SME CONTENT
Prof. dr. Vincent Molly – AY 24-25
TABLE OF CONTENTS
Chapter 0: Course content 4
Course positioning and aim 4
Content 4
Exam 4
Chapter 1: Introduction 5
Entrepreneurship 5
BMW case study 6
Introduction to CSC 6
3 horizons 7
Chapter 2: SMEs perspective 8
Definition and importance of SMEs 8
European definition of SMEs 8
European QUANTITATIVE definition of SMEs 8
US definition of SMEs 8
QUALITATIVE characteristics of SMEs 9
Small versus Large 9
Importance of SMEs 9
SME success and failure 10
Are small firms more vulnerable to failure than large firms? 10
What are the causes of failure among established SMEs? 10
SME main challenges 11
SME research Belgium (2020) 11
Governance 12
SME research EU (2020-2021) 14
SME research OECD (2020-2021) 14
EU Small Business Act 14
SME research OECD (2020-2021) 15
Business financing 15
SME innovation 16
Business financing – innovation 16
Innovation 16
SME research OECD (2020-2021) 17
1
, Open innovation research 17
Corporate entrepreneurship research 18
Chapter 3: FBs perspective 19
Introduction 19
Introduction 19
FB uniqueness 20
FB uniqueness 20
A Socioemotional wealth approach to family business 21
FB strengths and weaknesses 21
FBs and innovation 22
FB innovation 23
SEW and innovation 23
FB succession 23
FB succession 23
FB succession and innovation 26
Uniting the past and the future 27
FB history 27
Long-lived FBs 28
Uniting the past and the future 28
Outro 29
Chapter 4: SUs perspective 30
Definition of start-ups and scale-ups 30
Importance of start-ups and scale-ups 30
Who are the people who start up a company 31
Entrepreneurship myths 32
Entrepreneur ≠ manager 32
Who are the people who start up buy a company 32
What makes startups successful? 32
What are the main challenges of startups? 33
Financing of startups 34
Private equity and venture capital 36
Outro - Cooperation of startups 38
Chapter 5: Deep dive into CSC 39
Rise of corporate venturing 39
Defining and modeling CV 42
CV models 43
CV differentiators 45
2
, CV types 46
4 bridges 47
Motives for CV 47
Why CV – corporates 48
Why CV – start-ups 48
Theoretical perspectives 49
Common theoretical perspectives 49
Gaps in theory and practice 50
Insights from research 50
FB-CV research 51
Gaps in practice 51
Empirical research 52
Empirical research 52
Case: CV in pharma industry [Skip for exam] 55
Chapter 6: Kickstarting your CSC 58
Empirical research 58
CSC types 58
Kickstart your CSC 58
1.1 NETWORK EVENTS 58
1.2 CO-ORGANISE OR SPONSOR EVENTS 59
1.3 SCOUTING MISSION 60
1.4 SHARING RESOURCES 60
2.1 STARTUP CHALLENGES & AWARDS 61
2.2 HACKATHONS 62
2.3 MENTORING & ADVISORY 63
2.4 VENTURE CLIENTS 64
3.1 CO-DEVELOPMENT PROJECTS 65
3.2 STRATEGIC PARTNERSHIPS 66
3.3 LICENSING 67
4.1 INCUBATOR & ACCELERATOR 67
4.2 STARTUP STUDIO (SAAS – EXCUBATOR) 68
5. CVC, Joint Ventures and Acquisitions 69
Outro 71
3
,CHAPTER 0: COURSE CONTENT
COURSE POSITIONING AND AIM
Strategy
SMEs &
Entrepeneurship
Innovation Entrepeneurship
• The course ‘SMEs & Entrepreneurship’ can be situated at the intersection of entrepreneurship,
strategy and innovation, while focusing on the specific context of SMEs, startups and family
businesses.
• We critically reflect on the main characteristics and challenges of these firms and their main actors.
Starting from academic research and insights from practice we investigate how the uniqueness and
strengths of these firms can be united through strategic collaboration in order to support their
survival and continue their legacy.
CONTENT
• The world of SMEs, Family businesses and startups
• Deep dive into the Corporate Startup Collaboration (CSC)
• Strategic collaboration between SMEs/Family businesses and startups
EXAM
• Written
• Closed book
• Examining insight and ability to apply the learning content
• Open questions
• Try to be complete
• Quotation: 10 points
4
,CHAPTER 1: INTRODUCTION
ENTREPRENEURSHIP
Entrepreneurship →“Entrepreneurship refers primarily to an economic function that is carried out by
individuals, entrepreneurs, acting independently or within organizations, to
perceive and create new opportunities and to introduce their ideas into the market,
under uncertainty, by making decisions about location, product design, resource
use, institutions, and reward systems.
The entrepreneurial activity and the entrepreneurial ventures are influenced by the
socioeconomic environment and result ultimately in economic growth and human
welfare.”
→Entrepreneurship encompasses acts of organizational creation, renewal, or
innovation that occur within or outside an existing organization.
→Entrepreneurs are individuals or groups of individuals, acting independently or as
part of a corporate system, who create new organizations, or instigate renewal or
innovation within an existing organization.
Entrepreneurship:
• Nascent entrepreneurship
• New entrepreneurs (new enterprise or take-over of an existing enterprise)
• Serial entrepreneurs and portfolio entrepreneurs
• Habitual entrepreneurs (serial and portfolio entrepreneurs)
• Accidental entrepreneurs / Fuckupreneurs / Authorpreneurs / …
• Large entrepreneurship (building a business with a growth-oriented strategy)
vs.
Small entrepreneurship (independents with their own business)
• Interpreneurship
(familiness = unique competences and means as a consequence of family involvement and interaction between family
members)
• Intrapreneurship
5
,BMW CASE STUDY
→See slides 8-13
BMW case study - Questions
• Why would BMW look outside their company for innovation?
• What are the advantages for BMW to join forces with startups?
• What are the advantages for startups to join forces with BMW?
• What would be some important selection criteria for BMW?
• What is the key to a successful partnership?
→See slides 15-19
BMW case study - Questions
• Why would BMW look outside their company for innovation?
• What are the advantages for BMW to join forces with startups?
• What are the advantages for startups to join forces with BMW?
• What would be some important selection criteria for BMW?
• What is the key to a successful partnership?
INTRODUCTION TO CSC
6
,3 HORIZONS
Three Horizons model → is still very useful as a shorthand for prioritizing innovation initiatives.
And even today, some Horizon 3 disruptions do take long periods of development.
However, the trap of the Three Horizon model is not recognizing that today many
disruptions can be rapidly implemented…
→See slide 27
7
,CHAPTER 2: SMES PERSPECTIVE
DEFINITION AND IMPORTANCE OF SMES
EUROPEAN DEFINITION OF SMES
Commission Recommendation 2003/361/EC: official definition of SME which took effect on 1 January 2005
SME = Micro, small and medium-sized enterprises (SMEs) are the engine of the European economy.
→They are an essential source of jobs, create entrepreneurial spirit and innovation in the EU and are
thus crucial for fostering competitiveness and employment.
→The new SME definition, which entered into force on 1 January 2005, represents a major step
towards an improved business environment for SMEs and aims at promoting entrepreneurship,
investments and growth.
→This definition has been elaborated after broad consultations with the stakeholders involved which
proves that listening to SMEs is a key towards the successful implementation of the Lisbon goals
(Günter Verheugen, Member of the European Commission, Responsible for Enterprise and Industry)
→SME’s are crucial for fostering competitiveness and employment.
Listening to SME’s is key towards the successful implementation of the Lisbon goals.
EUROPEAN QUANTITATIVE DEFINITION OF SMES
# Employees (FTE) Turnover or Balance sheet
Micro < 10 <= 2 million <= 2 million
Small 10 until 49 <= 10 million <= 10 million
Medium-sized 50-249 <= 50 million <= 43 million
Qualitative characteristics of SME’s:
- More difficult to access finance
- Shares are not usually publicly traded
- Not developed management team – flat organizational structure
- More difficult to influence environment
→SME shareholder characteristics: limited number, know each other, personal lifelong relationships, shares important part of
wealth, difficult to exit, different types of owners.
US DEFINITION OF SMES
• No universally accepted definition of an SME
• Relative nature of the “small” and “medium” size in different sectors
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,QUALITATIVE CHARACTERISTICS OF SMES
• Often no separation between ownership and management
• Overlap between private and business issues
• More difficult access to finance
• Shares of SMEs are usually not publicly traded
• No developed management team – flat organisational structure
• More flexible and faster decision making
• More difficult to influence environment
SME shareholder characteristics:
• Limited number
• Know each other
• Personal (lifelong) relationships
• Shares important part of wealth
• Difficult exit
• Different type of owners (active, passive,…)
SMALL VERSUS LARGE
Schumacher: Small is beautiful (1973)
• Reaction against adoration of large corporations
• Instead small and large
• Republished in 2011 by Vintage:
“The revolutionary ideas are as pertinent, inspirational and thought-provoking today as when they
were first published in 1973”
↔️ The Economist , March 2012:”Small is not beautiful”
• Adoration of small corporations goes against economic reality
• Large enterprises more productive, paying higher wages and taxes
• Too many small enterprises cause of (growth) crisis in Southern European countries
Too many SE cause growth crisis in southern European countries
Even if the number of companies in the EU compared to the US are similar in percentage, the difference is made at the number of
employees: in US we can see a big difference in the people hire in large enterprises.
Which from the Economist perspective it is an important taxes and revenue source for the economy.
Risk of failure decreases if a company gets larger. Be careful not to confuse exit with failure.
IMPORTANCE OF SMES
Absolute and relative EU figures:
9
, SME SUCCESS AND FAILURE
ARE SMALL FIRMS MORE VULNERABLE TO FAILURE THAN LARGE FIRMS?
Failure rate
Belgium
2,00%
1,80%
1,60%
1,40%
1,20%
1,00%
0,80%
0,60%
0,40%
0,20%
0,00%
0 - 9 employees 10 - 49 employees 50 - 249 employees
2012 2017 2021 2022
WHAT ARE THE CAUSES OF FAILURE AMONG ESTABLISHED SMES?
Distinction between three factors:
1. Internal: under the control of management: lack of strategic management
2. External: beyond management control: customers’ default of payment
3. Personal: characteristics of the business leader/owner: financial, conflict, leadership style,…
Causes of failure according to liquidators:
• Internal: lack of financial and strategic management
Self-employed business people are good in their profession, but they usually know little or anything about the administrative part behind their business.
In addition, law and regulations are constantly changing and because they don’t have the time and knowledge for it, they depend on others.
For that reason they risk that others (accountants, bankers, …) will make the wrong choices for them or that they get in contact with the wrong people
• External: direct competition of large firms
• Personal: divorce and conflict between business partners
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