SMEs set out vision for 'innovation utopia'

A new report describes a vision of the perfect environment to promote innovation and entrepreneurship in Europe's SMEs (small and medium-sized enterprises). Entitled 'Dreaming of EUtopia: constructing a vision of an entrepreneurial idyll', the report was produced by the Association for Competitive Technology (ACT), which represents the interest of SMEs working in the ICT (information and communication technologies) sector worldwide. It was launched at the Intellectual Property (IP) Summit in Brussels, Belgium on 4 December.

Instead of setting out policy recommendations designed to boost innovation, the report outlines a vision of the ideal 'habitat' for entrepreneurship and innovation against which policy proposals in a range of fields can be judged.

The report is the result of research and interviews with over 350 entrepreneurs from the ICT sector across Europe. 'It was immediately apparent that much innovation policy was developed in a piecemeal way with no holistic vision of how the different policy instruments worked together,' commented Dr Tim Vorley of the University of Cambridge in the UK, who led the research along with Dr Tim Round of the UK's University of Birmingham.

'This study turns the research agenda on its head by developing an entrepreneurial idyll and presenting an apolitical framework for fostering innovation and SME development,' added Dr Round.

'The primary argument of this paper is a simple one,' the report states. 'To create an entrepreneurial environment, or at least a more entrepreneurial one, we need to know what one is. Then, and only then, can we make real progress.'

In the utopia described by the report, the tax system is streamlined and online. 'The number of payments, how they are paid and, perhaps most importantly, the number of hours it takes to do so are all central to entrepreneurial environments,' the report reads. In Ireland, for example, although the tax rate (29%) is not the lowest, there are only 9 payments to be made, and all of these can be completed online. The overall taxation processes takes businesses around 76 hours to complete. Meanwhile in Poland, there are 41 payments to be made, only one of them can be made online and the whole process takes 418 hours.

In the ideal world, starting a business would be quick and easy. According to the report, in Australia, setting up a business entails two procedures, both of which can be completed within one day at a cost of around EUR 200. Meanwhile in some European countries, the process can take a month and cost thousands of euro.

Education is an important factor in the entrepreneur's ideal habitat; business owners tend to have had more formal education than the rest of the population, suggesting that general education is an important factor in business success.

Intellectual property is also discussed in the report. 'For the EU to even consider catching up with the USA and Japan a single IP protection scheme must be put in place,' the report notes. 'The utopian ideal would be a scheme whereby innovators can apply for IP protection in one country, online and at minimal cost, which offers immediate protection across the environment.'

Furthermore, a utopian environment should promote investments while protecting investors. At the same time, the process of closing businesses that are not doing well should not be too complicated. According to the report, the most innovative countries in Europe that have the quickest and cheapest procedures for closing down a business are also the countries that have the highest levels of protection for creditors.

'This study provides groundbreaking results and a fresh perspective on the question of how to increase Europe's innovation and entrepreneurship,' concluded ACT's President, Jonathan Zuck. 'The authors of this study have gone back to the fundamental question and asked, "What is the ideal environment for SMEs to flourish?"'

The next step for the researchers is to study the situation in individual countries against the utopian blueprint described in the report.