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

Figure 2: Cross-Border Alliances Involving SMEs, 1988-2000Number of deals400350300250200150100500Manufacturing alliances involving SMEs with 1 249 employees358Services alliances involving SMEs with 1 249 employees921988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000Source: Sakai (2002)• Quicker Time to Market: The driving force of a more demanding consumer (and owner ofcompany stock) has catalyzed continuous improvements in production processes and innovation.The global market requires speed and flexibility, often only available in smaller companies.What are SMEs (small and medium-sized enterprises)?SMEs are defined as all enterprises employing less than 250 employees and earning less than€50 million in revenue (or having a total net worth of less than €43 million). In addition, nomore than 25% of the capital or voting rights may be held by one or more enterprises whichare not themselves SMEs. There are three size classes of SMEs:- Micro Enterprises, with less than 10 employees- Small enterprises, between 10-49 employees- Medium-sized enterprises, with 50-249 employeesEuropean Commission Recommendation 2003/361/EC of 6 May 2003The result of these trends is reflected in the increase in SMEs’ share of employment and enterprisesin various countries around the globe 13 , and in an increasing policy focus on identifying measures toinduce the further growth and development of these enterprises (see Table 9; see also Figure 3). Ascan be seen in Table 9, between 1988 and 2001, employment in SMEs in Europe-19 grew by 0.3%on average, while it shrank by 0.1% in LSEs. In this period, SMEs also experienced a higher growthin profitability (0.5%) than LSEs (0.3%).13It is important to note that SMEs’ relative importance seems to be greater in economies with low per capita GDP (Spain, Greece, Portugal), than in economieswith high per capital GDP (United States, Germany, France). Differences in per capital GDP do not fully explain differences between the EU and the UnitedStates. Instead, differences in economic structure explain these differences better, such as: the presence of a large domestic market in which social and culturaldiversity is much less than in Europe; a less fragmented market; and fewer barriers to mergers and acquisitions (European Commission, 2002d).30