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Accelerate the Reform of Science and Technology System to Facilitate the Transformation and Upgrading of Small and Medium-Sized Enterprises


By Ma Jun & Zong Fangyu, Research Team on "Key Areas for Innovative Development Basic Research" of DRC

Research Report No 108, 2013(Total 4357)

In China, the number of small and medium-sized enterprises (SMEs) accounts for 99% of the total number of enterprises, providing more than 80% of urban job opportunities and contributing about 60% of China's GDP. However, the overall development of SMEs remains at a lower level. Many SMEs participate in market competition with "high input, high energy consumption and high emission" and at "low cost, low prices and low profits". Employees are "badly paid, inaccessible to social security, faced with high labor intensity and poor working conditions". Thus, SMEs have become the focal and difficult point in China's economic transformation and upgrading.

Incompetence in technology research and development and in technology application is the key bottleneck encumbering the development of SMEs. Developed countries have set up technical service systems at large for SMEs. But in China, obstacles incurred from relevant systems and mechanisms have terribly weakened the technical service capabilities of SMEs. Accelerating the reform of the science and technology system to facilitate the transformation and upgrading of SMEs should be the primary task in present reform.

I. Technology Dilemma Faces the Transformation and Upgrading of SMEs

Practices of various countries in the world show that SMEs are confronted with technology plights at large. It is attributed to the nature of technologies as well as related to the features of SMEs. The main reasons are: one, incompetence has impeded the technological upgrading of SMEs. Most of them are incapable of setting up their own R&D institutions, and their purchase of technologies in the market is restricted by fund and personnel shortage. Two, information failure leads to market failure. Researches conducted by EU reveal that, on one hand, private enterprises are disinclined to offer technical service information owing to inadequate returns and, on the other, SMEs are less capable of acquiring, understanding and judging technical information. Information failure is the major problem facing these enterprises. Three, technology proliferation makes researchers reluctant to transfer technologies. Patent protection plays limited roles, and technology owners are inclined to use technologies to develop products to earn monopolist profits rather than use technology transfer to earn profits. Therefore, a good many SMEs are unable to conduct technology research and development and cannot have their technology needs met in the market. And four, the externality of technologies makes SMEs invest little in technology research and development. Researches made by developed countries show that the rate of return on R&D input by SMEs more than doubles the enterprises' rate of return. Thus, R&D input by SMEs is far from being ideal.

In China, small and medium-sized enterprises are confronted with worse technical dilemmas. Firstly, strength of China's SMEs is by far lower than developed countries, and their R&D and technology utilization capabilities are even poorer. Secondly, due to the imperfection of China's technology market, SMEs can easily gain advanced equipment in the market, such as the purchase of advanced equipment and computer systems with cash or by means of finance lease, but they can hardly acquire design techniques and technical skills. Thirdly, enterprises in China are confronted with the pressure of intellectual property rights. As China is making efforts to catch up with the developed countries, small and medium-sized enterprises in China are also trying to catch up with world advanced technologies and are mainly investing in mature technologies adopted by developed countries, whereas they are facing obstacles resulting from overseas intellectual property rights.

Public policies are a necessary means for helping SMEs get rid of technical difficulties. By energetically developing applied technology R&D institutions and intermediary technical service agencies, developed countries have achieved good results in increasing technology sources and improving technology-applying capabilities for small and medium-sized enterprises.  

II. Technical Service Experiences of Medium-Sized and Small Enterprises of Developed Countries

Take Germany and Japan as an example. Both countries have set up impeccable technical service systems for medium-sized and small enterprises and, to improve their defective R&D and technology-applying capabilities, both countries have guided R&D institutions to develop applied technologies for medium-sized and small enterprises and set up intermediary technical service agencies to enhance the ability of medium-sized and small enterprises to absorb technical capacities. The practices made by Germany and Japan are useful references for China to conduct microstructure construction and macro-policy management.

1. Development of applied technologies for serving small and medium-sized enterprises

Applied technology research and development agencies are a must for R&D-deficient small and medium-sized enterprises to gain access to needed technologies. In Germany and Japan, there are lots of independently-run applied technology research and development agencies that have provided loads of applied technologies for SMEs.

The applied technology research and development system runs perfectly in Germany. Among 750 research institutions supported by public finance, most are engaged in the development of applied technologies, including: 66 research institutes under Fraunhofer-Gesellschaft mainly funded by the federal government, 86 research institutes under the Leibniz-Gemeinschaft, 16 research centers under Helmholtz, 350 research institutions or so of colleges and universities jointly funded by the federal government and state governments, and 167 local research institutes funded by state governments. Applied technology research and development agencies in Germany are mostly nonprofit organizations, such as associations and foundations, which are highly independent and are diversely financed. A variety of mechanisms guide and inspire applied technology research and development institutions to develop technologies for small and medium-sized enterprises: Firstly, the R&D institutions will set the guideline of "providing technical services for enterprises" and, mostly, they will not commercialize the newly developed technologies but transfer them to other enterprises. Secondly, the R&D institutions will set up reasonable governance mechanisms, such as establishing councils dominated by a diversity of external members, or councils constituted by enterprise and industry representatives. The councils will command organizational development strategies and approve important matters, guarantee the implementation of organizational missions and guard against the control of the institution by insiders. Thirdly, government guidance is exercised by government officers participating in decision-making of the institutions as members of the councils and, more importantly, the government gives part of the funds to trade associations participated mainly by small and medium-sized enterprises for management and trade associations representing the demanders guide R&D institutions to cooperate with small and medium-sized enterprises by virtue of scientific research contracts. And fourthly, small and medium-sized enterprises in Germany are strong and often entrust scientific research institutions to develop technologies for enterprises.

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