Small businesses have a key role to play in fostering innovation

SMEs are some of the most innovative businesses out there, but they need and must receive adequate EU support, writes Martine Diss.

By Martine Diss

18 Jun 2015

The role of research and innovation in start-ups and SMEs is essential for growth and jobs in Europe. In fact, small and medium sized enterprises play a key role in fostering innovation. They have the ability to market new products quickly and can adapt easily to the needs of their customers. 

According to the European commission's latest 2015 innovation barometer results, 72 per cent of EU companies have introduced innovation since January 2012, and 27 per cent of these companies plan to increase their investment within the next year.

There are clear motivations as well as barriers to innovate for companies. Market potential and increased competition are the main reasons to invest in innovation, followed by client requests.

The main obstacles to innovation are weak management of the innovation process, difficult mobilisation of financial resources and the complexity of meeting regulations and standards.

Europe's businesses need advanced technologies and business models to improve their competitiveness across all industrial sectors, in both the traditional and emerging industries.

However, despite the potential benefits of new technologies for the manufacturing process, their adoption by industry is no trivial task. 

Success in the new industrial revolution requires that our companies use the best available technologies while revising traditional business models.

In order to allow research and innovation to flourish within the EU's borders, both policymakers and businesses need to act. 

Companies must broaden their understanding of innovation and enhance their management practices. EU legislators have to ensure that policy frameworks are more consistent in areas that are critical to innovation, and support collaborations for new industrial value chains taking root across Europe. They must also reduce market fragmentation and provide funding.

The EU is committed to supporting research and development. The Horizon 2020 research programme provides funding that spans the entire innovation cycle, from lab to market. With its integrated support to industry, it is well on the way to proving its attractiveness to the private sector. 

To ensure that excellent ideas from innovative entrepreneurs can benefit from the support they deserve, the commission has launched an unseen raft of new opportunities for enterprises of all different sizes, but for SMEs in particular.

Horizon 2020 promotes SME participation across the board: almost €9bn of the programme's budget will support small business innovation. Around €3bn of this amount is reserved for a new, dedicated SME instrument that will support innovative business ideas with the potential to shape new markets. 

Support to SME innovation is no longer restricted to collaboration with research institutions as SMEs can undertake their innovation projects alone or with clients, suppliers or other partners according to the needs of their business development plan. 

For the first time, the grant support system will be complemented by a range of services from enhancing innovation management skills, to accessing overseas markets and investors to finance growth.

In this context, last year the European commission, together with the European investment bank group (EIB), launched InnovFin, a series of financing and investment tools - covering both debt and equity financing, and complementing those available under the competiveness of SMEs (COSME) programme - and advisory services supporting companies from the early stage to growth stage, all throughout the innovation lifecycle.

The EU financial contribution to InnovFin is expected to reach almost €3bn for the period 2014-2020. It is also expected to leverage around €25bn of financial support which corresponds to an expected total investment of around €50bn.