IT enterprises have displayed resilience in the face of the crisis – spearheaded by the small and medium enterprises of the sector, which grew their sales by 6 per cent per year during 2009-2014 (compared with a contraction of 0.2 per cent by larger IT firms with sales between €10 million and €50 million). The positive picture presented by small and medium-sized IT enterprises is backed by the results of our survey of a sample of 1,200 firms, indicating their advantage mainly in growth dynamics, export orientation, innovation and digital technology. When taking a closer look at the structure of the IT services industry, it becomes clear that there are two distinct pillars supporting the growth of the IT sector: the dynamism of the tech startups ecosystem and firms organized in clusters.
- Corroborating the results of studies on European clusters, our study indicates that organization in IT clusters enhances sales and business development (with Greek IT SMEs that are cluster members posting average annual sales growth of 17 per cent in the period 2008-15 versus 5 per cent for other SMEs in the sector). Despite the relative advantages for companies that are members of tech clusters, such kinds of configurations still seem to have low penetration in Greece, as the respective cluster of Athens covers just 3 per cent of IT firms operating in the city (versus respective European averages of circa 30 per cent). The inefficient legal framework (especially in terms of intellectual property protection and enforcement of business contracts) in tandem with the weak links of academia with the business sector seems to be the main reasons for the low participation of Greek companies in clusters.
- IT startup ecosystems are cradles of rapid growth worldwide – the top performers being those of Silicon Valley, Tel Aviv, London and Berlin. According to our survey, Greek startups exhibit stronger dynamism than the rest of the sector, as they achieved higher growth of sales in the period 2008-2015 and increased employment, supported by their innovation activity, human resources and use of digital technology. However, the Greek ecosystem for IT startups is still in its infancy (with a total valuation of approx. €0.3 billion), accounting for 0.3 per cent of GDP in Athens, versus circa 3-4 per cent for medium-sized ecosystems and over 20 per cent for large-sized ecosystems (London and Berlin). On the basis of our econometric analysis, institutional deficits, in combination with the low availability of private investment capital and the weak links of the business sector with academic institutions, hold down both the number and average valuation of Greek startups.
A key finding of the analysis is that the current contribution of IT startups and companies in IT clusters is still low (about €200 million annually – about ¼ of the IT sector's value added), however there is a strong dynamic which is expected to lead to an added value of €900 million in 2020. It should be noted that institutional deficiencies in the greek business environment are a key restricting factor for IT startups and cluster development. Specifically, based on our findings, If the business environment in Greece (institutional, infrastructure, private investment, academic support) gradually approaches the European average (excluding countries with highly developed startup ecosystems), the value added of the sector could increase to €5.8 billion (from €0.8 billion in 2015), by means of i) tripling the number and nearly quadrupling the average valuation of startups, and ii) higher participation of companies in clusters (25 per cent from 3 per cent in 2015). The potential contribution in terms of employment would also be significant, as it is estimated that 80,000 new jobs would be created.
Given the flexible and extrovert nature of tech startups, it is important that legislative reforms be introduced promoting digital entrepreneurship with emphasis on:
- formulating a comprehensive and consistent legal framework for entrepreneurship (e.g. bankruptcy law, crowdfunding framework) and establishing faster and more effective procedures for defending this framework by the judicial system,
- strengthening, on an institutional basis , of the communication channels between the academic community and enterprises,
- targeted use of European programs (e.g. the Jeremie business financing program).