(1) Promotion of IT utilization
(a) Obstacles to IT usage
The country studies showed wide digital gaps between larger and smaller firms, especially medium and small/micro enterprises, although most SMEs recognize IT’s importance and claim that they intend to use it. But in reality, their actual performances are not satisfactory, making them reluctant to invest in IT. This is primarily due to deficiencies in human resources, funds, and government
policy. A deeper empirical study carried out by the Japanese team revealed the obstacles for SMEs,
which are mentioned by other country studies and valid for the public sector as well.
IT Leadership and political leaders’ or top executives’ consciousness
Since IT is related to business management and strategy, decisions made by top management are of primary importance. Even if SMEs were placed in an optimum environment, with IT specialists, sufficient funds, and government support, these factors could not promote IT usage without skilled decision-making by top management. This is true of regional, national, and international IT policies. We should not forget that IT is not just a useful tool to promote internal efficiency or productivity of routine works, but an essential tool to create entirely new business models.
Traditional business practices
Traditional business practices, which had been instituted before the IT age, hinder efforts made by individual firms or departments. New IT-based practices can breed conflicts with other departments and firms that are based on traditional approaches. For this reason, coordination efforts that complement IT leadership are a critical factor for successful implementation of an IT project.
Costs of IT investment
SMEs are in unstable business situations and generally have insufficient funds for IT investment. They do not well understand the long-term benefits of IT investment, and therefore see IT more in terms of the present costs than the future profit increases. It is true, however, that IT investment is very costly. In addition, large companies often ask SMEs to use software customized to be compatible with their own systems. This increases costs for SMEs not only to purchase and customize all necessary software but also to interconnect the customized IT system with other large firms.
(b) Key Policy Issues
Improvement of Internet connectivity and access
At least two crucial points are infrastructure availability and costs of access (investment) and operation (maintenance). Significant differences in IT diffusion observed between the analyzed countries. These differences can be corrected by public policies affecting the telecommunications sector, and the promotion of development of new access technologies, which are oriented toward special financial support programs for SMEs. Other goals are increasing public Internet access; stimulating investment in IT; implementation and use of IT in public places; applying tariff and tax exemptions; and applying incentives for the installation of public access facilities in the remote and rural zones.
Education and training
Digital alphabetization is an excellent concept. It mandates that all of the primary, secondary and higher educational establishments with IT access must include IT contents in their curriculums and be engaged with governmental programs to close digital divides. In order to implement this effectively, it is necessary to:
• Incorporate corporate executives, industry associations, NPOs, local communications carriers, and local companies in order to guarantee and co-finance the implementation of the programs,
• Implement training programs specially designed for SMEs,
• Implement special training programs to learn the use of public online services, • Develop cooperative programs between universities, R&D centers, firms, and
educational establishments; and
• Carry out education to change business culture.
Online government
This is one of the actions that strongly contributes to promoting acquisition and use of IT by economic agents and citizens. This includes: digitalization of central, regional and city governments; development of online services; building of online public procurement system; and promotion of online procedures.
Development of solid legislation systems
Creating sound normative and legal infrastructure assures confidence of businesses in e- commerce and privacy protection, and thus promotes development of e-commerce.
As pointed out by the questionnaire survey conducted by the Japan team, SMEs most frequently request support in the form of education, such as seminars and practical IT training. Most IT training focuses merely on using PCs and building homepages and other Web materials. However, the IT-related knowledge that would prove most beneficial for SMEs concerns how to build business models around IT. Training for top management is also of great importance, as mentioned previously. In addition, creating new firms, nurturing new industries, and providing consultation services on how to restructure businesses should be stressed. A helpful project is to
publicize and provide information about success stories of start-ups using IT; as mentioned in other parts of this report, there are many cases of successful business models built around IT. One of the reasons SMEs are reluctant concerning IT investment is that they tend to stick to short-term tangible results; thus, success stories will surely help encourage them.
Finally, it should be mentioned that the focus of IT supporting policy for SMEs may be different and customized in accordance with the maturity of IT utilization by individual firms. SMEs in the more IT-developed group point to policies such as low-interest loans, tax exemptions and subsidies for IT investment, along with various deregulations. In other words, they desire the establishment of an environment conducive to IT investment. On the other hand, the developing group tends to request policies such as IT seminars and training for PC operation and building homepages, which can be summarized as human resources development required for the introduction of IT.
(2) Policy Elements for Development of Smaller Exporters
Competitiveness development
It is observed that the governments in the studied countries have implemented four areas of separated policies:
• industry promotion
• export promotion
• IT
• science and technology
Industrial and enterprise development, which had been implemented in the relatively closed economies, has to be implemented in the process of globalization and nowadays in the process of adopting IT. In a situation of global competition, what is important for policy makers is to develop world-class SMEs that are able to compete in the world market. For this purpose, these four policy areas should be integrated into a development policy to enhance competitiveness. Otherwise, the results of the four policy areas will be incomplete, and therefore of no significance.
Inter-institutional coordination
Almost all of the surveyed countries have created diverse institutions and numerous programs to support SMEs. Nevertheless, SMEs do not necessarily understand how to take advantage of those policy instruments. One problem is that different ministries generally handle policy instruments related to these four policy areas. As a result, what happens usually to a greater or lesser degree in the researched countries is that too many, and duplicated instruments have been established without any coordination between them. In addition, these programs and instruments are often too all-purpose to meet specific requirements from a firm, an industry, or a region. Thus, each entrepreneur must combine instruments of different sources, which is not optimal. In addition, no one body can evaluate the attainment of overall policy goals, or the performance of individual policy measures.
Coordination between the public and the private sectors
Partnership between the public and the private sectors can take advantage of the expertise and experiences that each sector possesses. As observed in the case of an infocenter project in Mexico, a sector-specific policy can achieve good performance, with the government playing a catalytic role. Such a project can align the interests and capacities of the participants, and use an initial investment by the government to build the private sector’s faith in the project. It can also help overcome initial technological, financial, and organizational barriers. Utilization of know-how and resources of the private sector will be helpful to achieve public policy goals.
In order to make the partnership function well, it is necessary for policy makers to involve the private sector in the processes for definition, creation and measurement of impacts of policy
programs and instruments, in addition to defining clear roles and responsibilities of each sector. A challenge for SMEs is to get their best representatives involved in such processes. For the public sector, the challenge is to find specialists who have sufficient experience in private enterprise and capabilities to work together in a team.
Science and technology system and SMEs
One thing observed in many countries, especially in Latin America, is a lack of cooperation between universities and SMEs. The main reasons of this problem in Latin America is that universities have more interests in basic research programs and publishing their results in international scientific magazines, which will increase the possibility for them to obtain research funds. On the other hand, the entrepreneurs of SMEs do not have interest in approaching universities, because SMEs consider those universities’ fields to be too theoretical.
Highway to export
A company, which has a potential to be an exporter, but does not yet have export experience, will have to follow a metaphorical “highway” towards external markets. On this path, the firm should be highly productive and competitive. Thus, this highway can be a kind of observatory for both the public and the private sectors to generate the best conditions by providing the company with integrated support and promotion programs to develop it into a world-class one.
FIGURE 10
THE CONCEPT OF A HIGHWAY TO EXPORT
Source: sketched by Rodrigo Cárcamo Olmos.
Critical success factors for internationalization
From our observations, each country must assure the presence of at least the following three factors:
• Networks. SMEs must be integrated in productive and social systems at the local level in order to achieve economies of scale sufficient to compete with large companies.
• High quality of products, processes, and human resources. These are indispensable elements for SMEs to compete not in price but rather in a highly specialized niche market.
• Knowledge and competition. These are key factors that encourage generation of high value added, high quality, and innovative products.
Direct export vs. indirect export
We can identify two different business systems: one is oriented toward foreign markets and composed of highly dynamic, modern, productive and competitive exporting companies, most of which are large and medium companies. The other is oriented toward the domestic market and composed of non-exporters or incipient exporting companies with low productivity and competitiveness, most of which are SMEs. The outsourcer-supplier relation between larger exporters and non-direct smaller exporters can facilitate technological transfer and make it easier for SMEs to learn foreign markets’ requirement and clients’ needs, although it is very difficult for SMEs to participate in supply chains organized by larger firms and to meet the price and quality requirements of larger firms. In this way, these SMEs may be able to evolve into “direct” exporter.
Horizontal vs. sector-specific policies
Many of the studied countries have developed business and export promotion models with instruments applicable to all of the sectors/regions created, without considering their specificities – that is to say, horizontal policies. These models have shown some efficiencies, but they also have been insufficient to support sectors or regions progressing dynamically. What is important is to achieve an adequate combination of horizontal and sector-specific policies.
(3) International Cooperation
In order to achieve the dynamic and effective development of SMEs by incorporating IT into local economies, it is necessary to strengthen international cooperation with at least these objectives:
• Harmonizing regulations and technical standards • Sharing development of the information society
• Interchanging Best Practices and lessons learned from failures • Establishing and sharing information systems
It is also important to take advantage of opportunities that can be gained from trade agreements.