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 he drive to make the EU the world's most competitive and dynamic knowledge-based economy within a decade, backed by European Union leaders at the Lisbon summit in March 2000(1), promises to liberate small and medium-sized enterprises (SMEs) from the fetters of red tape. A recent package of reports on competitiveness from the European Commission encourage Member States to improve performance by learning from each other. Identifying, refining and applying the best policy ideas from across the EU will generate a much more supportive business environment, they say. Some of the reports measure progress on the 64 BEST recommendations, which identified legislative and administrative problems restricting the development of SMEs. They covered means of improving entrepreneurs' access to finance, creating more favourable conditions for research and innovation, and upgrading public administrations, education and training, and conditions of employment and work. The Commission reacted with an action plan to promote entrepreneurship and competitiveness, which called for actions and regular progress reports in each of these areas.
Innovation in the action plan
Access to long-term finance is one of the greatest problems for young or expanding companies. European SMEs tend to rely on costly - and risky - short-term loans. The Commission's action plan promises support for seed capital funds investing in smaller innovative companies, and the creation of more networks of 'business angels' and other informal investors. High-growth companies spend 40% more on process innovation and new product and service development than low-growth ones. Patent protection is six times more expensive in Europe than in the US. The plan includes the creation of an affordable Community patent valid throughout the EU(2), as well as help for companies to find appropriate finance for the exploitation of research results.
Ideas about innovation support have been progressively refined in recent years(3). The Commission is now urging Member States to benchmark national innovation policies and spread good practice. Priorities include lowering the administrative cost of doing business, and stepping up information exchange on sources of finance and best practice in technology transfer. Young, innovative companies should have easier access to Community research programmes and results. If the EU is to benefit from innovation, awareness of its economic and social importance must also be raised among governments, industry, academia and the public.
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Better, not the best
The Commission's paper 'Better, but not yet the best'(4), which gives an overview of the reports' findings, notes that despite improvements in EU performance, the competitiveness gap with the US is still widening. In the last four years, EU GDP per head grew by 2% per year, labour productivity by 1.3% and employment by 1%. In the US over the same period, GDP per head rose by 3.4%, labour productivity by 2.2% and employment by 1.9%. The main problem in the EU, says the Commission, is a lack of dynamism in business, industry and administrations, too much reluctance to invest in new technology, and too much delay.
There is room for optimism, however, and the paper gives many examples of best practice. France leads in science and engineering education, Denmark has the least obstructive procedures for setting up businesses, Ireland is strong in high-tech exports and the UK leads in quality assurance. The Commission is now piloting studies to assess the business impact of legislation. It has already established priorities for 2001, with a focus on the take-up of new technologies and services - among them the 11 BEST projects (see box). A new Enterprise Policy Group, with high-level representatives of the Member States and the business community, will advise the Commission.
Also within the package of reports(5), two scoreboards present indicators of Member States' performance. The innovation scoreboard(6) reveals significant differences in national strengths. Some of the smaller countries score above average on most indicators - the best performers are Sweden, Finland and Denmark, while Germany appears to be the most innovative among the larger countries. But the Commission warns that if small economies are concentrated in a few highly innovative sectors, they may not hold as great a lead over larger, more diverse economies as the scoreboard suggests. The enterprise policy scoreboard is more general and includes indicators for entrepreneurship and access to markets, as well as innovation. Both scoreboards will be updated regularly.
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Competitiveness
The competitiveness report looks at EU business and industry performance, comparing it with that of the US and focusing on investment, patterns of ICT uptake, and growth in services and e-commerce. Much faster competitive improvement is needed to prevent the EU slipping further behind the US, it says.
The report on best practice activities gives a comprehensive view of EU competitive strengths and weaknesses. Areas already assessed include financing of innovation, licensing and permits for industry, especially SMEs, simplification of business registration procedures, and support for growing companies. New projects are currently under way in information society skills, the industry-science interface, administration of start-ups and business incubators.
A key measure for improving the business environment as a whole, especially for SMEs, is the Multiannual Programme for Enterprise and Entrepreneurship 2001-2005(7), one of whose key objectives is to facilitate SMEs' investment in new information technologies. Applying best practices, reducing the regulatory burden and supporting the uptake of new technologies throughout the EU should continuously enhance its overall competitiveness.
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The 11 BEST Projects
Projects in the following 11 areas are being undertaken in 2001 to enhance understanding and identify best practices. Their findings may be disseminated via BEST projects or Commission recommendations to Member States.
- developing business angel networks
- benchmarking the red tape involved in business start-ups
- refinement and benchmarking of business impact assessment
- improvement of legal, tax and administrative measures for business transfers
- evaluation of economic impact of conformity assessment
- promoting entrepreneurship among women
- improving education and training for entrepreneurship
- reducing skill shortage in ICT
- improving business support services - advice, information (for example, on the single market and public procurement)
- benchmarking the management of incubators
- benchmarking national policies in support of e-commerce
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(1) See 'Radical Response to a Quantum Shift', edition 4/00.
(2) See 'Single EU-wide Patent Within Reach', edition 6/00.
(3) COM(2000) 567 final. The full text of the Communication was published in the November special edition of Innovation & Technology Transfer. It can also be downloaded from /innovation-smes/communication2000/home.html
(4) 'Better, but not yet the best', SEC(2000)1942.
(5) Benchmarking enterprise policy: First results from the scoreboard, SEC(2000)1841; European competitiveness report 2000, SEC(2000)1823; Report on the implementation of the action plan to promote entrepreneurship and competitiveness, Vols 1 and 2, SEC(2000)1825; Summary of results of best-practice-related activities in the field of enterprise policy, SEC(2000)1824.
(6) See special edition of November 2000.
(7) See http://www.europa.eu.int/comm/enterprise/
enterprise_policy/mult_entr_programme/overview.htm
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ENTERPRISE POLICY
