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Government SME and
Entrepreneurship Policies
After the Crisis
Dr Jonathan Potter
OECD, Centre for Entrepreneurship,
SMEs and Local Development
Contact: [email protected]
Presentation to OECD/Marche Region/
University of Urbino Economics of Small
Businesses Conference,
Urbino, 20-21 October 2010
Presentation structure
1. OECD Working Party on SMEs and Entrepreneurship
2. Impact of the crisis on SMEs and entrepreneurship
3. Broad policy challenges
4. Priorities for policy development
5. Conclusion
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1.1 OECD WPSMEE
Working Party on SMEs and Entrepreneurship (WPSMEE)
Unique international forum to compare policies and
identify good practices in:
• Fostering entrepreneurship
• Harnessing SMEs and entrepreneurship for job creation,
innovation and growth
• Helping SMEs meet the challenge of globalisation
Areas such as business environment, globalisation,
financing, innovation, training, access to markets, women
entrepreneurship
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1.2 OECD WPSMEE
Bologna Process – common policy tools:
• Bologna Charter on SME Policies, 2000
• Istanbul Ministerial Declaration on Fostering the Growth
of Innovative and Internationally Competitive SMEs, 2004
• Brasilia Action Statement for SME and Entrepreneurship
Financing, 2006
• Athens Action Plan for Removing Barriers to SME Access
to International Markets, 2006
• Tokyo Statement on Strengthening the Role of SMEs in
Global Value Chains, 2007
• Bologna+10 High-level Meeting, Paris 17-18 November
2010
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2.1 Impact of the crisis
• Twin shocks to SMEs and entrepreneurs :
― Strong fall in demand for their goods and services
― Strong squeeze on their working capital and investment
finance
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2.2 Job shedding
• In past, SMEs retained employees in recession more than
larger firms – remained true in several EU countries
• But in the USA, SMEs shed jobs faster than large firms –
new phenomenon?
Net job creation/destruction in the United States
(seasonally adjusted) 1999-2009, by firm size, in thousands
SMEs
Large
<50 employees
2,000
1,000
0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
-1,000
-2,000
-3,000
-4,000
Source: US Bureau of Labor Statistics
Note: “SME” refers to firms with 1-499 employees, “large” refers to firms with 500+ employees
2009
2.3 Unemployment
•
Unemployment increase of 50% in OECD 2007-10. Wide
dispersion by country
2.4 Nature of the recovery?
• “Bottoming out” was in mid-late 2009
• Gradual recovery in 2010
But…
… growth is much slower than in earlier recoveries
... unemployment will remain high
… protracted restructuring is expected
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3.1 Policy challenges
Need to tackle
unemployment
New jobs and
occupations
Opportunity for
restructuring
New technologies,
sectors, products
New geographies
Greener economy
More social economy
Enhanced role for
new firm creation and
SME growth
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3.2 New firms and job creation
• New firms play the dominant role in job creation in
response to unemployment and downsizing
• Nearly all net job creation in the USA from 1977-2005
occurred in firms less than 5 years old (Kauffman)
• Once started, the majority will remain in the SME sector
and appropriate SME policies and framework conditions
will be required to maintain the positive effect on
employment
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3.3 New firms and job creation
Employment creation by enterprise births, 2005 and 2006
As a percentage of the total number of persons employed in manufacturing and services
Source: 1. Mining and quarrying; manufacturing electricity, gas and water.
2. Wholesale and retail trade; hotels and restaurants; transport, storage and communications; financial intermediation; real estate, renting and business activities.
Source: OECD Entrepreneurship Indicators Project (2009)
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3.4 High-growth firms and job
creation
• High-growth enterprises play a disproportionate role in
job creation
• The 10% most rapidly growing enterprises created 5060% of gross employment gains over a 5-10 year period
in France, Italy, Netherlands and Greece
• Nearly 50% started as SMEs
• Although the probability of rapid growth declines with
age, the great majority were existing SMEs more than 5
years old
• There are notable differences among countries in share
of high-growth enterprises
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3.5 Share of high-growth firms
Employment definition, 2006
As a percentage of all enterprises with 10 or more employees (figures above the bar indicate change from previous
1. Mining and quarrying; manufacturing electricity, gas and water.
2. Wholesale and retail trade; hotels and restaurants; transport, storage and communications; financial intermediation; real estate, renting and business activities.
3. Employer enterprises with fewer than 250 employees.
4. 2008.
Source: OECD Entrepreneurship Indicators Project (2009)
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3.6 SMEs, entrepreneurship and
innovation
• Enterprise churn – firm exit and replacement – raises
productivity. Estimated at 20-40% of productivity
growth in selected European countries and USA late 90s
• A small group of innovative SMEs are initiators of
breakthrough innovation
• New firms represent a significant proportion of all
patents filed by business – but varies by country
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3.7 Patent applications filed by
young firms, 2005
As a percentage of patents filed by firms at the European Patent Office (EPO)
Source: OECD, HAN database, October 2009 and Bureau Van Dijk Electronic Publishing, August 2008
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4.1 Institutional framework
conditions
Recognised in Bologna Charter and Istanbul Ministerial
Declaration :
• Macroeconomic stability – interest rates, exchange rates
• Fair and transparent regulations – compliance costs,
transparency, bankruptcy procedures, product
standards, competition policy, anti-corruption measures
• Non-discriminatory tax regime
• Access to financial services
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4.2 Internationalisation
• Markets are increasingly international. Globalisation and
open innovation increase the importance of international
knowledge connections
• But SMEs are under-represented in the international
economy
• Barriers :
― Information and knowledge
― Managerial time
― Workforce skills
― Product and service quality
― Working and investment capital
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4.3 Internationalisation
• Recommendations:
―
Increase the participation of SMEs in international
collaborative research programmes
―
Address financial barriers to internationalisation
―
Support SME upgrading programmes
―
Provide brokerage and information services on
foreign market and collaboration opportunities
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4.4 Intellectual assets
management
• IPRs are an important tool for protecting and managing
intellectual assets
• But SMEs rarely have explicit intellectual assets
strategies, lack knowledge of the possibilities offered by
IPR regimes, and use IPR less than large firms
• Barriers:
― short-term thinking,
― lack of knowledge of IPR,
― poorly adapted regulatory landscapes (high fixed
costs, need for multiple filings)
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4.5 Intellectual assets
management
• Recommendations:
―
Enhance SME awareness of the possibilities to
protect their intellectual assets
―
Facilitate appropriate advice and consultancy on
intellectual asset management to SMEs and new
firms
―
Adapt the IPR system to the needs of SMEs and
entrepreneurs
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4.6 Entrepreneurial human capital
• Entrepreneurship skills and competencies are necessary
for new venture creation. Major gap is in strategic skills
• But entrepreneurship training is limited and there are
significant inequalities across countries
• Barriers:
― Poorly adapted cultures and incentives in formal
education
• Recommendations:
― Smartly scale up entrepreneurship education in
schools, vocational education, universities
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5. Conclusion
• SMEs and entrepreneurship are important now more
than ever
• Barriers exist, including framework conditions, SME
internationalisation, intellectual asset management and
entrepreneurial human capital
• The WPSMEE is an international forum for policy
analysis and exchange
• Messages in the OECD Bologna Process statements and
OECD publications
• High-level policy makers will meet in Paris 17-18
November 2010 to set out a road map for the future
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