2000 Edition. SMEs & EU RTD Small and medium-sized enterprises and European Union programmes for research and technological development

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1 EUROPEAN COMMISSION SCIENCE RESEARCH DEVELOPMENT 2000 Edition SMEs & EU RTD Small and medium-sized enterprises and European Union programmes for research and technological development

2 This brochure presents the results of an evaluation of SME participation in European RTD, which was completed in 1997 for the SME Coordination Unit of Research DG by Vertica Oy in collaboration with Yellow Window NV and Zenit GmbH. It is based on surveys of the 4,000 SMEs which made use of the Fourth Framework Programme in 1995 and SMEs are the cornerstone of Europe s competitive position and job creation. They form a dynamic and heterogeneous community which is confronted by many challenges. These include increased competition resulting from the completion of the European internal market and the growing demands of larger companies for which they often work as sub-contractors. To meet these challenges and to remain competitive, SMEs need constantly to innovate. Among other things, this means developing new technologies inhouse or gaining access to them. Besides this, many SMEs both need and want to internationalise in search of new markets and business opportunities. The EU Framework Programme for Research and Technological Development is an excellent instrument to realise both objectives at the same time. SMEs are increasingly realising this, and more than 14,500 of them have participated in the Fourth Framework Programme ( ). This is almost three times the level of SME participation in the Third Framework Programme ( ), and is largely due to the special measures which the EU has set up to facilitate SME participation: the Technology Stimulation Measures for SMEs. In the Fifth Framework Programme ( ), it is planned to continue these measures as part of a Horizontal programme on Innovation and Participation of SMEs, and to strengthen them further, for instance by creating a single entry point to inform and assist SMEs wishing to participate.

3 What type of SMEs use EU RTD programmes? One-third of SMEs which take part in EU RTD programmes can be considered as technology developers, and 62% are leading technology users. Only 4% are technology followers. Collaborative RTD Technology developers (high technology intensity) are companies with strong research capabilities. They make up some 3% - 5% of Europe s industrial SMEs, and tend to be small, young and in high-tech sectors. Many are university spin-offs, and many are in the RTD services sector. They are looking for longer-term results, and so invest a significant amount in research. They frequently launch technologically improved products or services. They like to take part in multinational pre-competitive research, and prefer collaborative to co-operative projects. Leading technology users (medium technology intensity) do not have sufficient RTD capabilities to meet their technological needs, so they outsource RTD. They make up some 10% - 15% of EU industrial SMEs, tend to be over 10 years old and invest much less in research than technology developers do. They come from both manufacturing and service sectors, and often lead co-operative (CRAFT) projects. Technology followers (low technology intensity) are uninvolved in RTD, but are end-users of it. They tend to be in more traditional sectors, be older, and invest less in RTD. They tend to look for short-term results, and to become partners rather than leaders of RTD projects. 55% 2% 43% 77% 17% 6% Co-operative RTD Technology developers Leading users Technology followers

4 Newcomer SMEs FP4 is attracting new SMEs to take part in RTD. Nearly two-thirds (64%) of all SMEs taking part in the 4th Framework Programme are newcomers. For co-operative research this proportion rises to nearly four-fifths (78%), and in collaborative projects almost half the participants are newcomers. Collaborative RTD 57% Experienced participants Newcomers FP4 creates new partnerships. Nearly half of all SMEs taking part in the 4th Framework Programme had never previously co-operated with any of the other members of their consortium. 40% 43% New partnerships No previous co-operation Existing co-operation A first taste of joint RTD FP4 offers SMEs a way into joint RTD. For over three-fifths (63%) of SMEs taking part in the 4th Framework Programme, it was their first experience of RTD co-operation. They had never taken part before in any regional, national or multinational programmes such as Eureka or COST. 22% 60% 52% 78% 48% Co-operative RTD 54% 46% Participated in programmes other than EC 73% 27% No Yes

5 Benefits of participation FP4 helps SMEs to innovate and develop transnational partnerships. Besides developing transnational partnerships, the main benefits that SMEs see in taking part in the Framework Programme are developing a new product or process, accessing technology and exploiting existing know-how. EU funding alone is not considered to be a main reason for participating. 30% Main benefits 20% 10% 10% 30% 40% 20% 40% Collaborative RTD Develop new product or process Exploit existing know-how Access technology or skills Image & international exposure Barriers to participation CRAFT s procedures are user-friendly. Barriers to participation in the Community RTD Framework Programme can be internal to SMEs (lack of management time or of internal resources) or external to them (delays in evaluating proposals, complex procedures, low selection rates). The procedures introduced in the CRAFT action have halved the importance of the external barriers. 23% Relative weight of important barriers 77% Internal barriers External barriers 65% 35% Co-operative RTD SMEs are satisfied FP4 participants are satisfied. SMEs are overwhelmingly satisfied with the benefits of taking part in the Framework Programme. Almost all would do it again. 96% 96% 4% 4% Do it again Don t do it again

6 Finding out about EU RTD Collaborative RTD SMEs find out about European RTD from their business partners or service providers. Business partners are the main source of general information for newcomer SMEs. However in the case of CRAFT, specialised service providers such as CRAFT National Focal Points, Innovation Relay Centres and Euro Info Centres are much used. 30% 10% 30% 30% First information Partners Service providers Press & events Other Partners Service providers Other From idea to project The EC and its networks of specialised service providers play an important role in informing and assisting SMEs. Partners are also the main source of assistance. Besides them public sector sources (including the EC and its networks) are the most used source for collaborative research. CRAFT projects rely both on RTD performers and EC networks. Assistance sources 25% 46% 29% 37% Partners EC & Networks Other RTD performers EC Networks Other Partners Other Preparing a project 40% 14% SMEs mostly require 3 basic types of help to prepare a project: Expert and partner search Clarification of the application material Checking the quality and eligibility of the proposal 46% 21% 21% 21% Co-operative RTD 31% 38% 31% Type of assistance required 21% 58% 21% Experts/Partners Screen proposal Explain material

7 New products FP4 helps product innovation. Over half of SMEs taking part are in manufacturing, with high- and low-tech equally represented. Lower-tech SMEs tend to participate in CRAFT, while service and consulting companies tend to undertake collaborative projects. Collaborative RTD 26% 21% 24% 29% Distribution of participating SMEs by activity sector Higher tech manufacturing Lower tech manufacturing R&D, consulting & engineering services ICT services Small companies FP4 is useful even to very small companies. Two-thirds of SMEs taking part have less than 50 employees. Only 7% have more than 250 employees. 45% Distribution of participating SMEs by number of employees 11% 14% 22% 8% < >250 52% 50% 13% 2% 33% 18% 15% 12% 5% Co-operative RTD

8 Achievements of some CRAFT projects BAKERS WARM TO WATER CONTROLLER To obtain quality bread without wasting water and energy, bakers require water to rapidly reach a well defined temperature. In CRAFT project 1106, 4 Italian and Danish bakers asked a small Italian process control development company to produce a fast response water mixer. The resulting device saves energy and time as it supplies water at the required temperature 10 times faster than previous models. It is also more flexible and more reliable, increasing uptime by some 25%. DON T LOSE YOUR MARBLES In project CRAFT 1815, 7 SMEs from 3 EU countries, all extractors or suppliers of building stone, asked Austrian research institutes why the marble cladding on so many modern buildings distorts and comes away after a few years, resulting in heavy repair bills. They found out that the main reason is that marble panels expand by differing amounts in different directions. The 7 SMEs now know that suitable tests on the marble before extraction and correct cutting and mounting of panels can prevent these problems. SHOES FOR DIGITAL FEET Orthopaedic shoes are increasingly used to increase the comfort of ageing citizens or the well being of injured people. Following CRAFT project 1402, 4 SMEs from different EU countries have founded a new company, based in France. It will commercialise a flexible and portable system, comprising a foot digitiser and a CAD-CAM system, to produce shoe templates. This should allow more people to have shoes tailored to their needs, quickly and at a moderate cost. TOXIC CHIPS Obsolete electronic devices are becoming a major source of pollution. In CRAFT project 1280, a German university and six SMEs from three EU countries developed automated machines to recycle used chips. They identify and recover valuable components, while separating and discarding toxic waste.

9 A steady growth trend By December 1998, the number of SME participations in the Fourth Framework Programme had reached more than 14,500, as against 5,500 in the Third Framework Programme. Cumulative SME participation in FP4 (94-98) CRAFT projects Exploratory awards Collaborative research Background: SME participation in FP3 (91-94) 0 Dec 95 Dec 96 Dec 97 Dec 98 Technology Stimulation Measures for SMEs To encourage more small and medium-sized companies to take part in the Fourth Framework Programme, special instruments were developed. These Technology Stimulation Measures for SMEs (TSME) consisted of: Exploratory awards: grants allowing at least 2 SMEs from different countries, with a common project idea, to prepare a complete research proposal. The Commission supports up to 75% of the cost. Co-operative research (CRAFT) projects: these enable transnational groups of SMEs with a common problem, but with limited or no in-house RTD capability, to sub-contract the research they need to a specialist (called an RTD performer ). The Commission supports up to half the cost, and while the RTD performer is paid in full for its work, the results belong to the SMEs alone. The Technology Stimulation Measures for SMEs were implemented via an open call for proposals, which means that proposals could be submitted at any time during the year. Special information and assistance was provided by the CRAFT network of National Focal Points in the Member States. SMEs with their own research capacity normally take part in mainstream collaborative research projects on the same terms as other companies, universities and research institutions. In this type of project, all the partners share in the research work, and all share the results. At least 2 partners in at least 2 countries must work together, and the Commission supports up to half the cost of such projects.

10 The future: FP5 Under Framework Programme 5 ( ) the special measures to facilitate SME access to Community RTD programmes will be extended and made more flexible. They will be supported and co-ordinated through the horizontal programme on Innovation and Participation of SMEs and will include: A SINGLE ENTRY POINT: A point common to all Community RTD programmes, to which SMEs can address all their questions, ideas and proposals concerning specific EU RTD actions for SMEs. EXPLORATORY AWARDS: Financial grants allowing 2 SMEs from 2 different Member States to prepare a project proposal for collaborative or co-operative research (CRAFT). CO-OPERATIVE RESEARCH (CRAFT): A scheme enabling at least 3 independent SMEs from at least 2 different Member States, facing common problems but without sufficient RTD capabilities, to find a solution themselves or to entrust the required research to a third party (the RTD performer). ECONOMIC AND TECHNOLOGICAL INTELLIGENCE: Identification of relevant information (for instance technological trends) for SMEs, which may help them to prepare a proposal for a Community RTD programme. A NETWORK OF SPECIALISED CONTACT POINTS will be available in each Member or Associated State to provide SMEs with information and assistance (for instance partner search) for participating in Community RTD programmes. 15 CG EN-D 5 questions: should your SME take part in the 5th Framework Programme? Are you exporting or looking for new business opportunities? Are you facing competition in your home market? Are you interested in developing or acquiring new technologies? Are you willing to invest in RTD? Are you willing to work with other companies? If your answer to these question is yes, then you are a potential participant in EU RTD programmes. For more information on EU RTD programmes and the special measures for SMEs, or to obtain a free copy of the report SME Participation in the 4th Framework Programme for Research and Technological Development, contact: SME and Innovation Unit European Commission Research DG, Rue de la Loi / Wetstraat 200, B-1049 Brussels Fax: research-sme@cec.eu.int Internet sites: OFFICE FOR OFFICIAL PUBLICATIONS OF THE EUROPEAN COMMUNITIES L-2985 Luxembourg

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