Challenges of European SMEs in ICT-Enabled Global Collaboration: Results from A European Survey Karsten Gareis, Matti Vartiainen, Katarina Stanoevska-Slabova

Research questions What is the motivation for SMEs to engage in global collaboration? What strategies do they apply? How do SMEs exploit online collaboration tools to implement their globalisation strategies? Is there a association between application of online collaboration tools and performance? What are key problems SMEs face when engaging in global collaboration, and when applying global virtual collaboration?

Sampling frame: Sectors Sought: Industry sectors with a high likelihood of being engaged in international collaboration Selected: “High-tech manufacturing” (NACE 24.4, 30, 32, 33, 35.3). “Medium-high-tech manufacturing” (NACE 24-24.4, 29, 31, 34, 35.2, 35.4, 35.5). “Knowledge-intensive business services” (KIBS)(NACE 64, 72, 73, 74.1, 74.2, 74.3, 74.4).

Sampling frame: countries Finland Sweden U.K. Denmark Netherlands Belgium Germany Portugal

Survey design Sample size Interview methodology Unit of observation n=1015 completed interviews (70-160 per country) Response rate between 10%-30% Interview methodology Computer Aided Telephone Interviewing Unit of observation Only companies with 5-250 employees Only companies that engage in global activities Unit of response Owners / CEOs / Heads of R&D / Heads of international operations Execution: IPSOS

Framework for data collection

Goals of global collaboration (% “very important” and “important”, Base: Total sample) Get access to a foreign market 74.8% Follow important customers into foreign market 63.7% Observe international developments in industry 58.5% Increase the speed of development 51.5% Realise direct cost savings 47.8% Get access to new technology 43.2% Get access to highly-skilled labour & expertise 40.6% Key results: Traditional internationalisation goals still apply... ... but access to knowledge & expertise and increasing speed of development have become equally important. SMEs are often driven into global markets by clients. Participate in or manage global supply chain 39.3% Avoid regulatory barriers in home country 20.0% Get access to low wage labour 15.9% 10 20 30 40 50 60 70 80 90 100

Global collaboration: Locations of collaboration partners (% of total sample, multiple response) U.K. North America Portugal 57.0% non-EU Europe (incl. Switzerland, Norway) 56.7% Asia 56.0% Finland A country formerly belonging to the Soviet Union U.K. 34.3% Middle East 29.4% Africa 29.2% Latin America 27.7% Australia, New Zealand 27.2% 10 20 30 40 50 60 70 80 90 100

Use of communication tools for global collaboration (% of total sample, multiple response) E-mail 99.6% Any virtual collaboration tool (excl. e-mail) 83.3% Groupware 48.9% 43.0% Voice over IP applications Special websites for collaboration 38.9% Industry-specific collaboration tools 27.6% Video conferencing 23.3% Key results: E-mail is most widely used ICT for enabling collaboration ... ... but more advanced online tools have reached wide diffusion: 83% use at least one such tool. Groupware and other more established ICTs much more diffused than Web2.0 applications. Skype and other VoIP have quickly reached wide-scale uptake. Whiteboard applications 19.1% Social networking services 18.0% Wikis or knowledge blogs 12.9% 10 20 30 40 50 60 70 80 90 100

Use of communication tools for global collaboration (% “very important” and “important”, Base: all SMEs that use them) E-mail 100% users 97.0% Groupware 49% users 75.2% Industry-specific collaboration tools 28% users 72.1% Special websites for collaboration 39% users 68.4% Whiteboard applications 19% users 59.8% Voice over IP applications 43% users 58.3% Key results: Advanced online collaboration tools are not only used in the large majority of SMEs, but they are also considered of high or even vital importance. Groupware and other more established ICTs, as well as industry-specific solutions, are considered much more important than newer types of applications. Video conferencing 23% users 53.2% Wikis or knowledge blogs 13% users 44.3% Social networking services 18% users 39.3% 10 20 30 40 50 60 70 80 90 100

ICT support for global collaboration Online collaboration tools... (% “fully agree” and “rather agree”, Base: total sample, multiple response) ... support coordination of tasks within team 72.9% ... support learning & knowledge sharing 69.1% ... support exchange of opinions & joint decision making 61.8% ... enable negotiations without meeting face-to-face 57.8% ... support generation of ideas 52.3% Key results: Experience with online collaboration tools is generally positive. But many see shortcomings with regard to: bridging cultural differences; enabling negotiations without meeting face-to-face; supporting the generation of ideas; and creating trust within a team. ... create trust within the team 47.9% ... bridge cultural differences 43.2% 10 20 30 40 50 60 70 80 90 100

Problems encountered (% “very often”, “often” or “sometimes”, Base: Total sample, multiple response) Problems caused by language or cultural barriers 46.9% Difficulty of meeting face-to-face when necessary 43.7% Problems due to regulatory barriers in host countries 42.5% Difficulty of building trust between collaboration partners 41.5% Problems in organising work across time zones 36.4% Increasing stress among employees 36.0% Lack of interoperability of processes & ICT systems 35.4% Difficulty of making employees adapt their working times 28.2% Key results: Trust and confidence-building, especially across cultural and language barriers are major challenges in global collaboration. The problem is aggravated as face-to-face meetings become more difficult. Interestingly, stress among employees caused by global collaboration is not uncommon. Data secuity, privacy and IPR issues are least often mentioned. Problems regarding protection of Intellectual property 27.6% Problems regarding data security 22.6% Problems regarding data privacy 21.3% 10 20 30 40 50

Goal achievement (% “fully achieved” and “largely achieved”, Base: all SMEs that stated this goal) Get access to a foreign market 68.3% Follow important customers into foreign market 62.6% Observe international developments in industry 58.9% Get access to new technology 52.3% Get access to highly-skilled labour & expertise 49.3% Increase the speed of development 49.1% Realise direct cost savings 48.3% Key results: The large majority of SMEs report that they have been successful in meeting their globalisation goals. SMEs were successful, in particular, in accessing new foreign markets, in following clients/customers into new overseas markets, and in observing international developments in their industry. However, many SMEs report lack of success in realising cost savings (incl. accessing low cost sources of labour). In addition, participation in global supply chains appears to be problematic. Participate in or manage global supply chain 48.0% Get access to low wage labour 37.1% Avoid regulatory barriers in home country 32.9% 10 20 30 40 50 60 70 80 90 100

LogReg analysis: some results What explains the extent to which SMEs encounter problems in global collaboration? SMEs that were taken over by foreign companies are more likely to face problems. SMEs which collaborate with Africa or successor countries of the USSR more likely. SMEs which search for low-cost labour are more likely. What explains the extent to which SMEs encounter difficulties in establishing trust in global collaboration? The younger an SME, the more often difficulties. Intensive users of online collaboration tools more likely to experience dificulties.

Policy implications There appears to be a policy case for fostering uptake and effective use of online collaboration. Policy support to online collaboration needs be integrated into an overall strategy to boost SME innovation. SMEs that go global face problems in establishing and maintaining trust relationships – intensive use of online collaboration tools could even exercerbate such problems. Better tools and more effective organisational support needed!

Collaboration  Globalisation

Thank you for your attention! Contact: karsten.gareis@empirica.com www.empirica.com