By Syahrul Aiman and Manaek Simamora
Source: Competitiveness at the FRONTIER, July 2009, pp. 10-11, published by the Masters of Management Program, Faculty of Economics, University of Indonesia and SENADA, a four-year USAID-financed project, http://www.senada.or.id/
.
Governments have a clear interest in promoting innovation among small and medium enterprises. They can move this goal forward by creating an environment where supporting institutions can thrive.
Policy makers throughout the world have increasingly realized that innovation is key to national and regional economic competitiveness. Innovations can improve productivity and create job opportunities, ultimately leading to improved welfare of citizens.
Small and medium enterprises (SMEs) have a special role to play in this process. In 2005, 99.9 percent of Indonesia’s firms were SMEs or micro-enterprises, that together accounted for more than 56 percent of GDP. On the other hand, the contribution of SMEs to total exports was not quite 15 percent (about 4 percent by small enterprises and 11 percent by medium ones). This indicates that Indonesian SMEs have little ability to compete in global markets and suggests that support is needed to improve SME competitiveness, especially through enhancing their capability to innovate.
In general, SMEs are constrained by limited access to human resources (talent), capital, intellectual property (IP) and/or innovations, business networks, and infrastructure to promote innovation, such as science/technology parks and incubators. These constraints require serious attention from government and other stakeholders. They can be addressed in many ways, for example through entrepreneurship education programs at all levels, training, and innovation competitions. In particular, the government can work to ensure that supporting institutions offer the facilitation, mentoring, and intermediation services that SMEs require in order to innovate.
Polices to Encourage Innovation
Innovation need not be restricted to large companies. SMEs can access inventions and innovations even if they lack the facilities to conduct their own research, by turning to outside sources such as research institutions and other domestic or foreign companies. In addition, independent inventors and innovators in Indonesia are a rich potential source of innovations for SMEs. Data show that from 1971 to 2007, the majority of patent applications in Indonesia (52 percent) were submitted by individual or independent inventors and the remaining ones were registered by universities, R&D institutions, and private firms.
Ironically, many large companies such as IBM, Intel, Procter & Gamble, Shell and others that have the resources to conduct their own in-house R&D often excel at “open innovation,” taking advantage of inventions and innovations created by others. SMEs, especially in Indonesia, are less likely to practice this strategy.
Through supportive policies, governments can encourage SMEs to adopt innovation. For example, the Malaysian government gives incentives to companies that obtain licenses for foreign technology by bearing 50 percent of the license fee if the production or business activities are conducted in Malaysia. The Indonesian Government has also issued a policy, through Government Regulation (Peraturan Pemerintah) No. 35/2005, to encourage the creation of intellectual property and the adoption of innovation by giving incentives to businesses that meet certain requirements to conduct research that leads to innovations.
Building Intermediary Institutions
Facilitators and mentors can provide services that assist SMEs to create and implement innovation. The governments of OECD (Organisation for Economic Co-operation and Development) member countries, China, and India are leaders in promoting the provision of such services. In Indonesia, the government provides support to mentors and facilitators, including but not limited to government and non-government R&D institutions, the University of Indonesia SME Center, and the Business Innovation Center (a young organization that strives to bring SMEs with innovative ideas together with potential investors).
However, these facilitators face several difficulties, in particular the limited availability of professional human resources. In addition, when the government serves as the direct provider of services, they will not be market-driven. Similarly, while the Corporate Social Responsibility (CSR) activities of large companies may be a source of mentoring, CSR programs are often limited to activities related to the core business of the company providing them.
Thus, support for institutions that offer facilitation and mentoring services must take these concerns into account. Efforts should be made to ensure that institutions have the funding and human resource capacity needed to provide professional integrated services. One strategy for accomplishing this is to provide services on a market-driven, sustainable basis: in other words, in exchange for fees that will be used to maintain and strengthen the facilitating institution.
An MSME Innovation Center
In 2008, the Government of Indonesia, through the Coordinating Minister for the Economy, established the Micro, Small and Medium Enterprise Innovation Center (PI-UMKM), which began operation in 2009 with the following primary missions:
• To grow and develop technological entrepreneurship (technopreneurship) among micro, small, and medium enterprises (MSMEs)
• To synergize efforts to develop innovative MSMEs
• To develop PI-UMKM and its network of partners as integral players in strengthening the Sub-national Innovation System (SIN) in the context of supporting a science-based economy in Indonesia
• To improve market access and information for MSMEs.
PI-UMKM works with a variety of public, private, and nonprofit partner institutions to carry out its goals, including universities, IPR centers, NGOs, and businesses. It selected 16 partners, out of a starting pool of 40, on a competitive basis, assessing the experience each institution had in successfully providing technical and management services to SMEs. These partners will provide integrated services in the areas of technology-based services, human resource capacity building, business network development, and facilitation of access to finance. The goal is to improve the support to organizations that provide services to SMEs, independent inventors, and innovators all along the “innovation chain” – an important step in building an ever-stronger Indonesian national innovation system.
--O--
About the Authors:
• Syahrul Aiman (co-author, “Supporting SME Innovation: The Role of Facilitators”) is the Deputy Chairman for Engineering Science, Indonesian Institute of Sciences-LIPI. He can be contacted at syahrul@lipi.go.id
• Manaek Simamora (co-author, “Supporting SME Innovation: The Role of Facilitators”) is the Head of Division for Business Development, Center for Innovation, Indonesian Institute of Sciences-LIPI. He can be contacted at manaek@yahoo.com, manaek@inovasi.lipi.go.id
Policy makers throughout the world have increasingly realized that innovation is key to national and regional economic competitiveness. Innovations can improve productivity and create job opportunities, ultimately leading to improved welfare of citizens.
Small and medium enterprises (SMEs) have a special role to play in this process. In 2005, 99.9 percent of Indonesia’s firms were SMEs or micro-enterprises, that together accounted for more than 56 percent of GDP. On the other hand, the contribution of SMEs to total exports was not quite 15 percent (about 4 percent by small enterprises and 11 percent by medium ones). This indicates that Indonesian SMEs have little ability to compete in global markets and suggests that support is needed to improve SME competitiveness, especially through enhancing their capability to innovate.
In general, SMEs are constrained by limited access to human resources (talent), capital, intellectual property (IP) and/or innovations, business networks, and infrastructure to promote innovation, such as science/technology parks and incubators. These constraints require serious attention from government and other stakeholders. They can be addressed in many ways, for example through entrepreneurship education programs at all levels, training, and innovation competitions. In particular, the government can work to ensure that supporting institutions offer the facilitation, mentoring, and intermediation services that SMEs require in order to innovate.
Polices to Encourage Innovation
Innovation need not be restricted to large companies. SMEs can access inventions and innovations even if they lack the facilities to conduct their own research, by turning to outside sources such as research institutions and other domestic or foreign companies. In addition, independent inventors and innovators in Indonesia are a rich potential source of innovations for SMEs. Data show that from 1971 to 2007, the majority of patent applications in Indonesia (52 percent) were submitted by individual or independent inventors and the remaining ones were registered by universities, R&D institutions, and private firms.
Ironically, many large companies such as IBM, Intel, Procter & Gamble, Shell and others that have the resources to conduct their own in-house R&D often excel at “open innovation,” taking advantage of inventions and innovations created by others. SMEs, especially in Indonesia, are less likely to practice this strategy.
Through supportive policies, governments can encourage SMEs to adopt innovation. For example, the Malaysian government gives incentives to companies that obtain licenses for foreign technology by bearing 50 percent of the license fee if the production or business activities are conducted in Malaysia. The Indonesian Government has also issued a policy, through Government Regulation (Peraturan Pemerintah) No. 35/2005, to encourage the creation of intellectual property and the adoption of innovation by giving incentives to businesses that meet certain requirements to conduct research that leads to innovations.
Building Intermediary Institutions
Facilitators and mentors can provide services that assist SMEs to create and implement innovation. The governments of OECD (Organisation for Economic Co-operation and Development) member countries, China, and India are leaders in promoting the provision of such services. In Indonesia, the government provides support to mentors and facilitators, including but not limited to government and non-government R&D institutions, the University of Indonesia SME Center, and the Business Innovation Center (a young organization that strives to bring SMEs with innovative ideas together with potential investors).
However, these facilitators face several difficulties, in particular the limited availability of professional human resources. In addition, when the government serves as the direct provider of services, they will not be market-driven. Similarly, while the Corporate Social Responsibility (CSR) activities of large companies may be a source of mentoring, CSR programs are often limited to activities related to the core business of the company providing them.
Thus, support for institutions that offer facilitation and mentoring services must take these concerns into account. Efforts should be made to ensure that institutions have the funding and human resource capacity needed to provide professional integrated services. One strategy for accomplishing this is to provide services on a market-driven, sustainable basis: in other words, in exchange for fees that will be used to maintain and strengthen the facilitating institution.
An MSME Innovation Center
In 2008, the Government of Indonesia, through the Coordinating Minister for the Economy, established the Micro, Small and Medium Enterprise Innovation Center (PI-UMKM), which began operation in 2009 with the following primary missions:
• To grow and develop technological entrepreneurship (technopreneurship) among micro, small, and medium enterprises (MSMEs)
• To synergize efforts to develop innovative MSMEs
• To develop PI-UMKM and its network of partners as integral players in strengthening the Sub-national Innovation System (SIN) in the context of supporting a science-based economy in Indonesia
• To improve market access and information for MSMEs.
PI-UMKM works with a variety of public, private, and nonprofit partner institutions to carry out its goals, including universities, IPR centers, NGOs, and businesses. It selected 16 partners, out of a starting pool of 40, on a competitive basis, assessing the experience each institution had in successfully providing technical and management services to SMEs. These partners will provide integrated services in the areas of technology-based services, human resource capacity building, business network development, and facilitation of access to finance. The goal is to improve the support to organizations that provide services to SMEs, independent inventors, and innovators all along the “innovation chain” – an important step in building an ever-stronger Indonesian national innovation system.
--O--
About the Authors:
• Syahrul Aiman (co-author, “Supporting SME Innovation: The Role of Facilitators”) is the Deputy Chairman for Engineering Science, Indonesian Institute of Sciences-LIPI. He can be contacted at syahrul@lipi.go.id
• Manaek Simamora (co-author, “Supporting SME Innovation: The Role of Facilitators”) is the Head of Division for Business Development, Center for Innovation, Indonesian Institute of Sciences-LIPI. He can be contacted at manaek@yahoo.com, manaek@inovasi.lipi.go.id
No comments:
Post a Comment