1OECD South East Europe Regional Programme

Introduction: Objective of

the reconciliation

meetingSub-

dimension 1: XXX

Sub-dimension 2:

XXXSub-

dimension 3: XXX

Next steps

Start-up ecosystems as a value-adding tool

for regional and national economies

Some OECD findings for South East Europe

Clément Brenot

Project Manager, South East Europe Division, OECD

Workshop on Start-ups and Technology Transfer in Innovation

Ecosystems in South-East Europe and the Alpine Region

Ljubljana, Slovenia

15-16 November 2018

Co-funded by the European Union

The OECD identifies, analyses and discusses global good

practices on economic and social issues

Key Partners: BrazilChinaIndiaIndonesia South Africa

36 member countries

Newest members: Colombia (soon)

LithuaniaLatvia EstoniaIsrael SloveniaChile

Ongoing membership talks with Russia (suspended)

2

The OECD SEE regional programme is solely

dedicated to the region

Provides policy advice to improve economic reform agendas and

foster competitiveness & SME development in:

Albania, Bosnia and Herzegovina, Bulgaria, Croatia, the Former Yugoslav

Republic of Macedonia, Kosovo*, Moldova, Montenegro, Romania,

Serbia and Turkey

Close partnership with European Commission, the main donor that

relies on the Programme’s work for its technical assistance programming

Strong legacy: Established in 2000, SEE is the oldest regional

programme at the OECD

Local presence through high-level national project co-ordinators and

comprehensive in-country stakeholder networks

2015 mandate for further strengthening OECD relations with SEE going

forward

New website: www.oecd.org/south-east-europe

3*This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo declaration of independence.

Measures SME policy convergence in non-

EU member countries based on the principles

of the Small Business Act for Europe (SBA)

A standardised assessment of SME policies

in the WB6 and Turkey

Assesses the design, implementation and

monitoring and evaluation of SME policies

and institutions.

Benchmarking within each policy area allows

for comparisons across time

Improves SME policy-making and enhanced

the capacity of policy-makers

Fifth edition —SME Policy Index 2019

expected in spring 2019

4

The SME Policy Index assesses the state of SME policies

A tool applied in the Western Balkans, Turkey and beyond

a

1. Entrepreneurial learning and

women’s entrepreneurship (ETF)

2. Bankruptcy and second chance for

SMEs (OECD)

3. Institutional and regulatory

framework for SME policymaking

(OECD)

4. Operational environment (OECD)

5. a. SME support services (OECD) and

b. public procurement

(OECD/SIGMA)

6. Access to finance for SMEs (EBRD)

7. Technical standards (OECD)

8. a. Enterprise skills (ETF) and

b. Innovation policy for SMEs (OECD)

9. SMEs in a green economy (OECD)

10. Internationalisation of SMEs (OECD)

SME Policy Index Dimensions

Challenge for governments: limits of previous approaches exposed

Efforts and results not necessarily matching

Governing the ecosystem ‘black box’: a complex network of diverse stakeholders,

capable of shaping their environment through bottom-up initiatives

A more modest role requiring a more holistic view

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Why talk about ecosystems?

A “start-up ecosystem” is a segment of an “entrepreneurial ecosystem”, which is

“…a set of interdependent actors and factors coordinated in such a way that they enable productive

entrepreneurship within a particular territory.” –Stam and Spigel, 2016

Source: Stam, E. and B. Spigel (2016) “Entrepreneurial Ecosystems” U.S.E. Discussion Paper Series, nr.16-13, Utrecht School of Economics

actors entrepreneurs, investors, mentors, employees, researchers…

and factors financial/human capital resources, infrastructure…

interdependent i.e. complexity

coordinated formal/informal institutions and services…

to enable i.e. facilitating rather than doing

productive entrepreneurship entry, survival, growth and scale-up

within a particular territory an ecosystem

Bengaluru (Bangalore), India

Profile: Home to the Indian headquarters of many global technology companies and a leading hub

for Indian entrepreneurs to start and scale their company

Strengths: Driven by a large talent pool and a high cost efficiency for engineers

Bengaluru an academic city with many technical institutions and R&D laboratories

94% of Bengaluru-based founders have a technical background (highest rate globally)

Key sectors: Advanced manufacturing, fintech and edtech

Amsterdam, Netherlands

Profile: Amsterdam StartupDelta among the top 20 ecosystems in the world, with over 10 tech

clusters covering nearly the entire country.

Strengths: A highly attractive city for entrepreneurs, talent, investors and banks alike

Widespread and deeply-rooted entrepreneurship and start-up culture

Knowledge, technology and capital found in the same place

Key sectors: Agtech and new food, fintech, health and life sciences

Source: Start-up Genome Global Startup Ecosystem Report, 20186

Ecosystems come in different sizes and shapes

Two examples

Recent global economic transformations make start-ups even more relevant

Services account for a larger share of economic activity

Production increasingly knowledge- and technology-intensive

Innovation, product differentiation and intangible assets essential for competitive

edge in global value chains

Small businesses go global

Successful start-up ecosystems generate

Employment and growth

Productivity gains and innovation

Benefits for all firms, for the region and for the national economy at large

7OECD South East Europe Regional Programme

Are start-ups so important? (Yes they are.)

8

Start-ups create jobs

Source: Calvino, F., C. Criscuolo and C. Menon (2015), “Cross-country evidence on start-up dynamics”, OECD Science, Technology and Industry Working Papers, 2015/06, OECD Publishing, Paris.

Reading: In Turkey, employment created by new firms over their first three yearscorresponds to 7.5% of total employment (not employment creation

9

Start-ups increase productivity

Source: OECD Science, Technology and Innovation (STI) Scoreboard 2017

A low-middle income city with a population of

400,000 in the Colombian coffee district that

collapsed in the 1980s

Since 2012, a mobilisation of city leaders,

professionals and educators alongside citizens

to help local firms grow more rapidly.

Impact

As of March 2016, 71 companies grown by

about 35%, each directly creating 1,291

new jobs and 1,451 new contracts

12 of the ventures became exporters for

the first time

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Start-up ecosystems can make a big difference at local level

The case of Manizales, Colombia

How?

Focus on existing firms with growth potential

Top executives and professionals trained as business mentors helping entrepreneurs scale their

businesses

Local universities developing new entrepreneurship courses and start-up programmes

Local banks increasing their loans and credit to take advantage of the growth

Source: Isenberg, D. and V. Onyemah (2017). “Start-ups won’t save the economy. But ‘scale ups’ could” World Economic Forum, https://www.weforum.org/agenda/2017/03/start-ups-entrepreneurship-scale-ups-latin-america/.

Direct jobs created in first 4 years greater than the increase by the city’s biggest employer

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Some start-ups are more valuable than others

(those that grow)

Need to shift focus from quantity to quality of entrepreneurship

Aim: Creating business environments conducive to high-growth enterprise (HGE)

development

Contribution to total net job creation

In all countries, the few start-ups with over 20 employees at the end of a five-year interval are

responsible for a disproportionate share of job creation by micro start-ups.

Source: Calvino, F., C. Criscuolo and C. Menon (2016), “No Country for Young Firms?: Start-up Dynamics and National Policies”, OECD Science, Technology and Industry Policy Papers, No. 29, OECD Publishing, Paris.

EU definition of high-growth enterprises (growth by 10% or more):

Enterprises with at least 10 employees in the beginning of their growth and having average

annualised growth in number of employees greater than 10% per annum, over a three year period.

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How to produce High-Growth Enterprises (HGEs)?

OECD findings on HGEs

More HGEs in services

Young firms more likely to become HGEs

More HGEs in high-tech than in non high-tech sectors

Firms investing in innovation more likely to become HGEs—yet, innovation only one factor driving

high-growth, and often insufficient unless combined with others (e.g. networks, adequate finance…)

Foreign ownership associated with greater incidence of HGEs

Enterprises receiving debt financing more likely to achieve high-growth (only up to a certain threshold)

Increased population density positively affects incidence of HGEs (complementary services, inputs…)

Higher tertiary education proportion (skilled entrepreneurship and labour force), more HGEs

High unemployment and low GDP growth rate not correlated with high-growth achievement (HGEs

born global and thus less affected by adverse local product and labour market conditions?)

Marchese, M. (2013), ‘OECD Findings on Entrepreneurial Ecosystems and Growth-Oriented Entrepreneurship’ [PowerPoint presentation] OECD LEED Programme Workshopon Entrepreneurial Ecosystems and Growth-Oriented Entrepreneurship, The Hague, 7 November 2013.

OECD (2010), High-Growth Enterprises: What Governments Can Do to Make a Difference, OECD Studies on SMEs and Entrepreneurship, OECD Publishing.

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Most welcome by-products of ecosystems: self-sustaining

dynamics and favourable conditions for all firms

1. Successful start-up ecosystems grow

self-sustaining over time (D. Isenberg)

Successful start-up ecosystems are conducive

to growth, employment, productivity gains,

innovation… because they are conducive to

Attracting more talent

New businesses

Increased economic competitiveness

Better integration of SMEs into value

chains

Benefits for regional economy Benefits

for the national economy

2. Efforts to create favourable conditions

for start-ups lead to more favourable

conditions for all firms.

Reduce barriers to entry and exit

Improve access to finance

Develop infrastructure

Expand business supportive services

Reinforce connections

Key elements, outputs and outcomes of the entrepreneurial ecosystem

Source: Stam, E. and B. Spigel (2016) “Entrepreneurial Ecosystems” U.S.E. Discussion Paper Series, nr.16-13, Utrecht School of Economics.

In an ecosystem, “the total (social) value created by entrepreneurial activity should be more than the sum of the (private) value created for the individual entrepreneurs...”

–Stam and Spigel, 2016

A start-up community and some basic start-up support exists in every country of the

region. However, there are significant differences between the countries:

Among WB6, Croatia and Slovenia, the latter has the most developed start-up community

The lack of financing is the most pressing issue for all ecosystems

Few scale-ups in the region as most local start-up ecosystems remain underdeveloped

Software development emerges as the industry with most advanced scale-up companies

Framework conditions remain challenging in most countries. Obstacles include:

macroeconomic instability, fast and drastic political change and the lack of a supportive

general environment for start-up culture.14

Start-up ecosystems in South East Europe remain less

developed

Source: Southeast Europe Startup Report 2017

15

Some ongoing policy catch-up efforts

A preview from the SME Policy Index 2019

Governments in the region are taking steps towards providing greater support to

nascent start-up ecosystems.

All WB economies and Turkey have improved their provision of business support services crucial

to the entry, survival, competitiveness and growth of SMEs. In the region, Serbia and Turkey offer

the widest range of business support services

However, venture capital and business angel investments remain largely underdeveloped

There is also considerable room for improving the promotion of all forms of entrepreneurial

learning through education and training, although all economies demonstrate a clear

commitment to improve the policy environment in this area

0

1

2

3

4

5

Venture capital ecosystem

Legal framework Design and implementation

Monitoring and evaluation Weighted average

0

1

2

3

4

5

Entrepreneurial learning

Planning and design Implementation

Monitoring and evaluation Weighted average

Source: OECD SME Policy Index 2019 (forthcoming)

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Some OECD references

SME Policy Index

Measures SME policy convergence

in the WB and Turkey, based on the

principles of the Small Business Act

for Europe (SBA).

2019 edition due in spring.

SMEPI 2016: https://www.oecd-ilibrary.org/fr/development/sme-policy-

index-western-balkans-and-turkey-2016_9789264254473-en

Competitiveness

Outlook

The most wide-ranging

assessment of economic policy

performance of the WB, based on

17 policy dimensions key to

economic competitiveness.

Competitiveness Outlook 2018:

http://www.oecd.org/about/sge/competitiveness-in-south-east-europe-

9789264298576-en.htm

OECD Entrepreneurial

Ecosystems Workshop

7 November 2013, the Hague

How do local entrepreneurial

ecosystems affect growth-

oriented entrepreneurship and

what role for policy?

Workshop resources available at:

http://www.oecd.org/cfe/leed/entrepreneurialecosystemsandgrow

th-orientedentrepreneurshipworkshop-netherlands.htm

Entrepreneurship at a

GlanceProduced by the OECD-

Eurostat Entrepreneurship

Indicators Programme, based

on official statistics.

Entrepreneurship at a Glance 2017: https://www.oecd-

ilibrary.org/employment/entrepreneurship-at-a-glance-

2017_entrepreneur_aag-2017-en

Co-funded by the European Union

Thank you for your attention!

For further information, please consult our new website: www.oecd.org/south-east-europe

Clément Brenot

Project Manager

OECD South East Europe Division

clement.brenot@oecd.org