ERMIS lis method guideline by CCI Nice Côte d'Azur

GUIDELINE FOR THE

ERMIS SWOT BUILDING AND

ANALYSIS

September 2012

Guideline for the ERMIS SWOT Building and Analysis

The ERMIS project has been made possible by the INTERREG IVC and Co-financed by the European Regional Development Fund. The contents reflect the authorâ&#x20AC;&#x2122;s views and the INTERREG IVC Managing Authority is not liable for any use that maybe made of the information.

Guideline for the ERMIS SWOT Building and Analysis

TABLE OF CONTENT

Context ....................................................................................................................................................... 5

The Effective Reproducible Model of Innovation System ......................................................................... 6

Presentation of the SWOT analysis ............................................................................................................ 7

Description of the different steps ............................................................................................................................ 9 4. Preparation phase .............................................................................................................................................. 10 QUESTION: what are the priorities of the region? ............................................................................................... 10 QUESTION: what is already done and useful for ERMIS? .................................................................................. 10 5. Positioning of the region ................................................................................................................................... 10 STEP 3. Defining the frontier of the region ..................................................................................................... 10 QUESTION: What is the right area to focus on for a R.I.S to exist (emerge)? ..................................................... 10 STEP 4. Defining the industrial profile of the region ....................................................................................... 11 QUESTION: What is the industrial structure of the region?................................................................................. 11 I.

Diversification/specialization ................................................................................................................ 11

QUESTION: is my region dependent on a limited number of industries? ............................................................ 11 II.

Maturity .................................................................................................................................................. 12

QUESTION: Are there opportunities for (small) new firms to grow and survive? .............................................. 12 III.

Strategic positioning and transition ................................................................................................. 16

STEP 5. Selection of reference regions ............................................................................................................ 17 QUESTION: Which European regions can be compared with my region (same size, same profile)? ................. 17

Guideline for the ERMIS SWOT Building and Analysis

6. Performance analysis ........................................................................................................................................ 19 STEP 6: Economic environment of the region ................................................................................................. 19 QUESTION: Does my region perform as expected? ............................................................................................ 19 I.

Compare regional vs national performance: ....................................................................................... 19

QUESTION: is my region better than other region in my country /reference regions and why? ......................... 19 II. III.

Industry structure and entrepreneurship performance indicators ................................................... 21 Innovative performance .................................................................................................................... 24

STEP 7: Determinants of SMEsâ&#x20AC;&#x2122; performance ................................................................................................. 26 QUESTION: does my region provide the necessary elements for SMEs to perform as expected? ...................... 26 I.

Access to finance .................................................................................................................................... 26

QUESTION: Are SMEs with high innovative potential in my region not more financially limited than other comparable regions? ............................................................................................................................................. 26 II.

Access to human capital and human capital mobility ......................................................................... 28

III.

Technology transfer ........................................................................................................................... 29

IV.

Quality of Infrastructures ................................................................................................................. 30

Legal and regulatory environment ....................................................................................................... 30

7. STEPS 8 & 9: regional Performance Qualitative analysis (based on the MERIPA Tool box) ......................... 32 STEP 8:

Super-structural level analysis .................................................................................................... 32

QUESTION: Do institutions (local institutions, culture, etc.) promote knowledge exchange? ............................ 32 I.

Measuring interactions .......................................................................................................................... 32

II.

Personal Interviews with private companies: ...................................................................................... 33

Personal interview with cluster initiative: ......................................................................................................... 34 Personal interview with key persons (1-2 persons): ......................................................................................... 35 Industrial clusters context and of the determinants of innovative capacities of SMEs ..................................... 35 STEP 9:

Infrastructural level analysis ....................................................................................................... 37

QUESTION: Given the industrial profile of the region, what are the required policy actions? Are policy actions consistent with each otherâ&#x20AC;&#x2122;s? Are local policy actions consistent with national and European policy actions? Are local governance structures adapted to promote the right policy actions? ............................................................ 37 I.

Governance structure ............................................................................................................................ 37

II.

Policy actions .......................................................................................................................................... 37

Infrastructural analysis...................................................................................................................................... 37 8. Final SWOT analysis ........................................................................................................................................ 40 7.1. Clusters determinants ................................................................................................................................. 40 7.2 Final SWOT analysis .................................................................................................................................. 41 STEP 10 : Global synthesis .............................................................................................................................. 41 Conclusion ............................................................................................................................................................ 42

Guideline for the ERMIS SWOT Building and Analysis

1. Context The literature review has made clear the following points: 1. National and regional economic growth highly depend on the ability of SMEs to innovate and grow 2. SMEs, whatever their potential performance, experience difficulties to access the required resources to achieve the minimum efficiency size 3. Regions and local areas are the most effective layers to implement SMEs dedicated innovation policies because access to resources, and in particular access to talents and to knowledge is best achieved through contractual and social relations among individuals and institutions sharing similar geographical and cultural contexts. 4. The Regional Innovation System (RIS) framework proves useful to describe the context of a region. In particular, it enables a fined-grained understanding of the different layers relating institutional, policy and industrial levels. However, the RIS approach fails to provide tools to systematically analyse the specific context of a local innovation system and provide guidance to initiate innovations policies in the direction of local SMEs 5. As previous European projects dedicated to the enhancement of regional innovation policies and practices, the ERMIS project aims to transfer best practices among partner regions. However, recognizing the necessity for a placedbased approach, ERMIS intends to provide a model to facilitate the selection of practices to be transferred depending on (1) their observed performance in the partner region that selected the practice as a best practice and (2) the fit of the considered practice with the context of the partner region potentially implementing the selected practice. The objectives of this document are (1) to present the model leading to the best practice selection process and (2) to propose a guideline to collect data and help partners to do the analysis of the partner regions. This analytical process is designed as a SWOT analysis in order to facilitate a simple and synthetic presentation of the evaluation of the region, its specificities and its potentials and the fit with the partner regions proposing best practices. In the following section, the model is described and explained, then the SWOT analysis is presented and the data collection guideline is detailed and complemented with the step-by-step analytical process.

Guideline for the ERMIS SWOT Building and Analysis

2. The Effective Reproducible Model of Innovation System ERMIS is a model that intends to be reproducible to all European regions â&#x20AC;&#x201C; and in particular to partner regions- and effective â&#x20AC;&#x201C;applicable whatever the regional context. The objective is to assess the situation As mentioned above, effectiveness relies on the ability of the model to describe the specificity of each region and to relate and compare regions that share similar contexts. Then, we assume that best practice transfers will be more effective by relying on the precise analysis of the gaps between the transferor region (where the considered practice has been developed, implemented and tested) and the host region (where the best practice will potentially be transferred).

Figure 1: ERMIS Model The ERMIS model (figure 1) suggests a step-by-step analysis to provide a synthetic understanding of the situation of the partner region and a highlight of potential developments with regard its structure and history on the one hand and its performance. The first dimension enables to position the region (define the geographic, economic, industrial and sociological situation). This analysis permits to relate the considered region with other European regions with similar or close characteristics. This first step facilitates a comparison based on performance measures among regions that look alike and then the recognition of the gaps. A sound analysis on determinants leads to better underline practices that explain performance gaps and select those that proved critically important

Guideline for the ERMIS SWOT Building and Analysis

in the relative success of the region as potential best practice to transfer to other regions. It also emphasises domains that need improvement and where potential best practice successfully implemented elsewhere could be transferred. The next section explains how and why the SWOT analysis is an appropriate tool to present synthetic results. Then, next sections describe the model more deeply and explain how collecting data and analyse the results.

3. Presentation of the SWOT analysis The aim of the SWOT analysis is to evidence strengths, weaknesses, opportunities and threats of partner regions in order to define and support the development of local and regional policies stimulating the innovative performance of SMEs as a source of sustainable growth. Innovative performance is defined as innovation output relative to resources invested in innovation process. The SWOT analysis approach -generally attributed to the “design school model” (Mintzberg 1994, 36-39) was originally designed to prepare the strategic corporate planning. It aims to relate internal dimensions (strengths and weaknesses) to external dimensions (opportunities and threats) in order to clarify the current situation and initiate possible remedial actions in case of potentially unfavorable conditions.

SWOT Analysis: In recent years, the SWOT analysis has been applied increasingly in a regional development context to evaluate the relevance of a specific project/policy. However, given the number of stakeholders in a region, the risk is to have ambiguous objectives and then reduce the relevance of the analysis. As a consequence, it is important that partner regions concentrate on a specific (set of) objective(s) in order to make clear which dimensions should be taken into account in the assessment process.

 Strengths rely on resources, conditions, or capacities firms can effectively exploit and leverage to innovate and thereby enjoy a competitive advantage  Weaknesses are limitations, defects or lack of necessary resources, conditions, or capacities to take up innovation and achieve a competitive advantage  Opportunities are favorable situations or conditions in the firms’ environment that could be exploited to increase the firms’ innovating capacity and achieve a competitive advantage  Threats are unfavorable situations in the firms’ environment that could damage the firms’ competitive advantage if required resources or capacities to face and overcome these situations are not accessible

The SWOT instrument will help analysts evaluate their region on the basis of the relevance and of the effectiveness of policy actions in enhancing the innovative capacities of local SMEs. It follows that the study will have first to evaluate strength, weaknesses, opportunities and threats of SMEs in their business context, and then to estimate the relevance and the impact of innovation policy actions aiming to boost SMEs innovation performance.

Guideline for the ERMIS SWOT Building and Analysis

Drawing on a RIS framework (as described by Cooke, 2001) the study will first carry out a cluster analysis in order to establish the economic environment and the business context of local firms. It will then focus on the super-structural level (interactive learning, network functioning, co-operative culture) of the region and, subsequently, on the infrastructural level (regional policies and the governance structures) in order to test their impact on cluster dynamics favoring SMEs innovation capacities. For a step-by step explanation of the process, see the complementary document â&#x20AC;&#x153;A stepby-step guidelines to the ERMIS SWOT analysisâ&#x20AC;?.

Guideline for the ERMIS SWOT Building and Analysis

Description of the different steps

Guideline for the ERMIS SWOT Building and Analysis

4. Preparation phase Step 1 and 2 are preparation phases. Step 1consists in setting the objective(s) of the region. The ideal starting point is a consensus among policy makers. If such a consensus is not clearly achieved before the beginning of the study, analysts should define objectives enabling the implementation and the test of priority actions potentially selected by the SWOT analysis. QUESTION: what are the priorities of the region? Step 2 invites you to rely on data already collected in the region QUESTION: what is already done and useful for ERMIS?

5. Positioning of the region Step 3 to 5 address the â&#x20AC;&#x2DC;one size does not fit allâ&#x20AC;&#x2122; argument and aim to describe the individual regionâ&#x20AC;&#x2122;s industrial and innovation profile. Two dimensions will be considered as the two axis of the regional profile matrix (table 1). The first axis is the level of industrial specialization; the second axis is the level of industry maturity of regional clusters. The main question in steps 3 and 4 is the dependence of the region on specific industry sectors. The more diversified the region the less dependent on a single industrial sector. Empirically, the level of diversification tends to increase with the size of the region. Thus, these steps also take into account the size of the region (GDP, density) and characterize the types of clusters and the nature of their dynamics (Science Park, large city, etc.). While very specialized regions will find it easier to define policy action to enhance innovations in cluster(s), diversified regions will be able to leverage agglomeration economies. Then the objective is to evaluate the level of maturity of industries in the region. If the region hosts different clusters, the level of maturity will be estimated by computing a weighted average & standard deviation of maturity of clusters. Maturity determines the opportunity of SMEs to enter, innovate and survive. The more mature the industry sector, the higher the barriers to innovation and the more expensive for small/new innovators to enter. What should be determined is if mature industries offer opportunities for innovative SMEs to have niche strategies by positioning as specialist suppliers or playing an intermediary role in the innovative value chain. This will enable you to select regions with similar profile, which will become reference regions if they exhibit interesting performance or characteristics.

STEP 3. Defining the frontier of the region See the Step-by-step guidelines for the ERMIS SWOT analysis QUESTION: What is the right area to focus on for a R.I.S to exist (emerge)?

Guideline for the ERMIS SWOT Building and Analysis

STEP 4. Defining the industrial profile of the region The profile of the region will depend on two dimensions. The first dimension is the diversity of activities. This measure estimates the dependence of the region on its industrial specialization. The second dimension is the level of maturity of the region. By maturity we mean the level of competition both from a business point of view and from an innovation point of view. Thus, the level of maturity will determine innovation opportunities of firms and the structure (small or large firms) of innovative firms. Each region profile will exhibit specific opportunities and threats guiding the assessment of the region. QUESTION: What is the industrial structure of the region?

Diversification/specialization

QUESTION: is my region dependent on a limited number of industries? To measure diversity, we suggest using the Herfindhal index (HHI) which is an absolute value of the regional specialization. The HHI is the sum of the square of the share of each activity:

 (s i ) 2

HHI  i 10000

Where Si is the share of employment in industry I in the region, that is: Si = Look out: the sum of each industry’s employment of should be equal to the total number of employees in the region Thus the HHI will be between 0 and 1. The closer to 1, the more specialized the region is. The closer to 0, the more diversified the region is.

Value of the HHI

Region’s specialization level

0 – 0.1 0.10-0.3 0.3-1

Low Medium High

Table 1: Evaluation of the level of specialization All regions should have data on the number of employee per industry. In case this information is not accessible or reliable, the C4 measure may be relevant. The C4 index is the employment share of the four most important industries in the region. The closer to 100% the C4 index, the more concentrated the industry. If data are missing, the

Guideline for the ERMIS SWOT Building and Analysis

analyst will make an approximation of the percentage of each three or four most important industries in the region. One way is to find between three and five experts from different environment (business, consultant, academics, policy makers for instance) and ask for an approximate evaluation. If their estimation does not converge, show them the estimation of other experts and ask for a new estimation. This process should help achieving a convergence of estimations.

II.

Maturity

QUESTION: Are there opportunities for (small) new firms to grow and survive? Maturity results from a combination of indicators. It aims to characterize the objective likelihood of SMEs to innovate. Mature industries are concentrated and exhibit a very low rate of entry, while young industries let new firms enter and allow a higher level of competition. Further, following the technological regime literature, we will consider mature industries as industries where innovation is essentially driven by large incumbent firms whereas young SMEs will experience an innovative advantage in young industries. Two business measures should be taken into account:



The business concentration index can be computed whether by the Herfindhal index (HHI) or by the C4 index. The HHI is the same measure as previously defined, but Sij is then the market share of each company in industry j (worldwide). The C4 measure may be another measure if only data of the main industries are available. The C4 index is the market share of the four leaders of the industry. It follows that we obtain one index (HHI or C4) per industry.



Entry rate (number of new firm each year compared with the number of firms in the industry). Again, the lack of data can be compensated by interviewing business experts and consulting business reports.

Complementary information could be the rate of product and process innovation. This information is provided by the CIS survey. If competition is essentially driven by product innovation reveals a dynamic industry with the emergence of new markets and more opportunities for new comers, while a higher impact of process innovation reveals high R&D investments and therefore higher barriers to SMEs’ innovation and high barriers to entry.

High concentration Low concentration

Low entry rate Industry type 1 Industry type 4

High entry rate Industry type 2 Industry type 3

Table 2: Industry type Industry type 1: Mature industry with high barrier to entry. Small firms can only have business opportunities as suppliers of incumbent firms (that is to be related to the industry but not be part of the industry). Innovation is essentially process innovation.

Guideline for the ERMIS SWOT Building and Analysis

Industry type 2: Mature industry with niche market opportunities. SMEs’ key success factor is positioning. Innovation is essentially process innovation. Industry type 3: Young industries, SMEs have high business opportunities and may challenge incumbent firms. Innovative opportunities are essentially product innovation ones. Industry type 4: traditional fragmented industry dominated by incumbent firms with local or national markets. Innovation is essentially process innovation and consists in adopting new machines or production techniques produced by other industries. Then, industry maturity should be related with SMEs’ likelihood to innovate. We suggest complementing the previous analysis by two additional measures of innovation:  Technological intensity, measured by R&D intensity. We suggest referring to the table provided in the literature review.  The share of innovation by SMEs. Two different means of measuring this indicator. The first one is to use patent data and calculate the ratio SMEs patents over total patents. The CIS survey may also be useful since it provides information on innovative output by company  The balance between product and process innovation will tell the analyst about the nature of innovation, whether it is essentially targeted to increase the quality of the products or the lower the cost of production. It will also be possible to measure the balance between product and process innovation in each industry by using the CIS survey. These measures will tell the analyst if innovation is a key determinant of the competitive performance of the firms. indicators

SMEs low

SMEs high

High tech

Industry type A Industry type C

Industry type B

Low tech

Industry type D

Table 3: Industry innovative profile Industry type 1A1: High R&D investments, high barriers to innovation. The knowledge base is cumulative and path dependent and often based on scientific knowledge (e.g.

This typology draws on several sources among which: Malerba, F. and L. Orsenigo (1999), Technological Entry, Exit and Survival: an Empirical Analysis of Patent Data, Research Policy, 28(6), 643-660. Breschi, S., F. Malerba and L. Orsenigo (2000), Technological Regimes and Schumpeterian Patterns of Innovation, Economic Journal, 110(463), 388-410. Marsili, O. (2001), The Anatomy and Evolution of Industries: Technological Change and Industrial Dynamics, Cheltenham, UK and Northampton, MA, USA: Edward Elgar.

Guideline for the ERMIS SWOT Building and Analysis

Chemicals, Instruments, Pharmaceuticals). SMEs have no innovative opportunities. The role of Universities is significant. Industry type 1B: Niche markets relates to very specific demands relying on research or on design competencies. Generally, type 1B industries have experienced a division of innovative labor between knowledge creation and production. SMEs can have high opportunities to become suppliers as knowledge producer specialists or design specialists (e.g. biotech firms in pharmaceuticals and agro-food fabless in semiconductors, specialist suppliers in the automotive industry etc.) and their business model rely essentially on market for technology (e.g. licenses). Industry type 1C: Innovation is not a source of competitive advantage (e.g. Food and Drink, Basic Metal, Building materials, Paper and Wood, etc.). Industry type 1D: Niche markets are essentially related to marketing based product diversity or adaptation of existing products to specific markets. Competitiveness of SMEs is not based on innovation. Industry type 2A: High R&D investments, high barriers to innovation. Small firms (almost) do not innovate. Entry is based on market opportunities exploiting existing technology. This case is very rare. Industry type 2B: Entry is based on market opportunities based on new technologies challenging existing technologies essentially controlled by incumbent firms. New entrants address niche markets with high growth potential whose products rely on research or on design competencies. (e.g. electric car, new energy generators, biotech in the 90s etc.) Industry type 2C: Innovation is not a source of competitive advantage Industry type 2D: Niche markets are essentially related to marketing based product diversity not on innovation. Industry type 3A: N/A Industry type 3B: Typical new markets in which different designs compete with no dominant design. Thus markets are segmented and firms essentially invest in product innovation. Innovation relies on a large range of different technologies. These markets are likely to experience a shake out once a dominant design will emerge. It follows that while entry rate is high, entry rate is also high and entrantsâ&#x20AC;&#x2122; survival is unlikely. (e.g. Mobile phones in the 90s) Industry type 3C: N/A Industry type 3D: Essentially service intensive activities addressing new needs. For instance services to elder people. Industry type 4: segmented and mature industries essentially based on local markets. The combination of specialization and of maturity estimations will enable the analyst to define the profile of the region. While specialization of the region is directly provided by the measure (the HHI or the C4 index), the maturity level depends on the maturity of the most important industries. Thus, maturity is not independent from regional specialization. The more specialized the region, the more dependent on the maturity of its industries it is. For the simplicity of the analysis, small clusters should not be taken into account in the study.

Guideline for the ERMIS SWOT Building and Analysis

Development models for SMEs2 Opportunities for SMEs depends on the industrial structure and the transition mode (see figure 2 for understanding the transition mode). Development model 1: creating new industries (e.g. industry types 1B, 2B, 3B): new industries generally emerge from existing competences related with existing industries (e.g. the PC industry in the Silicon Valley, related with the semiconductor industry and all supporting infrastructures already in place). In this development mode, opportunities for startups are high and rely on the ability to provide risk capital, facilitate (international) market access and generate collaborative and entrepreneurial spirit. Development model 2: Industry transplantation: The new industry developing in the region is imported from elsewhere. It is often related to access to specific resources or low cost factors (such as labour) or to tax advantages. A good example is the development model of Ireland. The essential question, then, is about the type of the imported industry (maturity level and innovation profile), and what are the leverages for increasing competitiveness. In general specialized education and supportive services are critical. A dynamic view tends to see this phase as a transition period supporting the increase of local human capital and technological capabilities enabling the next development phase more innovation oriented. Development model 3: Diversification into technology related industries: The emergence of a new industry relies on the ability to provide specialized / complementary services to existing industries and susceptible to initiate/develop related diversifications. Relatedness means that services are based on close or related competences or knowledge bodies, similar fundamental research or a multipurpose technology (such as biotech, laser, semiconductor etc.). It means that local policy should focus on platforms or tools facilitating the coordination of the link between upstream research and development en business opportunities in local industries. SMEs may have opportunities and should be supported to contribute to specialized projects through technological platforms grouping together large incumbent firms, SMEs and universities. The attractiveness of the region is also a major determinants since opportunities may come from large firms ex-employees preferring launching spinoffs rather than leaving the region. Development model 4: Upgrading of mature industry: upgrading is generally based on product or process innovation that increase productivity or generate new markets opportunities. Knowledge and competence acquisition and efficiency criteria are critical. SMEs have opportunities in playing as brokers between universities and large firms facilitating companiesâ&#x20AC;&#x2122; access to problem solving competencies (generally in universities). Consultancy and training activities prove useful to help companies focusing on efficiency management and educational and manpower development.

Inspired by Lester (2005) â&#x20AC;&#x153;Universities, Innovation, and the competitiveness of local economiesâ&#x20AC;?

Guideline for the ERMIS SWOT Building and Analysis

III.

Strategic positioning and transition

This stage will enable you to estimate which industries/clusters your region (should) focus on. The question is what are the most important industries (currently) and which have a growing weight in the regional structure relative to national weight. This analysis will also permit comparing if the governance and support structures fit with the specific needs of the most strategic industries/clusters. Measure the location quotient (LQ), which measures the under or over-representation of a certain industry in a given region compared to the whole of the national economy:

LQ ď&#x20AC;˝

ei Ei

e E

Where ei is the number of employees in the sector i in the region, e is the total number of employees in the region, Ei is the national number of employees in industry i I in the country, ej is the number of employees in the region and E is the number of national employees. Thus, a location quotient LQ < 1 means that the economic activity in the industry is less present in the region under observation compared to country. In contrast, LQ> 1 illustrates a relative higher share of industry activity compared to the national level.

Cluster

Share of regional employment Year t

Evolution

Specialization index or LQ (compared with the national the European index) Year t

Evolution

Cluster 1 Cluster 2 Clusterâ&#x20AC;Ś. Table 4. Industry structure

See the Technical Support document for building the matrix

Specialization index or LQ (compared with reference regions) Year t

Evolution

Guideline for the ERMIS SWOT Building and Analysis

EVOLUTION

Cluster 1

Cluster 4

Cluster 2 RELATIVE WEIGHT

Cluster 3

Figure 2: Example of a transition matrix Figure 2 is an example showing that while cluster 1 is the most important cluster (strategic importance compared with the national activity) the largest cluster is cluster 2. Cluster 2 is also the most growing one and therefore a clear candidate for concentrating regional efforts.

STEP 5. Selection of reference regions QUESTION: Which European regions can be compared with my region (same size, same profile)? ď&#x201A;ˇ

Do these regions perform better?

ď&#x201A;ˇ

Why?

The selection of reference regions is a gradual process. The first step is to select regions with similar size and population density that display better economic and innovative performance than the partner region. Then, select those regions that host the same type of dominant industries and possibly that exhibit the same innovative profile. Finally a more qualitative estimation will be useful. For instance, the development mode of the region, the governance structure can be good candidates to fine tune the selection process. Of course, the reference region cannot be the exact duplicate of the partner region. But it should be possible to find a set of comparable regions. If there is no satisfactory selection, then it is possible to define reference results in each dimension of the analysis rather than reference regions. For each of the following SWOT analysis, reference results can be found in other European regions that will be considered as a benchmark.

Guideline for the ERMIS SWOT Building and Analysis

Data on technological profile of European regions (essentially NUTS 1 level) may be found on the European Commission web pages: http://ec.europa.eu/enterprise/policies/innovation/facts-figures-analysis/index_en.htm http://ec.europa.eu/invest-in-research/monitoring/statistical01_en.htm

Mature regions

Figure 3: Regional profile matrix

Guideline for the ERMIS SWOT Building and Analysis

6.Performance analysis Step 6 and 7 rely on data collection, questionnaires, and interviews to estimate the SWOT analysis of each determinant of innovative performance at the industry level and at the regional level. Step 5 will enable the analyst estimating what are the main innovative outcomes of regional SMEs and what are the main barriers to innovation. In relation with the previous steps, it will be possible to know if barriers are essentially due to industry conditions or to the regional context. As a consequence, step 5 will be critical to undertake the regional SWOT analysis. For each set of indicators, a qualitative appraisal based on interviews of companies, policy makers and innovation experts should complement quantitative data. An example of questionnaire is provided at the end of the document. The objective is to fill in the SWOT matrix. Quantitative data aim to provide objective measures facilitating the analysis. However, a sound analysis should eventually be based on the knowledge of the regional history and context of the analyst. Furthermore, a lack of access to quantitative data should not be a conundrum. Solutions will be proposed to find approximate measure that should compensate for the lack of data.

STEP 6: Economic environment of the region QUESTION: Does my region perform as expected?

The objective of this assessment stage is to estimate the global economic competitiveness of the region in absolute and relative terms. Thus, it will be important to evaluate the results in comparison with national outcomes and with some (or at least one) European region considered as similar or with the same structural characteristics (regional profile, size and density). Most national data and economic data of richest/poorest European (NUTS 1&2) See the Step-by-step guidelines for the ERMIS SWOT analysis for a detailed list of accessible data sources through the Internet.

Compare regional vs national performance:

QUESTION: is my region better than other region in my country /reference regions and why? Indicators in bold are critical ones and are important to collect for a sound assessment. INDICATORS o Number of inhabitant in the region o Evolution of the number of inhabitant in the region (10 years) o Population density in the region o Net regional migration rate of 20-59 year old population o Evolution of the net regional migration rate of 20-59 year old population (10 years)

Guideline for the ERMIS SWOT Building and Analysis

o o o o o o o o o o o o

National GDP National GDP per capita (see annex 1) GDP of the region GDP per capita in the region National GDP per worker GDP per worker in the region Evolution of GDP per worker (5 years) Evolution of GDP per inhabitants (5 years) Unemployment/employment rate in the region Evolution of the unemployment rate in the region (5 years) Average and variance of wages in the country Average and variance of waves in the region

indicators

Region

Reference region

Evolution of population migration rate GDP per capita Employment rate GDP per worker (productivity) Gowth of GDP and employment Synthesis Table 5. Regional performance

In case (a) reference region(s) could not be found, here are some comparative elements:  The reference annual growth rate of population is between 0.20 % (median of European countries) and 0.56% (the third quartile of European countries).  The Annual GDP per inhabitant in 2004 was approximately between 20896 € and 24557 €  The annual GDP per employee was approximately between 51239 €- 60446 €  Unemployment rate is heterogeneous between countries and within countries. Given the recent crisis, good unemployment rates are between 5 and 8% of the workforce. In 2009, the European average unemployment rate was between 8 and 9%

On the basis of the comparative results, a first SWOT analysis based on the economic environment of the region is possible. Each cell must develop an argumentation based on evidences. Performance measures listed above provide economic results. Other data

Guideline for the ERMIS SWOT Building and Analysis

(such as labor costs compared with competitive regions for instance) will be used to support the argument in each cell. Strength and weaknesses evaluate resources of the regions while opportunities and strengths are related to external events/factors that may (positively or negatively) affect the future economic performance of the region. SWOT matrices should use data as evidences to support the arguments. But the evaluation should systematically be consistent with local expertise expressed in interviews.

Economic competitiveness of the region Strength Weaknesses Opportunities Threat Table 6. SWOT matrix of economic competitiveness of the region

II.

Industry structure and entrepreneurship performance indicators

Most quantitative data in the following two sections may be found in the Patstat data base (European Patent Office), in Eurostat data at NUTS2 level (which will be used if data at NUTS3 level are not available), in the Eurostat CIS survey or in the European Innovation Scoreboard. INDICATORS o Number of employees per industry at national level o Number of employees per industry at regional level o Average and standard deviation of the number of employees per establishment o Evolution of the number of employees per industry (5 years) o Evolution the number of employees per establishment (5 years) o Average and standard deviation of the number of employees per small, medium and large establishment o Age of companies in each sector (average) o Age of companies in each sector (standard deviation) o Number of new firms per year per industry in the region (5 years) o Evolution of the employment rate per start up in the region (5 years) o Number of mergers and acquisitions per year per industry in the region (5 years)

Guideline for the ERMIS SWOT Building and Analysis

o o o o o o o o o o o o

Number of high growth small firms3 per industry (evolution of employment or turnover over 5 years) Number of high growth medium firms per industry (evolution of employment or turnover over 5 years) Number of high growth large firms per industry (evolution of employment or turnover over 5 years) Number of gazelles (more than 20% growth per year over the last five years). Number of large firms headquarters per industry Number of medium firms headquarters per industry Number of large high tech firms headquarters per industry Number of medium high tech firms headquarters Number of employees working in foreign companies Share of sales outside the region per sector Share of sales outside the country per sector Share of SMEs’ sales outside the country per sector

The first set of data will be used to defining the concentration and maturity levels of the region. It determines the weight of large (old) firms/establishment in each industry of the region and its evolution. The standard deviation will show if the representative picture (the average) is precise (low standard deviation) or foggy (high standard deviation). Further, the analysis of evolutions will tell about the tendency of the region. A more strategic measure is to compare the weight of the regional concentration of an industry with that of the country. This will tell the analyst about the strategic importance of the region for the future of the industry. A simple measure could be the location quotient (LQ), which measures the under or over-representation of a certain industry in a given region compared to the whole of the national economy:

LQ 

ei Ei

e E

Here is the definition of small and medium-sized enterprises by the European Commission. We do not consider the difference between micro and small firms and thus will aggregate the data of all firms < 50 employees and/or turnover < € 10 million. Enterprise category medium-sized small micro

Headcount < 250 < 50 < 10

Turnover ≤ € 50 million ≤ € 10 million ≤ € 2 million

Balance sheet total ≤ € 43 million ≤ € 10 million ≤ € 2 million

Guideline for the ERMIS SWOT Building and Analysis

LQ> 1 illustrates a relative higher share of industry activity compared to the national level. The questions about headquarters will be useful for several reasons. First, it will provide information on the strategic importance of the region: if large firms have their headquarters in the region, they are more likely to commit to the development of the region. Second, headquarters tend to host top level employees, which may have a positive impact of the attractiveness of the region (job market and human capital mobility). Finally data on the share of sale outside the region provides information on the performance of local firms. The more orientated towards external markets, the more competitive the firms in the region are.

Cluster

Share of regional employment Year t

Evolution

Specialization index (compared with the national the European index) Year t

Evolution

Cluster 1 Cluster 2 Clusterâ&#x20AC;Ś. Table 7. Synthesis of industries

Specialization index (compared with reference regions) Year t

Evolution

Guideline for the ERMIS SWOT Building and Analysis

indicators

Region

Reference region

Number of new firms Share of SMEsâ&#x20AC;&#x2122; sales outside the country Number of high growth firms Evolution of the number of employee Synthesis Table 8. Entrepreneurship performance

The SWOT analysis of each cluster will rely on the above comparative study and the study of maturity of local industries. It will be complemented by a more qualitative/strategic analysis of each cluster based on the interview of companies. For instance, the current situation and the evolution of market conditions for each industry, the positioning of local firms in the value chain and the subsequent opportunities and threats will add a lot of value to the SWOT analysis. Entrepreneurship performance Strength Weaknesses Opportunities Threat Table 9. SWOT matrix of entrepreneurship performance (per cluster) Then, based on a synthesis of the situation of each industry/cluster, and on the level of specialization (dependence) of the region on specific clusters, a SWOT analysis of the industrial situation of the region will be useful.

III.

Innovative performance INDICATORS o Level of innovation by companies in the region (if available in the CIS survey) o Number of high tech companies4 (per industry) in the region o Evolution of high tech companies (5 years) o Number of medium tech companies (per industry) in the region o Number of low tech companies (per industry) in the region o Number of patent applications per inhabitant (choose one year since 2006)

High techn industries are NACE 35.3 ; 24.4 ; 30 ; 32 ; 33 Medium tech industries are 31 ; 34 ; 24 (excluding 24.4) ; 35.2 ; 35.4 ; 35.5 ; 29

Guideline for the ERMIS SWOT Building and Analysis

o o o o o o o

Evolution of the number of patent applications per inhabitant (5 years) Number of high tech patent applications per inhabitant (choose one year since 2006) Number of SMEs’ patent applications Number of SMEs’ high tech patent applications Evolution of the number of high tech patent applications per inhabitant (5 years) Number of publications in scientific journals per inhabitant (choose one year) Evolution of the number of publications in scientific journals per inhabitant (5 years)

This set of indicators is focused on innovative performance. Since it may be difficult to gather the comprehensive list of indicators, if important data are missing, it will be possible to complement the collection of quantitative data with a qualitative investigation. The objective is to fulfill the SWOT matrix by relying on evidences and not just “objective” data. Complementary interviews, questionnaires and the reference to industry or expert reports may help compensating for the lack of data. However, the comparison with other regions with similar profiles is recommended since innovative performance is strongly related to the type of regions as defined in section 4.

indicators

Region

Reference regions

high tech companies Medium tech companies Patent applications per inhabitant High tech patent applications per inhabitant Share of SMEs’ patents publications in scientific journals per inhabitant Synthesis Table 10. Innovative performance If no reference region was found, the following average data on European regions could be useful: The average share (%) of High tech industries in total employment was 1.09 - 1.62 in 2006 The average share (%) of Medium-High tech industries in in total employment was 5.64 8.01 The average share (%) of KIBS5 (knowledge intensive business Services) was 2.59 3.58

KIBS group together industries NACE 64 ; 72 ; 73. In agglomeration such as Stockholm or Ile de France the percentage of KIBS can be 7% or 8%

Guideline for the ERMIS SWOT Building and Analysis

Innovative outcomes Strength Weaknesses Opportunities Threat Table 11. SWOT matrix of innovative outcomes

The following steps are dedicated to the analysis of the determinants of innovation performance of local SMEs. Although data are very useful –in particular for the comparison with reference regions- a grounded understanding of barriers to innovation will probably provide more insight in the actual situation of the region.

STEP 7: Determinants of SMEs’ performance QUESTION: does my region provide the necessary elements for SMEs to perform as expected?

Access to finance

QUESTION: Are SMEs with high innovative potential in my region not more financially limited than other comparable regions? Depending on the region’s profile, specific institutions will be expected. For instance, young industries (e.g. development model 1, guideline document), will need both business angels and venture capital firms to boost early stage ventures. More mature industries (e.g. development model 4), will rely on active involvement and autonomy of local banks). INDICATORS o R&D intensity (R&D investment/ regional GDP) o

Public R&D expenditures at national and regional levels

Private R&D expenditures at national and regional levels

Evolution of public R&D expenditures at national and regional levels (5 years)

Evolution of private R&D expenditures at national and regional levels (5 years)

Non-R&D innovation expenditures of all enterprises as a percentage of turnover

Intensity of capital investment (Capital investment/regional GDP) Capital investment is investment to support firm’s growth. It groups together venture capital, business angels, subsidies investment whether in the initiation or the development stage.

Guideline for the ERMIS SWOT Building and Analysis

Venture capital investment/regional GDP

Number of capital venture firms located in the region

Number of business angels located in the region

Rate of Foreign Direct Investment (% of GDP)

SMEs innovation research grants received from national sources

SMEs innovation research grants received from regional sources

Large firms innovation research grants from national sources

Large firms innovation research grants from regional sources

indicators

Region

Reference region

R&D intensity Capital investment Venture capital’s investment Business angels’ investment Number of venture capitalists Number of business angels Public R&D investment at regional levels Private R&D investment at national and regional levels Share of SMEs’ research grants FDI Synthesis Table 12. Access to finance indicators

Access to finance Strength Weaknesses Opportunities Threat Table 13. SWOT matrix of access to finance

Guideline for the ERMIS SWOT Building and Analysis

II.

Access to human capital and human capital mobility INDICATORS o Number of graduated workers o Number of graduated workers in science or technology o Number of workers with a post graduate degree o Number of workers with a post graduate degree in science or technology o Number of researcher in the public sector o Number of researchers in the private sector o Number of researchers per employee o Number of students o Number of students in science and technology o Number of students from other regions of the country o Number of foreign post graduate students o Rate of executive education (% of employees) o Labor cost compared with competitor regions (regions hosting the same industry) o Rate of employees from other regions (per sector) o Rate of employees from other countries (per sector) o Rate of employees trained in local universities (per sector) o Number of spinoffs per year (average or select one year )

indicators

Region

Number of workers with a post graduate degree in science or technology Workers with a post graduate degree Workers with a post graduate degree in science or technology Number of researchers per employee Number of students in science and technology Labor cost compared with competitor regions Employees from other regions Employees from other countries Employees trained in local universities Number of spinoffs per year Synthesis Table 14. Human capital indicators

Reference regions

Guideline for the ERMIS SWOT Building and Analysis

Comparative data: The share (%) of employees with a university degree in science or technology: 22.6 – 28.1 Number of researcher (%) in total employment in 2003: 0.36 – 0.62 Number of students in science and technology in 2005: 56819 – 121583 Human capital Strength Weaknesses Opportunities Threat Table 15. SWOT matrix of human capital

III.

Technology transfer o o o o o

Number of spin-offs per year (average or select one year ) Number of incubators Number of firms in incubators Number of technological transfer institutions Employment in knowledge intensive business services (as a share of total employment) Indicators

Region

Reference regions

Number of spin-offs Number of incubators Number of firms in incubators Number of technological transfer institutions Knowledge intensive business services Infrastructures (such as open platforms) Synthesis Table 16. Technology transfer indicators Quality of infrastructure Strength Weaknesses Opportunities Threat Table 17. SWOT matrix of technology transfer

Guideline for the ERMIS SWOT Building and Analysis

IV.

Quality of Infrastructures

INDICATORS o Rate of household with internet access o Rate of household with large band access o Rate of SMEs with large band access o Airport: Number of passengers per year o Airport: number of foreign passengers per year o Airport: number of days of passengers in the region o Quality of roads in business areas o Peripheral level o Quality of the regionâ&#x20AC;&#x2122;s transportation o Regionâ&#x20AC;&#x2122;s cost of living indicators

Region

Reference regions

Rate of household with internet access Rate of household with large band access Rate of SMEs with large band access Airport: number of foreign passengers per year Quality of roads in business areas

Rate between 1 and 5

Synthesis Table 18. Quality of infrastructure indicators

Quality of infrastructure Strength Weaknesses Opportunities Threat Table 19. SWOT matrix of quality of infrastructure

Legal and regulatory environment o Level of taxation affecting business relative to competitor regions o Number of days to create a business o Number of days to close a business o Number of business and IPR lawyers in the region

Guideline for the ERMIS SWOT Building and Analysis

indicators

Region

Reference region

Level of taxation affecting business relative to competitor regions Number of days to create a business Number of days to close a business Number of lawyers in the region Patent application office in the region Quality of property right regime Labour market environment Level of non-compete agreements Synthesis Table 20. Legal environment indicators

Legal and regulatory framework Strength Weaknesses Opportunities Threat Table 21. SWOT matrix of legal environment

Guideline for the ERMIS SWOT Building and Analysis

7. STEPS 8 & 9: regional Performance Qualitative analysis (based on the MERIPA6 Tool box) Steps 8 and 9 evaluate the governance structures and the policy action of your region. The aim is to estimate the relevance and effectiveness of supportive actions undertaken by local governments and institutions. This assessment should be done relative to the regional profile as defined in step 4 and to performance results relative to reference regions. More precisely, depending on your region industrial profile, some criteria will determine the competitiveness of your region (see the ERMIS data collection guideline for further details)

STEP 8:

Super-structural level analysis

QUESTION: Do institutions (local institutions, culture, etc.) promote knowledge exchange? Results obtained in previous steps may be useful if they tell you about local structures enabling knowledge exchange. The qualitative analysis is based on the network analysis, as proposed by the MERIPA study. A network analysis is relevant to estimate the level of interdependence between key players. A network analysis may help determine what particular innovation support each cluster requires.

Measuring interactions

Network analysis assumes that dense patterns of interaction between firms induce increased innovative performance. Network analysis consists of the difficult task of determining the degree and quality of these interactions. What constitutes dense interaction? • • • •

frequent, close and stable interactions between actors a high degree of trust and openness between cluster members low levels of misunderstandings may be expressed as exchange of information, personnel and/or resources

Who should be interviewed? It would be excellent if we could analyze the complex web of interactions between several kinds of actors, but in practice we have to keep things simple. We recommend that the analyst interviews the economic actors in priority, specifically the CEOs of the firms in the selected clusters. By asking these actors about their interactions with other actors in the region such as researchers and administrators, the analyst will be able to get a sense of the full network without having to interview everyone in the network.

Methodology for European Regional Innovation Policy Assessment (http://meripa.odeum.com/download/meripa_toolbox.pdf) 6

Guideline for the ERMIS SWOT Building and Analysis

It may be useful to conduct more in-depth interviews with certain firms in the cluster. The analyst’s judgment about who can provide you with even more useful and multifaceted information. Interviews with other actors (academics/incubators/development agencies) may be useful to complement the first series of interviews Issues covered in the questionnaire The questionnaire is designed to elicit information about interactions by focusing on the topic of general product development. The analyst should be able to draw out a general sense of collaboration and cooperation with other firms. Naturally, it is important to determine not only how well firms interact with other firms in their cluster, but also with other regional actors. As already mentioned, it is rather difficult to canvass the whole network so the questionnaire allows the economic actors to reflect on their collaboration with a broad range of other local actors including customers, suppliers, other related companies, consultants, universities and public authorities. In order to determine the quality as well as the quantity of interactions, respondents are asked to describe the intensity of their collaboration with other partners on a five point scale (where 5 is ‘very close interaction’, and 1 is ‘no interaction’). Since the location and proximity of firms is an important consideration for regional clusters, the questionnaire also includes questions that address regional, national and international collaborations. Here is a list of sample questions you can adapt:

II.

Personal Interviews with private companies:

1) What is the situation within the “(XXX) – industry” today 2) Are you aware of the term “cluster” and do you think you have a cluster within XXX in your region? 3) Are you member of a cluster initiative in the region and what is your experience with it? 4) Are you member of other business clubs, etc.? 5) Can you describe your interaction with your suppliers (materials, equipment and design)? 6) How big a share of your total procurement comes from the cluster / region? 7) Can you describe your interaction with your customers – how big a share of your total sale is going to the cluster / region and how much outside the region Knowledge Exchange? 8) Can you describe your informal knowledge and experience exchange with other companies or other institutions within the cluster / region? Do you have a “frequent, close and stable interaction with the other actors in the cluster? 9) Do R&D or product development collaborations with other companies or institutions are based on contractual relations? 10)Is there a high degree of exchange of personnel between the companies? 11)Do you make use of public business services and laboratories in the region – could you please give some examples of this? 12)Are you aware of the most distinctive research achievement in the region?

Guideline for the ERMIS SWOT Building and Analysis

13)Do you know researchers that have achieved an international recognition –in which area? 14)Does research undertaken in the region is useful to your business? 15)Which percentage of your employees has been graduated in the region? 16)Which percentage of your employees has been graduated abroad? 17)How good would you consider the science and technology education in the region (local, national or international standard) 18)Do you collaborate (formal/informal) with the knowledge centers (universities, polytechnics and colleges) in the region - could you please give some examples? What is your experience with collaboration? 19)Do you often use external (private) services in your research activities 20)Do you often use external (private) services in your marketing/commercial activities 21)Do you often use external (private) legal services? 22)Are you politically active within the regional development agenda in the region? 23)(If no working cluster is identified) – is there a potential for a working cluster in the region and what should be done to strengthen its development? (If there is a working cluster) – How can the cluster be further developed and how should it be done? 24)Could you point out key people in the regions who have been particularly active in the development of the cluster – they could be business representatives, politicians, private people, professionals within the specific field, representatives from knowledge centers, etc. Personal interview with cluster initiative: 1) How did the cluster initiative start – who were the main actors? And on what basis (cluster analysis etc.) was it started? 2) How is the cluster organized, and what is its strategy? 3) What kind of activities is in the cluster? How would you describe interaction within the cluster (“frequent, close and stable” or not) 4) How many and what kind of members do you have? 5) Are there any evaluations of the initiative – what are the results? 6) How is the initiative financed? 7) Are the public authorities (municipality – region etc.) involved in the initiative? 8) What is the future of the initiative? 9) Could you point out some key people in the region who have been particularly active in the development of the cluster – they could be business representatives, politicians, private people, professionals within the specific field, representatives from knowledge centres, etc.

Guideline for the ERMIS SWOT Building and Analysis

Personal interview with key persons (1-2 persons): 1) How did the cluster start? What was the process; bottom up (company driven) or top down (regional policy driven)? 2) Can you describe the cluster – is it working and using its full potential, or is it latent (with a critical mass but no interaction)? 3) To what degree is there regional ownership of the cluster – is it recognized as a cluster and do all partners in the regional arena (business life, politicians, authorities, knowledge centres etc.) feel ownership of the cluster and support it / take part in it, or are there only a few kinds of regional actors taking part in the cluster? 4) Do you think the cluster acts as a “magnet” for other companies to place their company in the region? 5) How can other clusters grow either from a latent cluster to a working cluster or as a quite new cluster? 6) What does it mean for the cluster that the region is supporting it with through regional politics, etc? 7) What is the future of the cluster?

Interactions Strength Weaknesses Opportunities Threat Table 22. SWOT matrix for the infra-structural level Interactions

The synthetic SWOT analysis consist of (1) the SWOT analysis of the clusters context and of the determinants of innovative capacities of SMEs, (2) the SWOT analysis of the superstructural level and (3) of the infrastructural level, that is the evaluation of the relevance and effectiveness of regional policies to address SMEs’ barriers to innovate. Industrial clusters context and of the determinants of innovative capacities of SMEs The first table makes a synthesis of the determinant factors of competitiveness for local SMES. For each cluster, it rates the weight of each factor (from one to five) and evaluates SWOT of each factor for each.

Guideline for the ERMIS SWOT Building and Analysis

Cluster A rate (1 to 5) strenghts weaknesses Opportunities

Factors

Threats

rate (1 to 5) strenghts

Cluster B weaknesses Opportunities

Threats

Local resources Labor cost Transportation Marketing Innovation Skilled labor

Table 23. Cluster competitive factors The second table concentrates on the main determinant of (and potential barriers to) SMEsâ&#x20AC;&#x2122; innovation. As the previous table, each determinant is rated from one to five and assessed by the SWOT instrument.

Cluster A rate (1 to 5) strenghts weaknesses Opportunities

Factors

Threats

rate (1 to 5) strenghts

Cluster B weaknesses Opportunities

Interactions and social networks Access to finance Access to human capital Access to knowledge Access to market

Table 24. Innovation determinants

By integrating the weight and the development of each cluster, the combination of the two tables enables performing a global SWOT analysis of the industrial clusters context in the region. Regional cluster situation Strength Weaknesses Opportunities Threat Table 25. SWOT matrix for clusters situation (per cluster)

Super-structural situation Strength Weaknesses Opportunities Threat Table 26. SWOT matrix for the super-structural situation

Threats

Guideline for the ERMIS SWOT Building and Analysis

STEP 9:

Infrastructural level analysis

QUESTION: Given the industrial profile of the region, what are the required policy actions? Are policy actions consistent with each other’s? Are local policy actions consistent with national and European policy actions? Are local governance structures adapted to promote the right policy actions? This step is a synthesis and should try to take into account all policy and institutional dimensions that may (positively or negatively) affect innovative conduct and performance of local SMEs. For instance questions such as the power of local politician at national level, or the number of large firms headquarters in the region (and their impact on local policy) etc.

Governance structure   

II.

What is the level of autonomy of the region? (e.g. tax system, budget,…) Rate 1 to 5 Has the region got representatives in strong positions at national levels? Rate 1 to 5 Impact of the region on university and research institution (funding, governance) Rate 1 to 5

Policy actions

List the different policy actions:           

Actions Actions Actions Actions Actions Actions Actions Actions Actions Actions Actions

on physical resources on education on research on infrastructures on entrepreneurship on intellectual property on access to finance to reduce the administrative burdens on technology and knowledge transfer to help university spin offs to help firms access their market

Infrastructural analysis Consider the list of actions undertaken in the region and evaluate each action on the basis of its relevance and impact compared with its targeted objective (table 27) and its coherence with national/European policy actions and its transparency (table 28). The evaluation of the infra-structural level relies on the global estimation of the governance structure and of the relevance and impact of regional innovation policies. The rating must account for the fit between the needs of strategic clusters (as defined in step 4) and the objectives and achievement of policy actions.

Guideline for the ERMIS SWOT Building and Analysis

Action

Research Action on Development Behaviours

Relevance compared with cluster challenges

Impact on innovation performance of SMEs

Target Companies Clusters System Table 27. Policy actions analysis

Coherence with national and European policies

The policy action is clearly expressed and results are measurable

Policy action analysis (result of table 27)

PA 1

Rate 1-5

Rate 1-6

PA 2

Rate 1-5

PA n

Rate 1-5

Policy action

Table 28. Evaluation of policy actions

Super-structural situation Strength Weaknesses Opportunities Threat Table 28. SWOT matrix of policy action impact

Governance Strength Weaknesses Opportunities Threat Table 25. SWOT matrix for the regional governance

Rate 1-5

Guideline for the ERMIS SWOT Building and Analysis

Examples of regional policies: Tax policy such as R&D tax credits or tax incentives that reward businesses for providing industry-specific workers training or for creating high-wage jobs  Providing public loans/investments or public support for private loans/investments for business start-up or expansions  Funding education and workforce training  Encouraging R&D investment of SMES (subsidies or procurement dedicated to SMEs)  Regulatory measures to encourage startups and industry creation (deregulation of interest rates for firms created in targeted sectors for instance)  Improving access to seed and venture capital  Funding access to consultancy and legal advice (e.g. property rights)  Providing technology platforms in an open innovation spirit 

 .

Guideline for the ERMIS SWOT Building and Analysis

8. Final SWOT analysis 7.1. Clusters determinants

Region

Reference région 1

Reference région 2

Reference région 3

Access to finance

1 to 5

Human capital

1 to 5

Quality of infrastructure

1 to 5

Technology transfer

1 to 5

Regulatory framework

1 to 5

5 to 25

TOTAL

Table 26. Evaluation of cluster (each cluster)

Cluster 1 situation Strength Weaknesses Opportunities Threat Table 27. SWOT analysis of cluster 1 Evaluation of clusters determinants in the region: Estimate the results of each cluster compared with clusters in the reference regions and consider the respective SWOT analysis. Then, taking into account the weight and the development of each cluster, perform a SWOT analysis for the determinants of the region. The question is ‘What are the SWOTs of the local determinants to innovation of SMEs’? Regional cluster situation Strength Weaknesses Opportunities Threat Table 28. SWOT analysis of regional clusters situation

Guideline for the ERMIS SWOT Building and Analysis

7.2 Final SWOT analysis STEP 10 : Global synthesis The final SWOT analysis will analyze the clustersâ&#x20AC;&#x2122; situation and will focus on the relevance and impact of the policy actions, trying to estimate the effectiveness of the governance structure of the regional innovation system in promoting SMEsâ&#x20AC;&#x2122; innovation.

Cluster 1 situation Strength Weaknesses Opportunities Threat Table 29. Final SWOT analysis

Guideline for the ERMIS SWOT Building and Analysis

CONCLUSION

ERMIS is a model addressing the conclusion of the literature review: the necessity to develop analytical models to better design regional innovation policies dedicated to SMEs. Relying on a RIS framework (regional innovation system), ERMIS suggests analysing the context of a region by specifying structural dimensions, industrial dimensions (the levels of specialisation and of maturity of local industries). Then a SWOT analysis is proposed by evaluating regional performance by comparing local outcomes with performance of other European regions exhibiting similar contexts. This enables policy makers to better evidence the main weaknesses of the regions and to look at specific processes that generate better performance in the benchmark regions. This document has proposed a comprehensive analytical framework with a description of the different steps to follow to achieve a conclusion. The objective was to contribute to define place based innovative policies in European regions and favour an effective transfer of best practices between partners. We believe that the proposed analytical process is applicable to all European regions, whatever their economic context.

Guideline for the ERMIS SWOT Building and Analysis