European Workshop on Entrepreneurship Policy
– Analysing Measures in European Countries
Documentation from the seminar i Brussels on April 27
Dr Hans Crijns, Vlerick Leuven of Gent Management School made the introductory remark to this conference by pointing out that entrepreneurship policy has raised increased interest from politicians and more and more measures to promote entrepreneurship are being taken. However, there are many challenges, there are different policies in different countries, policy makers have a variety of measures to choose from –all interesting questions for the day ahead.
Ms Patricia Ceysens, Flemish minister of Economics, Enterprise, Science, Innovation and Foreign Trade European Countries. Minister Ceysens addressed the topic of policy in the financial crisis emphasizing that in order to push a credible policy agenda you really need two plans; one where you outline where you want to go in the long term and one that indicates how do you handle the short term perspective.
The Flemish Government has launched a recovery plan for the crisis, a plan made up by three points. Companies must have access to credits, the labour market must increase its flexibility, and the government should facilitate public and private investments.
With the recent development in the global economy, it has become evident that a region like Flandern needs to aim for an innovation-driven economy, consisting of; entrepreneurship, innovation, and internationalization. In order to support there three, the Flemish government has set up one agency for each of the three processes to support this.
However, in Flandern, entrepreneurship is not seen as a natural choice of career. The risk adversity is high, the education system may be underdeveloped and the minister called for an increased understanding of the concept of failure in the education process. Furthermore, the social security system is a hindrance since it is not adapted to business owners.
The Flemish government are taking several steps in order to address these issues; working with positive perception of the concept of entrepreneurship, promoting education attitudes and skills, stimulating entrepreneurship and supporting entrepreneurs/firms during their growth
25M€ is earmarked to stimulate entrepreneurship. Many initiatives are put into plan to simplify structures, six strategic clusters have been established; logistics, health care, medi-tech, nano-tech, social-tech and eco-tech.
The minister finally stressed an important remark. In the debate, we must not only speak about R&D, but about R&D and Entrepreneurship, this will help us getting more ideas to the market. The Minister left us with several examples where the three links work together for the Flamish region, but this is not done easily – put in the words of Minister Ceysens, “-You have to kiss many frogs to find a prince”
Perspectives on Entrepreneurship Policy Entrepreneurship and the cycle: A way out of the bust – Dr Roy Thurik, Erasmus University, FDC faculty, The Netherlands
The main topic of Dr Thuriks presentation was if entrepreneurship can help in the crisis? The straightforward answer is yes, although no instruments have been given to investigate weather entrepreneurship can be part of, or drive a solution for the crisis. In order to present such a tool, Dr Thurik has been looking at what the relationships are between entrepreneurial activity and the business cycle.
Data from 22 OECD countries indicates that the GDP cycle lags behind the Business ownership cycle. Entrepreneurship may therefore be seen as an indicator of the cycle. If entrepreneurship (in this case the number of start-ups) goes up – then GDP goes up. Also, there seem to be another correlation; if GDP goes up, entrepreneurship goes down. The economic cycle seems to lead the entrepreneurship cycle with a negative effect. Easily explained this has to do with the fact that good times in the overall business and labour market climate makes for solid ground - employment in big firms and the state may seem like a more attractive option at these times.
There is much evidence that entrepreneurship leads to economic growth through spill-overs and innovation, competition, newness, variations and learning. There is also evidence that more entrepreneurship equal shorter recessions (defined as business owners). The main conclusions must there fore be that entrepreneurship paves the way out of recessions in most cases and more entrepreneurship leads to shorter recessions.
How then should governments apply policies for encouraging e-ship during a crisis? Dr Thurik offered some advise on this matter; Do not raise unemployment benefits, do not increase bureaucracy and market entry regulations unless where it is needed in a short-term perspective. And also, financial support is important.
The Founder of IPREG, Dr Anders Lundström gave an address on the topic of “What are European Countries doing when they are doing Entrepreneurship policy?”
In this particular field, there is a central research question; to monitor what is going on in different countries when it comes to entrepreneurship policy. And how do we compare when measures are different? Motivation, Opportunities and Skills are central.
Several bn€ is being put into policy measures in a given country within the EU every year, but how much? No one seems to be able to answer that question. There is also no relation between the size of the policy measures and the results.
What are the governments trying to achieve by implementing their policies?
- Outcome; creating economic growth, high productivity
- Structure; size of the public sector, population density
- Vitality; increasing the number of start-ups and innovators
The study indicates that it might not be interesting with a lot of entrepreneurs or a lot of start-ups – perhaps its more important what kind of entrepreneurs one gets started?
Dr Lundstroem gave the following conclusions; more policies does not necessary mean better ones. The outcome of money spent is not very clear.
The role of financing
– Dr Ewa Sadowska-Kowalska, Foundation for Promotion of Entrepreneurship, Poland As Poland is currently struggling with high unemployment rates, especially among young people, there is also a general pessimistic view on the current situation for the SME´s.
There are a number of hindrances, such as the tax system, high labour costs and the fact that banks have cut lending dramatically since 2008 as they prefer loans to households.
Adding to this, surveys show that SME´s are even further troubled;
70% of SMEs have problems selling products and services
40% expect cutting investments
85% fear domestic economic situation will worsen
60% seek security of possible worsening economic situation
72% is damaged by exchange rate fluctuation.
Polish companies handle the situation by dismissals and by reducing salaries and bonuses. When asked why measures must be taken to handle the crisis, the Poles suggest lower taxes, subsidies to maintain employment and less red-tape. Direct financial assistance is the least convincing measure.
The policy recommendations indicate that focus should be put at long-term recommendations such as education, research and innovation. The government plans an injection of 91.3 billion of polish currency in the economy as stimulation including investments, projects co-financed by the EU. In addition, measures are being taken to increase consumption, introducing bank guarantees, etc. to strengthen SME´s.
Dr Dennis De, Reutligen University, Germany
The financial support system for SME´s in Germany origins from the 1950´s, following the recovery after World War II. Germany has since developed diversified policies at all levels (national, federal, local) to support start-ups and R&Ds in many areas. These policies, delivered by federal, state and local actors, are targeted at SME growth with the purpose of stimulating job creation and regional development. Most of the money offered to the SME´ goes into subsidized loans.
There are 194 different programs that support e-ship at federal and state levels and as many as 275 different programs that support innovation on these levels. These figures indicate a development towards innovation, a strategy adopted in order to maintain a competitive industry and economy.
Even though this indicates that there are many well functioning support functions, entrepreneurs do not start a business because of the existence of a support system. However; offering financing makes it easier. Dennis De finished by raising a very relevant question; is the effort (taxpayers money, resources) put into the support system worth what we achieve?
The role of entrepreneurship education
– Dr Thomas Cooney, Dublin Institute of Technology, Ireland Dr Cooney started by stating that today’s education system often takes a view where passing exams has a higher priority than igniting the fires within young people.
Entrepreneurship education is getting increased attention, not lest by the EU. However, EU initiatives can merely recommend activities, action is needed on the national level. There are more and more evidence put forward as to the effects of education. It generates interest in higher education, does create more jobs, it helps building confidence in students and increase students employability.
Dr Cooney highlighted Norway as an example where an action plan for entrepreneurship education has been introduced with a wide engagement from both the government and the business community. The aim of this action plan has been clear from the beginning; to foster a culture of entrepreneurship.
As a contrast to Norway, Dr Cooney turned the attention to Ireland, where there is no co-ordinated entrepreneurship education policy. There has been and exist initiatives but there is no co-ordination on a national level. A wide range of challenges to a policy like the one in Norway were highlighted; budget cutbacks, teacher resistance, resistance from the Department of Educations, the introduction of a new culture is hard.
Reduction of administrative burden
– Dr Javier Sanchez-Asin, University of Zaragoza, Spain
The Small Business Act put forward by the EU calls for a transition towards a knowledge-based economy in order to ensure a competitive and dynamic economy. Better regulation for SME´s is crucial in this aspect. In fact; the administrative burden is the most important problem for SME´s in the EU according to the Small Business Act.
The definition of administrative burden is the cost specifically linked to information that businesses would not collect or provide in the absence of a legal obligation. There can be said to exist two types of administrative burdens; the ones that hamper the existence of business and the ones that decreases efficiency of the firm.
With a cost for SME´s of administration currently at 4% of the EU GDP, the total cost of administrative burden is evidently high. Applying to tax regulation is the most costly administrative burden.
Spain has the ambition to reduce administrative burden by 30%, and is doing so by deploying several programs. But there are also limits to reduce the administrative burden such as the resilience of the system and also conflicts of interest between private and social interest.
However, it is important to note that not all regulation inhibit entry, there is regulation that is in place to protect and work to the benefit of both citizens and SME´s. Policy measures are supposed to lead to benefits to the society, its their purpose. However, there are a lot of policy measures, the question is if they effective. The fact is that to large extent we do not know. Evaluation is needed, however, policy measures are not often evaluated.
Parallel sessions:
The conference was divided in three parallel sessions dealing with the three aspects of the Small Business Act mentioned above. The discussions in the parallel sessions were summarized and then discussed in a plenary session featuring Ms Charlotte Kjeldsen, Managing director, FORA, Denmark, Dr Friedrike Welter, President, ECSB and Philip Verstraete, SME Coordinator, Federation of Enterprises in Belgium. The main points of this discussion can be summarized as follows;
On Financing;
Finance of SME`s does not only bring money, it also brings competence through the networks that often are created, by business angels. The question on how to get more people to act as business angels is also vital. Furthermore, finance is to large extent also a matter of access to the programs available. Access to information on finance is important – access to the system of finance is important as well.
On Entrepreneurship Education;
Entrepreneurship education might not have the impact that we believe. However, entrepreneurship education is important since it gives output of entrepreneurs in the system.
One of the most important issues in this aspect is the question of who is teaching the teachers?
On Administrative burden;
To widen the perspective, one must realize that administrative burden is not just a matter of start-ups, but it must follow the life-cycle of the company and adjust over time. Low regulatory thresholds probably lead to and increased number of start-ups and in general, less is more, regulation may work as a de-motivator in the system. Over regulation may be a problem right now during the financial crisis, there is a need for carefulness in this case.
The closing keynote was made by Ms Mechthild Wörsdörfer, Head of Unit, DG Enterprise, EU Commission, Belgium on the topic of SME Policy Development. Ms Wörsdörfer gave an overview of the Small Business Act, launched with the objective to stimulate entrepreneurship and promote SME Growth. In the EU, between 2002-2008, as many as 84% of new jobs came through SME`s, therefore, finding ways to promote SME´s is vital for the EU.
A survey in the Small Business Act indicates that the biggest problem for the SME´s is the administrative burden. Therefore, the aim is to reduce 25% of administrative burden by 2012.
Access to finance and access to markets is another priority, particularly in the crisis. Initiatives such the late payment directive, forcing payment to companies within a given number of days, is an example of measure taken.
But, it is important not to forget the long-term perspective. EU is providing access to finance in a number of ways, such as the structural funds where SME´s are targeted with €27bn and the CIP/EIP target SME´s with €2.17bn.
Initiatives are taken to further increase the recognition of SME´s, including entrepreneurship education through Erasmus for young entrepreneurs, network of female entrepreneurship ambassadors, various programmes for entrepreneurship education in schools, etc.
The Commission is taking several steps to highlight and promote the SME´s within the EU. One initiative coming up in May is the EU SME Week with over 1000 events taking place in between the 6th-14th of May to highlight the importance of SME´s for the EU.
