{"id":8677,"date":"2019-09-25T18:26:12","date_gmt":"2019-09-25T15:26:12","guid":{"rendered":"https:\/\/ces.org.ua\/?p=8677"},"modified":"2020-03-21T00:56:50","modified_gmt":"2020-03-20T21:56:50","slug":"how-can-ukrainian-sme-grow-into-national-and-global-champions","status":"publish","type":"post","link":"https:\/\/ces.org.ua\/en\/how-can-ukrainian-sme-grow-into-national-and-global-champions\/","title":{"rendered":"How can Ukrainian SME grow into national and global champions?"},"content":{"rendered":"\n<p>Small and\nmedium companies are the backbone of any national economy. An economy with a\nhigh share of strong SMEs enjoys several benefits, such as inclusive and\nsustainable growth and economic growth based on knowledge and innovation. SMEs\nare also more flexible and community-embedded.<\/p>\n\n\n\n<p>In Germany, the development of a strong SME sector\n(known as the Mittelstand) leads to the appearance\nof \u2018hidden champions\u2019, which contribute to the economic success of the country.\n<\/p>\n\n\n\n<p>In this paper, we study the key internal factors of resource management in Mittelstand companies and the policy measures that contributed to the success of the German SME sector, as well as the applicability of the German experience to the Ukrainian SME sector.<\/p>\n\n\n\n<p>Our paper\nis based on desk research, previous research projects of the Institute of\nEconomic Research (Kyiv), field visits to German SMEs and policymaking bodies, and\nin-depth interviews with Ukrainian and German policymakers and business. <\/p>\n\n\n\n<p>As for Ukraine, there are general factors that need to be taken into\nconsideration when developing strategic policy measures for SMEs, including low\nlevels of trust and a relatively weak rule of law, and political and economic\ninstability. These long-term circumstances have a strong impact on both public\ngovernance and business management. <\/p>\n\n\n\n<p>To formulate policy recommendations for Ukrainian SME policy, we analysed the\ndevelopment of a business from being run by an individual entrepreneur to becoming\nan international champion.&nbsp; First, we\ncompared absolute and relative numbers of population and businesses for the\nlatest available years for both countries. The relative rate of operating\nbusinesses to 1,000 population at a certain moment of time shows both the\nwillingness and the ability to run a business or to be an entrepreneur. Then we\nanalysed the reasons why more businesses succeed and\/or grow in Germany than in\nUkraine at each level. <\/p>\n\n\n\n<p>While the structure of small and medium enterprises and individual\nentrepreneurs in Ukraine is similar to that of Germany, the Ukrainian SME\nsector lacks capabilities and productivity that might lead it to become\nsuccessful at a national or international level. Particularly, Ukraine\nsubstantially lags behind in the number of small and medium companies that are\nsuccessful in international markets. Therefore, after conducting a comparative\nanalysis of the German and Ukrainian SME sector at each size and market level,\nwe suggest policy measures to increase the share of businesses that are able\nand willing to develop to the upper level, up to becoming exporters.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" width=\"696\" height=\"243\" src=\"https:\/\/ces.org.ua\/wp-content\/uploads\/2019\/06\/image-1.png\" alt=\"\" class=\"wp-image-8682\" srcset=\"https:\/\/ces.org.ua\/wp-content\/uploads\/2019\/06\/image-1.png 696w, https:\/\/ces.org.ua\/wp-content\/uploads\/2019\/06\/image-1-150x52.png 150w, https:\/\/ces.org.ua\/wp-content\/uploads\/2019\/06\/image-1-300x105.png 300w\" sizes=\"(max-width: 696px) 100vw, 696px\" \/><\/figure>\n\n\n\n<p>Below we summarize our recommendations for policy interventions at each stage of business development. <\/p>\n\n\n\n<p><strong>For\nprospective and new entrepreneurs:<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Development of a sustainable policy\nframework by the Ministry of Education and Science and the Ministry of Economic\nDevelopment and Trade to revitalize the existing innovation and science parks\nat universities and create new ones. <\/li><li>Giving reformed university clusters\nthe necessary level of autonomy and freedom to engage with possible\nstakeholders. <\/li><li>Funding the introduction of\ndedicated cluster management and part-time involvement of academics. <\/li><li>Funding advisory support for\nclusters.<\/li><li>Support for clusters based on the\nprinciples of co-funding, sustainability, objective-based performance, and\nrealistic goals.<\/li><li>Boosting the ideas of innovative and\ncompetitive start-ups among students by encouraging businesses to intervene\ninto the study process, especially in technical fields.<\/li><li>Implementing programs encouraging\nUkrainian labour migrants and other vulnerable population groups to launch\ntheir own businesses.<\/li><\/ul>\n\n\n\n<p><strong>For\nbusiness entity creation<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Unification of the taxation system framework,\nsimplifying the transition from being a micro- to a small enterprise, including\nthe change of legal form. <\/li><li>Microgrants and microloans should be distributed\nby local authorities and Ukrainian banks in cooperation with international\nfinancial institutions in order to minimize the risk of inappropriate funding\nallocation.<\/li><li>Combining lending with consulting or mentoring\nprogrammes to mitigate the risks of not returning loans.<\/li><li>Innovation support centres for SMEs could be\nestablished in Ukrainian regions by the ministerial SME development office, in\ncooperation with the World Intellectual Property Organisation and local\nstakeholders and using the best practices of the German Mittelstand Agency 4.0.\nThe focus should be on less economically developed regions or settlement types.\n<\/li><\/ul>\n\n\n\n<p><strong>For\ngrowing to the national level and expanding the market<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Enhancing cooperation and networking\npossibilities for SMEs (business associations, work councils, technology parks,\netc.) for exploring new business opportunities, giving them not only\nconsultancy but also a co-determination power in the policymaking process. <\/li><li>Boosting digital infrastructure usage and\nproviding better digital infrastructure outside of big cities.<\/li><li>Compensating for personnel scarcity and skills\nmismatches, e.g. introducing joint vocational training schemes with technical\nuniversities with the support of business associations.<\/li><li>Sharing information on best practices of\nbusiness support mechanisms at local and regional levels in order to make\nbetter use of the powers and financial resources granted to local authorities\nas part of decentralisation.<\/li><\/ul>\n\n\n\n<p><strong>For\nforeign market entry<\/strong>:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>Encouraging a company to develop its own brand\nrather than become an outsourcing unit when entering external markets.<\/li><li>Encouraging expansion abroad via establishing\nsubsidiaries while retaining headquarters, R&amp;D, and production in Ukraine.<\/li><li>Further foreign currency liberalisation measures\nto ease export operations. <\/li><li>Securing the constant supply of labour force and\nmanagers with a migration background and foreign language skills by encouraging\nshort-term educational and labour mobility.<\/li><\/ul>\n\n\n\n<p>Developing a competitive SME sector based on the Mittelstand role model could help Ukraine solve economic and social problems, such as monopolisation, unemployment, and the underdevelopment of certain regions. This would pave the way for more inclusive and sustainable economic growth in the country. <\/p>\n\n\n\n<iframe loading=\"lazy\" width=\"560\" height=\"315\" src=\"https:\/\/www.youtube.com\/embed\/8RrSD5ixkec\" frameborder=\"0\" allow=\"accelerometer; autoplay; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen=\"\"><\/iframe>\n","protected":false},"excerpt":{"rendered":"<p>Small and medium companies are the backbone of any national economy. An economy with a high share of strong SMEs enjoys several benefits, such as inclusive and sustainable growth and economic growth based on knowledge and innovation. SMEs are also more flexible and community-embedded. In Germany, the development of a strong SME sector (known as [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":8687,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[186,404,200,143],"tags":[],"experts":[170,217,169],"news_type":[140],"class_list":["post-8677","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-reports-en","category-business-en","category-news-list-en","category-home-news-en","experts-hlib-vyshlinsky-en","experts-bohdan-prokhorov-en","experts-dmytro-yablonovskyy","news_type-researches"],"acf":[],"_links":{"self":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/posts\/8677","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/comments?post=8677"}],"version-history":[{"count":0,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/posts\/8677\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/media\/8687"}],"wp:attachment":[{"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/media?parent=8677"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/categories?post=8677"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/tags?post=8677"},{"taxonomy":"experts","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/experts?post=8677"},{"taxonomy":"news_type","embeddable":true,"href":"https:\/\/ces.org.ua\/en\/wp-json\/wp\/v2\/news_type?post=8677"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}