DEVELOPMENT, ENTREPRENEURIAL ACTIVITY AND INDUSTRIAL EXTENSION

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1 DEVELOPMENT, ENTREPRENEURIAL ACTIVITY AND INDUSTRIAL EXTENSION Heitor Mendes doctorate student PPED IE/UFRJ Lia Hasenclever Professor IE/UFRJ 1

2 Sumary 1. Introduction 2. Industrial MPMEs: characteristics, difficulties and power to overcome 3. Industrial Extension: international experience and the brazilian case 4. Recent evolution of the industrial extension system 5. Conclusion 2

3 Looking for... relevance of Network structure concept cooperation relations phenomena: Agent A Agent B 3

4 Question What is the contribution offered by industrial extension programs for the economic development to support the entrepreneurial capacity of industrial MPMEs? 4

5 Methodology Literature review on impact of: Entrepreneurship on economic development; Industrial extension programs for improvement of the entrepreneurial capacity of MPMEs; Enterprise networks to encourage the diffusion of knowledge. (Acs et al., 2005; Hernández et al., 2008 and Hernández & Dewick, 2011) 5

entrepreneurial capacity of MPMEs; Enterprise networks to encourage the

6 Framework Neo-Schumpeterian approach Emphasizes appropriation of knowledge through interactive learning: Within the enterprise Its external relations Innovation Capability 6

7 Industrial MPMEs: Characteristics, difficulties and power to overcome Value exported 5% Employment Value added 7.5 million 22% 7

8 Industrial MPMEs: Characteristics, difficulties and power to overcome Industrial sector Employers 52% Firms 98% * PINTEC (IBGE, 2008). Technological Innovation Research* Quantitative 96% Qualitative 38% Mortality** In four years million employments - 772,679 firms Loss R$ 19.8 billion in the economic activity investments ** SEBRAE, MDIC (2007), only micro and small firms between 2000 and

Technological Innovation Research* Quantitative 96% Qualitative 38% Mortality** In four years - 2.

Industrial MPMEs: Characteristics, difficulties and power to overcome Schumpeter: importance of Development Entrepreneurship Innovation Brazil difficulty: Most of MPMEs 55% necessity-based

9 Industrial MPMEs: Characteristics, difficulties and power to overcome Schumpeter: importance of Development Entrepreneurship Innovation Brazil difficulty: Most of MPMEs 55% necessity-based firms (GEM, 2002). TEA*: 2007 => 2012 opportunity-based reached 69.2%. BUT... Still distant from Mexico and Chile (TEA: 85.2% and 82.2%). * Total early-stage entrepreneurial activity (GEM, 2012). 9

firms (GEM, 2002). TEA*: 2007 => 2012 opportunity-based reached 69.2%. BUT.

10 Industrial MPMEs: Characteristics, difficulties and power to overcome Schumpeter Analisys And the relationship among firms? The possibility of an innovation spillover of large firms; and opportunity-based entrepreneurial activities for the MPMEs? Acs et al. (2005), Hernández & Dewick (2011): What extent the MPMEs are capable of overcoming their problems? 10

The possibility of an innovation spillover of large firms; and opportunity-based

11 Industrial MPMEs: Characteristics, difficulties and power to overcome Acs et al. focus => origins of opportunities Bridge <Entrepreneurship> and <Economic opportunities> New Entrepreneurship Theory Knowledge spillover teory of Entrepreneurship Strong relationship: <spillover> <-> <entrepreneurial activity> Origin for the opportunities => part of the R&D investments SPILLOVER fell on new participants. 11

Entrepreneurship Theory Knowledge spillover teory of Entrepreneurship Strong relationship:

Industrial MPMEs: Characteristics, difficulties and power to overcome Hernández et al.; Hernández & Dewick: Institutional change Trade and labor contracts, but not only.

12 Industrial MPMEs: Characteristics, difficulties and power to overcome Hernández et al.; Hernández & Dewick: Institutional change Trade and labor contracts, but not only... Generate organizacional capabilities. Purpose: Integration of necessity-based enterprises (A) in the opportunity-based enterprise (B) networks. SOCIAL ENTREPRENEURSHIP 12

.. Generate organizacional capabilities.

13 Advantages Latin America Model of the authors wants to answer: Why and how the entreprises emerge and can integrate itself in a dual context. Coexistence => advanced firms of world level and manufacturers surviving with low resources??!! The model explains: Dynamics through which both A and B have complementary needs to generate a creative encounter... Interfirm collaboration Learning and dissemination of information Generation of knowledge 13

Coexistence => advanced firms of world level and manufacturers surviving with low resources?

14 Results of model simulation It sugests: Both types, A, B play important role: maintenance of a pattern or in the country s catching up. Opportunity-based firms as a key-institutions in the process of technological accumulation better absorption capability. Necessity-based firms as a key-institutions in the process of technology assimilation better in intraorganizacional learning, dissemination of information and tacit knowledge. 14

Opportunity-based firms as a key-institutions in the process of technological accumulation better absorption

15 Results of model simulation No Optimal enterprise These structures are complementary Figure Social entrepreneurship for the generation of networking capabilities Source: Hernández & Dewick (2011, p. 230) 15

entrepreneurship for the generation of networking

16 Industrial Extension: international experience and the brazilian case Possible advantages by MPMEs of knowledge spillover Does not occur automatically Started: end of XIX century. National relevance: NIST 1988 MEP 1989, promoting: capabilities and dissemination of new technologies. For => PMEs Started: beginning XX century. Kohsetsushi, promoting: capabilities and consulting. Inspired: USA. For => PEs Action: STATE Support Mechanisms This section: based in Madeira (2009) 16

National relevance: NIST 1988 MEP 1989, promoting: capabilities and dissemination of new technologies.

17 Industrial Extension: international experience and the brazilian case In general: focus on PMEs. View on: technological capability; Dissemination: information and knowledge. After 1990 s: Emphasis on technological innovation. Networks formed to solve problems (by cooperation): in the USA; 2,500 in the Japan. Important aspect*, useful in the Brazilian case. USA and Japan can improve the behavior of the PMEs by transferring simpler technologies: basic management; Mature production technologies, available in the market (new to PMEs). * Pointed out by Acs et al. (2005); Hernández & Dewick (2011) 17

Networks formed to solve problems (by cooperation): 150-200 in the USA; 2,500 in the Japan. Important aspect*, useful in the Brazilian case.

18 Industrial Extension: international experience and the brazilian case Started with experiences in agriculture, in the 1930 s. National impulse after Industrial extension: mid-1980 s: Basic Industrial Techonology Program (TIB), 1985; Brazilian Program of Quality and Productivity (PBQP) Main and broad Programs: PEIEX Exporting Industrial Extension Project SEBRAETEC Technological Consultation Program PRUMO Program of Support to Exports PROGEX Program Innovate to Compete 18

Industrial extension: mid-1980 s: Basic Industrial Techonology Program (TIB), 1985; Brazilian Program of Quality and

19 Industrial Extension: international experience and the brazilian case PEIEX Exporting Industrial Extension Project SEBRAETEC Technological Consultation Program Madeira (2009) concludes, in relation to extension programs: 1- the impact of program is directly influenced by the interference methods utilized; 2- intensive and more extended services permit to utilize more adequately the method which tends to produce a longer duration and more significant effect for the enterprises; 3- programs with less intensive characteristics, and shorter duration, tend to produce a more peripheral impact on the companies development, requiring complementation by other programs. 19

extended services permit to utilize more adequately the method which tends to produce a longer duration and more significant effect for the enterprises; 3- programs

Industrial Extension: international experience and the brazilian case Problems to solve Brazilian Extension Programs Standard feature of the programs generates negative consequences, since each

20 Industrial Extension: international experience and the brazilian case Problems to solve Brazilian Extension Programs Standard feature of the programs generates negative consequences, since each company is an unique resource collection (Penrose, 2006). The support policies to the SLPs* present articulation difficulties between local and federal agents. Non-continuity represents one of the negative points of extension programs. The restriction of scope regarding services rendered is also pointed out as one deficiencie for limiting the reach of projects. The programs offer similar services, with a double offer, which shows the lack of articulation among the existing extension alternatives. * Local production systems 20

The support policies to the SLPs* present articulation difficulties between local and federal agents. Non-continuity represents one of the negative points of extension programs.

Recent Evolutions: Industrial Extension System After 2007 In 2007 Decree 6.259 the Brazilian Technology System SIBRATEC was created.

21 Recent Evolutions: Industrial Extension System After 2007 In 2007 Decree the Brazilian Technology System SIBRATEC was created. Figure MDIC: SIBRATEC Structure SIBRATEC Three types of networks: 1. Innovation Centers 2. Technological Services 3. Technological Extension In accordance with Acs et al.; Hernández et al.; Hernández & Dewick. Source: Ministry of Development, Industry and Foreign Trade - MDIC 21

22 Conclusion 1. Entrepreneurship and innovation is positively associated with economic development. 2. The contribution of MPMEs for the development strongly depends on industrial extension programs for qualification. 3. The analysis conducted on the Brazilian programs has shown that they went from an individualized to a collective type of service, through networking formation. 4. The lessons pointed out by Acs et al. (2005), Hernández et al. (2008) and Hernández & Dewick (2011) to take advantage of knowledge spillover seems to have been considered. 22

Conclusion Impacts of network arrangements 1º Consequence of the technicalproductive cooperation: gain of operational efficiency; Gain with the increase of productive flexibility; 2º The capacity of

23 Conclusion Impacts of network arrangements 1º Consequence of the technicalproductive cooperation: gain of operational efficiency; Gain with the increase of productive flexibility; 2º The capacity of these structures to face the environment s lack of stability. 3º The technological cooperation in the companies networks, reinforcing their competitiveness by strengthening their innovative capacity - collective learning process. 23

Leverage the Competitiveness of Micro, Small and Medium Size Enterprises in Brazil. Rita Pinheiro-Machado

Intellectual Property as a Tool to Leverage the Competitiveness of Micro, Small and Medium Size Enterprises in Brazil Rita Pinheiro-Machado General Coordinator of Regional Action Summary Brazil ST&I indicators