SME and Entrepreneurship Policy in Ireland

Description

This publication presents the findings of an OECD review of SME and entrepreneurship policy in Ireland. It assesses the challenges for SME and entrepreneurship development and offers recommendations for future policy. SMEs and entrepreneurs play a crucial role in the Irish economy, with SMEs accounting for more than 70% of employment. Attitudes to entrepreneurship are positive and SME innovation rates are high. However, SME productivity has not been increasing in recent years, business entry and exit rates are low and few Irish SMEs are directly engaged in exports. There is also untapped potential for entrepreneurship among women, youth and migrants, and variations across the country in SME and entrepreneurship performance. Ireland has a strong set of policies and programmes to address these challenges. The business environment is generally favourable, there are many best practice programmes for supporting high potential SMEs and entrepreneurs, and strong co-ordination of policies across government. At the same time, policies could be strengthened in areas such as growing productivity in medium-sized businesses, increasing the start-up rate, increasing exports, fostering enterprise networks and clusters, drafting a unified SME and entrepreneurship policy strategy document and strengthening the role of Local Enterprise Offices. Foreword Acknowledgements Abbreviations and acronyms Basic statistics of Ireland Executive summary Key findings Increasing business dynamism and SME productivity growth are priorities The overall business environment is strong but there are priorities in skills and finance A unified national SME and entrepreneurship policy would be valuable SME and entrepreneurship programmes could be upscaled and refined in some areas Local Enterprise Offices have an important role to play A multi-pronged approach is needed to increase SME productivity growth There is scope to strengthen business advisory services Selected recommendations Chapter 1. Overall assessment and recommendations SME and entrepreneurship characteristics and performance SMEs are a critical pillar of the Irish economy SME productivity growth has been stagnant overall Business entry-exit dynamism should be strengthened A high proportion of Irish SMEs engage in innovation activities Irish SMEs are not very active in international markets Entrepreneurial attitudes are generally positive SME and entrepreneurship performance varies spatially within Ireland Some data gaps and measurement challenges affect understanding of SME and entrepreneurship issues Policy recommendations The business environment for SMEs and entrepreneurship Uncertainties in the macro-economic environment could affect SME performance The innovation system is supportive overall Ireland offers a favourable regulatory environment, but further improvements could benefit SMEs Policy efforts are increasing lifelong learning levels Broadband connection opportunities are good SME access to bank credit is constrained Low corporate taxation provides a platform to stimulate business Openness to trade and foreign direct investment offers opportunities for SMEs and entrepreneurship Policy recommendations The strategic framework and delivery system for SME and entrepreneurship policy A unified SME and entrepreneurship policy document would help guide and promote policy formulation, delivery and evaluation There are good whole-of-government arrangements for co-ordinating SME and entrepreneurship policies Broad stakeholder engagement processes are part of policy development An in-depth analysis of resource distribution across policy lines and enterprise target groups may reveal opportunities for rebalancing Policy evaluation is embedded Delivery of SME and entrepreneurship programmes has been strengthened Policy recommendations SME and entrepreneurship programmes There is scope to scale up SME lending support Innovation tax incentives could be adjusted to better support SME innovation activity Several programmes support research-driven innovation SME internationalisation is a recognised government priority Entrepreneurship education and training have been strengthened There is significant programme support for SME workforce skills development Developing enterprise-led networks could increase the effectiveness of business support Public procurement is being utilised to promote SME development Programmes for migrant entrepreneurship could be boosted Policy recommendations The local dimension Conditions for SME and entrepreneurship development vary spatially within Ireland Mechanisms for local tailoring of SME and entrepreneurship policy could be further developed Regional alignment of entrepreneurship policy is strong but sub-national policy co-ordination could be extended in some fields Policy recommendations SME productivity in Ireland The recent productivity growth performance of SMEs has been weak Low-productivity SMEs should be a target of policy Management skills and practices SME investment in physical capital is low SME adoption of digital technologies is low Entry into export markets is limited Increased SME adoption of international standards could support productivity growth Inter-firm networking can be a route to greater productivity spillovers Business dynamism is weak Direct support for SME innovation could be boosted Policy recommendations Business advisory services Business advisory services are a key feature of policy support in Ireland Business diagnostic tools have further potential The ‘Supporting SMEs Online’ tool could be extended to diagnosis and advice Relatively small numbers of SMEs receive management training Financial support for consultancy could be extended to more firms SMEs and entrepreneurs have good access to mentoring opportunities Support for mentors could be increased An assessment is needed of potential gaps in business advisory services provision Additional evaluation is needed in certain areas of the business advisory system Policy recommendations Notes References Chapter 2. SME and entrepreneurship characteristics and performance in Ireland The structure of the Irish business economy Enterprises by size class Employment by enterprise size class Value added by enterprise size class Business demography High-growth enterprises and gazelles The productivity, innovation and internationalisation performance of Irish small business Data and measurement issues Productivity of Irish SMEs Internationalisation of Irish SMEs R&D and innovation in Irish SMEs Entrepreneurship performance in Ireland Entrepreneurial attitudes Early-stage entrepreneurial activity Social target groups Geographical variations in SME and entrepreneurship activity Spatial variations in the economic contribution of SMEs Spatial variations in new firm formation Conclusions and policy recommendations Notes References Chapter 3. The business environment for SMEs and entrepreneurship in Ireland Macro-economic conditions The innovation system Regulatory environment Ease of doing business Stakeholder engagement Educational attainment and skills Tertiary education Dual training and apprenticeships Life-long learning and adult skills Entrepreneurial and management skills and education Entrepreneurship education is relatively well developed in Ireland The evidence base on managerial skills is weak Skills shortages Infrastructure and energy Physical infrastructure ICT infrastructure Energy costs Property prices Taxation affecting SMEs and entrepreneurship Corporate taxation Personal income tax Personal income taxes are highly progressive in Ireland Standard capital gains tax Compliance costs SME access to finance Bank credit Access to bank credit has not fully recovered from the financial crisis Irish SMEs pay high interest rates. Demand for credit remains subdued Take-up of finance instruments other than straight debt Financial acumen of entrepreneurs and business owners Trade and foreign direct investments Policy recommendations Notes References Chapter 4. The strategic framework and delivery system for SME and entrepreneurship policy in Ireland The SME and entrepreneurship policy framework SMEs and entrepreneurship policy documents Targets for SME and entrepreneurship policy The case for a more coherent policy approach for SME policy The National Policy Statement on Entrepreneurship (NPSE) Policy co-ordination across departments and agencies Policy dialogue with the private sector and stakeholders The policy mix and portfolio The portfolio analysis of SME and entrepreneurship policy Assessing the distribution of resources across the policy framework Evaluation of policy impact Policy delivery arrangements The main actors in delivering SME and entrepreneurship policies. Partnerships with private sector consultants and mentors Management of the LEO system Raising awareness of the policy offer Policy recommendations Notes References Chapter 5. SME and entrepreneurship programmes in Ireland Financing programmes Credit Guarantee Scheme (CGS) Local Enterprise Office (LEO) grants Strategic Banking Corporation of Ireland (SBCI) Microenterprise Loan Fund Scheme Schemes to develop risk capital for innovative Irish firms Development Capital Scheme Innovation Fund Ireland Enterprise Ireland Seed and Venture Capital Scheme Ireland Strategic Investment Fund (ISIF) InterTradeIreland Seedcorn WDC Investment Fund Innovation programmes Overall innovation framework Tax incentives for business R&D and innovation R&D tax credit The Knowledge Development Box (KDB) Direct support to incentivise domestic owned firms to innovate EI direct support schemes Direct support schemes from InterTradeIreland Attracting foreign-owned R&D and innovation-intensive high growth firms Policy programmes supporting collaborative R&D and innovation Science Foundation Ireland Research Centres and related measures to support collaboration Technology Centres Technology Gateways InterTradeIreland support for collaboration Disruptive Technologies Innovation Fund Innovation challenges and policy options Internationalisation programmes The Brexit challenge Main internationalisation programmes Internationalisation challenges and policy options Entrepreneurship education and skills programmes Workforce skills development programmes Major programmes in Ireland The National Training Fund (NTF) Skillnet Ireland SOLAS Conclusions and recommendations Programmes to stimulate enterprise-led networks and clustering The relevance of enterprise-led networks The Irish approach to enterprise-led networks The German experience Go-cluster Central Innovation Programme Mittelstand KMU-NetC Initiatives at the regional level The Danish experience Recommendations for Ireland Public procurement programmes The establishment of the Office of Government Procurement Recent improvements in public procurement policies Additional efforts could be made Entrepreneurship programmes for under-represented social groups Female entrepreneurship ACORNS Businesswomen 4 International Growth Enterprising Women Network Irishwomeninbusiness.ie Going for Growth Entrepreneurship promotion Programmes for the unemployed Migrant entrepreneurship Policy recommendations Notes References Chapter 6. The local dimension of SME and entrepreneurship policy in Ireland Spatial variations in the local context for SME and entrepreneurship activity The spatial variation in employment and output Spatial variations in employment The role of agglomerations Spatial variations in industry and skill structures The concept of industry “relatedness” The regional skill structure Mechanisms for tailoring and alignment of local and national SME and entrepreneurship policy Key actors for SME and entrepreneurship policy at sub-national level Enterprise Ireland regional offices Local Enterprise Offices (LEO) IDA Ireland offices Network of Regional Skills Fora Programmes Coordination and tailoring mechanisms to align local and national policies Alignment and tailoring in the LEO system Regional Enterprise Plans The Regional Enterprise Development Fund Conclusions and policy recommendations Develop data infrastructure Reduce complexity and identifiy of tailoring mechanisms Connect rural SMEs and entrepreneurs to urban ecosystems Improve coordination and horizontal alignment Recognise the broader role of local SME and entrepreneurship activity Notes References Chapter 7. SME productivity in Ireland What is the issue? Firms between 10 to 249 account for a relatively low share of output The median firm productivity is in decline Data limitations Causes of the SME productivity problem in Ireland Human capital Managerial skills appear weak Lifelong learning activities Physical capital and technology adoption Irish firms underinvest The uptake of digital technologies is average The use of Enterprise Resource Planning and industrial robots is below average Ireland faces a digital skills deficit There is a role for digital technology adoption support especially for larger SMEs Access to foreign markets Productivity externalities and spillovers The role of standards remains largely untapped Enterprise-led networks including large firms Impediments to the flow of labour Infrastructure Economic dynamism Innovation Innovation activities are positively correlated with firm size and lower among indigenous businesses The hampering factors for innovation Policy recommendations Notes References Chapter 8. Business advisory and support services in Ireland – approach and programmes The institutional structure and supply of business advisory and support (BAS) services in Ireland Challenges with respect to the BAS delivery system in Ireland Enhancing the “Supporting SMEs Online” tool as an entry point to information, an important component of basic BAS services General business advisory services provision Start-up and management training supports Use of incentives to encourage SMEs to avail of external consultancy services Mentoring - a widely used BAS service in Ireland The demand for business advisory and mentoring services Quality of service provision by business advisors, consultants and mentors Conclusions and policy recommendations Notes References