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THE majority of small-medium enterprises (SMEs) in Singapore are not engaged in innovation, despite calls to sharpen competitiveness and increase productivity in the midst of a slowing economy.
Only about half or less of SMEs are trying to innovate, with less than 35 per cent having invested in innovation in the past two years, according to survey findings by the Singapore Chinese Chamber of Commerce & Industry (SCCCI).
The survey is a partnership between SCCCI and NUS Business School's associate professor Sarah Cheah. It gathered responses from 233 SMEs from April to June this year.
While it found that SMEs across all sectors are open to innovation, they are relatively weaker in converting and implementing ideas.
Thomas Chua, president of the SCCCI, says that the results were "not a surprise", observing that many SMEs are bo chap (nonchalant in Hokkien) about innovation.
Shortage of funds was the biggest obstacle for SMEs to invest in innovation, at 60.5 per cent followed by difficulty in finding the right partners for innovation, at 58.8 per cent. Other problems that SMEs face in their quest to innovate include difficulty in getting qualified workforce locally (56.2 per cent) and uncertainty about the returns of investment (55.8 per cent).
Among the SMEs embarking on innovation, the majority are focusing on product or service innovation (51.5 per cent), rather than process innovation (43.8 per cent) or business model innovation (42.5 per cent).
The report also found that SMEs that innovate mostly choose to do it through their own in-house resources, rather than tying up with research institutes and universities or professional and industry associations.
Leong Teng Chau, SCCCI senior director of research & publications, says that there are two main factors that explain this.
Firstly, he believes that there is a gap between the research areas of institutes and the practical business needs of the SMEs.
Secondly, even if there is a match between what research institutes offer and what is relevant for SMEs, smaller firms generally don't have the in-house capabilities to operationalise the new technology and take the innovation to the next level.
While respondents identified the digital economy, big data analytics and the Internet-of-Things as the top emerging technologies that could affect them, SMEs are not too concerned about potential disruption, indicating that they only have a "moderate" impact on their businesses.
Among the government assistance schemes available for encouraging innovation, the Productivity and Innovation Credit (PIC) scheme remains dominant (54.5 per cent).
The PIC scheme's flexibility and ease of use were the biggest reasons for its popularity among SMEs.
In the report, SCCCI recommends that government agencies make their rules and regulations less rigid so that SMEs can be more flexible in their business operations.
It also proposed that the government develop schemes that are flexible and easy for SMEs to qualify and apply for, as well as more help in identifying suitable partners such as research institutes.
Mr Chua, however, cautioned SMEs against the over-reliance on any one government policy or grant, saying that "no scheme will last forever".
The expiry of the PIC scheme in 2018 was raised as an example. "It's to remind us that you need to be more pro-active and look at how you can apply that grant now rather than sitting back ... don't overly rely and get addicted. With or without a grant, it doesn't determine your success."
The SCCCI urged SMEs to have a mindset change to look beyond the current business model and innovate for long-term growth.
Mr Chua said: "Most of the SMEs focus on short-term goals while the long-term and sustainable business growth should be their main concern. In addition, disruptive technology may now have a direct impact on traditional sectors. So our SMEs should consider that innovation is their only way to survive."
He adds that SCCCI hopes to leverage on the Trade Association Hub (to be ready next year), as well as the chamber's various activities, to work together with government agencies and trade associations to cultivate an innovative mindset among SMEs and to boost capabilities.