By Mark Esposito, Terence Tse & Giorgos Dimitriou *
Fast-expanding markets (FEMs) is a broad concept by design in order to aid managers and policymakers in locating new sources of economic growth that are not captured by macroeconomic analysis. At the same time, companies and governments can provide the resources necessary to develop FEMs. Greece has been an excellent example of how support from government and institutions have provided the seeds for an FEM. Despite Greece’s economic challenges of a debt-to-GDP ratio of 176 percent and a 58 percent unemployment rate among under-25s, formal leadership and support has helped to shape an FEM in technology clustering. Between 2006 and 2013, the number of export-oriented tech start-ups in the country has gone from a handful to over 200.
As part of Europe’s economic and social cohesion objective, there has been a great focus on investing and developing information and communication technologies, as there is a correlation between productivity growth, innovation and regional development [European Commission, 2009]. Therefore a number of policies to secure the Internet, expand infrastructure and provide safer access to the Internet have been in the works. Greece, in particular, has struggled with increasing the use of Internet and e-commerce markets due to lack of infrastructure, information constraints, lack of skills and the limited perceived value of being online. But between the years of 2006 and 2010, there has been a 30 percent increase in the number of Internet users. In 2006, the number of users was 3,800,000; by 2010 that number had increased to 4,970,700.
Borrowing from Michael Porter’s concept of clusters, professors and other experts began attempting to solve Greece’s brain-drain problem by forming knowledge and technology clusters. In 2006, Corallia, the Hellenic Technology Clusters Initiative, received seed money from both the Greek government and European Union to launch a cluster focused on microelectronics. To date, Corallia has grown from 13 to over 130 members, consisting of start-ups, companies, academic labs and other institutions. As a group, the cluster produced more than $260 million in exports in 2011, including items such as sensor networks and solar energy equipment. OpenFund, the only Greek venture capital fund, started in 2008, was given 7 million euros in public funds from the EU’s European Investment Fund and private investors, dedicated to financing small and medium-sized enterprises (SMEs), with a total of 10 million euros to give out. In our estimation, SMEs are best positioned to create FEMs due to their smaller scale and more agile nature.
As a group, start-ups in the Greece technology clusters are poised to grow exponentially in the long term. As an example, Upstream Systems, an older start-up founded in 2001, gained traction between 2011 and 2013 to become of one of the five largest mobile marketing companies in the world. Sales have included 40 export markets while revenues in the period grew by 32 percent and employees by 20 percent. Velti, another mature start-up from 2001 in the information and communications technology sector, operates in 32 cities globally with over 500 employees. In 2011, Velti raised $150 million in an initial public offering on the NASDAQ.
The economic value of the clusters is also evident in newer respective start-ups. Last year, Constelex, a four-year-old start-up that makes light amplifiers for fiberoptic networks, was acquired for 650 million euros. Taxibeat, a company started in 2010 to help mobile phone users find a cab, operates in five countries, including Rio de Janeiro, Sao Paulo and Mexico City. In Rio, they have quickly become the dominant player in the market, based on volume and revenues.
Since inception, the company has raised over 1.7 million euros. Another cluster start-up, Pinnatta, has attracted funding from Greece, the US, Russia and Taiwan. In one more marked success, the company BugSense used its $100,000 from angel investors to make a developer app to monitor programming bugs. It is now used by 5 percent of all Android apps, and its customer list includes Yahoo, SoundCloud and Skype.
Success stories are becoming more frequent among the start-ups in these technology clusters. Moreover, these start-ups are entering new technology markets and industries with potential to become FEMs as well. In Greece, the technology clusters are forming a pocket of growth in an otherwise challenging economy. We believe these clusters offer new business opportunities to managers and policymakers to accelerate growth in the aftermath of the recent financial crisis, to a greater extent than what the international community has ever been able to recognize.
* Dr Mark Esposito is an associate professor of management at Grenoble Graduate School of Business in France and an instructor at the Harvard Extension School in the USA. He serves as senior associate for the University of Cambridge Program for Sustainability Leadership in the UK. He has advised governments, the UN and the NATO over the past 10 years on development and sustainability issues. He holds a PhD from the International School of Management in Paris/New York.
Dr Terence Tse is an associate professor in finance at the London campus of ESCP Europe Business School. He is also a director at i7 Institute for Innovation and Competitiveness, a Paris and London-based academic think tank. He began his career in investment banking, and later as an independent consultant to a University of Cambridge-based biotech start-up and various major corporations. He worked as a consultant at Ernst & Young in London. He holds a PhD from the Judge Business School, University of Cambridge, UK.
Political adviser Giorgos Dimitriou has been involved in European Union affairs for the past 10 years and has served the communities from a number of positions relevant to policymaking. He has led a number of EU publications and is an acknowledged author to the World Economic Forum following his contribution to the report Global Risks 2013. He has been nominated for the global award C|CISO and was ranked by the EC Council among the top seven professionals in his domain on a global scale. Giorgos Dimitriou MBA C|CISO,CRISC,CRMA,CPM,CCSK.