The results of the AEGIS survey

The results of the AEGIS survey Yannis Caloghirou & Aimilia Protogerou, LIEE/ NTUA AEGIS workshop Brussels, March 9, 2012 Y. Caloghirou & A. Protogerou, AEGIS Survey

Outline of the Presentation • The Survey: Why this survey is different from other established and regular surveys? • The Survey: Design and Implementation. • Selected preliminary results • The comparative dimension (sectoral, group of countries..) • Combine survey results with case-study findings • Can we draw conclusions by combining findings from different kinds of entrepreneurship surveys? • Policy Implications and (Business) Strategic Considerations Y. Caloghirou & A. Protogerou, AEGIS Survey

AEGIS Survey: a pilot for developing a new tool for Entrepreneurship Research in Europe The AEGIS Research Consortium (FP 7 Very Large Integrated Project) is developing and testing a new tool for Studying and Monitoring Entrepreneurship in Europe in different contexts (sectoral, country and socioeconomic) with high research potential. Y. Caloghirou & A. Protogerou, AEGIS Survey

AEGIS Survey: Why is different? What is the value added? (1) • AEGIS survey is different both from CIS and GEM surveys and any other ad-hoc surveys on entrepreneurship • CIS: measures innovative activity of all firms across sectors in order to produce important R&D and innovation indicators • GEM: a general population survey targeting individuals, which explores the behaviour and characteristics of nascent entrepreneurs, new entrepreneurs, and established business owners among population • Other surveys e.g. the KfW-ZEW study which is a national study placing emphasis mainly on the firm’s competitive environment and financing/capital requirements, or the Kauffman survey in US Y. Caloghirou & A. Protogerou, AEGIS Survey

AEGIS Survey: Why is different? What is the value added? (2) • Different focus: Knowledge Intensive Entrepreneurship (KIE) • Wide geographical coverage (10 EU countries)  Comparative Entrepreneurship • The newly established firm is the unit of analysis, not the individual/ person (not person-centric) • Context matters (National System of Innovation, Sectoral System of Innovation, Varieties of Capitalism/ different models, Networks,...) Y. Caloghirou & A. Protogerou, AEGIS Survey

AEGIS survey: A pilot for a Community Entrepreneurship Survey? • AEGIS Survey: Could be considered as a pilot exercise for the design of a new instrument aiming at the identification and monitoring of Knowledge-Intensive Entrepreneurship in Europe on a regular basis. • A Community Entrepreneurship Survey. Y. Caloghirou & A. Protogerou, AEGIS Survey

Survey Design: Who is in? • Newly established firms • Established from 2001 to 2007with a primary activity in pre-selectedsectors (High Tech Low Tech, KIBs). • Actually new firms but not new legal entities resulting from any type of legal transformation of already existing firms (screening questions) • No subsidiaries of existing companies, or mergers acquisitions, or joint ventures (screening questions) Y. Caloghirou & A. Protogerou, AEGIS Survey

The survey arithmetic (numbers) • Initial population 338,000 firms based on Amadeus Database (enriched with data from two other sources, i.e. D&B and Kompass). • 10 countries (Sweden, Denmark, UK, Germany, France, Italy, Greece, Portugal, Czech Republic, Croatia) • 22,000 contacts • Large questionnaire (around 300 variables). Average duration: 30 minutes. • 4,004 completed questionnaires • Field research executed by GDCC (Global Data Collection Company), CATI type. Y. Caloghirou & A. Protogerou, AEGIS Survey

The country dimension: The 10 countries surveyed belong to 5 different models (VoC) Y. Caloghirou & A. Protogerou, AEGIS Survey

The sectoral dimension: Selected Sectors (OECD classification based on technological/ RTD intensity) Y. Caloghirou & A. Protogerou, AEGIS Survey

The sectoral dimension: Selected Sectors (OECD classification, EC for KIBS) *Selection of most 4-digits sectors. Some of 74.87 (other activities) excluded Y. Caloghirou & A. Protogerou, AEGIS Survey

The size, sector and country dimension of the survey: Firm distribution per country and sector Y. Caloghirou & A. Protogerou, AEGIS Survey

AEGIS SURVEY Main findings Y. Caloghirou & A. Protogerou, AEGIS Survey

Knowledge-intensive entrepreneurship Reminding the definition of KIE • Knowledge-intensive entrepreneurship (KIE): new firms that have a significant knowledge intensity in their activity and develop and exploit innovative opportunities in diverse sectors • For AEGIS knowledge-intensive entrepreneurs are: • involved in systematic, problem solving processes; • embedded in innovation systems; • affected by the institutional context; • open to innovative opportunities coming from (a) linking scientific or technological knowledge with market needs and applications, (b) using internal to the firm and external factors and (c) accessing key knowledge and resources through networks Y. Caloghirou & A. Protogerou, AEGIS Survey

What are we looking at? • The size of the new firm. • The size of the founding team. • Ingredients of KIE: The cognitive foundations of the founding team, the educational level of the human capital engaged in the venture, networking, sources of knowledge, innovative performance, exposure to competition, dynamic capabilities, • The cognitive foundations of the founding group: Educational background, prior exposure to academic research, professional background, origin of ideas, sources of knowledge, • Human Capital: educational level • Market and demand pull, technology push and underlying approaches to entrepreneurship • The market and business environment • COMPARATIVE ENTREPRENEURSHIP: Compare specific aspects of entrepreneurship in different groups of countries Socioeconomic regimes (VoC) Taxonomy • Knowledge and innovation based Taxonomies Y. Caloghirou & A. Protogerou, AEGIS Survey

What are we looking at? [continue] • Reconciliation of survey results and case-study findings • Can we draw some conclusions by combining different surveys or other sources: AEGIS, GEM, ZEW, Kaufman, OECD (?) Y. Caloghirou & A. Protogerou, AEGIS Survey

Firm size the majority of firms are micro enterprises • On average, 11 full-time employees ( trimmed mean 5%) • There are 1630 firms (41%) with part-time employees. • On average, 5.5 part-time employees (2.5 trimmed mean 5%) Y. Caloghirou & A. Protogerou, AEGIS Survey

The educational level of Human Capital • High • 2 out of 3 of all new companies have employees holding a University degree. • On average, these firms have 6 employees holding a University degree. • Half of all the new companies employ people with a postgraduate degree (PhDs included). • Higher Educational Level in Knowledge Intensive Business Services (KIBs) compared to high and low-tech manufacturing. Y. Caloghirou & A. Protogerou, AEGIS Survey

Share of firms per sector and educational level The employees’ educational level is higher in knowledge-Intensive business services compared to high and low-tech manufacturing Y. Caloghirou & A. Protogerou, AEGIS Survey

Founding team size: small average size (2 persons) and male dominated (8 out of 10) Y. Caloghirou & A. Protogerou, AEGIS Survey

What is the Founders background? Y. Caloghirou & A. Protogerou, AEGIS Survey

323 firms ( 1 out of 100 )have at least one PhD founder: limited exposure to academic research Y. Caloghirou & A. Protogerou, AEGIS Survey

Most important drivers of firm formation • Work experience, • Market and engineering knowledge, • Networks built during previous career, …and, New firm formation funding: Own and family sources Y. Caloghirou & A. Protogerou, AEGIS Survey

Sources of funding for setting up a company  on average 80% of funding came from the founders’ own resources Y. Caloghirou & A. Protogerou, AEGIS Survey

Knowledge Sources and Networking • The most important knowledge sources are related to customers, suppliers and competitors. • Networks are perceived as important facilitators of contacting customers. • Formal types of agreements (e.g. strategic alliances) are relatively limited. Y. Caloghirou & A. Protogerou, AEGIS Survey

Knowledge sources: the most important one is external related to clients, suppliers and competitors Y. Caloghirou & A. Protogerou, AEGIS Survey

The importance of networking in different firm operations main facilitator to contact customers Y. Caloghirou & A. Protogerou, AEGIS Survey

Formal types of agreements (e.g. strategic alliances) are relatively limited. Y. Caloghirou & A. Protogerou, AEGIS Survey

Firm dynamic capabilities related to market adaptation and new product development are more important than technical adaptation and participation in technology collaborations Y. Caloghirou & A. Protogerou, AEGIS Survey

How innovative they are? • 2 out of 3 firms have introduced or improved new goods/services into the market during the last three years. • The majority of firms report that they have also introduced at least one of either process (production and delivery methods) or organizational innovation. Y. Caloghirou & A. Protogerou, AEGIS Survey

Type of product innovation Y. Caloghirou & A. Protogerou, AEGIS Survey

Firms use mainly informal or semi-formal ways to protect intellectual property rights Y. Caloghirou & A. Protogerou, AEGIS Survey

Market and Business Environment • In their majority, these firms have many business competitors, while their most important customers are other business firms and organizations (mainly B2B). • On average, 86% of their sales comes from the domestic market • The most important obstacles of their growth are market risk/uncertainty and funding Y. Caloghirou & A. Protogerou, AEGIS Survey

Competition intensity and most important customer type  the majority of firms has many business competitors Y. Caloghirou & A. Protogerou, AEGIS Survey

Most important type of customer per country  the vast majority of customers are B2B Y. Caloghirou & A. Protogerou, AEGIS Survey

Market and Business Environment(…cont..) • Continuously changing taxation regulations and high tax rates are also important barriers for the firm operation and growth, but differences exist across countries • The most important factor for achieving competitive advantage is related to addressing market and customer needs. Y. Caloghirou & A. Protogerou, AEGIS Survey

Performance in terms of sales: a rather mild effect of the crisis % of firms • Trimmed Average increase during 2007-2009: +22% • no significant differences across 3 sectoral groups, although high tech and KIBS outperform low tech • 2007-2009: better results in France, Greece, Portugal, Sweden • 2010: worse results in Greece and Croatia Y. Caloghirou & A. Protogerou, AEGIS Survey

Performance in terms of employment: increase during 2007-2009, stability during the crisis % firms • 190 firms doubled their size during 2007-2009 • Trimmed Average increase during 2007-2009: +15% • High tech firms outperform other sectors • Employment performance follows more or less the sales performance in most countries • Employment rates in high tech firms remained higher during the crisis, compared to the other 2 sectoral groups Y. Caloghirou & A. Protogerou, AEGIS Survey

Performance in terms of exports: those that export keep their pace in 2010 % of firms • Most firms do not export, but those that export kept their pace in 2010 • Portuguese firms present significant exporting activity during 2007-2009, followed by Croatian firms • French and German firms underperform (due to the size of the internal market;) • High tech manufacturing firms perform better Y. Caloghirou & A. Protogerou, AEGIS Survey

Post crisis period • Liquidity problems in the value chain of the firms: the main characteristic of the post crisis period, as some customers or suppliers may exit from the market. • Increased borrowing costs after a long period of rather low interest rates will also emerge. • On the other hand, 5 out of 9 firms agree on possible new opportunities, as restructuring could help in healthier economic conditions and maybe a new growth cycle in certain sectors • Extent and consequences of the crisis vary in the various countries • Czech Republic, Croatia, Greece, Italy, Portugal, but also UK: major problem are liquidity difficulties of customers and suppliers. • Italian and French firms: most pessimistic in terms of opportunities that could be created, • Greek and Portuguese companies: concerned most with increasing borrowing costs. • Low tech firms are anxious about increasing borrowing costs, and the problems with suppliers and customers. Firms from KIBS sectors however, believe in opportunities that may arise in the post crisis era

Classification of KI ventures following the AEGIS theoretical framework (1) KIE is associated with four basic characteristics: • it concerns new ventures, • new ventures that are innovative, • new ventures engaging in activities that are knowledge intensive, • and finally, new ventures that are not to be found solely in high-tech industries The first and last conditions are satisfied a priori in our sample. Y. Caloghirou & A. Protogerou, AEGIS Survey

Classification of KI ventures following the AEGIS theoretical framework (2) Variables used from the AEGIS survey to determine innovative ventures: • Introduction of new or developedgoods/services (during the last 3 years) • Type of producrinnovation (N2F, N2M, N2W) • Introduction of process and organizational innovation • Intellectual property protection methods Variables used to determine the firm’s knowledge assets: • Knowledge-seeking activities (sources of knowledge) • Average educational attainment of the founding team • Percentage of funding coming from venture capital • Human capital (education background) & innovation input (R&D intensity as a proxy) Y. Caloghirou & A. Protogerou, AEGIS Survey

Classification of firms in terms of KIE Y. Caloghirou & A. Protogerou, AEGIS Survey

Classification of KI ventures in the AEGIS sample of firms • The first group, "all-around innovators”, shows a more balanced emphasis on different dimensions of innovation and relies basically in external knowledge seeking (clients, suppliers, competitors/ across the value chain) • The second, labelled “world-class product innovators”, emphasizes new-to-world innovation drawing from in-house knowledge which in turn draws from high quality human capital (both in terms of founders and workforce). • The third group (“followers”) clearly lags behind in all dimensions of knowledge-intensive activities and innovation; it represents what might be called “standard” entrepreneurship. Y. Caloghirou & A. Protogerou, AEGIS Survey

Comparative analysis of the two more KI groups against “followers” • In the two more KI groups, entrepreneurial teams are more heterogeneous as regards their prior expertise and employment backgrounds than “followers”. • When it comes to their internal management and strategic behaviour, KI ventures: • have built more strongly their R&D and product related capabilities, their dynamic capabilities (i.e. their ability to exploit market and technical opportunities), they engage more strongly in networking and participate more heavily in various types of collaborative arrangements, and of course, spend significantly more on R&D. • tend to pursue differentiation and focus strategies more than followers, who show more emphasis on low cost. • are heavily geared towards international markets, presumably based on their more innovative profile. • are found to operate in more dynamic, competitive, and perhaps less benign environments. • seem to enjoy higher performance (average profits and average growth rates in sales) than followers. • “World-class product innovators”, compared to “all-around innovators” and “followers” seem to address (relatively) more the sophisticated needs of the Public sector and of large enterprises rather than the needs of mass markets and small enterprises. Y. Caloghirou & A. Protogerou, AEGIS Survey

How KI ventures are distributed across sectors? • “Followers” are more concentrated in low-tech manufacturing, medium-low manufacturing, and KI Market services • “World-class innovators” are basically to be found in high-tech manufacturing, KI high-tech services, and in KI market services • “All-around innovators” are more prevalent than expected in almost all types of industries, except for high-tech manufacturing In general, therefore, industry context seems to play a role in KIE, with the qualification that all-around innovators appear to be spread in somewhat higher proportions than expected across all industries except in high-tech manufacturing. Y. Caloghirou & A. Protogerou, AEGIS Survey

How KI ventures are distributed across different Varieties of Capitalism (VoC)? (1) The ten countries included in the AEGIS survey belong to different VoC types. They are indicatively classified in six categories: • Liberal coordinated market economies UK • Continental Europe  Germany • Nordic countries  Denmark, Sweden • Large Mediterranean economies / continental  France, Italy • Small Mediterranean economies Greece, Portugal • X-planned economies  Croatia, Czech Republic Y. Caloghirou & A. Protogerou, AEGIS Survey

The results of the AEGIS survey