Survey of Greek SMEs: Innovation (January 2020)

Innovation is a key driver for economic growth and a crucial factor for attaining competitive advantage. Greece appears to be well behind regarding R&D spending, as well as the legal and institutional framework for fostering innovation. For example, according to the Innovation Index constructed by NBG Economic Analysis Department, Greece comes 34th out of 44 European countries – that is, well below the EU average (i) in terms of inputs (i.e. quality of legal framework, human resources, infrastructure, alternative sources of financing and market sophistication) as well as (ii) in terms of outputs (i.e. academic, business, macroeconomic and digital production outcomes).

By taking a closer look at innovative activity in Greek manufacturing — the sector producing the highest share of business innovation in Greece as well as in Europe (62 per cent and 64 per cent respectively) — we observe that, despite the unfavourable environment, 43 per cent of manufacturing SMEs present innovative activity (versus 50 per cent in the EU). These enterprises have managed to significantly increase their sales in the past 5 years (+11.2 per cent, on average), while also adopt more aggressive business plans and offer more jobs (versus the non-innovative SMEs).

Innovative SMEs are divided into Leaders (enterprises which generate innovation) and Adopters (enterprises which adopt innovation):

• Leaders make up 5 per cent of SMEs in the Greek manufacturing sector (versus 6.4 per cent in the EU), and seek to develop innovative products, and establish R&D structures and synergies with the academia, thereby capturing a competitive edge in profitability and access to international markets.

• Adopters account for 38 per cent of SMEs in the Greek manufacturing sector (versus 44 per cent in the EU), and innovate in order to maintain their market position, mainly by adopting technologies from abroad.

With 28 per cent of non-innovative SMEs (15 per cent of total SMEs) having already drawn up plans for innovation over the next 5 years (that being a percentage capable to close the gap between Greece and European average), what is needed is support for such activity by fostering an environment that favours enterprises in their innovation endeavours, so that business innovation can improve in terms of quality.

By aiming to quantify the benefits of a relevant reform policy, our estimates indicate that if future innovative SMEs succeed in realizing their plans, the gains for the sector would be €0.7 bn over the next 5 years. But if these plans go hand in hand with an improvement in the innovation environment, the extra benefits could reach €4 bn over the 5-year horizon, while creating also substantial synergies between Leaders and Adopters and thereby improving the productivity of innovative enterprises overall.

Improving innovation performance can also attract high value-added investments, further enhancing the positive footprint of innovation in the economy and the position of Greek entrepreneurship in the global value chain.