The Future for Entrepreneurship and SME Policies in European Countries

– One day conference in Stockholm, May 5, 2010

The conference showed examples and results of different measures taken within SME policies in the European countries. The conference was divided into three blocks – Counselling, Education and Financing. Scholars as well as representatives from organisations working with support and development of SMEs contributed with analyses, experience and examples. The purpose of the conference was to highlight  and discuss what role SME policy can play for Europe in the future. The conference was organised jointly by ECSB, Growth Analysis and Swedish Entrepreneurship Forum.

SME Counselling

Dr Thomas Ebdrup, FORA Denmark, presented results from ”Nordic Entrepreneurship Monitor” a comprehensive benchmarking study of the Nordic region, and started out by addressing a few findings.

  • We don’t have many high-growth companies and we don’t have a policy for growth.
  • All the Nordic countries have good infra structure for entrepreneurship and starting companies.
  • Building a high-growth infrastructure seems to be a key challenge. It’s difficult and there is a lack of policy in this area.
  • All the basic counselling services in these countries are good
  • Start-up rates have increased in the Nordic countries, i e this no longer at major problem.

The study, prepared for the Nordic Council of Ministers, shows that countries that improve their framework seem to improve in performance, and that changing the entrepreneurial culture will prove to be a challenge for future policy makers.

img_5maj_ebdrup_rothLena Roth and Thomas Ebdrup

Why do we have such small number of high-growth companies compared to USA? One reason, according to Ebdrup, is the small home market and the fact that fast growing companies need to start exporting right away, which can prove to be a difficult task.

– We don’t have the same level of ambition as the American entrepreneurs. We have more of a venture mindset in the Nordic region. With an earlier exit strategy.

We also need a systematic approach to attract the necessary talents.

–  There is also a lack of personal competence needed to build high-growth companies and we will probably have to import it if we want it, said Ebdrup.

Marie Ahlgren, Business Area Manager Almi företagspartner, presented her view on counselling SMEs.

– We support companies to have sustainable constant growth. It is not possible to point out one target group with higher growth.

There has been a shift in the power chain, outsourcing has shifted power from bigger companies, which gives a lot of opportunities, but also poses threats to SMEs.

– To develop a product is one thing. To get the market to buy it something completely different and furthermore Sweden has a small home market.

img_5maj_ahlgren_stuartMarie Ahlgren and Ulrika Stuart Hamilton

Marie Ahlgren talked about differences between perceived and real threats in a number of policy areas.

– Going from an idea to a competitive business, that is when counselling comes in. We don’t think we can pick the winners in advance but we can support them, said Ahlgren.

Comments by Lena Roth, from Swedish Agency for Economic and Regional Growth.

– Very much comes down to risk. If we lower the risks we will see a lot more firms coming in to the market.

– We don’t need more studies. We need to take action. How can we build more high-growth companies? We don’t even have a policy for working with companies with 250 employees or more. Counselling alone is not sufficient.

David Storey commented from the audience.

– Ultimately entrepreneurship is a choice. People make a transfer if it’s the best option in town. In Scandinavia the benefits of social security and public employment does not incur that.

Entrepreneurship Education

Eric Burton, National Enterprise in Education Development Officer, West Lothian Council, Scotland.

–We don’t teach children, we inspire them. The secret to achieving the vision of the Lisbon agreement is in our classrooms. It’s about planting a seed and cultivating an idea at an early stage.

Scotland has implemented a national program called ”Determined to succeed” along with the tag line ”Can do – Will do”. Burton said that the program is not about teaching enterprise as a subject, rather that teachers deliver their subject lessons in an enterprising way. But why is entrepreneurship in the education system so important? According to Eric Burton there are several reasons in Scotland.

– Sustainable economic growth
– More business start ups
– Skilled work force
– A demographic challenge with an aging population

Burton said it’s about equipping young people with the skills they will need for tomorrow’s workforce

– Who would not want to give every child the best possible start in life? We are trying to change Scotland but cultural change takes time.

img_5maj_burton_rotefossEric Burton and Beate Rotefoss

Beate Rotefoss, assistant professor, from Bodø Graduate School of Business, talked about implementation, dissemination and effects of entrepreneurship education in Norway. Like Scotland the Norwegian government has adopted a broad definition of entrepreneurship.

– People in the school system were asked to rank their understanding of entrepreneurship: creativity came in at the top of all categories. The focus is on developing personal qualities and knowledge.

– Starting businesses came in at number seven.

Rotefoss noted that entrepreneurship is a very good way of opening up the school to cooperation with the external environment such as business community, cultural life and public sector. When the subject of entrepreneurship enters the system, the role of the teacher changes and in Norway skills upgrading has been offered in this area.

– Competence, or lack of it, is mentioned as the biggest obstacle in teaching entrepreneurship, said Beate Rotefoss.

Rotefoss also stressed the importance of other serious actors in this area, apart from the school system. She mentioned organisations like Young Enterprise and First Scandinavia. Entrepreneurship can be used to stimulate basic skills but we also see that 20 percent of the participants in Young Enterprise programs start businesses.

– School owners must acknowledge both the importance of entrepreneurship in education and the difference between the pedagogical concept of entrepreneurship compared to the traditional concept, said Rotefoss.

Miguel Meuleman, assistant professor from Vlerick university, commented on entrepreneurship education by presenting results from an ongoing Flemish study trying to measure the impact of entrepreneurship education.  The study shows impact on different areas such as creativity, desirability and propensity to act.

– The effect is stronger, depending on personal goals, and the success of initiatives depends on involvement of educators.

Meuleman also said that more international research is needed for benchmarking and that programs need to take into account the different backgrounds of students.

Financing SMEs

Jarna Heinonen, professor and director of the TSE Entre Turku School of Economics, has over the last ten years followed Finnvera. Finnvera is a specialised financing company owned by the State of Finland.  But she pointed out that it is not a bank, rather at publicly owned instrument of finance.  With 28 000 customers it is the second largest financier in Finland after the bank sector.

–  The objectives of Finnvera is to target the market gaps and to play an important role in providing start up loans, said Heinonen.

– Operations are steered by the industrial and ownership policy goals, laid down by the State. On the board there are government representatives as well as from the business sector.

Moderator Ulrika Stuart Hamilton asked if there is a risk that Finnvera gets ”kidnapped” by politics and asked to fulfil various temporary political objectives.

– The government will only give a framework, which is quite stable. But it can change over time, as with the re-introduction of cyclical loans, said Heinonen.

Evaluations show that a quarter of the companies would not have needed Finnveras investment.

img_5maj_heinonen_isakssonJarna Heinonen and Anders Isaksson

Dr Anders Isaksson, Umeå university, talked about governments as venture capitalists, a mission impossible according to him. He based his speech on a recent report for Growth Analysis to evaluate government venture capital programs internationally.

– It’s an empirical study with the purpose of learning for the future. Trying to find the keys to success behind these programs.

He stated that the reason why government programs exist is marketing gaps, to help companies that can’t find financing.

– But there is no market failure. Private investors are rational. It’s more a question of small and narrow markets.

According to Isaksson there is also an exaggerated faith in the venture capital model as a growth model.

– Context is very important when it comes to investments being successful or not. Results are better in areas with existing innovative and technical centres.

– Government action should complement the private sector and not compete with it. But it is clear that this is easier said than done, concluded Isaksson

Dr Chunyan Zhou from International triple Helix Institute in Madrid was commenting trying to compare the two cases from Sweden and Finland with the situation in US and China. She presented a so called double triple helix approach illustrating the differencies in cooperation between governments and industry in different countries.

Panel discussion

Participating in the panel discussion were Pontus Braunehjelm, professor and Managing Director Swedish Entrepreneurship Forum,  Joao Leitao, professor at University of Beira Interior and responsible for policy issues at ECSB, and Dr Peter Vikström, Growth Analysis.

img_5maj_panelFrom left: Peter Vikström, Pontus Braunerhjelm and Joao Leitao

Joao Leitao presented an upcoming anthology, at Kluwer publishing company, entitled ”Public Policies for Fostering Entrepreneurship” and he stressed the need for European cooperation.

– We need to use common tools and talk among the EU countries, said Leitao.

Peter Vikström, Growth Anlysis, pointed out the need for structural changes in many European countries.

–  Entrepreneurship policy should create productivity, but our knowledge about which tools to use is not enough. Policy in the future ought to be evaluated against goals like job creation, competitiveness and growth.

– The real challenge is to create a policy to promote high growth companies, without falling in the trap of trying to pick the winners, said Vikström.

Pontus Braunerhjelm stated that if Europe is to survive there has to be a future for entrepreneurship policy. It is essential to get our micro level policies right.

– The macroeconomics must be robust but you can’t stop the shock of a crisis, only deveop systems that moderate the effects. Sweden is a good example of this, said Braunerhjelm.

– We need to communicate research to policy makers. The real challenge is how we convert knowledge into firms and products, which leads to productivity and growth.

There is no quick fix, according to Braunerhjelm, you need to take several areas into account like taxes, social welfare systems, education and venture capital.  And these aspects must cut through several policy areas.

On venture capital Braunerhjelm said.

– The supply side of capital is important but if you don’t have the demand side there a danger that good money goes after not so good ideas.

– We want high growth and ambitious entrepreneurs in Europe. This can oly be reached by long term strategies, which is not the case today.

– No minister controls all the factors in promoting SMEs. In order to succeed you need a commitment from the top of the government, said Peter Vikström.

Professor David Storey, University of Sussex, made concluding remarks. Policy depends very much on what you’re trying to achieve. What we need, according to Storey, is evidence.

– And self-report is no evidence.

What evidence you find depends on your objectives and by what measure you choose to evaluate it.

– Asking people what they thought of counselling and measuring if it actually made any difference in performance may give you very different results, said Storey.

Storey emphasized the importance of macro economics

– Factors like interest rates, unemployment and house prices influcence entrepreneurship and growth possibilities. If we want to influence entrepreneurial activity we should elaborate with these.

– Also taxes and benefit systems are a big influence. We can’t tell politicians which levers to pull but you need to look at these factors.

Other important areas, according to Storey, are regulation, competition and policies on immigration.

– The evidence is that these guys drive the train. There has to be at big picture for development.

img_5maj_lundstrom_storeyAnders Lundström and David Storey

Finally Anders Lundström, professor and project manager for the IPREG project briefly presented the ongoing international research project in the area of entrepreneurship and SME policies. This project aims to give answer to the following three questions:

  • How much costs are spent on entrepreneurship and SME policies in different countries and regions.
  • What are countries and regions doing then they are doing entrepreneurship and SME policies
  • To what extent are consideration taken to the different contexts in countries and regions

Download presentations:

Thomas Ebdrup
Eric Burton (External link Slide Share)
Beate Rotefoss
Jarna Heinonen
Anders Isaksson
Joao Leitao

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