The objective of this study is to analyse the role of new companies for the introduction and take-up of new e-business applications, i.e. for e-business innovation and diffusion. The analysis has led to conclusions for business impacts with regard to single enterprises and industry structure as well as to policy implications. The report takes up on the importance of new companies for innovation and economic growth which has been commonly acknowledged by political decision makers and researchers. It is a crosssector report that does not focus on particular industries. The analysis is based on literature findings, secondary statistical data, qualitative findings from case studies and a survey among the members of the e-Business W@tch 2006 Advisory Board as well as quantitative data from the e-Business Survey 2006.
Various studies show that new companies contribute considerably to economic growth and employment. On a national level, research results indicate that in developed countries a high amount of nascent entrepreneurs and owners of young firms is positively associated with growth. There is also empirical evidence that small and new enterprises serve as an engine of employment creation in Europe. New firms may have various advantages over established firms in innovative activity, including organisational flexibility, interest in incremental innovations, and sustained excitement about innovation. In recent years, economic framework conditions are assumed to have changed in a way that innovative advantage has shifted towards new and small firms.
Findings from qualitative research for this report and from literature confirm the assumption that new companies play an important role in introduction and uptake of new e-business applications in many industries. However, some industry representatives indicated that there are no considerable differences between new and established companies in this respect. Furthermore, many new companies’ innovations may not necessarily be visible and not widely known: the innovations of new firms may be incremental and modified by other firms, and innovative e-business ideas may also diffuse when established companies employ former freelancers, i.e. former one-man or one-women companies. Finally, many new companies are not innovative at all as far as e-business in concerned. At the firm’s level, the impact of new companies on e-business innovation and diffusion obviously depends on the importance of e-business in their business model. At an aggregate level, the impact of new companies on e-business innovation and diffusion differs between industries, regions, types of technologies and stages of the innovation process:
In 2006 the e-Business Survey offered for the first time the opportunity to analyse data about e-business infrastructure, use and impacts by the age of the company. Overall, 9% of the survey companies were founded between 2006 and 2003. For the purposes of the study in hand, this group is considered as “new companies”. 22% of the surveyed companies were founded between 2002 and 1997, a relative majority of 42% was founded between 1996 and 1981, and 26% were founded before 1981. This report is focusing on “new companies”, for which the survey findings indicate that, in general, they are important for e-business innovation and diffusion, but not necessarily more important than established ones. The analysis also indicates that there are considerable differences between industries. Core findings include the following:
As new companies may have more organisational flexibility and more interest to introduce incremental inventions than established companies, new companies serve customisation and co-operation in innovative networks. To the extent that customisation and co-operation become more important for regional and national competitiveness,industries in certain regions or countries with a lack of new companies may loose competitiveness and productivity to industries in other areas with a larger number of agile start-ups.
Knowledge and capital are particularly important resources for new companies that use or produce e business applications: New firms may need particular ICT skills for the production or use of e-business applications, and they may also need ebusiness management skills. They also need financial capital to the extent that the production or use of e-business applications requires considerable investment – in certain cases from specialised venture capitalists. Furthermore they need real estate with appropriate production and office space.
Decision makers in governments, industry associations and other organisations can facilitate the access to and the use of knowledge and capital. They can promote innovation and diffusion of e-business technologies through establishing and supporting related stakeholder networks. Such networks may include, above all, companies producing or purchasing ICT and e-business applications as well as firms offering related services. New companies should receive particular attention in such fora in order to exploit their innovative potential.
In terms of finance, the opportunities for “business angels’” investments appear to be largely untapped. On the investors’ side, in order to increase the investment skills of active and potential business angels and thus to increase their readiness and capability to invest in new ICT firms, relevant academies can be created. On the companies’ side, new ICT firms should be informed about such funding opportunities from “business angels”. Furthermore, policy makers can facilitate the access of company founders to appropriate real estate. They can, for example, help to establish and foster business incubators that are specialised in hosting and consulting new companies that either produce ICT or have a business model based on e-business.
“Spin-offs” from universities and public research institutions should also receive particular attention from policy makers. There appears to be a large unused potential of commercialising inventions and knowledge from such spin-offs, also related to e-business. Approaches for promoting these start-ups should be differentiated and involve, for example, relevant research institutes or clusters within the university, educational courses for e-business management, specialised finance providers, and university-related business incubators. Such measures should target not only graduates and students, but also professors as potential company founders.
