This is a guest post from Susan K Finston, President of Finston Consulting. Do you have a response to Susan’s post? Respond in the comments section below.
At the start of a bright and shiny new year in 2015, I am thinking about my own New Years resolutions as well as one that I would wish for the BRICS and Emerging Markets specifically: to strive for an enabling and nurturing environment for R&D-intensive Micro-Small and Medium Enterprises (MSMEs). In 2014 I was privileged to work with the Wadhwani Foundation, a non-governmental organization active in South Asia and East Asia to promote MSME entrepreneurship and innovation. The following is adapted from an upcoming Wadhwani Foundation study: The Innovation Blueprint: Identifying, Adapting and Assimilating Best Practice for R&D Intensive MSMEs:
R&D-Intensive MSMEs drive innovation across sectors including information and communications technologies, social media and applications, life sciences, and many others. In India there has long been recognition of the importance of MSMEs for livelihood creation, where the MSME sector employs an estimated 80 million people, and accounts for nearly half of all industrial output. The challenges facing India’s innovative MSMEs are also common to small-scale companies in Brazil and China. In fact in some areas India leads its BRICS peers. Brazil has lagged India in developing both a Venture Capital (VC) and start-up culture. While outpacing India in the WIPO Global Innovation Index, China has been unable thus far to translate innovative capacities into successful start-up companies for creation of economic and social value. For example while China has a stronger VC sector, it continues to struggle with issues of financing for innovative SMEs. China figures prominently in the Wall Street Journal’s Billion Dollar Startup Club though, with 10 Chinese startups now valued at over a billion dollars (USD) as compared to 2 Indian companies out of a total of 71 companies (as of January 2015). Looking at the BRICS as a whole, we also see continuing challenges to provide adequate capital resources needed for R&D-intensive life sciences start-ups.
In OECD-level countries, by contrast, innovative MSMEs play a leading role in generation of innovative products and services through direct commercialization, co-development and/or out-licensing to larger companies.
The World Intellectual Property Organization (WIPO), has described Micro-Small-Medium Enterprises (MSMEs) as a “deep, broad, fertile forest floor that nourishes, sustains and regenerates the global economic ecosystem,”
Within the OECD, Israel and the United States excel at innovation and job creation through MSMEs, with a strong ‘start-up culture’ that values risk and tolerates failure. The mantra of one well-recognized US technology cluster, Silicon Valley, California, is “Fail fast, fail often.” Israel also places a high premium on individual initiative and a willingness to challenge conventional wisdom, recognizing that the only true failure is not to try something new. In this context, the Weizman institute estimates that up to 24% of leading new biopharmaceuticals include Israeli-developed technologies (see table). Acceptability of risk increase effective mobilization of capital for MSMEs through angel investors, seed funders and venture capitalists, as well as local and centralized sources of funding for start-up ventures.
MSMEs are empirically the most productive engines of innovative technologies, products and services, and yet in the BRICS and most emerging markets, government support and funding favors larger, established and less innovative companies. Perhaps the hardest and most important adjustment of all is attitudinal.
For 2015 then, let’s hope that policy-makers will extend MSME support across sectors and regions for inclusive growth and to truly see the innovative potential of vibrant R&D-intensive MSMEs to become the next Facebook, Google, Amgen or Celgene.
About the author:
President of Finston Consulting LLC since 2005, Susan works with innovative biotechnology and other clients ranging from start-up to Fortune-100, providing support for legal, transactional, policy and “doing business” issues. Susan has extensive background and special expertise relating to intellectual property and knowledge-economy issues in advanced developing countries including India and South Asia, Latin America and the Middle East North Africa (MENA) region. She also works with governments, and NGOs on capacity building and related educational programs through BayhDole25. Together with biotechnology pioneer Ananda Chakrabarty, she also is co-founder of Amrita Therapeutics Ltd., an emerging biopharmaceutical company based in India with cancer peptide drugs entering in vivo research. Previous experience includes 11 years in the U.S Foreign Service with overseas tours in London, Tel Aviv, and Manila and at the Department of State in Washington DC. For more information on latest presentations and publications please visit finstonconsulting.com.