Patrick Humphreys, LSE (UK) Blanca Martins , UPC (ES) Kay Alwert, GmBh (DE)

1. The role of Clusters for SMEs Cross-enterprise Assessment and Development of Intellectual Capital Patrick Humphreys, LSE (UK) Blanca Martins , UPC (ES) Kay Alwert, GmBh (DE) CEA=PME symposium Oct 1 2010

2. Summary • Motivation • To contribute theoretical and practical aspects of SME cluster building emphasising Intellectual Capital • Key Issues • Successful cluster building, management and networking is essentially a bottom-up process • Importance of facilitating mechanisms to enable and enhance intellectual Capital (IC) flows within and across the cluster • Practical implications • Highlight critical factors; successful cluster operationalisation lies with the SMEs involved, devoping clusters bottom-up through improving and exploiting the flow of IC (soft knowledge and know-how) between and within SMEs in the cluster.

3. Presentation • The importance of networks for SMEs • Why do they appear as the alternative in dynamic and turbulent contexts? • The fundamentals of collaboration • The decline of top-down • Why have top-down approaches proven ineffective? • The emergence of the bottom-up approach • Supporting bottom-up cluster-building by SMEs • CADIC cluster activity framework • Conclusions • Implication for practice, multiplication

4. Cluster: evolution of concept Network arrangements that, though embedded in, transcend geographical location, focus on global markets, operate as ad-hoc and/or long term business networks, are ICT enabled, and are based on dynamic aggregations of capabilities of different SMEs. Damaskopoulos et al (2008) Geographic concentrations of interconnected companies, specialized suppliers, service providers, firms in related industries, and associated institutionsin particular fields thatcompete but also cooperate. Michael E. Porter (1998) • Shortening life cycles innovation • Large IT and institutional changes • Dynamic specialization • Strong and radical shifts in social bonds • ……..

5. The relevance of networks • Early 2000s: clusters called into question • Highly innovative firms: HOW to combine strong local SME knowledge base with others in distant regions? • Locally embedded knowledge vs. international knowledge spill-overs & networks • Networking triggers ... • Keeping pace of innovation; IT advancements; institutional and social changes • Flows of new knowledge become critical to business success and these flows occur only in the context of relationships • ... And its impact on business • Business strategies/models reconfigured (Open innovation) • Innovation is increasingly the result of cooperation (Collaborative pull )

6. Collaboration: the counterpart of NWs • What is it? • “A process through which parties who see different aspects of a problem can constructively explore their differences and search for solutions that go beyond their own limited vision of what is possible.”(Gray, 1989: 5) • “A mutually beneficial relationship between two or more parties who work toward common goals by sharing responsibility, authority, and accountability for achieving results.”(Chrislip and Larson , 1994: 5) • Implications for SME clusters • Setting the basis for a collaborative environment, right at the outset, is essential (Collectively articulated vision and goals; trust building) • Collaboration has to be systematically nurtured and managed

7. The decline of the top-down • The reasons behind: • Regional oriented approaches which promoted structures constructed to benefit from governmental funding • Inoperative and terribly slow to respond to market demands and firms’ innovation needs • Overabundance of “standard” support ; bias towards technical solutions rather than towards addressing organisational and managerial deficits; lack of proper understanding of SMEs’ knowledge flows and communicative practices(EU ADAPT, 1999) • Inability to evolve from stage of co-location • The emergence of the bottom-up • Evidence: OECD (2007), Huggins (2008), European Cluster Memorandum (2009), OECD LEED program (2009), EU launching of Knowledge Intensive Clusters (2010)

8. Cross-enterprise Assessment and Development of Intellectual Capital CADIC is a research project funded within the European Union Seventh Framework Programme. It is coordinated by CEA-PME. • The CADIC consortium of SME Associations and Groupings (SME-AGs) and RTD partners focuses on seven “core” countries in Europe (Greece, Portugal, Spain, Italy, England, Scotland, Germany), helping a large number of SMEs to set Up, manage and strengthen their own clusters for their own benefit: • CADIC supports and facilitates Intellectual Capital (IC) flows within and between SME clusters

10. CADIC’s Support Tools • New set of practical and simple tools and methodologies to promote, support and assess the evolution of the cluster • The tools and methodologies are customised to the SMEs’ (cluster) requirements (IC base; IC complementarity; absorptive & learning capacity) • They aim to ensure the development of a collaborative mindset (Trust building mechanisms –IC competence; governance; shared vision; shared values and beliefs) • locus of the support initiative resides at the SME level (Bottom-up) • The different levels (cluster, SME & people in facilitation and supportive roles) are not isolated silos but co-evolving dimensions in the process of cluster creation and development

11. CADIC Support in SME Clusters

12. CADIC Cluster Multiplication • In the European Union: importance of dissemination • Throughout the World - Transfer partners

13. Management implications of bottom-up clusters • The Cluster Management Framework CMF must be adequately customized to respond to the evolving demands of the different actors involved • The CMF is attentive and sensitive to a set of actionable areas, mainly • Conceptual and strategic • Relations and governance • Action-driven • The CMF lays the foundations of an SME cluster process evaluation for improvement system • Through systematic reflection & learning it serves the purpose of creating a shared and collaborative mindset • The evolution of the cluster is different from the evolution of each SME partner and so shall be the system of evaluation for improvement

14. Conclusions • Top-down approaches have proven ineffective to improve firms’ (esp. SMEs) innovation capacity • Networks and open knowledge clusters, bottom-up conceived, are the alternative for SMEs to flourish • Implications for CADIC • Identify and develop the necessary tools, methodologies and roles to support collaboration and the expansion of the cluster • Selection and aggregating of capabilities at regional, national, cross-regional or international level (IC base, complementarity, absorptive capacity and learning skills, …) • The complexities and dynamics generated through SME/cluster interactions shape the cluster’s oprerational framework and evaluation process

15. Conclusions • Policy implications • Well designed policies and supportive mechanisms to spur new collaborative habits and practices among SMEs. • Adoption of a broader systemic vision and longer time horizon in policy-making • Finally, effective support of SME clusters in dynamic and complex business landscapes will require not only the concurrence of multiple disciplines but involving multiple interacting levels of understanding (macro, meso and micro)