Supporting SME Growth through Innovation and Partnership
This week Connect to Grow launches its first public report ‘Supporting SME growth through innovation and partnership’ – a review of the landscape. The report provides a baseline for what is currently known about the role of innovation and partnership in SME growth. But it is much more than a literature review. It also draws on analysis of 70 different initiatives that offer support to SMEs to provide a comprehensive picture of the current approaches, trends and gaps in this space. It was originally prepared as an internal document to help set the context for the Connect to Grow team. But a public version has now been released as the findings are valuable well beyond Connect and will no doubt benefit others working on programmes that support SME growth as well as innovators themselves seeking support from such programmes.
For Connect, the review confirms the value of supporting SME growth as an overall objective, and of innovation and B2B partnership as a means to support SME growth. It also indicates that by focusing primarily on the adopters of innovation, Connect to Grow is operating somewhat differently to other programmes that are working on diffusion of innovation from the innovators.
SMEs have a critical role to play in generating growth, employment, and solutions for people at the base of the pyramid in emerging economies. SMEs also face many constraints. They lack access to finance to grow. But more fundamentally, questions are raised by investors and business experts, on whether they have the value proposition their clients need, the ability to innovate, or the talent to manage and grow.
Innovation is an important contributor to enterprise growth. But there appears to be a lack of B2B innovation transfer and several constraints including lack of ‘network pathways’ for innovation diffusion. There is also a lack of evidence on how innovation transfer happens and whether it is effective. This suggests that programmes that seek to support innovation uptake, such as Connect to Grow, need to operate as one kind of 'network pathway' and assess how to provide that pathway most effectively.
The same can be said of partnership. Partnership is identified as a success factor for SMEs. But there are many kinds of partnership and little evidence of the effectiveness of different partnering structures or brokering mechanisms.
Amongst the hundreds of initiatives that exist to support SMEs, the majority focus on SME growth, with a major focus on improving access to finance. A minority explicitly support innovation, and a handful explicitly support innovation transfer. Of these, most focus on supporting innovators to scale or replicate rather than supporting adopters of innovation to find and absorb innovations into their business. This is despite innovation having been identified as a core mechanism for enterprise competitiveness and growth.
Of the multiple programmes that focus on supporting enterprise to engage in partnership, the majority focus on PPPs or multi-stakeholder alliances and relatively few on B2B partnership brokering. Those that do support B2B partnerships include the objective of supporting innovation transfer amongst several other objectives. None start the partnership building from the perspective of the innovation adopter.
Thus while the evidence on SME growth highlights the crucial role that innovation plays in building competitive advantage, becoming investible, and developing a proposition that can scale in base of pyramid markets, this is not matched by the focus of current initiatives. Several seek to help the most innovative entrepreneurs to expand, or to replicate their innovation through others, but they do not focus on helping other aspiring SMEs to tap into innovation to add value to their own enterprise. This suggests there are gaps in an otherwise fairly crowded space, but also gaps in understanding of what works and for which kind of enterprise.
The first half reviews existing literature on SME growth, partnership, and innovation. For more detailed analysis of what other programmes in this space are doing, delve into the second half of the report.
Connect to Grow seeks to support growth of SMEs with impact on health and agricultural livelihoods, by facilitating innovation transfer from enterprises in India with a desire to expand internationally through business-to-business (B2B) partnership with enterprises in sub Saharan Africa and South Asia with a desire to grow.