26th April 2007
Micro and Small Enterprise Development, innovation and public policy
2nd. International Workshop of the BRICS Project
Ana Arroio Federation of Industries of Rio de Janeiro and
Myths
• MSE are not enterprising
• MSE do not innovate
• MSE are not competitive
A question of size
Brazilian Micro and Small Enterprise
We are women, hear us roll – gender and MSEs
The Second Economy
Mapping innovation in Brazilian MSME• Innovation overview • Innovation co-operation• Public support for innovation• Innovation protection methods
Firm size - classification
Annual gross income: • Micro firm: annual gross income equal or inferior
to US$ 201,981.4386• Small firm: annual gross income superior to US$
201,981.4386 and less than US$ 992,981.4580.
Number of people employed: • Micro firm:I) in industry and construction: 19 employeesII) in commerce or service, 9 employees
• Small firm: I) in industry and construction: 20 to 99 employees II) in commerce or service, 10 to 49 employees
Distribution of firms, occupied personnel, wages and other remuneration according to number of personnel employed, Brazil, 2004
Personnel employed
Number of firms (%)
Personnel employed (%)
Wages and other remuneration (%)
Micro 96,7 36,2 10,3 Small 2,6 14,2 11,6 Medium 0,5 14,0 8,9 Large 0,1 37,0 61,5
Source: IBGE, 2005
Firm closure
0 10 20 30
Personal difficulties
Inadequate firm location
Low profits
Financial difficulties
Disinterest in the continuation of the firm
Bad payers / contract breaching
Competition
Lack of clients
High taxes and other tributes
Lack of floating capital
Exports
0
500
1.000
1.500
2.000
2.500
3.000
3.500
4.000
4.500
5.000
Micro Small SpecialMicro and
Small*
Medium Large NonClassified
Nu
mb
ers
of
Fir
ms
0
10000
20000
30000
40000
50000
60000
Val
ue
(US
$ m
illi
on
)
Source: SEBRAE, 2005a, using information consolidated by the Central Bank statistical institution FUNCEX
*“Special Micro and Small”, is a category used by FUNCEX that comprises firms with less than 100 employees but that have exports that are over US$ 2500.
Sustainable economic development
The most dynamic states in terms of exports are not concentrated in the wealthier south and south-
east of Brazil, as might be expected, but rather in the rich forest land of the northern states.
Exploitation of natural resources is the main source of advantage for these enterprises, leading to issues concerning sustainable
economic development and potential environmental impacts.
Gender and MSEs
- 40.000 80.000 120.000 160.000 200.000 240.000
Transport
Communication
Financial institutions
Prof, Tech, Services
Other services to firms
Social Services
Reparation and Conservation
Lodging and Alimentary
Other personal Services
Distributive Services
Male
Female
Source: IBGE/PNAD, 2001, consolidated by Melo and Sabbato, 2002.
0 1000 2000 3000 4000
1
2
3
More than 3
Source: IBGE, ECINF 2003.
Commerce and Repairs
Civil Construction
Industrial Transformation and Extraction
Transports, Warehousing and Communications
Collective, Social Personal Services
Real estate, Rentals Services to Firms
Lodging and Alimentary
Education, Health and Social Services
Undefined Activities
Other Activities
Informal sector enterprises
Mapping innovation in Brazilian MSME
• Industrial Survey of Technological Innovation, PINTEC, is the soundest statistical basis for the analysis of MSME innovation efforts in Brazil
• Profile by enterprise size and the structure by sector are the main factors influencing the rate and the pattern of innovation in the industries of each country.
• Limitations:– Innovation data is limited to the industrial sector – information regarding cooperation in both PINTEC and
CIS3 is limited to formal partnership agreements.
The Surveys – overall results
• Total Sample: 72 thousand industrial companies in 2001; 84.3 thousand in 2003
• Number of companies which altered their products or processes grew from 22.7 to 28 thousand, leading to an innovation rate of 33.3% for the period 2001-2003
• Increase in the total national industry innovation rate, from 31,5% to 33%, occurred particularly in firms occupying 10 to 49 people.
• Rate of innovation in micro firms grew from 26,2% to 31,1%
• Micro firms represent 80% of the firms researched in PINTEC 2003
- 10 20 30 40 50 60 70 80
Total
10 to 49
50 to 99
100 to 249
250 to 499
500 and more
Product Product & Process Process
Proportion of firms that implemented innovations, Brazil 2000 - 2003
Source: IBGE, 2005.
Innovation co-operation
Source: IBGE, 2005.
0 20 40 60 80 100
10 to 29
30 to 49
50 to 99
100 to 249
250 to 499
500 and more
1998 - 2000
2001 - 2003
Public support for innovation
0 20 40 60
R&D
Informatics Law
Financing of research projects
Other Programmes
Financing of machinery andequipment
10 to 99
100 to 499
500 and more
Source: IBGE, 2005.
Innovation protection methods
0 20 40 60 80 100
Lead-time advantage oncompetitors
Industrial secrecy
Complexity of design
Trademarks
Patents
10 to 99
100 to 499
500 and more
Source: IBGE, 2005.
45.4% firms experienced difficulties that caused innovation projects to be seriously delayed or abolished
Main obstacles:
high innovation costs - 79.7%excessive economic risks - 74.5%scarcity of financing sources - 56.6% lack of information on technology - 35.8%inability to adjust to regulations or standards - 32.6%lack of information on markets - 30.5% Lack of interaction with other firms or institutions - 29.6% inadequacy of external technical services - 25.9%lack of qualified personnel - 13%
Barriers to innovation
Policies – Finding a Common Ground
• Financing innovation efforts
• Education – Development of Capabilities and Educational System
• Entrepreneurship & Entrepreneurial culture
• Support services
• Simplification of Bureaucracy
Questions
• Dynamics of policies that foster innovation in small firms?
• And in Local Innovation and Production Systems?• How to grasp and measure informal co-operative
practices?• What other indicators that also comprise intangible
aspects of local processes of learning and innovation?• how do issues related to women’s and other
“minorities”, rights and needs differ according to local social, economic and cultural realities? How can these needs best be included in development plans?