Incentives for SMEs to Invest in Skills

4. Fostering entrepreneurial ecosystems

Networks and partnerships can help address the complex skills needs of SMEs, while addressing some of the challenges these companies face. Co‑operation allows for pooling of resources, information sharing, knowledge exchange, developing ideas and learning from each other’s experiences. In addition, promoting participatory approaches that involve of SMEs in the development, implementation and evaluation of measures that target investment in skills builds ownership and enhances learning within the companies.

4.1. Pooling of resources and SMEs participation

Pooling of resources can help address various obstacles to training confronting individual small firms. Among the different modalities of SME participation in firm partnerships, learning and training networks are prominent. Evidence suggests that developing networks can strengthen the engagement of small firms in training, developing the training itself, exchanging knowledge more broadly (Stone, 2010[16]). It can provide a solution for the complex needs for training of SMEs, as it allows for economies of scale and for the creation of a critical mass in the demand for education and training, including the analysis of skill gaps, thus lowering the per-worker cost of training.

Networks may involve local or sectoral co‑operation among SMEs themselves, or between larger firms and their supply chain partners, including small firms. There can be a lead company responsible to provide the main service, or a consortium of equal partners.

While many networks are local in nature, others can formalise a collaboration that goes beyond the territorial dimension and the industrial specialisation. This is useful especially for territories that cannot supply certain advanced technologies that are needed for firms to thrive in the 21^st century. Supply-chain relationships, however, remain an important and frequent component of networks. Indeed firms in a supply-chain relationship tend to purse the same goals, which counterbalances the natural forces of market competition and the “do‑it-by-yourself” entrepreneurial culture characterising many SMEs. Successful networks therefore ask for a common, long-term vision. More short-lived, typically horizontal networks can also succeed, if they typically carry out a well-defined and time‑bound project.

Policy makers can support firm networks by allowing these entities to apply for support alongside individual firms. Moreover, they can earmark specific resources for firm networks only. Public support can also differentiate rate of subsidisation for different objectives pursued by the network, including giving priority to up- and re‑skilling initiatives. Many of the programmes presented above allow for the realisation of projects by individual companies or consortia/groups of employers. This is the case for example of the Finnish Joint Purchasing Training Programme, a scheme for subsidised training which supports employers – either individually or in groups – in the creation of training offers for their employees. Similarly, programmes such as MKB!dee in the Netherlands allow for the submission of project proposals by a partnership, which must include at least a certain minimum participation of SMEs.

Programmes can also have co‑operation among companies, and especially on SMEs, as a specific focus. This is the case of the Impulse Training Networks (Implus-Qualifizierungs-Verbund) in Austria. They are networks through which companies can co‑operate to provide cost-efficient and work-relevant training, organising and purchasing relevant qualifications for their employees. This is a long-standing subsidised programme, which is managed by the PES at national level and at the state level through a number of consulting companies, which provide support services to the networks for a maximum of ten consultation days. These services include setting up the network and its working processes or structures, as well as supporting the network in surveying the educational needs of its workforce and developing training plans and applications for available financial support for training. The acquisition of qualifications increases the potential of employees and keeps teams up-to-date and motivated.

This is a longstanding subsidy programme, which has been funded partly with ESF funds under programming periods 2007‑13 and 2014‑20, and is considered a key scheme to promote adult learning and joint training within SMEs in Austria (Cedefop, 2020[54]).

Box 4.1. Impulse Training Networks in Austria

Impulse Training Networks are an Austrian programme through which companies can co‑operate to provide cost-efficient and work-relevant training. An “impulse qualification network” is a network of several companies jointly organising and purchasing promising training that delivers a qualification for the companies’ employees. The programme is a key scheme to promote join training and learning in SMEs in Austria, and entered into force in 2007.

The PES fully funds support services for the running of these networks, including in the set-up of the networks, the development of training plans and development programmes and the application for available financial support for in-company training. The implementation is led by the PES at federal level and at state level commissioned to consulting companies that support the network companies with a maximum of ten consultation days covered. The tasks of the consulting companies include: the application, processing and billing of funding; help in structuring and defining processes within the network, including with regard to work organisations, roles, objectives and services offered; development of personnel development programmes; implementing a survey of skill needs; creating the curricula; researching and organising joint courses; co‑ordinating activities. The network can also serve as a platform for information exchange and joint development projects and as an additional labour market policy offer for regional economic communities, business and industrial areas or business incubators.

In addition, the PES offers a subsidy that covers 50% of the costs of training of underserved groups (older and low skilled workers). Networks must be made up of at least three companies and 50% of companies in the network are required to be SMEs.

Source: AMS Arbeitsmarktservice (2020[55]), Impuls-Qualifizierungsverbund.

In Ireland, training networks are promoted by Skillnet, the business support agency that promotes and facilitates continuous learning in the country, with an approach that mixes sectoral and regional aggregation of firms into networks. The agency complements traditional training programmes with tailored training for groups of firms through its main programmes: the Training Networks Programme, which has supported 15 000 companies over 50 enterprise groups and 66 learning networks; and the Future Skills Programme, which provides seed funding for enterprise groups to develop innovative enterprise‑led trainings with HEIs and private training providers.

Under the TNP Programme, networks funded need to conduct skill assessment of their members and promote subsidised training programmes, which can best respond to them, with exclusion of training which is mandatory by law which cannot be covered under the programme.

The work of the agency has had a proven effective to incentivise SMEs investment in skills, and increase participation in training (European Commission, 2020[24]).

Box 4.2. SkillNet – Private‑public co‑operation through learning networks in Ireland

Skillnet Ireland is an enterprise‑led agency that promotes and facilitates continuous learning in Ireland with the objective to increase learning participation in enterprises. It is considered a successful public-private co‑operation initiative and a good practice example internationally.

The agency supports learning networks representing specific sectors or regions with the aim to increase participation in enterprise training by companies, improve competitiveness and provide improved access for workers to industry-specific/transferable skills development. Its Flagship Training Networks Programme (TNP) supports enterprise‑led learning and development, and skills supply responses. It does this through 65 learning networks.

The TNP is aimed at supporting training measures undertaken by enterprises with the purpose of developing and updating the knowledge of their workforce. Activities are organised in four pillars: partnerships to encourage training participation at sector level; growing the skills base by giving workers access to lifelong learning opportunities; developing local learning responses; building training in enterprises by continuously identifying and promoting best practice and quality in all aspects of the design, delivery, evaluation and dissemination of enterprise training.

Skillnet Ireland operates a joint investment model, where government funding of on-the‑job training is matched by contributions from businesses. The allocation of funding is based on specific calls for proposals. Proposals are made by the networks.

Networks are furthermore required to conduct a Learning Needs Assessment of their member enterprises to gather information about their skill development requirements. Training which is mandatory under Irish law (e.g. health and safety training) does not receive funding under the TNP. To access the subsidised training, the company must become a member company of a network.

In 2018, the networks delivered over EUR 36 million worth of education and training programmes to more than 56 000 individuals in Ireland. Currently, Skillnet Ireland has close to 16 500 member companies, 95% of which are small and medium-sized enterprises and 56% are micro‑enterprises with less than 10 employees. Evaluations of Skillnet Ireland show that companies perceive the training provided to be in line with labour market needs (Indecon, 2019[48]).

A key overall indicator of Skillnet Ireland’s success has been the growth of its enterprise participation base across the organisation’s networks. It achieved a growth of 9.7% on the number of enterprises between 2017 and 2018, and a 28% growth between 2015 and 2018. The organisation’s SMEs represent approximately 5.2% of the overall population of SMEs in Ireland. In addition, new networks cover a diversity of sectors and skill needs, including robotics and automation technologies, micro- and nano-technologies, the recruitment and hospitality sectors, among others.

Source: Indecon (2019[48]), Evaluation of Skillnet Ireland in 2018; Skillnet Ireland (2020[56]) https://www.skillnetireland.ie/.

4.2. Leveraging ecosystems for skills investment

Co‑operation between industry, institutions and academia encompass a large set of knowledge‑transfer channels, such as collaborative research, co-patenting, or academic spinoffs. These interactions are the object of a vast literature (OECD, 2019[57]; Kreiling and Paunov, 2021[58]; OECD/European Union, 2019[59]), and fall largely outside the scope of the present study. Some forms of collaboration, however, also provide incentives to firms to expand their investment in human capital, e.g. via the hiring of R&D personnel, the development of new lines of production that require a more skilled workforce, or the design of education curricula that minimise the occurrence of skill mismatches in the labour market. If industry-university co‑operation reduces the cost of a firm’s access to high-skilled workforce, then SMEs are poised to benefit from these initiatives more than firms that can leverage economies of scale. In this context, various programmes and policy strategies have been used to ensure partnerships that involve stakeholders from all relevant sectors.

Entrepreneurial and innovative ecosystems1 in particular have been largely promoted in European countries with the aim to foster co‑operation among different actors, including entrepreneurial actors and organisations, as well as institutions including academia.

The European Commission recently produced a roadmap with clear strategic steps that need to be taken at European and national level to ensure that SMEs access talent relevant to their digitalisation journey, identifying the importance of ecosystems in this regard. In particular, according to the roadmap, ecosystems should be strengthened and strong leadership activated within these environments, as to promote strategies and best practices and increased awareness within SMEs.

Inspiring examples of different measures and initiatives that strengthen ecosystems and facilitate their development are present in different countries, with specific measures aimed at building SMEs capacity and knowledge, when it comes to digital transformation and digital competences. Competence centres are example of ecosystems that do so.

In Germany, the Mittelstand 4.0‑Kompetenzzentren, SME 4.0 Competence Centres are part of the German policy for SMEs on Industry 4.0 – Mittelstand 4.0 already presented above. They are cross-sector and cross-thematic digitalisation ecosystems supporting knowledge and technology transfer to SMEs. They combine subsidised training and other forms of financial support with free capacity building activities for SMEs on the topic of digitalisation. On the information side, they present firms with concrete actions and solutions in relation to skill development.

Box 4.3. Mittelstand 4.0‑Kompetenzzentren – Germany

The Mittelstand 4.0 Competence Centres are meant to be cross-sector and cross-thematic digitalisation ecosystems supporting the knowledge and technology transfer to SMEs. By offering workshops, demonstration plants and networks with representatives of the complete value chain, SMEs are practically supported in developing their own Industry 4.0 solutions.

The Centres’ work does not favour any particular provider and is available free of charge. SMEs are free to access the centres directly and receive consultations and advices for free. Since 2015, the Economic Affairs Ministry has set up a total of 26 Mittelstand 4.0 centres that provide the Mittelstand (SMEs) with information and support about digitisation. A combination of regional centres in all parts of Germany and specific thematic centres delivers a wide range of support for all sorts of sectors and corporate needs. Workshops, training sessions, practical tests, webinars and interventions, designed with SMEs in mind.

The projects within Mittelstand-Digital are completely funded by the BMWi. The BMWi issues an invitation to tender to which project consortia can apply for. The project consortium describes in detail their action plan to achieve the objectives of the tender. Although the Mittelstand 4.0 Competence Centres are funded by the BMWi, a separate project management agency oversees all Mittelstand 4.0 Competence Centres.

The Mittelstand 4.0 competence centres reached around 60 000 companies at over 100 locations in 2018, with a network of over 800 experts, 18 regional and 8 thematic competence centres.

Source: BMWi (2019[60]), SMEs Digital – Strategies for the digital transformation.

Similarly, in Austria, Competence Centres for Excellent Technologies (COMET) are in place since 2006 and their current rationale is to develop new expertise and encourage greater internationalisation, as a sign of excellent co‑operative research. Recently they have also supported numerous projects that link digitalisation and circular economy.

Box 4.4. Austrian Competence Centres for Excellent Technologies (COMET)

Austrian Competence Centres for Excellent Technologies (COMET) were launched in 2006 and are internationally recognised as best practice. They develop new expertise and encourage greater internationalisation as a sign of excellent co‑operative research. Defining promising fields of research via science‑industry collaboration creates new ideas, encourage technology transfer, and strengthen the innovative capacity of companies. Their objectives are:

• Developing skills through long-term research co‑operation between science and industry at the highest level;

• Strengthening Austria as a research location;

• Strengthening the competitiveness of science and industry by driving internationalisation as a sign of high quality co‑operative research: involving internationally-renowned scientists, organisations and companies, positioning COMET Centres as internationally attractive partners, and benchmarking with top research institutions;

• Establishing and developing human resources: increasingly attracting scientists of international renown, creating structured career models for scientists, and actively supporting inter-sectoral mobility for research personnel in order to intensify the transfer of know-how.

COMET are managed by the Austrian Research Promotion Agency (FFG) on behalf of the Federal Ministry for Climate Action, Environment, Energy, Mobility, Innovation and Technology (BMK) and the Federal Ministry for Digital and Economic Affairs (BMDW). The Austrian provinces support COMET with additional funds. Evaluations showed that COMET increase the expertise and innovative output of the companies involved, help consolidate existing research areas and scientific expertise.

Several supported centres and projects develop expertise in the circular economy. For instance, the COMET Competence Centre for Recycling and Recovery of Waste 4.0 (ReWaste 4.0) promotes waste management and new Industry 4.0 approaches based on digital networking and robotics technology (European Commission, 2020[7]).

Source: European Commission (2020[7]), Skills for SMEs – Cybersecurity, Internet of Things and Big Data for Small and Medium-Sized Enterprises; FFG (2020[61]), https://www.ffg.at/en/comet/programme.

In Denmark, a bottom-up and industry-science co‑operation initiative developed since 2014. MADE – the Manufacturing Academy of Denmark – implements collaborative actions, which promote productivity through applied research, innovation and education. It constitutes an inspiring example of bottom-up initiative, which is quickly developing an innovation ecosystem in the Danish manufacturing sector. Since 2017, MADE Digital aims to develop a Danish approach to Industry 4.0 with a focus on its SMEs.

MADE Digital was launched as a collaboration project to enable scientists and practitioners from companies to work together and implement digital solutions, tailor-made to the specific needs of Danish manufacturing companies. Within this initiative, large companies collaborate with smaller companies, research teams from universities and technical experts from the regional training organisations on topics linked to digitalisation. Their aim is to provide industry with new knowledge and help SMEs implement digital solutions, particularly assess which services within the firm could gain most from digitalisation. (Larosse, 2017[62])

Being mostly funded by business sector contributions and the Danish Innovation Fund, this project enables strong and co‑ordinated digital development especially for SMEs, which can gain knowledge of the latest technological possibilities. The programme is similar to the Industry 4.0 programmes developed in Germany, but it has been tailored to the Danish context, where leading companies are non-competitors, building on diversity and enabling co‑operation among them (Larosse, 2017[62]).

In the Netherlands, Katapult is a learning network of more than 300 industry-education partnerships that is showing positive results in bringing together education, business and society. The network combines relevant knowledge about collaboration, support to public-private partnerships with free tools and guidance, including individual support from experts through all phases of the collaboration. Different instruments proposed include knowledge sharing, workshop and lessons, study visit to other inspiring partnerships, research within SMEs by university or VET students and learning events. Importantly, online tools are available and open source for stakeholders to access.

Box 4.5. MADE‑Digital – Denmark

MADE – Manufacturing Academy of Denmark is the Danish innovation and research platform for the manufacturing industry in Denmark. The initiative started in 2014 as a bottom-up initiative for industry-science co‑operation and it is implementing collaborative actions under the second area of the proposed Digital Growth agenda (Attractive digital growth environment), to promote production in Denmark through applied industrial research, innovation and education, enabling increase in productivity and growth. MADE achieves its goals through the development of strategic partnerships between industry and academia.

MADE has two main programmes where industry and academic partners are working together:

• MADE SPIR (Strategic Platform for Innovation and Research), which aims to develop Advanced Manufacturing technologies and strengthen the Danish manufacturing ecosystem (suppliers, end user companies, research and education)

• MADE Digital is a research and innovation platform aimed at developing a Danish approach to Industry 4.0, where there is focus on the many Danish SMEs.

MADE Digital builds on the research of MADE SPIR with the aim of accelerating the digital transformation of Danish manufacturing companies.

In MADE Digital, large companies collaborate with smaller companies, research teams from universities and technical experts from the regional training organisations. The research themes are distributed along nine areas: Smart industrial products; Digital assistance tools; Sensor technologies and production data; Digital manufacturing process; Smart factories; Intelligent supply chains; Organising digital production; Automation with collaborative robots; Digital design.

The aim of the project is to provide new knowledge through research and help large‑scale companies and SMEs to implement digital solutions. Particularly SMEs will be helped to assess which part of the factory or which service within the company will gain most from digitalisation.

Today MADE is run as a non-profit association, and the members of MADE are Danish companies, research and knowledge institutions and organisations. Approximately two‑thirds of business members are SMEs. The members of MADE are each year charged a membership fee, depending on the type of organisation and number of employees. Members of MADE have then free access to activities, events and services. About 50% of the funding comes from companies, 40% from the Danish Innovation Fund, and the remaining share from universities, private funds and associations.

Source: Larosse (2017[62]), Analysis of national initiatives on digitising European Industry: Denmark; MADE Digital (2020[63]), https://www.made.dk/digital/.

Partnerships within this network are considered generally successful, and the network has witnessed high growth. Today, it serves about 14 000 firms, with the goal to reach 20 000 companies by 2025 and to have a coverage of 90% of schools for senior vocational education, as well as of the Universities of Applied Sciences, participating to a centre’s activities.

Box 4.6. Katapult – The Netherlands

Katapult is a network of more than 300 partnerships between education and business in the Netherlands. It gathers all public-private partnerships in the Netherlands, organises meetings, collects the relevant knowledge about collaborations, and offers individual support from experts. Its objective is to improve co‑operation between the education sector, businesses and society.

This is done with a variety of measures, including business professionals providing lessons and students conducting research for an SME company during their studies. The network also organises a number of activities and meetings that bring together partnerships.

A set of tools is available to support partnerships throughout the five main phases of a project’s life (start, development, expansion, maintenance, validation). Tools are open source and include:

• Model phase, to help determine which actions to take, based on the phase the firm’s project is in;

• Impact study questionnaire: a tool used to make a scan of the firm’s skills ecosystem and to measure the project’s impact;

• An overview of the firm’s partners;

• Various workshop tools to facilitate the discussion with partners;

• Benchmarks with other projects, and relevant best practices;

• Database of contracts and collaboration models;

• Peer review model.

This effective public-private collaboration quickly gained strong support after starting to bring together in an unique community the Centres of expertise (within higher education) and Centres for innovative craftsmanship (within vocational education), which promote collaboration between entrepreneurs, vocational schools, higher education institutions and government. The Centres were promoted by the Dutch Government, with the first pilots in 2011. Each centre is autonomous, has its own characteristics, and creates its niche and own market value. Shared investments of both public and private parties help drive business models that create financial viability. Through associations with education organisations, new insights, methods and curricula reach an extended audience (Cedefop, 2018[64]).

75% of the partnerships within Katapult are considered successful and the programme is already beyond the pilot phase and is scaling up. The Katapult network intends to increase outreach and sustainability and to explore and launch strategies to involve more regional stakeholders in the centres’ activities. Within the first two years of operation, the number of involved businesses doubled (Cedefop, 2018[64]). Katapult is actively working to increase the number of SMEs within partnerships and their effectiveness within them, registering overall increased interest within small businesses.

Source: CEDEFOP (2018[64]), the Netherlands: public-private partnerships will promote innovation in VET; Katapult (2020[65]), https://wearekatapult.eu/.

4.3. Making information available and easy to access

A last set of measures promote information access and ease of understanding on support services available to companies and are therefore instrumental in incentivising SMEs access and participation in skill-enhancing initiatives (OECD, 2020[19]).

Some of the measures presented above, such as competence centres, already contribute to this goal. In other cases governments design and finance awareness campaigns, such as the Irish Supporting SMEs campaign. The 12‑month campaign developed an online guide (“Supporting SMEs Online Tool”) that helped Irish start-ups and small businesses navigate the range of 80 public support policies dedicated to them and find the one that best fits with their specific needs. The training levy scheme (i.e. Skillnet Ireland) is one of these instruments. Business leaders and representatives play a key role in promoting the campaign.

Other good practices develop virtual one‑stop-shops (portals) that provide information for companies on existing opportunities for funding and support, as well as information on good examples from previous applications in other companies.

Portals of this type exist in different countries with different aims and content. In Sweden, for example, the Agency for Economic and Regional Growth has developed a search service called Digitise your Company, which aims to help companies find offers that can stimulate digitalisation in SMEs, while funding from the Agency has been used by a research institute (RISE) to create a knowledge bank on digitalisation for companies Time to Digitise. The agencies disseminated and lobbied for the use of the portals during seminars and lectures, company meetings and individual meetings.

A more encompassing analysis of European good practices reveals a few common features of success. A key role is played by employers’ associations and Chambers of Commerce, and, to a lesser extent, by trusted professionals (e.g. tax accountants, employment consultants) that already know the company which is interested in touching the support. Indeed a direct contact with the entrepreneur has proven to be most effective. Furthermore, dissemination campaign should rely on “accessible” and time‑saving instruments such as online “how-to” guidelines, short webinars, and transform into ad-hoc, tailor-made approaches in a second step, for firms that manifest their interest. Lastly, the participation of well-known figures in the entrepreneurial world increases the probability that the message is well-received by other business leaders.

Box 4.7. Making information and offerings easy to access – the Swedish case

Digitise your company is an online search service available at www.verksamt.se/digitalindustri and developed by the Swedish Agency for Economic and Regional Growth, as part of a larger portal offering services to companies. The purpose of the service is to help small businesses find current instruments that promote digitalisation in SMEs. The portal allows searches by the following areas: digitalisation, sustainable production, innovation and competence.

Similarly, RISE, the Swedish Research Institute, developed www.dagsattdigitalisera.se – Time to Digitise, a knowledge bank on digitalisation for companies. The platform was developed with funding from the Swedish Agency for Economic and Regional Growth, under the Digitalisation Promotion initiative. The purpose was to complement physical meetings of projects such as Kickstart Digitalisation with digital tools, so that companies got access to several opportunities to familiarise with what digitalisation can mean for their business. Time to digitise was published in the summer of 2019 and offers free and easily accessible content in 12 areas linked to digitalisation, with over 200 films that are divided in basic and in-depth parts. Of these movies, 20 specifically highlight how SMEs work with digitalisation. Time to Digitise was further supplemented during the autumn of 2019 with ten workshop concepts, where parts of the material were packaged to enable modular use.

Through Time to Digitise, SMEs get access to material they can use according to specific needs and have the possibility to download content and create ideas and action plans for further work. The portal has had more than 15 000 views and 6 500 users have used the tools on www.dagsattdigitalisera.se and 780 of them have created their own accounts to continue working. In addition, dissemination took place in seminars and lectures, in company contacts and in individual meetings.

Note

← 1.  Ecosystems are defined as “a set of interconnected entrepreneurial actors (both potential and existing), entrepreneurial organisations (e.g. firms, venture capitalists, business angels, banks), institutions (universities, public sector agencies, financial bodies) and entrepreneurial processes (e.g. the business birth rate, numbers of high growth firms, levels of blockbuster entrepreneurship, number of serial entrepreneurs, degree of sell-out mentality within firms and levels of entrepreneurial ambition) which formally and informally coalesce to connect, mediate and govern the performance within the local entrepreneurial environment” (Mason and Brown, 2014[66]).