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

function as such. Areas to be addressed in this context include the management and organisation ofinstitutions and processes as well as the development of appropriate human resource strategies.• The general awareness of innovation policy and of its importance for economic growth andcompetitiveness.As pointed out in a recent evaluation of innovation policy in the Candidate Countries, “innovation, inits broadest sense, remains a poorly understood, and even accepted, concept” ((European Commission2001a), p.158). There is a need to increase and improve the general awareness and understanding ofinnovation and innovation policy, and of its importance for economic growth and competitiveness.Increased awareness and understanding is vital for ensuring the coordination and the effectiveness ofpolicies.• Improving methods and data for measuring and comparing innovation performance.In order to ensure the design of effective and resource-efficient innovation policies, there is a needto improve data and methods for assessing and comparing innovation performance and capacity,particularly with regard to SMEs.Specific challengesTurning to the specific challenges for policymakers striving to promote SME development in theB4 countries, a number of areas where there is still considerable room for improvement can beidentified 25 :• Insufficient access to start-capital and long-term investment sourcesLack of access to capital, as one of the principal barriers for starting new companies and expandingcompanies, is a problem which is by no means unique to the B4. In business surveys conductedin, and analyses carried out on, the EU-15, for example this factor is generally listed as one of themajor challenges facing SMEs (see, for example, European Commission (2004), p.5; and EuropeanCommission (2003u), p.22). Similarly, a recent business survey analysis concluded that “almost allEuropean businesses feel that national governments and/or the European Union could do moreto help small enterprises to get access to finance” (European Commission (2003t), p.41). Havingsaid that, however, in our analysis we have found strong indications that insufficient access to startcapital and to long-term investment sources is a greater problem for SMEs in the B4, than in existingEU Member States. Start-up companies have neither collateral nor a credit history, and often lackexperience in completing loan applications. Financing for high-risk projects is generally inaccessible,or is so limited that only a few, select business projects receive financing. A number of specific problemscan be identified in this context. Firstly, banks in many of the B4 appear to lack both the experienceand the organisational, institutional and managerial means required to function as effective financingsources for SMEs. 26 Secondly, while there are provisions for receiving start-up loans or grants (fromPAED, SMEDA, LDA, Enterprise Estonia, among others in Poland, Lithuania, Latvia and Estonia,respectively), these grants are generally limited to standard sums which often do not meet the needsfor starting up hi-tech companies or other companies, which might have a strong potential to grow,but which also require significantly higher initial capital investments than those available through25Sources for this summary list include UNECE report on SMEs in Countries in Transition, 2003; European Commission Report on the Implementation ofthe European Charter for Small Enterprises in the Candidate Countries for Accession to the European Union; and individual country input from Workshopon Designing Policies for Innovation and Enterprise Development June 16/17 2003 in Riga.26See, for example, presentation by Emmanual Berck, DG Enterprise at CEI Summit Economic Forum, 2003 http://www.google.com/url?sa=U&start=1&q=http://www.ceinet.org/download/sef_2004/sSU_%2520Berck.ppt&e=7704 . This finding was confirmed in our interviews with policymakers and representativesof the banking sector in the B4.84