Exports and innovation are key to success

In cooperation with the National Technical University of Athens’s Laboratory of Industrial and Energy Economy and polling firm Public Issue, the Foundation for Economic and Industrial Research (IOBE) carried out a major survey of 2,000 of Greece’s biggest businesses (in terms of employment) in 2011 on behalf of the Federation of Greek Enterprises (SEV).

The object of the study was to create an overview of the strategic identity of the country’s production system through statistical characteristics such as profits, exports, markets etc, and more so through its dynamic characteristics.

A study of the data collected shows that these businesses can be separated into three separate categories based on their economic performance.

The first category includes established businesses that saw profits and an increase in sales in the 2010-11 period, therefore comprising the most dynamic section of the country’s business community that has managed to withstand the effects of the crisis and to maintain their dynamic features, at least until 2011.

The second category comprises a mixed group of businesses that may have had some healthy years in the past but have struggled under the crisis. These are businesses that continued to make a profit in 2010 and 2011, but which saw a drop in sales.

Finally, the third category features troubled companies that were in the red in 2010 and 2011, and saw a consistent decline in sales. These are also the companies that are likely struggling to survive today.

According to the study, of the 2,000 enterprises examined, 573 (28 percent) belong to the first category and 400 (20 percent) to the third. The remaining 1,052 businesses come under the second category, though some 400 of them stand out from the rest because they have managed to continue to make a profit despite the drop in turnover.

Another interesting aspect of the study is the outline of the factors that make some businesses succeed and others fail. The main drivers of success are exports and innovation, but also the size of the business itself, even though half the enterprises in the first category employ fewer than 50 people.

Almost three in five of the Category 1 businesses are export-based and were expecting an increase in activity. In contrast, of the businesses in Category 3, just 38 percent are exporters and they also expected to see a drop in business, suggesting that exports, even if moderate, are a key factor in healthy economic performance.

Established companies also appear to stand out for their innovative spirit, as over half in the first category showed product innovation, compared to just 42 percent of the struggling businesses.

Businesses in the first category tend to invest more in technological evolution while also conducting research of their own or commissioning studies from third parties. This means that while the overall performance of businesses in research and in collaboration with universities and research centers is poor, most that do invest in this area belong to the first category.

Other factors that are crucial to successful innovation and exports are knowledge of the markets, quality of product, flexibility, technological capabilities and strong human resources.

For businesses to become and remain successful, they need to invest in new technology and advanced innovation, to forge synergies with other businesses in complementary or similar fields for economies of scales, and to focus on international niche markets.

* Aggelos Tsakanikas is research chief at IOBE and an associate professor at the National Technical University of Athens.