The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian

Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does
not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used
may not necessarily be consistent with ADB official terms.

SMEs Innovation and Incubation

SME Development in Emerging Asia: Integration to the Global Value Chain

November 2, 2016

Taeko Takahashi
Fellow, IGES

Outline of the Presentation

Introduction
I. Innovation & Eco-Innovation
II. SMEs and Innovation
III. Measures for SMEs Innovation by governments
IV. Other options for Incubation ?
IV. Conclusion

The Institute for Global Environmental Strategies (IGES)

The Institute conducts innovative policy development and strategic research
for environmental measures, reflecting the results of research into political
decisions for realizing sustainable development.
Head office: Kanagawa, Japan
Offices: Tokyo, Kitakyushu, Kansai Research Center,
Bangkok Regional Center, Beijing Office,
India, Indonesia (desk)

Business and the environment

at Kansai Research Center

- Low carbon technology transfer and application

- Policies toward low carbon technology diffusion
http://www.iges.or.jp/en/business/index.html

Sustainable Development Goals (SDGs)

affirms importance of the private sector
involvement in realizing sustainable and inclusive
growth.

IGES headquarters Hayama, Kanagawa

Innovation & Eco-Innovation

Innovation
Product innovation
The introduction of a good or service
that is new or significantly improved with
respect to its characteristics or intended
uses.
These
include
significant
improvements in technical specifications,
components and materials, incorporated
software, user friendliness or other
functional characteristics.

Process innovation
The implementation of a new or
significantly improved production or
delivery method. This includes
significant changes in techniques,
equipment and/or software. Process
innovations can be intended to
decrease unit costs of production or
delivery.
(https://www.innovationpolicyplatform.org/conte
nt/product-and-process-innovation)

Eco-goods and
services

Sustainability consideration
Energy saving
Waste management

Eco-Innovation

Creation of the environment related market (JPY50 trillion), and

generation of employment in eco-industries (JPY1.4 million), and
reduction of GHGs (1.3 billion) globally through green/eco-innovation
- Japans New Growth Strategy (2010) The ASEM* SMEs Eco-Innovation Center (ASEIC) defines Eco-Innovation
as an idea to achieve environmental improvements, to enhance
competitiveness of enterprises and to provide new business
opportunities by means of using low cost and non-technology intensive
methods. *Asia-Europe Meeting
Eco-Innovation works through a new business strategy that incorporates
sustainability throughout all business operations, based on life cycle
thinking and involves partners across the value chain. Intermediaries
support SMEs, facilitating knowledge, experience, funding sources and
business contact. - UNEP Eco-Innovation Project

SMEs and Innovation

Characteristics of SMEs
CEOs strong leadership
Quick decision making
Highly skilled workers with
specialized technique
(some cases)
Seeds of innovation in
routine work, rather than
R&D

Product Innovation
in the niche market
Process Innovation

Still challenges to overcome

- Financial instability, thus initial investment cannot be borne.
- Weak access to information and knowledge, due to limited human resources.
- Lack of interaction with other sectors
- Less skilled workers
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Measures for SMEs Innovation by governments

1. Small Business Innovation Research (SBIR) Programme
Supporting mechanism by the national government of Japan to
promote business opportunities for SMEs.
Provides subsidies for R&D, and supporting measures for them to
commercialize outputs of the R&D, such as low interest loan from the
Japan Finance Corporation (government owned), and discount of
patent fee.
Collaborative scheme by several Ministries - Ministry of Economy,
Trade and Industry (METI), Ministry of the Environment (MOE) and
others.
Since 1998, more than 30,000 companies have used the SBIR.

Case: Small Business Innovation Research (SBIR) Programme

ZENERAL HEATPUMP
INDUSTRY CO., Ltd.
(40 employees)
The company won the subsidy for
strategic energy saving technological
innovation programme through the
Ministry of Economy, Trade and
Industry in 2012 under the SBIR, and
has developed the highly efficient heat
pump system which recovers unused
heat and utilizes the unused heat.

(http://www.zeneral.co.jp/nounyuujirei/bikkuridonkey.html)

2. Organization for Small & Medium Enterprises and

Regional Innovation
An independent administrative agency affiliated to METI, Japan. It
provides comprehensive tailored support according to the individual
needs of SMEs in collaboration with government agencies, SME
support organizations, financial institutions and research institutions.
(http://www.smrj.go.jp/english/index.html)
Activities:
a. Technical support: face-face consultation and dispatchment of
experts (12,000 cases/year);
b. Information sharing : J-Good Tech Business match making site;

c. Capacity building: SME University provides seminar and trainings

for managers on human resource development, management, and
accounting.

(http://www.smrj.go.jp/inst/tokyo/shisetsu/index.html)

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3. Tokyo Metropolitan SMEs Support Center

(http://www.tokyo-kosha.or.jp/english/index.html)

Public-interest corporation established by the Tokyo Metropolitan

Government with the goal of contributing to the development of local
economy by providing support for SMEs.
Activities:
a. Training for product design and
commercialization;
b. Consultation and seminars on
global business;
c. Subsidies for developing new
products and technologies,
acquiring ISO certification,
and for market development.
(http://www.tokyo-kosha.or.jp/topics/1603/0013.html)

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Other options for Incubation?

Large enterprises?
Large
enterprises
SMEs

Supply Chain

(https://www.swtc.edu/academics/programs/
business/supply-chain-management)

E.g. In adopting green procurement, manufactures (large enterprises) do

businessonly with suppliers/subsidiaries (SMEs) that follow the green
procurement guideline.
Large enterprises provide technical assistance to SMEs
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Research Partnership for Application of Low-carbon technology

for Sustainable development

IGES and TERI (The Energy and Resource Institute in India) had successfully engaged and
matched various stakeholders to promote Japanese low carbon technology application in
India.

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Industry Association?

Business
Association

Chamber of
Commerce

Potential lays in:

Established network;
Because members are from same industry, information and knowledge
can be utilize efficiently;
Members with commitment resulted from collection of membership fee;
Capacity to negotiate with governments and academic institutes, thus
could stimulate open innovation*.
Open Innovation is a paradigm that assumes that firms can and should
use external ideas as well as internal ideas, and internal and external
paths to market, as the firms look to advance their technology.
(http://openinnovation.net/about-2/open-innovation-definition/)

Case: Promoting SME business association projects in Chile

It aims to improve the technical, financial, and managerial capacities of
SMEs. Program evaluations have shown a positive result in terms of
added value products and growth in the productivity of participating SMEs.
(https://innovationpolicyplatform.org/sites/default/files/rdf_imported_documents/Case%20StudyPROFO.pdf)

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Conclusion
Economic, social, and environmental sustainability have to
be taken into account.
SMEs have a great potential of Innovation.
Comprehensive public measures are available for SMEs to
overcome difficulties.
Roles of large enterprises and industry associations is to
be further explored.
Collaboration beyond sectors can be a key to innovation,
especially for SMEs, advancing Open Innovation.

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