STATE REGULATION OF SMALL AND MEDIUMSEIZED ENTREPRENEURSHIP INNOVATIVE ACTIVITY

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Today the majority of the anti-recessionary measures accepted in the leading countries, are directed on stimulation of innovative activity [3, 6], including in sphere of small and average business (further — МСП) [2, 7]

State Regulation of Small and Medium-seized Entrepreneurship Innovative Activity in the Novosibirsk Region: Challenges and Opportunities

Gourounian Tatiana Valentinovna

Ph.D. in Economics

Associate Professor

Abstract

World experience shows that small and medium-seized entrepreneurship (SME) can be a powerful resource of innovative development in Russia and in the Novosibirsk region in particular. The purpose of this article is to define the directions of state regulations of small and medium-seized businesses’ innovative activity. The paper reports recent research that examined factors countervailing SME innovative activities and the most effective support measures at Federal, Regional and Municipal levels. The author highlights the implications of the findings and concludes with presenting special measures for developing information space in the field of innovative activities support. Concrete technologies at Federal level is offered to be created in the nearest future. The offered measures of SME innovative activities will promote recovery and stabilization of its economic development, maintenance and increase of its competitiveness in Novosibirsk Region.


Analisys of Current Approaches to the valuation

of small and medium-seized entrepreneurship innovative activities


Today the majority of the anti-recessionary measures of the leading countries are intended to stimulate innovative activities1, including Small and Medium-seized Entrepreneurship (there and then - SME)2.

World experience shows that SME can be a powerful resource of innovative development3. However, this resource is understudied only as a part of small hi-tech enterprises. There is a crying need to investigate SME administrative, organizational, social, industrial and marketing innovative activities; to develop a balanced scorecard of innovative activities and a performance evaluation of state support; to monitor SME innovative activities.

The purpose of this article is to define the directions of state regulations of small and medium-seized businesses’ innovative activities. The paper reports recent research that examined factors countervailing SME innovative activities and the most effective support measures at the Federal, Regional and Municipal levels.

The methods that were used to reach the aim of this article can be summarized as follows: literature study; the method of reiterative, critical reasoning; the techniques of analysis and synthesis, inquiries, induction and deduction, statistic processing.

To begin with, perfection of SMB innovative activity support, especially at regional and municipal levels is required in the conditions of the global crisis and the post-crisis period4.

Innovations in the economy come into fruition in materialized (new or improved products, technologies, equipment, materials, energy sources and etc.), and in not materialized forms (job and management enrichment, personnel professional development). Innovative processes interrelate with many processes in social and natural environment; create competitive advantages of some regions in the country and some states in the international market5.

In modern innovative theory extended classifications of innovations are examined6. Accordingly, SME innovative activities covers not only highly technological sphere, but also administrative, organizational, social, industrial and marketing ones which are understudied in the economic science and sociological practice.

Traditionally SME innovative activities are considered to be hi-tech. In the Novosibirsk region, for example, the innovative potential of purely large industrial enterprises and small high-technology companies is analyzed now. So, the survey of 50 high-technology innovative companies working at the research institute in 2006 has been accomplished at Novosibirsk Center of Science in Academgorodok (Science Campus).

To define the directions of state support, a research project «Efficiency of the State Support of Innovations in the System of Small and Medium-seized Entrepreneurship in the Novosibirsk Region» 7under the order of the Novosibirsk Regional Department of Science, Innovations, Computerization and Communication has been carried out at Siberian Academy of Public Administration.

We interviewed 166 businessmen of Novosibirsk Regional SME to estimate their needs in resources; to define the factors countervailing innovative activities and the most effective support measures at Federal, Regional and Municipal levels.

Supportive measures effectiveness was defined on the basis of SME innovative activities ratio. Its monitoring helps elicit the resources that are necessary for innovative activities.

To define scales and dynamics of innovative activities the following indicators may be offered, namely:

— the density of SME entities using innovations in total;

— the share of innovative production or products in the total amount of SME production conducting innovative activities;

- the share of employees involved in innovative activities.

«Questionnaire for carrying out sampling enquiry of SME innovative activities in the Novosibirsk region» is a methodical tool of monitoring. Its results can help receive indicator values of SME innovative activities. In-depth interviews with SME entities were used for assessment of innovative activities of leaders, proprietors of the enterprises and entrepreneurs responded.

The following results were obtained, namely:

1. more than half of SME were involved in innovative activities to some extent in 2008-2009: the percentage was 52 % in total;

2. innovative production sharing in total innovative SME output was 56% in total;

3. employee share involved in SME innovative activities in was 36 % in total.

We can say that the research shows a crying need to investigate administrative, organizational, social, industrial, marketing innovative activity of SME; to develop a system of innovative activities’s indicators and a technique of estimation of the state support effectiveness; to carry out practical monitoring of SME innovative activitIes.


effectiveness analysis of innovation ACTIVITIES state support in THE nOPVOSIBIRSK rEGION


All respondents pointed out that they needed information resources for their innovative activities. Thus, according to 33 % respondents, information resources play a strategic role in the development of innovative activities in the country.

Firstly, 98 % of small enterprises employees and 92 % of medium-seized enterprises employees emphasized their need in the database about innovative workings in the Novosibirsk region .

The second place took the information on financing sources of innovative activities, (95 % of small enterprises and 88 % of medium-seized enterprises).

It’s also essential to develop the database about patents, trade marks, copyright certificates of SME as 90 % of small enterprises and 72 % of medium-seized enterprises need it.

80 % of small enterprises and 67 % of medium-seized enterprises look forward to having the information on intellectual property rights protection.

The information on exhibitions and fairs is more accessible as only 75 % of small enterprises and 55 % of medium-seized enterprises underlined it. The data on competitions, grants, tenders, state orders are of great importance for 70 % and 55 % respondents accordingly.

The information on scientific researches such as dissertations in Russia and abroad appeared the most unclaimed as only 21 % of small enterprises and 39 % of medium-seized enterprises emphasized it. It proves the fact that such information resources aren’t in great demand for entrepreneurs today.

We may say that it is necessary to expand information support, to provide businessmen with a database about SME innovative workings, and to strengthen protection measures from the unfair competition in order to develop SME innovative activities in the Novosibirsk region.

It is obvious that small enterprises need more information support than medium-seized ones for their successful innovative activities as they are limited in financial and personnel resources for the appealing to the consulting services in the questions of the effective business organization, attracting investments, getting financial support, appeal to the patent right and protection of other intellectual property rights such as trade marks, service marks, company names, brands. SME are limited in the opportunities to have lawyers and innovative managers in their staff. Moreover, today consulting business and consultation services in the sphere of MSE support organized by the state and municipal structures aren’t developed enough in the Novosibirsk region.

Special researches of small hi-tech enterprises show that private businessmen consider the product market promotion as the most significant resource. According to SME entities that are not hi-tech (production industry, service business, everyday services and others), they need elementary information for conducting innovative activities, namely: on the sources of innovative activities financing, on intellectual property protection.

The information on the product market promotion such as exhibitions, fairs is necessary, but the representatives of SME find this information more accessible (for example, advertising of the Siberian Fair is published in many mass-media). Actually, exhibition activity is rather developed in the Novosibirsk region. So, the Novosibirsk region received the diploma and the Winner’s Cup of the competition «The Best Region of the Russian Federation» as the result of «The Days of Small and Medium-seized Business of Russia-2008». «Siberian Business Forum» is annually organized in Novosibirsk. There are some events during «The Days of Entrepreneurs» that promote SME development.

At the same time, only 25 % respondents know about exhibition activity of the Department of Industrial and Business Development in the Novosibirsk region. In this context, it is necessary inform businessmen about all exhibition activities on time.

SME entities are interested in conducting innovative activity to develop their competitiveness. The information on such workings shows the requirement of studying innovative activities effective practices.

Thus, above-noted features require targeted measures of information support of SME innovative activities.

One third of SME pollees mentioned financial resources as the main resource for the development of innovative activities. Primarily, such estimation is connected with long pay-off period of innovations, high risks and difficulties of their introduction.

Innovative activities of 85% of small enterprises and 80% of middle-seized enterprises are provided by equity financing. Only 25 % of small enterprises and 31 % of middle-seized enterprises use bank credits; 15 % of small enterprises and 18 % of middle-seized enterprises receive direct investments of the customers; 13 % of small enterprises and 15 % of middle-seized enterprises apply for the grant capital. Supportive means of different structures were used by 13 % of small enterprises and 16 % of middle-seized enterprises, micro credits of retail cooperatives were utilized by 4 % and 5 % accordingly. Venture investments are accessible for 8 % of small enterprises and 9 % of middle-seized enterprises, business angelic investment — for 5 % and 7 % accordingly.

Special attention should be paid to the use of supportive means of different structures outdraws. Here we can mention the Regional Support Fund of SME, the program “Start” of the Fund for the Promotion of Small Businesses Development in the Sphere of Science and Technology and special regional programs such as “Small and Medium-seized Entrepreneurship Development in the Novosibirsk Region in 2009-2011” and “The Development of Public Amenities in 2009-2011”.

The Department of Business and Entrepreneurship Development in the Novosibirsk Region has legislated well-established and popular forms of finance support that are focused on business activities incentive stimulation, business growth, salary legalization, turnovers and incomes of business entities.

The analysis of the financing sources used by the respondents shows that not all MSE representatives can profit by the given support.

There is Novosibirsk Venture Capital Fund and Western Siberian Venture Capital Fund of European Bank for Reconstruction and Development (EBRD), but entrepreneurs highlight that it’s too difficult to prepare applications and steep demands for their fund financing. 50 % of the respondents don't know anything about this funds, as well as about business angelic investments.

It is necessary to underline that the third part of SME, drawing bank credits in their innovative activities, have used credit preferential programs (according to the cooperation agreements on SME financial support between the banks and the administration of the Novosibirsk region). They include both short-term credits, and long-term investment projects. Businessmen specified big difficulties in receiving bank credits. It is connected with the world financial crisis that resulted in the bank liquidity deficiency. In this context, it’s necessary to develop new forms of innovative activities and strengthen measures of SME innovative activities financing. Personnel resources are mentioned as the most important resources for SME innovative activities (20% of respondents). At the same time 80 % of SME representatives need experts in the field of innovative activities development.

Small businesses would like to hire managers of innovations (30% and 32%), researches (12% and 15%), and financial analysts (7% and 9%). In Siberia managers of innovations are prepared at few educational institutions, and this specialization is rare at universities.

21 % of real sector representatives and 68 % of SME find infrastructural resources to be of great importance in the development of innovative activities. High costs of rent and office purchases, trading, production and warehouse areas in Novosibirsk become real barriers for conducting innovative activities as majority of the businessmen activities pointed out. Commercial property acquisition (especially of micro-enterprises) is practically inaccessible for SME entities. Moreover, there are many problems with SME power installations to the electric networks and getting electric capacities. The given resource is especially significant for the businessmen who work in a real sector of economy.

SME weak awareness about innovative activities infrastructure arouses great concern. But a good the most significant investment project of the region in the sphere of innovative activities support is the construction of Research and Technology Park in Novosibirsk Academgorodok.

I’d like to describe this project in details here. It is realized on the principles of public private partnership. 160 thousand square meters of office and laboratory production areas are supposed to be built for the innovative companies which are the residents of Research and Technology Park during seven years. In fact, investment volume will be more than 20 billion rubles, including about 18 billion rubles of private investments. Nevertheless, only 2 % of SME, 5 % of middle enterprises and 4 % of small enterprises are going to participate in a business incubator in Koltsovo.

A business incubator is being created in the technology city Koltsovo by the government program of SME support. Organizing conducive environment for SME introduction and development will be formed with the help of this project. Consultation services on the problems of business planning, technology transfers, training and professional improvement, crediting, legal protection and enterprises development are provided for the clients of the business incubator. Successful graduates of this business incubator will have a splendid opportunity to build their office production buildings in the research and technology park of Koltsovo.

The enterprises specializing in different areas are the residents of the business incubator, namely: drawing-up and production of air cleaning system, developing furniture, enzyme preparation and vitamins production, infant and clinical nutrition production, production of cosmetic formulations, examining operation of human resource management systems, drawing-up software and web sites, information technologies. On the whole, SME entities highly appreciate the conditions created for innovative activities development in Koltsovo.

At the same time, many SME representatives find this business incubator location inconvenient, and they are also at a loss by the fact that many innovative enterprises such as medical and lawyer services are excluded from the number of its potential residents. What is more, difficulties in collecting numerous supporting materials and high requirements to the competitors act as a brake on innovative activities development. Therefore today about 60 % of useful business incubator territory is inhabited.

I can’t but mention the fact that the concept of public private partnership and reinforcement of the role of the self-regulatory organizations in the innovative entrepreneurship is successfully realized on the territory of the Novosibirsk region. The regional state administration and the Presidium the Siberian Branch of Russian Academy of Sciences  (SB RAS) supported the development of the Association "SibAcademInnovation", Noncommercial partnerships of "SibAkademSoft" and «Information and technologies», the Association «Power Electronics of Siberia» that unite leading high technology companies. These associations successfully solve political problems, carry out arbitration functions, and promote innovative infrastructural development.

But these measures are insufficient and therefore it is necessary to strengthen SME support for social stability preservation and economic safety in the period of a crisis.

Improvement of innovative ativities state support of small and middle-seized enterprenuership in the Novosibirsk region


The analysis of the most effectual measures of innovative activities support which was specified by the respondents shows that all SME entities are interested in information and financial support at regional level, and regional SME entities as well are interested in the support of the local government.

The directions constraining innovative activities development are defined within the framework of the project, namely:

1. Insufficient information support on innovative activities state support, on protection of intellectual property rights, on successful practices of innovations introduction, on methods and principles innovative activities.

2. The lack of free monetary resources which is not compensated by the state financial support and high percent for using bank credits.

3. High cost of innovations and economic risk, a long period of projects payback periods, a lack of highly-qualified personnel.

4. Illegibility and insufficiency of innovative activities tax privileges.

5. High degree of economic activities in the sphere of intense territorial resources (power resources, capital fund, etc.) controlled by large managing entities.

6. Insufficient access to the infrastructural resources.

7. A lack of operative organizational and resource support from the regional authorities and local government.

Now market innovative activities boost is considered as a primary factor of economic and national safety by the supreme authority. According to the presidential strategy, the economy of Russia should enter five world economic schemes because of the innovative development. The President also underlined the necessity of inclusion of state innovative policy as a separate direction into the Long-term Russian Federation Development Concept up to 2020. The strategy of social and economic development of the Novosibirsk region is a major perspective document which defines a basic installation of the Novosibirsk region to develop innovative development, its stages and mechanisms, and also the role of SME in this sphere. Because of conceptual and macroeconomic adjustments in the terms and conditions of Development Strategy of the Novosibirsk region fulfillment, I suggested the following ways to implement it, namely:

1. To elaborate a draft law of the Novosibirsk region «About Innovations in the Novosibirsk Region».

2. To specify and update target parameters of innovative activities development of SME entities in the Novosibirsk region.

3. To create favorable conditions to satisfy the additional demand in learning the bases of entrepreneurship with the help of the best world programs and MBA programs. The Novosibirsk region can become the leading center of a business education in the sphere of innovational development of the Russian regions if to develop business education at Novosibirsk universities in co-operation with recognized world educational centers of MBA (Master Administration Business) and with the support of such centers in Moscow and St.-Petersburg.

We consider that it is expedient to include special measures support into the program «Development of Small and Medium-seized Entrepreneurship of the Novosibirsk region in 2009-2013», namely:

1. To specify in the passport of target indicators’ program: «the increase of the innovative production share in the SME total production; the increase of small entrepreneurship using innovations in total»;

2. To add the following statement to the section 4/в “Mechanisms of the Program Realization”: “Regular monitoring of SME innovative activity in order to reveal the needs in innovative activities and to define efficiency of accepted support measures”.

3. To add special measures for the development of SME innovative activities to the list of policy measures.

Intensive innovative activities information space can be developed if to solve the following tasks.

1. To form an information-consulting network, not less than 25 consulting centers. Here consultation and maintenance of a free access of SME to the necessary information on financing sources and other measures of innovative activities support; protection of intellectual property rights such as trade marks, service marks, company names, brands; on forming clusters; on certification of quality management systems according to the international standards ISO of a series 9000; learning opportunities and etc. should be organized.

For this purpose the following kinds of methodical maintenance of SME innovative activities are supposed to be introduced, namely:

— rendering accounts through the Internet for decreasing transaction expenses of businessmen and their involving into the up-to-date information technologies of innovative activities;

— organizating free exit seminars, consultations and short-term trainings for effective innovative activities on the following subjects: accounting records maintenance, maintenance of tax records, optimization of taxation system, management accounts; IP management and etc.

2) To create the Internet portal on the problems of innovations.

3) To establish a database about vacant spaces, standby capacities, incomplete constructions, enterprises and organizations providing the equipment to SME on the terms of leasing.

4) To update Internet sites on the problems of SME innovative activity support. on protection of the intellectual rights, on possibilities of learning and etc.

5) To develop Internet exhibitions of SME innovative workings in the Novosibirsk region.

6) To work out municipal programs of SME innovative activities support, including seminars, exhibitions and fairs of innovative activities and etc.

7) To establish a database about SME innovative workings in the Novosibirsk region (that is distribution of the best practice).

8) To highlight questions of cluster-based policy in the Novosibirsk region, information on the forming clusters and opportunities for small enterprises for the participation there.

More than that it’s necessary to create additional conditions for small businesses access to the financial and property resources to develop innovative activities, namely:

1) introduction of share investment funds of retail cooperatives;

2) development of the regional venture fund;

3) subsidizing patent fees for its international registration;

4) development of credit relaxation and tax advantages for environmentally efficient technologies.

5) support of financial leasing institutions, crediting and small businesses insurance;

Some words about strengthening antimonopoly control and coherent competitive policy. Here we can suggest the following steps: the tax stimulation of small business innovative activities; the development of a youth innovative infrastructure; preparing innovative managers and IP management experts at Novosibirsk Universities and the incorporation of regional components into their educational programs.

The development of a base of technologies is proposed at the Federal level. This important measure of information support nd other support measures will give potential customers and investors the information on new technologies in Russia, namely: a list of scientific research institute and enterprises — developers, the description of workings, and comparative analysis of the given workings with domestic and foreign analogs, business-plans of the product development (progress milestones, schedules and line item budgets).

The results of our research were offered at the Council of Administration of the Novosibirsk region when there was a discussion of the regional target program «Development of Small and Medium-seized Entrepreneurship in the Novosibirsk region in 2009-2013».

Our recommendations of SME state support innovative activities are included into the section «Development of Small and Medium-seized Entrepreneurship in the Novosibirsk region» of the draft plan of Novosibirsk regional social and economic development in 2010 – 2012. There are recommendations to monitor researches of SME innovative activities for information on punctual and productive administrative decisions in the sphere of SME development and their innovative activities, and there are proposals to work out municipal programs of SME innovative activities support.

Let's especially notice that the offered measures of SME innovative activity support will promote restoration and stabilization of SME economic development, their maintenance and competitive recovery in the Novosibirsk region.

BIBLIOGRAPHY

1. Valiev, O.V. “Science and Business as a Strategic Alliance”. In ECO. 2007, #7.

2. Vasiliev, M.V. “State Support of Small Business in Crisis Conditions: Experience of the USA”. In USA and Canada: Economy, Policy, Culture. 2009, #11.

3. Gamidov, G.S. 2009. “Innovations in Anti-recessionary Struggle and Post-crisis Development of a Society”. In Innovations. 2009, # 8.

4. Golichenko, O.G. National Innovative System of Russia: a Condition and Development Ways. Moscow: Science, 2006.

5. Dobyndo, M.N. “Development of Business as Preconditions of Steady Innovative Transformation of Regional Economy”. In Regional Economy: Theory and Practice. 2007, # 13 (52).

6. Dynkin, A.A. “World Crisis as Impulse for Development of Innovations”. In Problems of Theory and Practice”. 2009, # 4.

7. Zverev, A. “Measures of Small and Medium-seized Businesses State Support in Germany”. In Economist”. 2009, # 9.

8. Kostrov, A.V. “How to Involve Small Enterprises to Innovative Sphere?”. In Innovations. 2009, # 10.

9. Molchanova, O.P. “Small Business in Scientific and Technical sphere as Stimulus to Progress of National Innovative System in Russia: Current State and Problems”. In Vestnik of Moscow University. 2010, # 2.

10. Monastic, E.A. “Terms and Definitions in Innovative Sphere”. In Innovations. 2009, #2.

11. Pligina, N.A. “Small Business in the Innovative System of Russia”. In Economy and Property Management”. 2009, # 1.

12. Prigulny, A.G. “Questions of Methodology in the Research of Innovations”. In Economy and Management. 2007, # 3.

13. Rube, V.A. Small Business: History, Theory, Practice. М: ТЕIS, 2000.

14. Gurunyan, T. V. Efficiency of Innovations State Support in the System of Small and Middle-seized Business in the Novosibirsk Region. Novosibirsk, 2009.

15. Yulenkova, I. B. Factors. “Constraining the Development of Small Business Innovations in the Region”. In Regional Studies. 2009, # 2.




1 Gamidov, G.S. 2009. “Innovations in Anti-recessionary Struggle and Post-crisis Development of a Society”. In Innovations. 2009, # 8.; A.A. Dynkin. “World Crisis as Impulse for Development of Innovations, in Problems of Theory and Practice”. 2009, # 4.


2 M.V. Vasiliev. “State Support of Small Business in Crisis Conditions: Experience of the USA”, in USA and Canada: Economy, Policy, Culture. 2009, #11.; A. Zverev. “Measures of Small and Medium-seized Businesses State Support in Germany, in Economist”. 2009, # 9.


3 G. Golichenko. National Innovative System of Russia: a Condition and Development Ways. Moscow: Science, 2006.; O.P. Molchanova. “Small Business in Scientific and Technical sphere as Stimulus to Progress of National Innovative System in Russia: Current State and Problems”, in Vestnik of Moscow University. 2010, #; V.A. Rube. Small Business: History, Theory, Practice. М: ТЕIS, 2000; M.N. Dobyndo. “Development of Business as Preconditions of Steady Innovative Transformation of Regional Economy”, in Regional Economy: Theory and Practice. 2007, # 13 (52).



4 A. Zverev. “Measures of Small and Medium-seized Businesses State Support in Germany, in Economist”. 2009, # 9; N.A. Pligina. “Small Business in the Innovative System of Russia”, in Economy and Property Management”. 2009, # 1; I. B. Yulenkova. “Factors, Constraining the Development of Small Business Innovations in the Region” in Regional Studies. 2009, # 2.


5 A.V. Kostrov. “How to Involve Small Enterprises to Innovative Sphere?” in Innovations. 2009, # 10.


6 A. Monastic. “Terms and Definitions in Innovative Sphere”, in Innovations. 2009, #2. ; A.G. Prigulny. “Questions of Methodology in the Research of Innovations”, in Economy and Management. 2007, # 3.



7 T.V. Gurunyan. Efficiency of Innovations State Support in the System of Small and Middle-seized Business in the Novosibirsk Region. Novosibirsk: SAPA, 2009, 133.


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