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International Innovative Driven Entrepreneurship Case Study

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Updated: Jun 29th, 2022

Introduction

To start, it seems reasonable to compare Innovation Driven Entrepreneurship (IDE) and Small and Medium Enterprises (SMEs) as the discussion on the chosen countries will be given within the scope of the former. IDEs are expected to reach the global market scale, as well as a significant range of clients; thus, initial investments here are riskier if comparing with SMEs, business outcomes of which are more predictable. IDE gives new and untested ideas – innovations – and undiscovered aspects take place (Murray & Budden, 2017). Meanwhile, SMEs are a source of well-understood ideas for a local market. Their success is more secured, but IDEs possess a greater potential. Nowadays, given the tendency to turn to “digital” and “smart” economies, IDEs are a preferable target for adapting governmental policies, initiatives, and standards. In the framework of the stimulation of Innovative Driven Entrepreneurship, Germany, the Republic of Korea, Israel, and the UAE will be analyzed.

Germany

The stimulation of IDEs in Germany is largely entrusted not to federal agencies or higher education institutions as to regional infrastructure organizations. The regions are more than federal centers focused on the needs IDE, as well as on the problems of industrial enterprises located in specific territories (Kuhlmann & Rip, 2018). Through the use of a regional approach and the formation of territorial innovation networks, in modern Germany, the work of industry and research teams is mutually consistent and more efficient.

In Germany, the KfW – the German development bank – plays an active role in the implementation of the principle of supporting the innovation activity of IDEs at the national level (BMWI, 2021a). A combined scheme is used to provide finance for the development of R&D and replenishment of current assets in the form of subsidies by the Government of Germany of interest rates on loans. Mobilization of venture capital for the development of an innovative economy is also an instrument of state policy in promoting the interests of IDEs. An example of a modern program that stimulates innovative activity is the ERP fund – it implements EU initiatives in Germany (BMWI, 2021b). The KfW takes an equity stake in the authorized capital of technology companies on the same financial terms as the lead investor, participating in the formation of venture capital to finance R&D and innovation.

Presence of IDE Initiatives Innovation Policy Peculiarities IDE Ecosystem’s Strengths IDE Ecosystem’s Weaknesses
High Crucial role of regional infrastructure organizations;
The KfW importance.
Well-established funding system;
Great opportunities and success probability for IDEs-beginners.
Considerable presence of SMEs focused on traditional businesses.

Table 1. German IDE Ecosystem Summary

The Republic of Korea

The main source of government funding for the IDE is the Korea Development Bank – or the KDB. In order to finance projects related to the development of innovation, the KDB, in conjunction with the Industrial Bank of Korea, established a Global Partnership Fund (Crucianu, 2017). It acts as a strategic investor for other venture capital funds, where foreign venture capital or foreign companies will participate as a strategic investor.

In order to launch the Creative Economy Implementation Plan, a system of tax incentives, a system for financing new projects, a system of state support and guarantees, and other financial instruments were carefully worked out. In 2015, tax reform was carried out aimed at stimulating the national economy, developing IDEs, and rationalizing the tax system (Kim & Choi, 2019). In particular, a restriction was introduced on the use of net operating losses of up to 80% for large companies. Changes were made to the criteria for determining the real estate of large companies to tax capital gains. In the innovation system of South Korea, it is possible to combine the state investment policy in R&D with the business strategies of chaebols, which in turn are dictated by the needs of the world market. Moreover, an effective system of knowledge transfer from universities and research centers to industrial companies has been created.

Presence of IDE Initiatives Innovation Policy Peculiarities IDE Ecosystem’s Strengths IDE Ecosystem’s Weaknesses
High Substantial cooperation between public and private sectors;
The state-owned funds’ critical role.
Low tax burden;
Significant funding.
Difficulties in luring investments for risky projects.

Table 2. South Korean IDE Ecosystem Summary

The UAE

The three pillars of an innovation ecosystem in the UAE are human capital, financial capital, and technology capital. The UAE is actively working to foster innovation through policies and targeted initiatives aimed at developing the human factor of the ecosystem, as well as the key human factors components: financial and technological capital requirements (Hana, 2017). Cultural barriers to innovation, such as fear of failure and reluctance to take risks, can present major challenges to IDE. The number of such obstacles in the UAE is starting to decrease. Although government employment has historically been the preferred employment for UAE citizens, 71% of UAE citizens aged 35 or younger are currently pursuing entrepreneurship (OC&C, 2018).

There are several sources of funding for IDEs available in the UAE, including government funds, securities investment, and crowdfunding. Government funds tend to provide early-stage funding and include such institutions as the ICT fund, the Khalifa Fund, the Expo 2020 fund, and others (OC&C, 2018). Along with human and financial capital, technology is critical to the very epicenter of innovation. While the UAE’s R&D spending as a percentage of GDP remains below global rates, the country is launching several targeted industry research initiatives in an attempt to meet the demand for this significant element of innovation.

Presence of IDE Initiatives Innovation Policy Peculiarities IDE Ecosystem’s Strengths IDE Ecosystem’s Weaknesses
High Emphasis on human capital;
Citizens’ substantial aspiration to entrepreneurship.
Diversified funding programs. Cultural barriers to innovations.

Table 3. The UAE’s IDE Ecosystem Summary

Israel

In Israel, powerful government support for the development of innovation has been created, more than 20 different programs have been developed and are operating. Among them are companies that promote patents for faculty and staff at Israeli universities (IIA, 2018). They register patents not only at home, in Israel, but wherever it is required. Then, the role of the state in the Israeli technology transfer system is quite large.

The Tnufa program is designed for individual innovators, innovation-orientated enterprises, and the Standards Institute of Israel, which is an Israeli government agency for the preparation and publication of national standards. Venture funding is of great importance, as it is the main financial engine of IDEs. There are many facts that contribute to the successful sustainable development of the ecosystem and innovative culture of Israel. In 2018, the Office for Innovation launched a five-year strategic program 2018-2022 aimed at increasing competitiveness and labor productivity in the business sector of the economy (Menipaz & Avrahami, 2019). However, the decisive role is played not by programs but by the culture of behavior and thinking of Israelis, the ability to take risks and not be afraid of mistakes.

Presence of IDE Initiatives Innovation Policy Peculiarities IDE Ecosystem’s Strengths IDE Ecosystem’s Weaknesses
High Crucial role of universities;
Low governmental control.
Citizen’s willingness to take risks. Developing standardization system.

Table 4. Israeli IDE Ecosystem Summary

Conclusion

To conclude, Germany, Republic of Korea, Israel, and the UAE were discussed in the framework of IDE. The crucial peculiarities, strengths, and weaknesses were identified and put into the tables. All of the mentioned countries achieved an exact extent of success within the given scope, but each of them has disadvantages that are to be overcome.

References

BMWI. (2021a). Web.

BMWI. (2021b). Web.

Crucianu, P.-A., R. (2017). Redefining Community in Intercultural Context, 1, 231–236. Web.

Hana, A. M. (2017). Innovation in the UAE: From first foundations to ‘Beyond Oil’. Global Policy, 8(3), 414–417.

IIA. (2018). Innovation report 2018. Web.

Kim, S. S., & Choi, Y. S. (2019). The innovative platform programme in South Korea: Economic policies in innovation-driven growth. Foresight and STI Governance, 13(3), 13–22.

Kuhlmann, S., & Rip, A. (2018). Next-generation innovation policy and grand challenges. Science and Public Policy, 45(4), 448–454.

Menipaz, E. E., & Avrahami, Y. (2019). Gemconsortium.org. Web.

Murray, F., & Budden, P. (2017). Innovation.mit.edu. Web.

OC&C. (2018). Web.

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