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Innovations and Financing of SMEs Part II: Case Study of German SMEs in 2010
Abstract
Financing is one of the most critical boundaries for the establishment and growth of a Small and Medium-sized Enterprise: SME (Moore, 1993). This chapter describes traditional and non-traditional financing opportunities for SMEs in Germany by focusing on its applicability. The disclosure of financial business information and giving a say to an equity financier is a difficult topic for owners of Small and Medium-sized Enterprises (SMEs), because these companies are often run as a ‘one-man-show’ (by a single manager) and this person identifies itself with the company. The request for external funds is in that perspective still regarded as a disability of a business to be self-financed. A comparison of the organisational structure of a SME and that of a Large Scale Enterprise (LSE) reveals the structural weaknesses in terms of research and development (R&D) activities. While LSE have an extra department, budget and procedures to develop product and process innovations similarly to a knowledge push, in SMEs, innovations are often originated from customers—similarly to a need pull process (Tidd & Bessant, 2009). Furthermore, CEOs and customer contribute to a great extend to innovations in SMEs (BDI, 2010). The results of an online-based survey presented in the BDI-Mittelstandspanel 2010, show that less than 13% of innovations are originated by external scientists, R&D organisations and consultants. This proofs that external R&D sources (to compensate missing internal resources and structures) are rarely employed; impeding or slowing down the development of innovations.
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