INSME's Interviews

INSME: Mr. Arzeni, you are the Director of the OECD Centre for Entrepreneurship, SMEs and Local Development, a newly-established centre that brings together the experiences of two long-established OECD initiatives: the LEED Programme (Local Economic and Employment Development Programme) and the OECD Small and Medium-Sized Enterprises and Entrepreneurship Division.
Can you tell us what the objectives of this Centre are? And above all, can you highlight the role of this iniative in the framework of the OECD's strategy to support SMEs?

Mr. Arzeni: The OECD Centre for Entrepreneurship, SMEs and Local Development has its roots in the Bologna Process and is the concrete and operating answer to the outcomes of the two OECD Ministerial Conferences on Small and Medium-Sized Enterprises, the Bologna Conference held in 2000 and the Istanbul Conference held in 2004.

The Centre was officially launched on July 1, 2004, not even a month after the Second Ministerial Conference [Istanbul Conference]. The connection is obvious and the Centre was created to give visibility at international level to the role that new and small entreprises play in fostering job creation, competitiveness and innovation. In doing this, we too innovated the OECD from within.

INSME: In which way?

Mr. Arzeni: By encouraging horizontal work. That is by giving up the silo syndrome approach.

Let's consider the traditional way in which national governments work and operate. There are different ministries: the ministry of economy, the ministry of labour, the ministry of welfare and so on. Each of them competes for the funds allocated by the Parliament. They individually plan and put their initiatives into practice, without creating any satisfying synergies and agreements with the others. The point is that as long as funds are abundant this system will work, but when resources decrease, it won't work anymore and will result in inefficiencies.

This is exactly what happens nowadays. As a matter of fact we are going through a generalised macroeconomic trend of tax reduction: in every country, citizens want to pay lower taxes and governments want to reduce fiscal pressure. But in order to reduce taxes without reducing services to the citizens, it is necessary to improve services' efficiency and in order to improve services' efficiency, it is necessary to avoid duplications, to avoid competition among different ministries.

Above all, it is necessary to act according to principles of decentralization and devolution of responsibilities, as many countries already do. In fact, revitalising a town, a region or an urban area using the allocations of a sole ministry is out of question. In this context, partnerships and horizontal usage of allocations are essential.

INSME: Let's also say that in this approach of horizontal exchange, co-ordination plays an essential role but it also becomes more complicated and difficult...

Mr. Arzeni: It's difficult mainly because who has money doesn't want to be coordinated by who has none and in general who has no money thinks of taking up a role by trying to coordinate those who have money. This is one of the classic examples of why coordination doesn't work: usually the coordinator is the wrong person, the less important one.

INSME: So, how can this failure be overcome? Referring to the centre that you manage, how did you try to overcome it?

Mr. Arzeni: By creating the OECD Centre for Entrepreneurship, SMEs and Local Development we wanted to stress first of all the importance that entrepreneurship and small enterprises have for local and regional development, following a trend of decentralisation and new organisation of powers in almost all OECD countries.

Secondly, we created a mechanism, a steering group (that was experienced at the Bologna and Istanbul Conferences), to which all OECD Directorates were associated in order to give their contributions. All Directorates were called to cooperate to a single goal: entrepreneurship and small enterprise.

This permanent structure [the Centre for Entrepreneurship] was created in order to give continuity to this horizontal cooperation on a specific goal. This is the meaning of the organisational innovation operated by the OECD.

Therefore, the message we want to give to the OECD countries is the following: if you want to do the same things with less money, if you want to supply the same services while reducing resources, you have to innovate your modus operandi, both at institutional and organisational level.

INSME: Which initiatives have been adopted in order to translate this message into tangible and concrete results? Could you give us examples of countries that best implemented this approach?

Mr. Arzeni: INSME is a paradigmatic example of this institutional innovation. The fulfilment of a need coming from the recent economic evolution has been pursued not by creating a governmental institution, but an association, marked by less convoluted and more simplified mechanisms.

At national level, we cannot make a definitive evaluation yet. Moreover, countries do not act in a univocal way. However a few changes going in the same direction can be quoted. For example, in Sweden and Germany the Ministry of Economy and the Ministry of Labour have been merged. In Ireland, the same thing happened. In Italy, the Ministry of Industry became Ministry of Productive Activities and the Ministry of Labour became Ministry of Welfare.

Another example of change in the course is given by the fact that today, in order to revitalise the economy, we do not talk about supporting big national industrial enterprises and giving state aids to enterprises. Instead we talk about policies aimed at fostering entrepreneurship in small enterprises and about active labour policies.

INSME: And this surely affects the way of innovating...

Mr. Arzeni: Surely. As a matter of fact "radical" innovations are mainly made by small and medium-sized enterprises, not by big companies, which are mainly concerned with "routine" innovations. And we expect young people, with their creativity, to give the economy a new thrust. The progressive obsolescence of innovation we are witnessing in Europe is also due to the researchers' high average age (around 45/50 years old). Thus, we have to encourage young people to enter the market. After all, Steve Dell and Bill Gates, at the beginning of their careers, didn't have significant economic possibilities, neither did they consider licensing. Nonetheless, they acted in an environment characterised by mechanisms that made them grow and that allowed them to enter the market. We have to foster this kind of mechanisms.

INSME: This focus on young people characterises the OECD too. We have noticed several initiatives related to the encouragement of young people's enterepreneurship. Could you tell us more about it?

Mr. Arzeni: The LEED Programme was especially concerned with young people's entrepreneurship. In doing so, it has filled a void left by national governments, that all say to care about small enterprises and entrepreneuship, but when it comes to investing in young people's entrepreneurship, they become hostile. Investing in young people's entrepreneurship means investing in something uncertain, as young people by definition do not have a past, a track record. Governments, instead, are not willing to invest in what seems manifestly uncertain. They prefer to be certain about results and believe that investing in big enterprises is safer because they have more of a track record.

This is the exact opposite of the culture of entrepreneurship, innovation and small enterprise. This culture states that your future depends on you and not on somebody else. The OECD had already warned several countries on this issue for a long time.

INSME: Which countries for instance?

Mr. Arzeni: Germany. From 1992 to 2003, 1,300 billion euros (more than 100 billion per year) have been transferred from West to East Germany. As to make a comparison, East Germany has approximately 15 millions inhabitants, Southern Italy has 36 and in 40 years has received only a quarter of the amount received in 10 years by East Germany, which has half the population. This is just to get the idea of the measure implemented, that mainly supported incomes and infrastructures. Supporting income means paying unemployment benefits to unemployed people, just to put it clear. And this has nourished a culture of dependence, which is the exact opposite of the entrepreneurship culture.

As a result, today Germany is Europe's ailing nation and the German model faces considerable obstacles. Difficulties are not confined to Germany. Given the importance Germany has in continental Europe, countries such as France and Italy are affected too.

INSME: Are there any "virtuous" countries, that is countries that have adopted measures correctly interpreting the OECD's directions on entrepreneurship and SMEs issues?

Mr. Arzeni: Yes, there are. Ireland for instance.

Ireland is well performing. It has reached full employment and is a champion in attracting talented people. 10 years ago, Ireland created 38 county enterprise boards, which represents local partnerships aimed at stimulating the link, the interaction between managers of foreign enterprises that had invested in Ireland and local entrepreneurs, civil society and authorities.

The Irish realised that in the 80s they had been successfull in attracting foreign investments, but these investments had a low impact on the creation of employment, because they were a sort of ivory towers laid on the territory. As a consequence the Irish government created a bridging mechanism between endogenous and exogenous investments. This proved to be a virtuous mechanism, since the partnerships I mentioned before have contributed to give a thrust, a very strong push to the economy.

Today enterprises' competitiveness depends more and more on the competitiveness of the territory on which they are located.

INSME: Talking about INSME, you have followed all the phases in the life of the INSME Network, from when it was born as an informal community to its formal establishment as an association. How would you evaluate this evolution? What would you suggest for its future development?

Mr. Arzeni: I believe that this "network of networks" mechanism that INSME has is a useful tool and a value per se. Becoming a formal recognised association is the starting point of a path that, grounding on this value, now has to aim to ahieve tangible results.

In other words INSME should design specific products able to generate added value and economic return. As far as I can see, a number of alliances representing a good starting point for such a kind of evolution have been already established.