The gradual improvement in business sentiment observed over the past two years is beginning to help mitigate the liquidity problem. The steady turnaround in business outlook is also reflected by the fact that all the indicators measuring the level of vulnerability among SMEs appear to have hit their highest level at the end of 2012.
Improved business sentiment is reflected in SMEs’ more aggressive investment plans. Specifically, 80% of SMEs intend to carry out some kind of investment in the course of the next two years, compared with 67% at the end of 2012. Access to new markets or products continues to be an investment priority.
When it comes to financing, the situation is improved – with 31% of the SME segment applying for financing, of which 70% are granted the full or part of the amount. Likewise, SMEs with uncovered financing needs (42% compared with 33% in H1.2013) seem for the most part to avoid external financing, which partly explains the shift towards financing via their own resources.
Our survey focused on the innovation activity of Greek SMEs, which notably they have been pursuing within a far from supportive environment. A mere 15% of SMEs are strategically innovative, 50% do not innovate, and the other 35% innovate only sporadically. The problems of the wider innovation environment identified in Greece by international and European indicators are indeed reflected in the behaviour of SMEs. Specifically:
- Our survey confirms that a large part of Greek innovative activity (around ½) is not primary, but merely an adaptation of innovations by other enterprises.
- The relatively good level of research activity in Greece lacks adequate channels for feeding through to the business sector, meaning that only a small portion of innovative activity by SMEs (20%) arises from collaboration outside the firm. This provides an explanation for why Greece’s good level of research activity is not reflected in respective economic outcomes.
Nonetheless, our survey highlights three features of recent SME behavior that could under certain conditions prove beneficial in future:
- While the wider innovation environment seems to have become more hostile over the past five years, the percentage of SMEs that innovate has increased (to 30% in 2013 from 20% in 2008) – most likely because they have realized that this strategy offers a way out of the crisis.
- Although exports of innovative products and services continue to be low (reflecting the low level of SME investments in the previous years in new products and services in the international market), our survey indicates a shift of SMEs towards developing such new products and services as a way to increase their exporting activity.
- Innovation is a critical parameter for economic growth and it offers sustainable competitive advantages. According to the findings of our survey, innovation enhances the financial health of SMEs, leading to growth strategies, greater resilience in the face of the crisis, milder liquidity problems and higher export-orientation.
Accordingly, the desire for innovation seems to exist among SMEs (combined with an export orientation). Innovation by SMEs has the potential to increase significantly with the support of policies such as:
- Fostering interaction between the forces of innovation (mainly universities and research centers) and enterprises.
- Promoting and fostering business clusters to mitigate fixed costs of innovation.
- Targeting public R&D expenditure so that it better supports business R&D activity.