Innovations and examples of entrepreneurial activity Andrii Podlevskyi

Innovations and examples of entrepreneurial activity Andrii Podlevskyi, Ph. D in economics National University of Water and Environmental Engineering a. a. podlevskyi@nuwm. edu. ua

CONTENT 1. Innovative Policies, Innovation Systems and Their Content. 2. Entrepreneurship and Small Business Development: Concepts, Theories, Definitions. 3. National and Regional Innovation Policy 4. Innovative Activity and Entrepreneurship in the World Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 2

Basic terminology An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organisational method inbusiness practices, workplace organisation or external relations. The minimum requirement for an innovation is that the product, process, marketing method or organisational method must be new (or significantly improved) to the firm. A common feature of an innovation is that it must have been implemented. By definition, all innovations must contain a degree of novelty. Three concepts for the novelty of innovations are: new to the firm, new to the market, new to the world. Innovation activities are all scientific, technological, organisational, financial and commercial steps which actually, or are intended to, lead to the implementation of innovations. Some innovation activities are themselves innovative, others are not novel activities but are necessary for the implementation of innovations. Innovation activities also include R&D that is not directly elated to the development of a specific innovation. An innovative firm is one that has implemented an innovation during the period under review. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 3

Main type of innovation A product innovation is the introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses. This includes significant improvements in technical specifications, components and materials, incorporated software, user friendliness or other functional characteristics. A process innovation is the implementation of a new or significantly improved production or delivery method. This includes significant changes in techniques, equipment and/or software. A marketing innovation is the implementation of a new marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing. An organizational innovation is the implementation of a new organizational method in the firm’s business practices, workplace organization or external relations. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 4

Changes which are not considered innovations Ø Ceasing to use a process, a marketing method or an organization method, or to market a product Ø Simple capital replacement or extension Ø Changes resulting purely from changes in factor prices Ø Customisation Ø Regular seasonal and other cyclical changes Ø Trading of new or significantly improved products Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 5

Innovative strategy and policy Innovative strategy of the state Innovative policy of the region Innovative enterprise policy Innovations and Entrepreneurship Innovative strategy allows to form tools, due to which innovative policy will be implemented Innovative policy this mode of action of state and local governments to create a climate of coordination of interests and implementation of long term innovation plans through medium and short term programs and projects. It includes various activities and is oriented, on the one hand, to stimulating the development and introduction of innovations by national economic entities, and on the other, to creating conditions for the progressive technological development of the country's economy Innovations And Examples Of Entrepreneurial Activity 6

National Innovative System Scientist Definition C. Freeman (UK) This is a network of public and private sector institutions whose activities and engagement initiate, import, modify and disseminate new technologies. Particular attention he paid to the stability and change of the innovation system in the face of strong coordination role of the state and the horizontal coordination of the efforts of entrepreneurs. B. -A. Lundvall (Denmark) R. Nelson (USA) This is the set of elements and relationships, which interact in the production, diffusion and use of new, and economically useful, knowledge. The scientist in his work focuses more on the relationship between knowledge producer and consumer. This is a set of institutions whose interaction determines the innovative effectiveness of national firms. On the contrary to K. Freeman, the researcher emphasizes the role of competition as a mechanism of diversity and stimulation of innovation. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 7

Main components of the NIS Competitive environment competition encourages the firm to engage in innovation activities National Innovative System State policy Infrastructure provides effective interaction of firms, as well as the creation of infrastructure and favorable institutional conditions for the innovation activities of private companies as a system of institutions capable of providing firms with the resources necessary for the implementation of innovation (financial means, personnel, information, etc. ) Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 8

The main ideas of the concept of the national innovation system 1 2 3 • the main factors in the development of the modern economy that shape competition are innovation and research for business; • institutionality is a factor influencing the content and structure of innovation activity; • scientific knowledge plays an important role in the development of the economy. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 9

The innovation measurement framework The main characteristics of the framework described are: ● Innovation in the firm. ● Linkages with other firms and public research institutions. ● The institutional framework in which firms operate. ● The role of demand. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 10

CONTENT 1. Innovative policies, innovation systems and their content. 2. Entrepreneurship and small business development: concepts, theories, definitions. 3. National and Regional Innovation Policy 4. Innovative activity and entrepreneurship in the world Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 11

Features of the entrepreneur Innovation Initiative Responsibility Freedom of funds using Risk Innovations and Entrepreneurship Features of the entrepreneur Creativity Control Planning Organization Innovations And Examples Of Entrepreneurial Activity 12

Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 13

There is a view that SMEs are, in general, less effective compared to large enterprises. This is mainly explained by the fact that in large enterprises could be realized economies of scale, which reveals in increasing the production output, and if other things are being equal allows to reduce cost per unit of output. However, if earlier it was considered that the main agents of growth are large enterprises, the rapid development of productive forces, result of which is reduction of production costs, structural changes, the emergence of new industries and markets have resumed interest in the development of SMEs as an engine of national economic growth and employment Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 14

The main differences of small, medium and large businesses Feature Ownership Management Decision-making Planning Organization of business processes Funding sources Sales markets Professional and career growth Relationship with an external environment Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 15

Main advantages of SMEs Chronic lack of funding as result need to attract loan funds Flexibility; The limited scale means used of production, including inadequate technical equipment and supplies of raw materials compared with large enterprises Dynamism; Receptiveness to innovations Greater motivation for productive work The compactness and multifunctional of the management team Rapid market saturation Innovations and Entrepreneurship Main disadvantages of SMEs Hypersensitivity to variations of economic conditions and the political situation Significant dependence on certain large customers Great dependence on small business support systems; High risk and susceptibility to bankruptcy Weak segmentation own market share and insufficient strong position on it Innovations And Examples Of Entrepreneurial Activity 16

Some indicators of SMEs in different EU countries The share of SMEs in Ukraine Poland EU 28 Slovakia Germany Number of enterprises 99. 9% 99. 8% 99. 9% 99. 5% Employment 75. 5% 69% 66. 9% 71. 2% 60. 9% Sales volumes 60. 4% 51% 57. 9% 62. 7% 53. 8% However, the spread of small and medium enterprises in the country does not necessarily indicate a high level of economic development. The main reason for starting their own businesses in Ukraine is the ability to earn additional income. In European countries, the main reason is independent of the employer. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 17

SMEs need special attitude from the state because: • SMEs play a special role in the economy, especially from the position of job creation; • SMEs are particularly sensitive to various economic shocks; • SMEs are particularly sensitive to "market failure" (monopoly, asymmetric information, etc. ). Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 18

Types of state policies Low level of interference The high level of interference The low level of direct assistance Limited assistance policy (ex. : developing countries) Competition (ex. : USA) The high level of direct assistance Compensation (ex. : EU) Upbringing (ex. : national minorities in the United States) Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 19

CONTENT 1. Innovative policies, innovation systems and their content. 2. Entrepreneurship and small business development: concepts, theories, definitions. 3. National and Regional Innovation Policy 4. Innovative activity and entrepreneurship in the world 20

Major problems in the building up of national innovation system • underestimation of the role of public sector in the national innovation system • dominating role of the linear innovation model and neglecting demand • confrontation between high and low tech industries • overvaluation of the role of foreign direct investments • ack of social capital and network failures • weak innovation diffusion system and low motivation to learn Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 21

Finland was the first country to adopt the concept of a national innovation system as the main element of policy in the field of science and technology. Features and strengths of the Finnish innovation system: stability of education systems, management and innovation institutions, cooperation between universities and the private sector availability of the venture capital market availability of regional development programs constant study and use of international experience continuous evaluation of the effectiveness of measures aimed at supporting the innovative activities of the country Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 22

Variety of innovative policies for different regions Building on current advantages (science push/technology led or a mix) Supporting socioeconomic transformation Catching-up: towards the creation of knowledgebased capabilities Knowledge and technology hubs ♦♦♦ � ♦♦ ♦ Knowledge intensive city/capital district � ♦♦♦ ♦♦� �♦ S&T intensive production regions � ♦♦♦ � ♦♦ ♦� Skill intensive regions � ♦♦♦ Type of region Knowledge hubs Industrial production zones ♦♦♦� ♦� � ♦♦♦ �♦ Medium tech manufactur ing and service providers � ♦♦ Traditional manufacturing regions �♦ ♦♦� Service led and natural resources based regions � ♦♦ Regions with structural inertia or de industrialising regions ♦♦� Primary sector intensive regions �♦ ♦♦♦� Non S&T-driven regional systems ♦♦♦� � ♦♦ ♦♦♦� Legend: ♦♦♦ main priority ♦♦ strategic choice ♦ low priority Инновации и предпринимательство Инновации и примеры предпринимательской деятельности 23

Regional innovation systems The concept of “innovation system, ” emphasizing the evolutionary and interactive dimensions of innovation and the importance of hard and soft institutions, was initially developed with a focus on the national level. It has been subsequently applied to the regional level on the basis of the following rationales: The observed variety in regional economic specialization patterns and innovation performance The spatially bounded character of (some) knowledge spillovers The importance of tacit knowledge, which cannot be transferred easily across space because it relies on trust based relationships favoured by geographical proximity The fact that some institutional competences and policy resources relevant for innovation are devolved to sub national authorities. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 24

In a regional innovation system firms and other organisations are systematically engaged in interactive learning within an institutional environment characterised by embeddedness, that is, interactions and networks rooted in a specific local economic, institutional, social and cultural contexts. One view of the regional innovation system sees it as a combination of two subsystems: • the knowledge application and exploitation sub system centred on firms, • the knowledge generation and diffusion sub system centred on public research, education and technology diffusion organizations. In this view policy acts on the endowments and relationships within and between these sub systems. Other views of the regional innovation system refer to the “regional innovation ecosystem” where the role of users and markets for innovation is prominent, and where the distinction between the two subsystems is blurred as innovation is “co created” by actors in all parts of the system. Therefore, the region is increasingly seen as the level at which innovation occurs most effectively through networks of innovators, local clusters and the cross fertilising effects of research institutions. These theoretical and empirical concepts have shifted the policy focus towards local and regional policy interventions in favour of innovation. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 25

This is a set of institutions whose interaction determines the innovative effectiveness of national firms. The growth pattern of regions across the OECD is uneven, reflecting their diversity in income levels, employment rates, mixes of high and low productivity activities, assets, comparative advantages, stages of development and public policies. OECD wide analysis of the determinants of regional growth has put in evidence that, although national factors influence regional growth, regional factors in most cases largely determine regions’ performance (OECD, 2009). This points towards the potential for exploiting regions’ specific assets and addressing their specific failures to nurture growth. To picture the high degrees of heterogeneity between regional innovation systems, reflecting different regional development paths, the OECD and the European Commission (EC) have developed typologies of innovative regions, relying on the following quantitative indicators: The OECD has developed a classification of regions based on an analysis of regional economic indicators, the labor market and technological innovation indicators, resulting in the eight types of regions being divided into three broad categories: knowledge centers, industrial production zones, and not S & T regions. The European Regional Innovation Rating provides a comparative assessment of the effectiveness of regional innovation. The report covers 190 regions throughout the European Union, Norway and Switzerland classifies them into four groups of innovative innovations: "innovative leaders", "innovators", "moderate innovators" and "modest innovators" (EC, 2013). Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 26

The Regional Innovation Scoreboard (RIS) is a regional extension of the European Innovation Scoreboard, assessing the innovation performance of European regions on a limited number of indicators. The RIS 2017 covers 220 regions across 22 EU countries, Norway, Serbia, and Switzerland. In addition, Cyprus, Estonia, Latvia, Lithuania, Luxembourg, and Malta are included at country level. The new Scoreboard confirms that Europe's most innovative regions are located in the most innovative countries. The most innovative region in the EU is Stockholm in Sweden, followed by Hovedstaden (Copenhagen) in Denmark, and South East in the United Kingdom. Some regional innovative hubs exist also in moderate innovator countries: Praha (Prague) in the Czech Republic, Bratislavský kraj (Bratislava) in Slovakia, and País Vasco (Basque Country) in Spain. Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 27

For effective implementation of its regional advantages in the innovation policy regions need: develop a vision and a strategic framework to encourage innovation; design and implement appropriate policy mixes to implement the vision; establish multi level, open and networked governance structures; foster a learning based and experimentation driven policy environment; evolve towards outcome driven policies supported by better metrics and evaluation practices Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 28

CONTENT 1. Innovative policies, innovation systems and their content. 2. Entrepreneurship and small business development: concepts, theories, definitions. 3. National and Regional Innovation Policy 4. Innovative activity and entrepreneurship in the world Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 29

Regional leaders in innovation Region / rating Country Place in the global rating of GII 2017 North America 1 USA 4 2 Canada 18 1 South Africa 57 2 Mauritius 64 3 Kenya 80 1 Chile 46 2 Costa Rica 53 3 Mexico 58 1 India 60 2 Islamic Republic of Iran 75 3 Kazakhstan 78 1 Israel 17 2 Cyprus 30 3 United Arab Emirates 35 1 Singapore 7 2 The Republic of Korea 11 3 Japan 14 1 Switzerland 1 2 Sweden 2 3 Netherlands 3 Sub-Saharan Africa Latin America and the Caribbean Central and South Asia North Africa and West Asia Southeast Asia, East Asia and Oceania Europe Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 30

TOP-5 The World's Most Innovative Companies Rank Company Country 12 -Month Sales Growth Innovation Premium* #1 Salesforce. com United States 25. 87% 82. 46% #2 Tesla United States 73. 01% 78. 43% #3 Amazon. com United States 27. 08% 72. 78% #4 Shanghai RAAS Blood Products China 15. 27% 71. 72% #5 Netflix United States 30. 26% 71. 54% Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 31

The most expensive start-ups in the world № Company Valuation ($B) Date Joined Country Industry Select Investors 1 Uber $68 8/23/2013 United States On-Demand Lowercase Capital, Benchmark Capital, Google Ventures 2 Didi Chuxing $50 12/31/2014 China On-Demand Matrix Partners, Tiger Global Management, Softbank Corp. , 3 Xiaomi $46 12/21/2011 China Hardware Digital Sky Technologies, Qi. Ming Venture Partners, Qualcomm Ventures 4 China Internet Plus Holding (Meituan Dianping) $30 12/22/2015 China e. Commerce/ Marketplace DST Global, Trustbridge Partners, Capital Today 5 Airbnb $29. 3 7/26/2011 United States e. Commerce/ Marketplace General Catalyst Partners, Andreessen Horowitz, ENIAC Ventures 6 Space. X $21. 5 12/1/2012 United States Other Transportation Founders Fund, Draper Fisher Jurvetson, Rothenberg Ventures 7 Palantir Technologies $20 5/5/2011 United States Big Data RRE Ventures, Founders Fund, In-Q-Tel 8 We. Work $20 2/3/2014 United States Facilities T. Rowe Price, Benchmark Capital, Soft. Bank Group 9 Lu. com $18. 5 12/26/2014 China Fintech Ping An Insurance CDH Investments, Bank of China 10 Pinterest $12. 3 5/19/2012 United States Social Andreessen Horowitz, Bessemer Venture Partners, Firstmark Capital Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 32

Reference literature • • • Deok Soon Yim. Korea’s National Innovation System and the Science and Technology Policy [Electronic resource] / Soon Yim Deok / Global S&T Center Science and Technology Policy Institute (STEPI). – Access mode to a resource: http: //www. unesco. org/science/psd/thm_innov/forums/korea. pdf. Freeman, C. (2002) “Continental, national and sub national innovation systems—complementarity and economic growth“. Research Policy 31, 191– 211. Lundvall, B. Å. (2003) National innovation systems: history and theory. Aalborg: Aalborg University Press Nelson, R. (1993) National innovation systems: a comparative analysis. New York: Oxford University Press. OECD (2011), Regions and Innovation Policy, OECD Publishing, Paris. Oslo Manual (2005) Guidelines for collecting and interpreting innovation data, OECD Publishing, Paris. The Innovation Policy Platform. Access mode to a resource: https: //www. innovationpolicyplatform. org Tödtling, F. and M. Trippl (2011), “Regional innovation systems”, in P. Cooke, B. Asheim, R. Boshma, R. Martin, D. Schwartz and F. Tödtling (eds. ), Handbook of Regional Innovation and Growth, Edward Elgar, Cheltenham. Varblane Urmas. How To Improve the National Innovation Systems of Catching up Economies? [Electronic resource] / Urmas Varblane, David Dyker, Dorel Tamm. – Trames. – 2007. – № 11 (61/56). Innovations and Entrepreneurship Innovations And Examples Of Entrepreneurial Activity 33