of ICTs and management support within single E-business is a resource that is rapidly inno-vating not only traditional business processes but also the very nature of competition, as e-business enables market fragmentation, with its ability to treat mass clients as individuals, convergence be-tween products and services, generation of global production networks, and simultaneous coopera-tion and competition between organisations. As e-business facilitates this radical transformation of both technical and business operations, it is truly innovative. Innovation is an important engine of long-term competitiveness, growth and employ-ment. The OECD estimated that between 1970 and 1995, more than half of the total growth in output of the developed world resulted from innovation, and that this proportion is increasing as economies become more knowledge-intensive (Irwin, 2000). The cross-functional nature of innovation man-agement requires strong leadership in managing through turbulence (Tushman, 2002). 176 EU SMEs and E-Business Innovation The Innovation Scoreboard (which analyses statistical data in the areas of human resources, knowledge creation and the transmission and application of new knowledge, and innovation ¿QDQFHRXWSXWDQGPDUNHWVIRXQGWKDWVDOHVRI innovative products as a proportion of total turn-over increases with organisation size: 15% for small, 21% for medium-sized, and 38% for large organisations. The Innovation Scoreboard (Eu-ropean Commission, 2000a) also found that large organisations spend nearly twice the proportion of their turnover (4.2%) on innovation activities as do SMEs. Similarly, the Statistics on Innova-tion in Europe, 2000 (European Commission, 2000a) also found that the larger the organisation, the more likely it is to be an innovator (36% of VPDOORIPHGLXPDQGRIODUJH¿UPVDUH innovators) and that SMEs account for only 18% of Europe’s innovation productions. Building an Innovation Economy in Europe, 2001(European &RPPLVVLRQEZDVWKH¿UVWLQDVHULHVRI Innovation Policy Studies undertaken for the European Commission’s Enterprise Director-ate-General to promote the message that not only is innovation important, as competitiveness increasingly depends on the ability of industry sectors to meet turbulent market needs quickly DQGHI¿FLHQWO\WKDWLQQRYDWLRQLVSHUYDVLYHDQG GLYHUVHWDNLQJSODFHLQ¿UPVRIDOOVL]HVDFURVV skills (Bergquist, 1993). For lasting change to occur, new behaviours must be learned so that attitudes and routines can be replaced (Senge, 1990). Although the implementation of innova-tive ideas is an organisational change process (Hoffer, George, & Valacich, 1996), lasting competitive change takes application, time, and involves individual and organisational learning and adjustment. An organisation must possess (and be willing to commit) the resources needed to implement a new technology for innovation adoption and implementation to be successful (Amidon & Mahdjoubi, 1999). An organisation’s VL]H¿QDQFLDOUHVRXUFHVDQGWHFKQLFDONQRZKRZ DOOLQÀXHQFHWKHDGRSWLRQRIWHFKQRORJLFDOLQQRYD-tion. Customer and competitive pressures, along with support from business partners, can also be VWURQJLQÀXHQFLQJIRUFHVLQWKHDGRSWLRQGHFLVLRQ (Iacovou,Benbasat, & Dexter, 1995; Premkumar & Roberts, 1997). The 1999 KITE project’s Analysis of E-Busi-ness Practice in SMEs reported that SMEs typi-FDOO\KDYHPRUHGLI¿FXOW\LQDFKLHYLQJHEXVLQHVV success because of these characteristic SME attributes (Chappell & Feindt, 1999). The KITE project also found that SME e-business adoption and implementation success is dependent on the following factors: all regions and all sectors, and that innovation is unevenly distributed, but also that innovation is systemic rather than linear, with multidimensional processes. In order to develop these ideas, we must draw further upon the literature to explore and extend questions concerning the motivation(s) for, and genesis of, innovation. There is no single reason for an organisation to innovate: In some cases, innovation is triggered by new knowledge, in RWKHUV E\ WKH RSSRUWXQLW\ WR IXO¿O D PDUNHW need (Mahdjoubi, 1997). Multiple forces inhibit change and maintain the status quo. Some of these forces are group performance norms, fear of change, member complacency, and a lack of • Having an original idea and/or targeting a unique market niche; • Developing a business case for e-business; ‡ )LQGLQJVXI¿FLHQWIXQGLQJWRFDUU\RXWH business properly, without being dependent on third parties, or having to update sites out of hours, etc; • Finding the right business, technology and promotional partners; ‡ (QVXULQJ WKH ULJKW ³ILW´ EHWZHHQ WKH company’s product or service and internet demographics; ‡ %HLQJÀH[LEOHHQRXJKWREHDEOHWRUHVSRQG to competition and changing technological conditions; and 177 EU SMEs and E-Business Innovation • Being able to manage and scale the growth that may result (Chappell & Feindt, 1999). Having examined the concepts of e-business of these policies, schemes and programmes are interlinked. For example, the European Union’s 1994 Regional Technology Plan (RTP), which was inspired by the 1993White Paper on Growth, and innovation, we turn now to examine EU policy initiatives directed at promoting e-business innovation amongst SMEs. FUTURE TRENDS A series of EU SME policies have been intro-duced to create a favourable competitive busi-QHVVHQYLURQPHQWLQZKLFK60(VFDQÀRXULVK However, relevant technological innovation policy promoting e-business adoption and implementa-WLRQGHSHQGVRQDQXQGHUVWDQGLQJRIZKDW³UH-ally” drives adoption and implementation, of the external barriers that prevent or delay it, and of how it impacts on competitiveness and employ-ment. Incentive schemes and policies intended WR EHQH¿W WKH 60( VHFWRU QHHG WKHUHIRUH WR take into account the culture, performance, and abilities of SMEs. Although an evolution towards more interactive support is visible, there is a high degree of heterogeneity in policy instruments aiming to foster innovation in SMEs throughout the European Union (HM Treasury, 2001). Cur-rent EU government-funded projects designed to assist SMEs to adopt e-business include the promotion of online trading and the creation of virtual business networks to promote technol-ogy diffusion (Papazafeiropoulou, Pouloudi, & Doukidis, 2002). A number of EU policies have been formulated and introduced to facilitate the creation of a busi-ness environment in which SMEs can innovate DQGÀRXULVK0RVW(8PHPEHUVWDWHJRYHUQPHQWV UHFRJQLVHWKDW60(VRIWHQKDYHGLI¿FXOW\¿QG-ing appropriate independent sources of business advice and information, and face skills shortages. Accordingly, they have launched national and regional initiatives to assist SMEs to acquire or adapt e-business skills (Mulhern, 1995). Many Competitiveness and Employment, was in turn instrumental to the development of the 1996 Green Paper onInnovation, which was created to develop an EU-wide strategy for the promotion of innovation. The 1996Action Plan for Innovation in Europe paved the way for a common European analytical and political framework for innovation policy. Building on this framework, the Trend Chart on Innovation in Europe was introduced as a tool for policy makers. Formulated along the lines of the 2001 Community Innovation Survey (CIS), which is jointly implemented by Eurostat and DG Enterprise under the aegis of the Euro-pean Innovation Monetory System (EIMS), The Trend Chart updates and analyses information on innovation policies EU-wide and at national level, and provides a forum for benchmarking and for WKHH[FKDQJHRI³JRRGSUDFWLFHV´LQLQQRYDWLRQ and technological policy development. The 2001 Innovation and SME Programme promotes innovation and supports SME participa-tion in the Fifth Framework Programme (FP5) in order to optimise their potential advantages from such participation. FP5 aims to diffuse good practices and to encourage interregional cooperation in innovation by improving support infrastructures, in addition to introducing comple-mentary policies for innovation and technology transfer through a set of interrelated projects: the Regional Innovation Strategy (RIS), theRegional Innovation and Technology Transfer Infrastruc-tures and Strategies (RITTS) and the Regional Technology Transfer Projects (RTT). The RIS and RITTS projects share the same methodol-ogy and philosophy as well as many objectives in common. Both are based on building regional consensus and agreement, referenced to the same FRUHVSHFL¿FDWLRQVDQGDUHDEOHWRJLYHDFFHVVWR international experience. Twenty-eight European regions have been participating on RIS and RITTS 178 ... - tailieumienphi.vn