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

CHAPTER 4:CHALLENGES AND RECOMMENDATIONS“Enterprise policy is a key area that will play a major role in setting the conditions for this objective(of the EU becoming the most competitive and dynamic knowledge-driven economy in the world) tobe met. In particular, the promotion of small and medium-sized enterprises (SMEs) is thought to befundamental in fostering an environment that encourages economic growth and job opportunities.”Eurostat (2002b)81IntroductionEnabling the development of innovative and internationally competitive SMEs that are both willingand able to grow is a challenge for nearly all countries in the EU, both existing and acceding. It isa topical issue and policy priority throughout Europe. Given this common challenge, countries canbenefit immensely from a structured exchange of policy experiences in this field.At the same time, however, the conditions for SMEs and SME development in the new MemberCountries differ significantly from those of the existing Member Countries in some important aspects.Compared with countries with a longer tradition of market economy, SMEs in the B4 countries tendto be very young, both individually and as a sector. One should point out here that, as in the case ofPoland, for example, there had already been some reforms prior to 1989 that liberalized small privatebusiness activity and foreign trade and investment, to a certain degree (Balcerowicz et.al. (1998)). Itwould therefore be misleading to assume that private business activity appeared ‘out of nowhere’ in1990 in these countries. Nonetheless, it is fair to say that SMEs as a category and as a policy targetgroup are a very recent phenomenon in the B4 countries. This fact has implications for attitudes toentrepreneurship, managerial capabilities, etc.One might generally assume that the bulk of SME challenges come from their small size – lackof critical mass to make longer-term investments (e.g. R&D), lack of international reach, or lackof adequate human resources/skills. In fact, the proliferation of ICT and the increasing trend forinternational networking/clustering among SMEs has opened up new ways for SMEs to address oreven overcome these challenges. Instead, SMEs in the B4 experience difficulty in combatting attitudestowards commercialisation, securing adequate sources of financing, and finding the appropriatepartners to lift the level of innovation in their companies/sectors. But they are also struggling with arelatively large burden of meeting regulations (compliance costs) and bureaucracy.SMEs in the B4, and particularly in Poland, are smaller than in the existing EU Member States.They face greater challenges than SMEs that are already in the Single Market – the double challengeof increased competition, and having to raise standards, adjust their processes, production andorganisation to meet the EU regulations.SMEs in the B4 tend to be have little experience with formulating and lobbying for their needsvis-à-vis government. The local, regional and national organisations aimed at providing support forSMEs are also new and relatively inexperienced. In addition, academic institutions, which potentiallyprovide important access to knowledge and to human capital, are not used to interacting with SMEsor meeting the needs of SMEs. The interviews conducted in connection with this study confirmed