Results of the field research

IΟΒΕ – ΕΒΕΟ / ΕΜΠField research supported by PUBLIC ISSUE

13/12/11

FOUNDATION FOR ECONOMIC AND INDUSTRIAL RESEARCH

NATIONAL TECHNICAL UNIVERSITY OF ATEHNS

SCHOOL OF CHEMICAL ENGINEERNINGINDUSTRIAL & ENERGY ECONOMY LABORATORY

European Union

European Social Fund With the co-funding of Greece and the European Union

Changes  in regional productive systems and local labor markets

Structure of the research teamProject Management

Yannis Stournaras, General Director IOBE

Scientific Responsible : Y Caloghirou, Professor, National Technical

University (NTUA)

Research Responsible: A. Tsakanikas, Head of Research , ΙΟΒΕ

Assistant Professor National Technical University (NTUA)

Greece: Need for highly competitive firms based on well educated employees

In the midst of the economic crisis and in search of a new growth model for Greece, the role of the private sector and the institutional set up is decisiveWe are in need of viable firms capable to compete in

international markets even under a credit crunch conditions,

In modern knowledge economies, we should focus on firms’ resources and human capital qualitative performance

Changes and adaptation: need for education, (re)qualification and training

Aim of project: A foresight mechanism

Monitoring and mapping changes in production systems, labor markets, firms’ performance and behavior:

Analysis of existing business models coordination of resources / skills, deployment of plans that drive business development

Impact assessment studies in order to capture the impact of changes on business, professions, skills and work structure

Focus on the existing pool of companies, but also highlighting features of the new entrepreneurship, especially the one that can be named as knowledge-based entrepreneurship

Benefits of the mechanism Better information that will allow predictions

and develop early warning indicators of changes in production systems in the Greek economy

Contribution to the public consultation with targeted policies

Design of the necessary policy measures that will be integrated into business strategies and public policies that support / influence these changes

Improvement of decision making process bearing in mind sectoral specialties, needed qualifications and skills, shortages of qualified human capital today and potentially in the future

MethodologyDesk researchConduct of a field research  in the largest

2000 Greek firms companies through telephone interviews

Panels of expertsBusiness executives, institutional representatives Innovation and human resources development

experts, Senior researchersAcademicsPolicy makers

Expert panels

Field Research in 2000 largest Greek firms

The largest firms at the national and regional level (in terms of emloyement)

Respondent: General Director

Period: from 30/3/2011 to 5/7/2001

Stepwise approach: first 1000, next 1000  and so on (~ 4200calls)Total responses: 2025

Employment: 317.000 personsAverage number of employees: 140 people

Total turnover 2009: € 68 billion

Sufficient sample from all regions

Regions Responses  %

Attica 715 35,3%

Central Macedonia 270 13,3%

Thessaly 155 7,7%

Crete 144 7,1%

Eastern Macedonia and Thrace 127 6,3%

Western Greece 122 6,0%

Central Greece 110 5,4%

Peloponnese 98 4,8%

South Aegean 92 4,5%

Epirus 61 3,0%

Western Macedonia 54 2,7%

Ionian Islands 45 2,2%

North Aegean 32 1,6%

Total 2025 100,0%

Industries and Wholesale / Retail Trade: 75% of responses

SectorsΑπαντήσε

ις  %

Wholesale / Retail Trade 740 36,5%

Manufacturing 688 34,0%

Hotels and restaurants 143 7,1%

Construction 109 5,4%

Business Services (financial, real estate, telecoms, transport) 98 4,8%

Primary sector 72 3,6%

Consulting services 70 3,5%

Other services (entertainment, recreation, education, health services) 54 2,7%

IT Companies 51 2,5%

Total 2025 100,0%

Size: 46% employ over 50 employees

Companies %

1-10 employees 248 12,2%

11-49 employees 849 41,9%

50-249 employees 713 35,2%Over 250 employees

215 10,6%

Total 2025 100,0%

So in fact more than half of the largest firms at the national and regional level in Greece employ less than 50 persons

Conceptual Framework: Business Development

Main Results of the Survey

The role of investmentsGood financial results support investments:

Two out of three companies that invest> € 1 million in 2011-2012 made large investments also in 2009-2010

73% of companies that invest  in 2011-2012 had profits in 2010

63% of companies that invest  in 2011-2012  over € 1 million estimate that in 2011 sales will rise or remain stable

Exports lead to investments because companies have to keep up with global competition70% of exporting companies  invested  in 2009-

2010, primarily in capital equipmentLinks with universities, research centers and

participation in research projects boost investments14

The role of investmentsInvestments support innovation of any kind

(product, process, marketing)71% of companies that introduced product

innovation ...73% of firms that introduced process

innovation and ...63% of companies that introduced organizational

innovation ...

... Made significant investments in the two previous years

The role of innovationInnovation and especially process

innovation supports exportsBasic requirements / conditions are:

Increased technological capabilities of firmsHigh response in changes in demand, flexible

production, modernizationAction research planNetworks with research centers, participation in

research programsKnowledge of demand

Cooperation  with suppliers, customers, competitors, etc.

The role of exportsExports boost financial results (sales and profits)

All exporting companies that estimatean increase in exports in 2011 declare an increase in sales as well

Exports are facilitated byTheir size of firms (60% of exporting companies are large

firms)Their organizational structure

Use of management systems (information systems, project management mechanisms etc.)79% of exporting companies use information

management systemsQuality management systems and environmental

approvals68% of exporting companies use quality

management systems

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Evaluation Forecast

Financial Results

Decline (2010/2009) Negative forecast (2011): Further reduction in sales

Decrease in Sales by 11%  Limited profits in most businesses, large losses in few

Further decrease in sales by 7% in 201152.3% of companies estimate further decrease in  sales

Only 18% of companies estimate an increase in sales

Exports

Still plenty of room for improvement

Positive forecasts for 2011

About 45% of firms have exports (70% in the manufacturing sector)

 The volume of exports is amounts 30% of total sales

54% of exporting companies estimate that they increased exports in 2011

87% of them however believe that the increase will me less than 10%

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Evaluation Forecast

Investments

Significant volume of investment  (2009-2010)

Decline in investments (2011-2012)

5,16 billion Euros have been invested    Mainly for purchasing new or replacing existing equipmentHighest average investment (7.6 million €) in manufacturing

Significant decline in investments, both in terms of plans and in terms of volumeInvestment plans are only half of the precious years, total investments reduced by 40% Smaller  decrease in investments in manufacturing (-29%)

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Innovative performance

Product Innovation

50% of the firms made a product innovation (2009-2010)Type of innovation: new to the firm (69% of the firms) or new for the Greek market (50%)13% of total sales comes from those innovative products

Process Innovation

One company out of three have adopted process innovation mainly on production processes (70%) and ICT (50%)

Organizationa; / Marketing Innovation

38% of companiesmainly on selling methods (70%)

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Capabilities

Technological Capabilities Generation of new knowledge

Rapid response to changes in demand (2 out of 3 companies)More difficult the switch among different productsLess  than half the sample are flexible enough for the production of different productsGood technological background on production

More than 50% can significantly advance their technological base but they use technology as a commodity: turn key solutions from abroad

Poor results in R&D activitiesAlthough half of the firms respond that they undertake some sort of R& D activities, most of them do not have a unique special R&D department Basic sources of knowledge in most businesses: customers and suppliers Low involvement in research projects, working with consultants, conferences, etc

Human Resource Management

Employment HR Policy 

37% of companies bear difficulties in finding suitable candidatesMainly because the candidates do not meet the requirements of the position36% of companies face skill deficits in the existing staff. Basic lags in:Initiatives and risk takingTechnical knowledge required for the job

¾ of companies implement training programsMainly internal programs training, but also financed seminars outside the company

So, there are not only soft skills missing, but also real technical knowledge related to the workplace responsibilities

Degree of exposure to the crisis’ characteristics: common problems in the majority of sectors

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Because suppliers/customers face liquidity problems (48,7% of the firms responded that they feel exposed to the

specific factor)

Because banks do not approve new loans (36%)

Because demand from the main customer has been reduced (mainly in the construction sector) (29%)

Due to a shift in demand towards cheaper categories (hotels – restaurants) (23%)

Liquidity lack

Due to increased pressure from foreign suppliers for cash payments (mainly in manufacturing) (22%)

Firms’ response to the crisis in the next 12 months

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Restraint/ decrease of employees’ wages (69% of the firms will probably

follow the strategy)

Reductions in premiums and bonuses (44%)

Reduction of employees’ indirect benefits (43%)

Adjustment of working time (34%)

Actions

Price reductions (34%)

Reduce personel (28%)

Typologies of Business Behaviors

Classification : Economic PerformanceTypology Category A: the

«established»Category B: the «in

crisis» (mixed trends)Category C: The «problematic»

Identification

Profits 2010/2011 and sales’ increase in 2011/2010:

573 firms

(28,3% of the sample)

1Β : profits 2010 or/and 2011, but sales’ decrease (19,7%) 2Β : profits in 2010, (32,3%,):

1052 firms(52,0% of the sample)

Losses in 2010 and 2011:

400 firms (19,8% of the sample)

Differences

55% export-oriented61% expect exports’ increase in 201110% bank financing problems54% product innovation, 37% process, 43% organizational

45% export-oriented53% expect exports’ increase in 201120% bank financing problems49% product innovation, 31% process, , 39% organizational

38% export-oriented42% expect exports’ increase in 201140% bank financing problems42% product innovation, 25% process, , 32% organizational

Classification: Technological Performance & Innovative

Typology Category A: the «high innovation-intensive»

Category B: the «middle innovation-intensive»

Category C: the «low innovation-intensive»

Identification

Product innovation and process innovation:

443 firms (21,9% of the sample)

984 firms (48,6% of the sample)

No innovation

598 firms (29,5% of the sample)

Differences

61% large firms86% applies vocational education and training30% conducts some R&D in house

46% large firms 79% applies vocational education and training25% conducts some R&D in house

33% large firms 60% applies vocational education and training14% conducts some R&D in house

Classification : Human Resource Education & Training

TypologyCategory A: the «high education-intensive»

Category B: the «middle education-intensive»

Category C: the «low education-intensive»

Identification

Appliance of all kinds of formal and informal education:

591 enterprises (29,2%)

Mainly informal education forms:

933 enterprises (46,1%)

No educational program at all:

501 enterprises (24,7%)

Differences

50% export-oriented59% exports’ increase in 2011 6,4% exports’ decrease in 2011 16% bank financing problems

48% export-oriented55% exports’ increase in 20118,3% exports’ decrease in 2011 22% bank financing problems

41% export-oriented45% exports’ increase in 201114% exports’ decrease in 2011 28% bank financing problems

Firms’ size a determinant for…

The innovation performance of each typeExportsInvestmentsThe level of exposure to the economic crisis and

the ways of response to itThe implementation of management practices and

the possession of quality certificatesThe EXCELLENCE (?)

The “excellent ones” (ΑΑΑ!!): 70 firms

ΑΑΑ

70% large firms

Use of integrated information systems

half of them in Attica

mainly manufacturing

Official staff assessment procedures Smoother reaction to the crisis, mainly through wages’ restraint

Wider use of management practices

Wider use of quality management systems

Conclusions

Conclusions...The current crisis is decisive for the strategic identity of the

largest firms in the country

Increasing pressure from shrinking domestic demand, credit crunch, lack of liquidity in the whole value chain of the firms

Poor economic performance that threatens firms’ viability

Growing uncertainties

Result: Investing climate deterioration, constant efforts for operational cost reductions

Conclusions...Enterprises intensify their efforts to support their revenues

through exports

But: extroversion is not easy

Knowledge of markets, quality, flexibility, technological skills and advanced human capital are required

Investments in technology, modern equipment and “difficult” innovation are required

Synergies with other businesses of complementary or similar sectors for scale economies Focus on market niches at the global level

Main question todayUnder a fiscal consolidation process, what

are the requirements for a restarting of the growth of the economy?Beyond the macroeconomic management, is it

necessary to develop a connection between technology/innovation, institutions’ quality and productive structures

We seek for qualitative development focusing on knowledge, technology, innovation, focusing on knowledge-intensive entrepreneurship and the support of an intelligent, effective and Public Sector.

A new social deal, a coordination of public policies and strategic management of the implementation

Growth policy: Towards a new Social Deal based on knowledge and technology

Systematic use of the new knowledge produced.Incorporation and operational use of ICT technologies

everywhere,Coupling the production process with environmental

protection and efficient use of resources (energy, raw materials, materials, etc.).

Encouragement of the entrepreneurship based on quality, research and use of knowledge and innovation.

Strengthening of production and technology ecosystems.Promotion of the extroversion of the Greek economy

through a strategy of focusing on market niches at a global scale, escpecially for manufacturing SMEs.

The public sector as a smart user: procurements based on innovations, “green” and smart solutions, etc.

Growth policy: Towards a new Social Deal based on knowledge and technology

Development of network digital infrastructures of the next generation.

Systematic effort to attract foreign investments at the production and infrastructure level that will allow the efficient use of innovation and knowledge

Promotion of innovation as a way of thinking and acting (knowledge transfer networks and experience encoding, innovation competition, etc.)

Treatment of side effects and gaps (social, technological, educational, peripheral etc.) that arise as results of productive restructuring and technological modernization

Beyond the sectoral approach at the perception of the “ecosystem”The transfer of the ecosystem at the analysis of

value chain and related socio-economic processes .

Technical-socioeconomic ecosystems.

The role of actors and stakeholders. Broad range.

Interactions between organizations and symbiotic relations for the creation of knowledge.

The role of actors and the exigent demand.

Platforms, learning, knowledge and innovation networks.

Examples of ecosystems

The ecosystem of Information and Communication Technologies

The agro-bio-nutritionalThe environmentalThe constructions’ (projects, materials,

insulators, bioclimatic, smart buildings..)

Energy (production and demand management..)

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The organization and the strategic management of the implementation matters a lot

Policy system. Consolidation and integration of measures, interventions and actions. Timing.

Public debate agenda configuration. Development is a process of mobilization of resources, humans, groups etc.

Strong coordination but decentralized implementation

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Thank you for your attentionThank you for your attention

For information concerning the project:

Aggelos Tsakanikas atsakanikas@iobe.gr

Tel: 210-9211265