CORDIS Archive

August
2002

Looking at SMEs from all sides

The Observatory of European SMEs, established and funded by the European Commission, has been reporting on Europe's SMEs for nine years. Now, to get its message over, it has abandoned generic annual reporting in favour of a series of thematic reports that enable policy-makers to better understand how SMEs operate and how they differ in member states. Rob van der Horst,(1) project director of the Observatory, talks to Euroabstracts.

Rob van der Horst: Yes. I have been involved since the beginning of the Observatory, in 1992, when it was under Directorate-General XXIII. At that time it was a small and not very powerful DG. So the impact of our project on policy-making was limited and the dissemination was rather weak. Things improved with the white paper on growth and competitiveness which had lots of references to SMEs.

We have produced a couple of dozen chapters regarding SMEs: looking for example at trade sectors; exporting; management in SMEs; and business education and training. There has also been progress with the quantity and quality of statistical data from Eurostat, which has improved a lot. At first they were not harmonised across member states, so the quality was variable. Now all member states use the same definition of SMEs and the quality of data has improved. With better data, the quality of our own work has improved.

A couple of years ago, the Commission decided to include in our reports a survey of SMEs. At first the size of the survey was rather low. But now it covers almost 8,000 SMEs in all countries covered by the project, in all sectors. That has been another major improvement in research.

The disadvantage in using Eurostat statistics is that they are always late, for reasons that are not Eurostat's fault. There are always delays of three or four years, as they wait for the data to arrive from member states. That is why we are always updating the Eurostat data and use other sources as well.

The Observatory is not the only information source for policy makers. The OECD is active in studying the SME sector and there are a number of other projects not commissioned by the Commission, such as the Grant Thornton report covering at least 25 countries and the Global Entrepreneurship Monitor (GEM) - report looking at new firms in each country.

Just how important is it for policy-makers to have your research?

I really do believe that you can't make policy without having proper research. Some policy-makers even now don't know what they are talking about when discussing SMEs. 99.8% of enterprises are SMEs and two-thirds of total employment is in SMEs. On average, in each SME there are just four people employed. This is important to take into account before you suggest policy. Then there must be a needs assessment for SMEs which should always be done by independent researchers. Research is an inevitable part of the game.

The Commission's SME envoy, Timo Summa, has spoken of the need for SMEs to influence EU policy-making at a much earlier stage than before. Do you see your research as the means for this to happen?

It is of the utmost importance to have the input of business associations in developing policy. There are always discussions with such European associations as UEAPME, UNICE, ESBA and Eurochambres, which are playing an important role in formulating policy. These business associations know the strengths and weaknesses of their members and the opportunities facing them. I would also encourage including trades unions in this process. Policy-makers need to remember to demonstrate a market failure before introducing a new policy measure.

Your research findings point up major differences in SME culture, performance and significance in different member states, and especially in the candidate countries. Does this limit the relevance of the research?

The idea of this Observatory is to collect all kinds of information about SMEs in all member states, whether quantitative or qualitative. More and more policy-makers at national level use our reports. I know this from several governments. They have looked at our reports to see what is happening in other countries and whether they can learn from them.

Cultural and socio-economic differences make it difficult to compare data, which is why we have an international network - called the European Network for SME research (ENSR) - which allows us to work with national experts. These differences are interesting and you should try at least to explain them. It makes policy-making at supranational level complicated. You always have to decide whether to implement policies at supranational, national or local level.

With candidate countries coming in, it becomes even more complex. It is interesting to look at the differences between countries and see what reasons there are for them and decide whether this should affect policies.

You have moved to smaller topic reports, away from the large annual reports. What are the benefits of this?

I am very much in favour of these new reports. I had been discussing this for a couple of years with the Commission. If you publish a very long report of 500 pages people will not easily read it. The new format allows the Commission to focus attention on individual reports, which get more attention from the press and people in Brussels. For us as researchers it is easier to work on a constant basis than on one major report to be delivered on time. Downloading shorter reports from the web is much easier, too.

What is the structure of the Observatory? How does it operate?

For the first five years, we at EIM, which is based in Zoetermeer near The Hague, were the main contractor for the project. From the sixth report (published last year) onwards, KPMG Special Services has been the main contractor. But most of the work is carried out by EIM and partners in member states.

Our network partners are economics researchers: some universities, some private consultants, some linked to their governments. All of them are independent research institutions. We later recruited partners in the other countries of the European Economic Area as well and then Switzerland, which is involved at the cost of its own government. So together we cover 19 countries. To conduct our surveys, we use market researchers to call 80,000 SMEs to speak to 8,000 entrepreneurs.

The Commission decides on the subjects. Each subject is led by one network partner: for instance Norway was responsible for the report on clusters, and Spain for the one on corporate social responsibility. All partners in the network collect quantitative and qualitative information covering their country, which complements the Europe-wide survey information. The co-ordinator puts it all together to compile the report. Then we add our comments and when we are happy with it do we send it to the Commission.

From the very beginning we set up a reference board containing business associations and trades unions, who discuss outline and draft reports. These organisations are aware of what is going on in practice and can give us useful insights.

Major decisions are not taken by EIM alone, although we are quite a large organisation with about 120 employees. In the ENSR we have a steering committee of four directors appointed every year, consisting of directors of our partners in the national institutions. This takes major decisions on budgets and who is going to co-ordinate each report. We try to decentralise decisions and to be transparent. We have a quality control system - a few years ago we were forced to replace one of our partners because we were not happy with their work. Since EIM opened an office in Brussels two years ago our relationship with the Commission has become much easier.

Can you explain the principles behind the methodology and approach to your research?

Accessibility of sources is important. We are preparing a CD-Rom to be published independently on which you will find all reports and background information used by report co-ordinators, including a database of survey information so you can prepare your own tables from the information. Transparency is the other key factor. We use some estimates to make reports as up-to-date as possible and when the firm information is available we check to ensure that the estimates were accurate.

What is the Observatory's future programme of work?

We are now discussing this with the Commission. There will be an eighth Observatory project to start in September for another one and a half years, which is an extension of our contract. That will have almost the same structure, containing nine reports. There will again be a survey of 8,000 entrepreneurs. But from now on there will be more information on the candidate countries, looking in detail at between six and eight countries - which is both a challenge and hard work because we have to manage a research network of at least 25 organisations.

Only two subjects have been decided on definitely: access to finance and competence of SMEs. Three issues are under discussion, one is internalisation and globalisation of SMEs, another is co-operation between SMEs and the third is governance.

(1) Rob van der Horst is a regional economist with an MA from the Erasmus University, Rotterdam. He joined EIM Business & Policy Research in 1986. In 1991 he became head of EIM's International Division and is now director of its Brussels office. He has been responsible for applied economic research projects on SMEs in all EU countries, in some candidate countries and elsewhere and is a consultant to the OECD and UNIDO. He is the director of the European Network for SME Research (ENSR) which brings together 20 economic research institutes in 19 Western European countries. He is the project director of 'The Observatory of European SMEs', a project for the Enterprise Directorate-General of the European Commission.