A small group of innovative, high-growth enterprises, representing 2 to 6 per cent of the business population, plays a disproportionately large role in innovation, structural change, and sustainable development more broadly. Their potential as drivers of experimentation with the ideas needed to build a sustainable foundation for development is even more salient in countries with economies in transition, such as those of Eastern Europe and South Caucasus (EESC), and even more so in the context of rapid technological change and shocks such as the social and economic effects of the COVID-19 pandemic.
Making the most of this potential is therefore high on the policy agenda in the EESC region, where, as UNECE and OECD research shows, there are very few such innovative, high growth enterprises (IHGEs). Removing obstacles for and directly promoting such entrepreneurs effectively, especially in the context of limited and declining fiscal resources, requires EESC policy makers to rethink and scale up policies and instruments for small and medium-sized enterprises (SMEs) and private sector development that target the specific needs of this important group.
To back and guide these efforts, UNECE, in cooperation with the Organisation for Economic Co-operation and Development (OECD), and with financial contribution of Sweden, is supporting EESC policy makers. In two webinars on 15 and 17 September, officials, stakeholders, and experts from the region discussed their experience in designing effective state support mechanisms and in facilitating access to finance. The webinars also identified recommendations and best practices, based in part on the initial findings of the UNECE Handbook on Supporting Innovative High Growth Enterprises in Eastern Europe and the South Caucasus region (forthcoming). Among the leading insights are:
- Understanding IHGEs is essential to design the right mechanisms for public support. This requires good, reliable data and the institutions and processes that use that data continuously to inform decisions.
- As IHGEs are particularly vulnerable to changes and unexpected effects of the nature and enforcement of regulation on labour markets, product standards, and intellectual property, the EESC region needs to ensure continuous improvement in the business environment.
- Innovation is, by its very nature, risky – but risk capital markets in the region are non-existent or nascent. Governments need to work both on adapting the legal framework and enabling, promoting, and in some cases cautiously investing in venture capital for IHGEs.
- Broad SME policies fall short of meeting the needs of IHGEs. governments should get to know potential IHGEs well and design targeted support packages to meet their needs effectively.
- Investment in IHGEs could be successfully carried out at the regional level, benefiting from a larger pool of talent, opportunities, demand, and risk finance. Participants called for a regional initiative to catalyse risk capital for IHGEs through an EESC fund to which both governments, international financial institutions, and private investors contribute.
UNECE will present the Handbook on Supporting Innovative High Growth Enterprises in Eastern Europe and the South Caucasus region, at an online event in December 2020.
To find out more about the webinar series on 15 and 17 September, please, click here.