Competing in the Single Market - SMEs and ... - Erhvervsstyrelsen

INTRODUCTIONAfter more than 10 years of massive reforms and transformation, many of the so-called ‘transitioneconomies’ in Central and Eastern Europe are in the process of completing the transformation to afully-functioning market economy, and in particular, of preparing their economies for accession tothe European Union. One of the central questions raised in this context is how well their companieswill adjust to the consequences of joining the European Single Market. There are, in fact, widespreadconcerns that the Small and Medium-sized Enterprises (SMEs) will not be able to capture theopportunities nor cope with the new challenges arising with their integration into the EuropeanUnion.A dynamic and competitive SME sector is pivotal for future economic growth and employment inmost countries. The presence of structural weaknesses or obstacles preventing SMEs from competingeffectively in the Single Market would significantly increase the transition costs and result in a slowerpace of economic development in the EU Accession Countries than might otherwise be possible. 1These issues are greatly relevant for other transition economies as well.The ability and capacity of individuals, companies, and institutions to innovate will play a vitalrole in ensuring the competitiveness and well-being of EU Accession Countries during their nextdevelopment phase. By strengthening their innovation systems, these countries can significantlyimprove the ability of SMEs to compete internationally, thus making a vital contribution to ensuringa successful transition of their economies to the Single Market.The aim of this report is to examine key challenges for SMEs, national innovation systems andpolicymakers in four of the EU Accession Countries – namely Estonia, Latvia, Lithuania and Poland,henceforth referred to as the B4 countries – in the context of these countries’ accession to the SingleMarket. In particular, the report identifies some of the hurdles which companies, and particularlySMEs, in the B4 countries have to overcome if they are to be able to thrive and prosper within theEuropean Union. Furthermore, we examine how governments can support or put in place appropriatemechanisms enabling the development of a critical mass of innovative SMEs that will be able tocompete successfully in the Single Market, and thus catalyse innovation and competitiveness for theireconomies as a whole. Adopting a comparative perspective, the report examines the structure of,policies for, and challenges facing SMEs in Estonia, Latvia, Lithuania and Poland, and also presentssome policy recommendations.A comparative analysis of these countries is useful for several reasons. In addition to their closegeographic proximity and location on the Baltic Sea, the B4 countries share a number of importantand interesting parallels and commonalities related to their history, culture, institutional structures,political and economic developments and challenges, among others. In terms of policy orientation,the B4 are presently striving to build the framework conditions and implement policies that areneeded for strengthening their structural reforms and national competitiveness.While these four countries have a lot in common, there are also significant differences betweenthem, relating not only to the obvious diversity in size, but also to important aspects of their socialand economic assets, policy orientation and organisation. The above-mentioned combination ofsimilarities and differences provides a useful basis for gaining valuable insights and lessons from a1The EU Accession Countries joining the European Union on May 1, 2004 are Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland,Slovak Republic and Slovenia. Bulgaria and Romania hope to join by 2007, while Turkey is not currently negotiating its membership.13