The Role of Intermediaries in Helping SMEs Master Non-Market Strategies

1. E pluribus unum?The role of intermediaries in helping SMEs master non-market strategies Prof. Luca Brusati (brusati@uniud.it) School of Advanced Social Studies – Autumn session of doctoral students Nova Gorica (Slovenia), 24th October 2015

2. SMEs and non-market strategies:the example of MaterMacc (www.matermacc.it) http://themoscowtimes.com/business/article/farm-equipment-producers-lobby-for-15-import-duty/376352.html

3. Impact 2008 turnover 2009 turnover

4. Non-market strategies in a globalized world • The supranational regulatory frameworks designed to address global economic governance issues are much more likely to incorporate the views and interests of large MNEs than those of SMEs • The reach of SMEs and of their traditional intermediaries is limited when faced with global challenges • SMEs often can secure a strong competitive foothold in the market environment • But on average their ability to understand and cope effectively with non-market challenges is very weak  SMEs have a non-market competitive disadvantage

5. Climate change as a non-market challenge • Climate change is a paradigmatic example of a global “wicked problem” that poses a serious challenge to many industries • Many large firms incorporate already this challenge in their strategies • SMEs largely overlook the risk that environmental dynamics could erode their competitive advantage • time is commonly focused on core business activities • it is difficult to engage SME leaders in non-market issues which they regard as being “too difficult”, deferrable, outside their reach or not of immediate benefit/threat

6. What role for SME intermediaries? • Intermediary = organization that interacts in a way separate from, or in addition to, a standard customer-supplier relationship (trade associations, government agencies, HEIs, non-profit sector organizations, etc.) • A key function of intermediaries is to provide knowledge and advice to SMEs • The project “SME Leaders and Sustainability: Deliberative Engagement” (SME-DE) explores how intermediaries can trigger the engagement of SMEs in addressing global wicked problems such as climate change

7. Mechanisms Independent variables that can bemodified or influenced Outcomes Dependent variables The SME-DE framework Context Independent variables that cannot be modifiedor influenced, if not with great difficulty Communication measuresInitiating and supporting the formation of a relationship Confidence building measuresShort term wins Networking measures Motivation and problem solving Effective engagement of SMEs on climate change issues Policy context (e.g., EU, national, administrative tradition, regulation/voluntarism) Market factors (e.g., consumer preferences, supply chain) Heterogeneity of SMEs (e.g., industry sector, size, strategy, SME owner value) Nature of pre-existing intermediary-SME relationship (e.g., membership vs. non-membership, social capital) Information asymmetries/ deficits (e.g., existing knowledge of SME/ intermediary, complexity of issues) • Realist impact evaluation perspective: CMO framework Sustainability

8. The empirical base • Research questions: • RQ1: how do the organizational arrangements defined by the intermediaries impact SME engagement? • RQ2: what is the mediating effect of contextual variables • Nine case studies from five different EU countries analysed according to the same protocol: • Bulgaria (one case) • Croatia (one case) • Denmark (two cases – on-going) • Italy (one failed and two successful cases) • United Kingdom (two cases)

9. Findings (1) • Intermediaries can engage SMEs in discussing issues related to climate change, provided that truly participative approaches are properly designed and implemented • Engagement processes can also be successful also at triggering the creation of new SME networks and collaborations • When engaging SMEs, organizational arrangements such as communications and confidence building measures have to be adapted from standard techniques designed originally for the engagement of citizens

10. Findings (2) • The context influences the effectiveness of engagement • When the issues at stake are important or sensitive, the loss of decision-making control by the intermediary is often perceived as a disadvantage • Customary top-down practices and traditions create a non-ideal environment for the participatory process to succeed • The presence of specialists or units for engagement facilitates the uptake of an active role in involving SMEs • SMEs react more favourably when prodded by an intermediary perceived to be able to deploy the assets (e.g., reputation, expertise, access to funding, network of contacts) that can help them achieve their objectives

11. Findings (3) • Membership-based intermediaries such as trade associations seem to be less effective than “arms’ length” intermediaries at engaging SMEs • “Arms’ length” intermediaries are expected to facilitate the availability of additional assets • Membership-based organizations rely primarily on membership fees and cannot afford to devote their efforts to “global commons” issues with unclear return • If stakeholders believe in engagement and organizational arrangements are designed and implemented to stimulate real participation, arms’ length intermediaries can be effective enablers of a collaborative innovation process helping SMEs deal with non-market challenges

12. Research was performed in the framework of the Multilateral Project “SME Leaders and Sustainability: Deliberative Engagement” (SME-DE), funded by the European Commission through the ERASMUS “Life-long Learning” Programme