EN    EN EN 
EN    EN  COMMISSION OF THE E UROPEAN COMMUNITIES 
Brussels, 25.6.2008 
SEC(2008) 2101 
  
COMMISSION STAFF WORKING DOCUMENT 
 
accompanying the 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Think Small First 
A Small Business Act for Europe  
  
Impact Assessment  
{COM(2008) 394 final} 
{SEC(2008) 2102} 
EN 2   EN  
TABLE OF CONTENTS 
1. Procedural issues and consultation of Interested Parties ..............................................4 
1.2. Background................................................................................................................ ...4 
1.3 Consultation and expertise............................................................................................4 1.3.1 Studies.................................................................................................................. .........4 
1.3.2. Stakeholder consultations and inter-service group .......................................................4 
1.3.3. Opinion of the Impact Assessment Board ....................................................................5 2. What issue/problem is the policy/ proposal expected to tackle? ...................................5 
2.1. SMEs - which are crucial for economic gr owth, job creation and regional and social 
cohesion - are not reaching thei r full potential in the EU.............................................6 
2.1.1. Facts and figures ....................................................................................................... ....6 
2.1.2. SMEs, job creation and regi onal and social cohesion ..................................................6 
2.1.3. The importance of SMEs and entrep reneurship for economic growth.........................7 
2.1.4. Comparison with the US indicates that EU SMEs are not fulfilling their potential.....8 
2.2. Remaining problems holding back EU SMEs, in spite of the existing SME policies10 2.2.1. Existing policies already implemented .......................................................................10 2.2.2. Expected developments under th e current existin g SME policy ................................13 
2.2.3. Remaining problems for SMEs, in spite of existing policies, which might need further 
public action................................................................................................................14  
2.3. Summary of the remaining problems, in spite of the existing policies.......................21 2.4. Who is affected? .........................................................................................................2 1 
3. What is the overall policy objective in terms of expected impacts?...........................22 
3.1. Has account been taken of any prev iously established objectives?............................23 
4. What are the main policy options av ailable to reach the objective?...........................23 
4.1. Which policy options have been considered?.............................................................23 4.1.1. Options discarded at an early stage.............................................................................24 4.1.2. Options selected for further assessment of their impacts ...........................................24 
5. Analysis of impacts.....................................................................................................25 5.1. Impacts of option 1: No addi tional Action (baseline option) .....................................25 
5.2. Impacts of option 2 as compared to option 1..............................................................27 
EN 3   EN 6. Comparison of the options..........................................................................................35 
6.1. Justification for action at EU level .............................................................................36 6.1.1. Subsidiarity test and impact on budget.......................................................................36 6.1.2. Are there especially severe impacts on a particular social group, economic sector 
(including size-class of ente rprises) or region? ..........................................................37 
6.2. Are there impacts outside the Union (“external impacts”)? .......................................37 
7. Implementation and monitoring..................................................................................38 7.1. Implementation ...........................................................................................................3 8 
7.2. Monitoring and evaluation..........................................................................................38 
ANNEX I ........................................................................................................................ ..........39 
ANNEX II....................................................................................................................... ..........44 
ANNEX III...................................................................................................................... ..........58 
ANNEX IV ....................................................................................................................... ........77 
EN 4   EN 1. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
This Impact Assessment accompanies the Commi ssion’s proposal for a “Small Business Act” for 
Europe. This document does not pre-judge the fina l form of any decision to be taken by the 
Commission.  
It has to be highlighted that, given that the proposal for a “Small Business Act” represents a 
package of measures in a wide range of areas of  a different nature, this impact assessment cannot 
analyse the impacts of each individual action. Sp ecific actions or legisl ative proposals to be 
presented together within the “Small Business Ac t” for Europe and which would normally require 
an Impact Assessment will be accompanied by separate Impact Assessments as needed. 
1.2. Background 
In its Communication to the Oc tober 2007 Meeting of Heads of State and Government: “The 
European Interest: Succeeding in the age of globalisation” the Co mmission underlined the need to 
fully unlock the growth and jobs potential of SMEs  and make full use of their innovative capacities. 
This was reflected in the strategic report on th e renewed Lisbon strategy for growth and jobs 
adopted on 11 December 2007, which substantially increases the emphasis on SMEs in the context of the next Lisbon cycle 2008-2010 . Lastly, the March 2008 Europ ean Council expressed a strong 
support for the “Small Business Act” initiative  and requested its swift adoption, to further 
strengthen SMEs' growth and competitiveness. The Commission has theref ore received a mandate 
to go further and to propose a new initiative to fu lly unlock the growth and jobs potential of SMEs.  
1.3 Consultation and expertise 
This impact assessment is based on: the resu lts of a dedicated stakeholder consultation; 
consultations on specific actions to  be proposed; and a broad range of  internal and external studies 
and surveys. This includes: 
1.3.1 Studies 
The results of a number of studies have b een considered for this impact assessment. 
• Internal studies and surveys from the Commi ssion, including the 2007 Observatory on EU SME; 
• Previous consultations by the Commission on SME related topics; 
• External reports have provided further important input. 
More detail in particular about re ferences used by the services re sponsible for drafting the impact 
assessment is given in annex I. 
1.3.2. Stakeholder consultations and inter-service group 
Internally, an ad-hoc inter-se rvice group was set up in November  2007 involving all relevant 
Commission services
1. This group met on a regular basis and also provided input for the work on 
the impact assessment. 
                                                 
1 Including : Secretariat General, Legal Service, Competition DG, Social  Affairs and Equal Opportunities DG, 
Agriculture and Rural Development DG, Energy and Transport DG, Environment DG, Research DG, Internal 
Market and Services DG, Regional Policy DG, Taxation and Custom Union DG, Education and Culture DG, 
Health and Consumer Protection DG, External relation DG, Trade DG 
EN 5   EN Externally, DG ENTR launched an internet stakeholder consultation on the “Small Business Act” 
for Europe. The results of  the answers (more than 500) were summarized in the report published on 
the Commission’s website and attached in annex II2. 
A stakeholder hearing was organised on 6 Februa ry 2008 with Commission President Barroso and 
Vice-President Verheugen. More than 350 stake holders from Member States, industry, NGOs, 
private companies, trade associations, and manage ment consultancies partic ipated. In parallel, DG 
ENTR received a number of position papers from va rious stakeholders and screened all of them. 
Moreover, regular information and meetings with  European business organisations chaired by the 
SME Envoy3 provide a forum for a regular exchange of information on the Commission’s major 
legislative and policy initiatives  and their impact on SMEs. In  addition, several high-level 
stakeholder conferences have brough t together a wide variety of re presentatives from the European 
Parliament, Member States and business communit y, furthering the commitme nt of all key players 
to implement Modern SME policy. 
1.3.3. Opinion of the Impact Assessment Board 
This impact assessment report takes into account  the opinion of the Impact Assessment Board 
issued on 5 June 2008 on an earl ier version of the report. The fo llowing improvements have been 
made to address the main recommendati ons of the Impact Assessment Board: 
• Improve the outline of expected development under the baseline scenario : The problem 
description has been substantially reworked to distinguish more clearly between policies which 
are already in place or planned, and remaining problems. In addi tion, a better description of the 
expected developments in the SME sector und er the existing policies has been carried out. 
• Strengthen the link between the obje ctives and the proposed policies : The objectives have been 
revised accordingly to strengt hen the link between the remain ing problems and the policy 
options and have been made more specific and pr ecise. In particular, a gr eater emphasis has been 
given to the positive opportunities for SMEs, es pecially under the environmental objective. 
• Give an indication of the magnitude  of the impact of new policies: Where possible, data on the 
economic, social and environmental incremental im pacts of the new action have been provided. 
However, due to the cross-cutting nature of th e SBA, no overall quantitative estimation could be 
developed. In the future, we intend to develop a new SME Performance Review to improve the 
situation and have more quantitative data on SME policies. 
2. WHAT ISSUE /PROBLEM IS THE POLICY /PROPOSAL EXPECTED TO TACKLE ? 
The general issue, analysed in detail hereafter, is that EU SMEs, which are crucial for economic 
growth, job creation and social co hesion are not reaching their full  potential. In particular, EU 
SMEs have lower productivity and grow more slowly than their US counterparts and do not 
innovate sufficiently. 
                                                 
2 http://ec.europa.eu/enterprise /entrepreneurship/sba_en.htm 
3 http://ec.europa.eu/enterprise/sme/envoy_en.htm 
EN 6   EN 2.1. SMEs - which are crucial for economic grow th, job creation and regional and social 
cohesion - are not reaching th eir full potential in the EU 
2.1.1.  Facts and figures 
From a statistical point of view , SMEs are by far the dominant form  of business organisation in the 
EU economy. There are around 23 million SMEs in the EU 274 and 41000 large companies. SMEs 
represent 99.8 % of all enterp rises and generate 57.6 % of th e EU-27’s non financial business 
economy value added (see EU SME definition in box 1 in annex IV)5. 
2.1.2.  SMEs, job creation and regi onal and social cohesion 
SMEs account for almost 70% of total employm ent (in 2004, 67.1 % of the EU-27’s non-financial 
business economy workfor ce was employed by an SME6) with micro-businesses providing the bulk 
of employment (see figure 1 in annex IV)7. This is particularly marked in the service sector (see 
figure 2 in annex IV).  
In addition, studies have  shown that SMEs are responsible for most of the net job creation in the 
EU8 (see figure 3 in annex IV). In France, fo r example, where the ac tive population grew by 10% 
between 1985 and 2004, employment remained stab le in large companies (250 employees and 
more) at around 5.5 million employees, whilst the nu mber of employees in SMEs grew by 35% (+ 
2.3 million jobs) to reach 8.9 million employees in 20049. 
SMEs also play a key role for local, regional and social cohesion. There are SMEs in each region of 
the EU and they contribute to em ployment and wealth in every pa rt of Europe, including rural and 
peripheral areas, urban areas and industrial rede ployment areas. Thus they contribute to the 
development of regions not considered attractiv e by multinational firms. The 2007 Observatory of 
European SMEs shows that the smaller the firm, the more likely it is to hire local labour: while 89% 
of an SME’s workforce is local, only 77% of th e workforce of large-scaled enterprises (LSEs) 
comes from the same region10. 
                                                 
4 Estimations vary on the exact number of EU-27 SMEs: Eurostat, in European business, Facts and figures 2007, 
mentions 19 million enterprises in the EU-27’s non-financial business economy in 2004. The 2003 
Observatory of EU SMEs:  (http://ec.europa.eu/enterprise/enterprise_policy/ analysis/doc/smes_observatory_2003_report8_en.pdf
, 
indicates an absolute number of around 24,668 million SMEs for EU 15 (18,698 million, 2003 data) + EU 12 + 
Turkey (5,970 million, 2001 data). These statistical differences stem mainly from a different evaluation of the number of micro enterprises and from the fact that Eurostat data do not take into account personal services 
where many enterprises are SMEs. However, both Eurost at and the EU Observatory of EU SMEs acknowledge 
that 99.8 % of EU-27 enterprises are SMEs. 
5 Eurostat, European business,  Facts and figures, 2007 
6 67.1 % of the EU-27’s non-financial business economy workforce was employed within SMEs in 2005: 
Eurostat, Enterprises by size class - overview of SMEs in the EU, 2008 
7 See: http://ec.europa.eu/enterprise/entrepreneurship/facts_figures.htm 
8 Eurostat: SMEs and entrepreneurship in the EU 2006:  
http://epp.eurostat.ec. europa.eu/cache/ITY_OFFPUB/KS-NP -06-024/EN/KS-NP -06-024-EN.PDF 
9 OSEO, Quels emplois pour les PME? Etude sur les PME et l’emploi en France, 2007 
10 European Commission, Observatory of European SMEs, 2007 
EN 7   EN 2.1.3.  The importance of SMEs and entrep reneurship for economic growth 
An extensive literature review on the theoretica l framework linking entrep reneurship and economic 
growth has been developed in the report “SMEs in Europe 2003”11 analysing the new theories of 
industry evolution (including Jovanovic, 1982;  Ericson and Pakes, 1995; Audretsch, 1995; 
Hopenhayn, 1992; Lambson, 1991 and Klepper, 1996). Th e main feature of these evolutionary 
theories is to recognise entreprene urship and SMEs’ role in economic growth as agents of change in 
a knowledge-based globalised  and interlinked economy. 
Entrepreneurship direct contribution to growth potential 
Entrepreneurship generates economic output by providing diversity among enterprises. Not only 
does entrepreneurship generate a greater number of en terprises, but it also increases the variety of 
enterprises in a given location. There has been a series of theoretical arguments12 suggesting that the 
degree of diversity, as opposed to homogeneity, in  a location will influence the growth potential. 
SMEs’ indirect contribution to productivity growth 
In this theoretical framework, wh at is crucial for aggregate produc tivity growth, and therefore for 
economic growth, is the continuous process of entr y, development and exit of new enterprises or the 
process of ‘creative destruction’ usually ascribed  to Joseph Schumpeter. Firms’ entry and exit help 
increase aggregate productivity gr owth thanks to the continuous reallocation of resources from 
exiting, less productive, firms to new, more productiv e, firms (the so called churning process). This 
process increases competition and therefore forces existing firms to innovate, to upgrade 
technology, or change work orga nization to promote efficiency13. With new entrants and exiting 
firms being typically small, SMEs are, almost  by definition, at the heart of this process. 
New complementarities between enterprises in a knowledge-based, globalised and interlinked 
economy 
With the development of a knowledge-based, globalised and interlin ked economy, productivity 
growth can now be obtained in a more decentralis ed way than concentrating capital and labour to 
generate economies of scale within big companie s. Now, economies of scale can be generated by 
combining factors through networks on an ad hoc  basis. In this context, there is a higher level of 
complementarities between enterprises, notably between small and big players. 
This can be observed in the fi eld of innovation where “greater competition across enterprises 
facilitates the entry of a new ente rprise specializing in some partic ular new product niche. This is 
because the necessary complementary inputs and se rvices are likely to be available from small 
specialist niche enterprises but not necessarily from large, ve rtically integrated producers14”. These 
complementarities come from new business models but also from the inhere nt nature of knowledge. 
According to Baumol (2002)15 the most efficient i nnovation environment is in fact one in which 
most of the breakthrough innovation occurs in sma ll firms while most of the improvement on those 
                                                 
11 European Commission, Observatory on EU SMEs, SMEs in Europe 2003,  
http://ec.europa.eu/enterprise/enterprise_policy/an alysis/doc/smes_observatory_2003_report7_en.pdf 
12 European Commission, Observatory on EU SMEs, SMEs in Europe 2003, p.14 
13 Cotis, J. P. ,OECD Chief Economist, Entrepreneur ship as an Engine for Growth: Evidence and Policy 
Challenges, GEM Forum Entrepreneurship: Setting the Development Agenda, London, 10 and 11 January 2007 
14 European Commission, Observatory on EU SMEs, SMEs in Europe 2003, p.12 
15 Baumol, W.J. , The Free-Market Innovation Machine, Princeton University Press, 2002 
EN 8   EN innovations and wide-scale dissemination occurs in  large oligopoly firms. In line with this 
theoretical analysis, Eurostat data16 on the intensity of innovation pe r size class and country in EU 
27, show a high level of correlation and su ggest that there are complementarities  between 
innovative large and small firms (see figure 4 and 5 and 8 in annex VI). 
In addition, the globalisation of production brings new forms of mu tually beneficial relationships  
between SMEs and large companies17. This form of globalisation is driven mainly by the search for 
efficiency, which includes inter alia  subcontracting inputs to more  efficient producers and the 
search for complementary and strategic assets. In  this context, large companies benefit from 
efficient SMEs. For SMEs, this reorganisation of pr oduction at the international level also provides 
new opportunities and challenges. “N ew niches for the supply of pr oducts and services continuously 
emerge from the fragmentation of production, where small firms can  quickly position themselves, 
exploiting their flexibility a nd their ability to move fast18”. This can lead SMEs to substantial 
benefits in terms of information flow, technol ogy transfer and learning opportunities but also 
through enhanced interna tionalisation and growth . 
2.1.4.  Comparison with the US indicates that EU  SMEs are not fulfilling their potential 
In Europe, however, SMEs do not reap the full benefit of the above mentioned opportunities (in 
particular when compared to their US counterpart s) and thus do not reach their full potential in 
terms of aggregate economic growt h, job creation and social cohesion. 
EU SMEs have lower productivity than la rge companies and their US counterparts 
Aggregate labour productivity  tends to be lower for EU SMEs than for large EU firms since their 
share in value added is typically lower (45% in  manufacturing and almost 60% in services) than 
their share in employment. This si ze-class difference is partly due the sectoral distribution of small 
and large enterprises. Larger companies are mo re present in manufacturing, which is capital 
intensive, whereas smaller comp anies are predominantly active in the service sector, which 
inherently is more labour intensive19 (see figure 2 in annex IV). However, this difference does not 
exist in the US, where “small businesses employ about  half of the private sector work force and 
produce about half of private sector output20”. 
                                                 
16 European Commission, BEPA Monthly Brief - Issue 11, January 2008, The role of SMEs in Innovation in the 
EU, By Reinhilde Veugelers,  Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 
17 See: OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs 
in Global Value Chains, 2007, p.13 
18 See: OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs 
in Global Value Chains, 2007, p.13 
19 See : Baumol, W. J., “Macroeconomics of unbalance d growth: the anatomy of urban crisis”, American 
Economic Review, 57 (3), 1967, and “Paradox of the Services: exploding costs, persistent demand”, Chapter 1 
in “The growth of Service Industries – The Paradox of Exploding Costs and Persistent Demand” edited by T. 
ten Raa and R. Schettkat, Edward Elgar Publishing Limited, 2001. According to Baumol (2001), while some 
services (e.g. postal delivery times, rubbish collection) may have benefited from technological advances and 
many in particular from computerisation (particularly in  the financial industries), he argues that so far, these 
productivity gains had been modest, whilst in other services no significant sources of productivity gains can be 
identified (e.g. care of the elderly) 
20 U.S. Small Business Administration, The 2005 Small Business Economy, Report to the President. 
EN 9   EN EU SMEs contribute less to the “creative de struction” process and have less beneficial 
interactions with large firms than US SMEs 
A comparison with the US seems to indicate th at the role played by SMEs in the creative 
destruction process is lower in the EU than in the US21. There is no strong evidence to suggest that 
entry rates are very different between the US and the EU22. In the EU almost 90% of employment in 
newly born firms in 2003 was created by firms of less than 20 employees23. But exit rates and hence 
gross turnover rates (the sum of entry24 and exit rates) are higher in the US than in the EU. As a 
result, successful SMEs in the US can grow faster , because inefficient firms (SMEs or large) leave 
the market and do not continue to occupy “valuabl e” market space (see figure 6 in annex IV). In 
addition, lower entry and exit costs in the US allow firms to enter more easily, thus benefiting from 
the experimentation process offered by the market25. 
EU SMEs grow more slowly post-entry than US SMEs 
As a condition for their survival, smaller firms s hould have higher growth ra tes than their larger 
counterparts. This is particularly  so in manufacturing sectors, especially in high-tech sectors26. The 
links between firm size and firm growth are how ever more ambiguous in Europe. In the United 
States, surviving firms on average increase th eir employment by 60% by their seventh year27, while 
employment gains among surviving firms in Europe are in the orde r of 10 to 20% (see figure 7 in 
annex IV). Even in highly dyna mic industries, surviv ing US firms show a stronger employment 
expansion, compared with those in most other count ries. For instance, post-e ntry growth at 7 years 
for manufacturing is 6% of the US rate in France , 17% in Finland and 60% in the UK. The same, to 
a lesser degree, applies to the total business sector28 
EU SMEs are not sufficiently innovative 
SMEs have a crucial role to play  in the innovation process, in part icular by generating more radical 
innovation. This takes place in Eu rope, especially in the case of young innovative companies. For 
instance, in the German comm unity innovation survey (CIS29) sample, the share of sales from 
                                                 
21 Aghion, P., R. Blundell, R. Griffith, P. Howitt and S.  Prantl: “Entry and Productiv ity Growth: Evidence from 
micro-level data”, Journal of the European Economic Association, 2003, 265-276 
22 See: European Commission, BEPA Monthly Brief – Is sue 10, December 2007, The role of SMEs in EU’s 
growth and jobs , By Reinhilde Veugelers, Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 
23 European Commission, SMEs and Innovation, Note for the Economic Policy Committee, Brussels, 26 October 
2007 
24 Based on data for a sample of nine EU15 countries and the U.S. both entry and exit rates are lower in the EU 
than in the U.S. though the differences in exit rates ar e substantially larger. Exit rates in EU range between 
1/10 and 1/3 of US rates, while EU entry rates represent between 0.4 and 0.8 of the U.S. entry rates. See Van Reenen, J. (2007): Economic Perfor mance of the EU and the Structur al Reforms Agenda: Firm Level 
Evidence, GEPA Meeting of 9th July. Cincera, M.,and O. Galgau (2005): “Impact of Market Entry and Exit on 
EU Productivity and Growth Performance,” Economic Papers 222, European Commission 
25 Aghion, P., R. Blundell, R. Griffith, P. Howitt and S.  Prantl: “Entry and Productiv ity Growth: Evidence from 
micro-level data”, Journal of the European Economic Association, 2003, 265-276 
26 See Sutton, 1997, Caves, 1998, Geroski, 1995 for surveys. Audretsch, (1995) shows the growth advantage of 
small and new firms vis-à-vis large enterprises to be even  greater in high technology industries. See Almus and 
Nerlinger (2000); and Harhoff, Stahl and Woywode (1998) for European results 
27 In the US, 70% of all the new jobs created by new firms between 1992 and 1996 came from just 3% of the 
fastest growing firms: Birch et.al. (1997) 
28 Eric Bartelsman, John Haltiwanger and Stefano Scarpe tta, Microeconomic evidence of creative destruction in 
industrial and developing countries, 2004, Worldbank 
29 http://epp.eurostat.ec.europa.eu/portal/page? _pageid=0,1136250,0_45572555&_dad=portal&_schema =
 PORTAL 
EN 10   EN radically new innovations in total sales for young innovative companies is on average 23%, which 
is three times higher than the total average30. However, relative to US SMEs, EU SMEs are less 
R&D intensive31. Moreover, in Europe, a lo wer percentage of SMEs i nnovate successfully (i.e. 
introduce new products or processes) as compared to  large firms, both in services and in industry 
sectors (see figure 5 in annex IV). 
2.2. Remaining problems holding back EU SMEs, in spite of the existing SME policies 
2.2.1.  Existing policies alre ady implemented  
Existing policies at EU level 
EU policy makers, both in the Member States and at EU level, have long recognised the need to 
allow EU SMEs to fulfil their potential. As a consequence, a comprehensive EU Modern SME policy was put in place in 2005
32 as an integral part of the Lisbon Partnership for Growth and 
Jobs33, aimed at alleviating SMEs’ specific problems a nd market and regulatory failures in five key 
areas: 
(1) cutting red tape; 
(2) improving SMEs’ access to markets; 
(3) promoting entrepreneurship and skills; 
(4) improving SMEs’ growth potential; 
(5) strengthening dialogue and consul tation with SME stakeholders. 
A great number of specific policies have already b een developed in this framework or have already 
been planned to reinforce it, and a comprehensive list has been included in annex III. The present section only singles out some of the key existing measures and does not claim to be exhaustive: 
• As regards the regulatory and administrative burden
, the Commission has taken important steps 
towards creating a more SME-friendly regul atory environment. In January 2007, the 
Commission presented an Action Programme to reduce the administrative burdens on businesses 
in the EU by 25% by 201234. It addresses 13 priority areas covering around 40 legislative acts 
and a list of ten fast-track reduction proposals.  A High Level Group was es tablished to provide 
advice on the implementation of the Progr amme and an on-line consultation on the 
administrative burden has been launched. To da te, the baseline measurement of administrative 
burdens has been almost completed for one of  the 13 priority areas  (company law/annual 
accounts) and the results for the remaining 12 ar eas are expected for the autumn. As regards 
simplification, the Commission has tabled 100 initiatives since the launch of the rolling 
simplification programme in 2005. 20 initiatives have been adopted so  far, whilst 47 are 
currently pending for adoption before the co-legis lators. The Commission will further strengthen 
its action, taking stock of progress achieved and introducing a new set of simplification 
initiatives. Additional measures will contribute  towards facilitating the environment for SMEs. 
                                                 
30 For sales of new products (incremental as well as radical), the superior performance of YIC is less outspoken: 
while YICs have an average of 51.7% this is "only" twice the average share. This superior performance of 
YICs is confirmed in multivariate anal ysis, correcting for other firm and in dustry characteristics, Veugelers & 
Schneider (reference to be added), Working Paper in progress, 2008 
31 On average the R&D intensity of SMEs is 0.34% in EU, 0.53% in US, according to DGRTD Key Figures 2007 
32 Commission Communication: Implementing the Community Lisbon Programme Modern SME policy for 
Growth and Employment, (COM(2005)551) 
33 See Annex III. For more detailed information on existin g SME policies and measures, see the European portal 
for SMEs:  
http://ec.europa.eu/enterprise/sme/index_en.htm 
34 COM(2007) 23 
EN 11   EN For instance, State Aid rules traditionally adopt a positive approach towards SMEs. In particular, 
the revision of the Community state aid rules has increased to €200,000 the de minimis threshold 
under which aid need not be reported. Moreover, the Services Directive35, which Member States 
have to implement by the end of 2009, requires Memb er States to simplify their procedures and 
formalities, to abolish unjustified requirements a nd to set up single points of contact, through 
which all relevant procedures and formalities can be completed. Full and timely implementation of the Services Directive will help accelerate business start-up times. 
• Concerning SMEs’ access to markets
, many measures also already ex ist. An integrated business 
and innovation support network (the  Enterprise Europe Network)  was set up in 2007 and became 
fully operational in 2008 to assist SMEs in bene fiting more from the opportunities of the Single 
Market. It promotes match-ma king events between SMEs, tec hnology brokerage and partner 
searches, and organises feed-back from SMEs on EU legislation and standards. In addition, the 
new Services Directive will free up the provisi on of services, which a ccount for 70% of EU 
value added and have a consider able potential to stimulate grow th and employment. Moreover, 
the Commission is already providing co-funding to support the partic ipation of experts 
representing SMEs’ interests in the process that establishes Eur opean standards. In addition, the 
Public Procurement Directives provide a framew ork to foster competitive public procurement 
markets to the benefit of SMEs, including in par ticular the use of electro nic public procurement. 
Finally, EU actions include the development of tr ade facilitation provisions  in future free-trade 
agreements (FTAs) and in the WTO and regulat ory and industrial policy  dialogues with third 
countries to tackle regula tory obstacles to trade. 
• As regards the promotion of entrepreneurship and skills  many measures depend on the Member 
States. For its part, in February 2006, the Commission adopted a Co mmunication on fostering 
entrepreneurial mindsets th rough education and learning36, providing examples of good practices 
which were discussed at the Oslo conference on entrepreneurship education. Moreover, it is 
estimated that more than 200,000 secondary school students participate in a practically-oriented 
training scheme, launched by the Commission, whereby they run mi ni-companies to familiarise 
themselves with basic business concepts and skills.  These students are four times more likely to 
create their own company than others. To facilitate the take- up of e-skills, not the least by SMEs, 
the Commission has also proposed a new e-skills policy agenda. In addition, to safeguard the estimated 2.8 million jobs which are at stake through th e transfer of businesses each year, the 
Commission is promoting good practices on how to de sign services to estab lish contacts between 
potential sellers and buyers of transferab le businesses. Further to a Commission 
Communication
37, a pilot action aims to promote mentor ing schemes in EU Member States in 
order to enhance the k nowledge and core competences that are essential for the successful 
transfer of business ownership. Finally, the Commission adopted a Communication on 
“Overcoming the stigma of business failure – for a second chance policy” where areas of action for facilitating the fresh st art of honestly failed entrepreneurs are put forward
38. 
• To improve SMEs’ growth potential , the Commission has alrea dy developed many policies. 
Among many other measures, these include programmes to facilitate SMEs’ access to finance. 
The Commission has increased the SME focus within major Community spending programmes 
for the period 2007-2013. SMEs are at the core of Cohesion Policy which is expected to invest 
around €27 billion – the largest sh are of EU funding – in the ar ea of entrepreneurship and 
business support services. Moreove r, €1.1 billion has been earmarked for financial instruments 
                                                 
35 Directive 2006/123/EC  of 12 December 2006. 
36 http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 
37 Implementing the Lisbon Community Programme for Growth and Jobs: Transfer of Businesses - Continuity 
through a new beginning COM (2006)117 
38 COM(2007) 584 final 
EN 12   EN within the Competitiveness and Innovation Fram ework Programme (CIP) for that period. In 
addition, to allow efficient use of financial inst ruments at regional leve l, the Commission with 
the European Investment Bank (EIB) and the European Investment Fund (EIF) launched the 
JEREMIE initiative of the Structural Funds39. The European Agricultural Fund for Rural 
Development (EAFRD)40 will also spend up to €10 billion to support the creation and 
development of non-agricultural enterprises in ru ral areas, skills acquisition and training, as well 
as SMEs in agriculture, the food industry and fore stry. In addition, to foster SMEs’ research and 
innovation, the EU’s 7th Framework programme for research and development (FP7) established 
the target of allocating 15% of the budget of its  Co-operation programme  to SMEs. The results41 
of the first calls for proposals show that the part  allocated to SMEs in the main proposals listed 
(e.g. after evaluation) is just below 20%. Mo reover, the Commission’ s innovation policy and 
specific support actions have co ntributed to increasing SMEs’ participation in innovation by 
addressing market failures and promoting c ooperation between stakeholders. Finally, the 
ambitious environmental goals of increasing energy efficiency and reducing greenhouse gas 
emissions by at least 20% by 2020 and promo ting renewable energy sources require the 
emergence of a new business paradigm. The chal lenge is to help SMEs to adopt sustainable 
production and business models and thus make th em active players in shifting the European 
economy towards more environmentally-friendly production and consumption, while in parallel 
allowing SMEs to reap the ec onomic benefits that this presents. Some innovative SMEs are 
already active in “green  markets” and the Commission has pr oposed a programme to further help 
SMEs to integrate environmenta l concerns into production proce sses and products starting with a 
better compliance with environmental legislation42. 
• Lastly, regular information and discussion meeting s with European business  organisations 
chaired by the SME Envoy provide a forum for a regular exchange of information on the 
Commission’s major legislative and policy initiatives and their impact on SMEs. 
Existing policies at Member State level 
• Member States, for their part, ha ve all integrated SME-specific measures in their Lisbon reform 
programmes. They have also made efforts to deli ver on the five priority actions requested by the 
2006 Spring European Council43 (establish a one-stop-shop for setting up a company, encourage 
entrepreneurship through education, facilitate the recruitment of the first employee, make the 
‘Think Small First’ principle a gu iding principle in all relevant legislation and facilitate SMEs’ 
access to public procurement), thus contributi ng to the implementation of the “Think Small 
First” principle throughout the European Union. In  particular, the majority of Member States 
have established a one-stop-shop for setting up a company and most of them have reduced the 
time required to do so. Many of them have taken measures to develop entrepreneurial mindsets 
through education, although the progress is relati vely slow. Moreover, Member States are 
introducing measures to rais e enterprises’ awareness of public procurement opportunities, 
although few have put in place a specific strategy to help SMEs participate in public tenders.  
• Moreover, the regular dialogue with Member  States on SME-policy has led to better 
complementarities  between national and EU measures. The Commission has supported this 
process by facilitating mutual learning and excha nge of best practice. It has collected and 
published on-line, in the framework of the European Charter for  Small Enterprises’ process, 
more than 250 good practices from the Member St ates, e.g. in the areas of improving on-line 
access, taxation and better regulation.  
                                                 
39 http://ec.europa.eu/regional_policy/funds/2007/jjj/jeremie_en.htm 
40 Council Regulation (EC) No. 1698/2005 of 20 September 2005 
41 1st progress report of the FP7 SME inter-services task force 
42 ECAP Programme: http://ec.europa.eu/environment/sme/programme/programme_en.htm 
43 For more details, see table 2 in Annex III 
EN 13   EN 2.2.2.  Expected developments under the current existin g SME policy  
The existing measures described above already addr ess some of the most pressing issues facing 
SMEs. A mid-term Review of the existing Modern SME policy took place in 200744 and showed 
that a lot of progress had already been made. The main achievements include: 
• both Member States and the Commission have made considerable progress in implementing 
actions to create a better business environment, to mainstream SME issues in major policy areas 
and to encourage more people to become entrepreneurs; 
• the better regulation “cultu re” has also begun to take root across the EU. 
Indeed, creating a better bus iness environment for all businesses,  including SMEs has already had a 
great impact on economic growth. Accordi ng to the Impact Assessment on the Action 
Programme45, various studies using different economic mode ls point to potential rises in the level of 
GDP due to a 25% reduction of the administra tive burden of between 1.4 % and 1.8% of GDP. The 
10 ‘fast track actions’ identified within the Action Programme alone are expected to generate significant benefits (estimated at  €1.3 billion) through requiring relatively minor changes in the 
underlying legislation
46. This programme will indeed benefit to all businesses, including SMEs. 
Moreover, the mid-term review analysis showed that the implementation of the Modern European 
SME policy, which has been carried out in a c ontext of increasing economic growth, has had a 
positive impact on job creation. In 2006, EU GDP grow th reached 3.0% – almost twice the rate of 
2005 – and about 3.5 million new jobs were create d. Indeed, SMEs are the main driver of 
employment growth, in particular  in sectors like constr uction, transport, comm unication or tourism. 
However, in spite of the progress of the comprehe nsive policies that are in place, the 2007 mid-term 
review of the Modern SME policy47 concluded that there is room  for further improvement, since 
some problems are currently not or only inadequate ly dealt with and there is a need for better 
coordination of existing policies. The mid-term review therefore emphasized the need to fully 
unlock the growth and jobs potentia l of SMEs and make full use of their innovative capacities by 
putting even more emphasis on SM Es in the context of the next Lisbon cycle 2008-2010. These 
findings are confirmed by the worse performance of  EU SMEs compared to their US counterparts, 
analysed in section 2.1.4 above. 
Consequently, an analysis of the main existing  SME policies at EU and national level has been 
carried out in the context of this impact assessmen t, as well as by screening a number of studies and 
surveys (including the public consultation on this initiative), to single out the remaining problems 
that might continue to hamper SMEs’ potential. 
The details of this screening exercise can be found in Annex III. However, for proportionality 
reasons, the main text of the present assessment will only focus on the analysis of the selected remaining problems. The following list does not claim to be exhaustive, due to the wide scope and 
inherently interdisciplinary nature of the “Small Business Act” initiative. 
                                                
 
44 Commission Communication: Small and medium-sized enterprises - Key for delivering more growth and jobs. 
A midterm review of Modern SME policy, COM(2007) 592 final 
45 SEC(2007) 84 
46 European Commission, Second strategic review of Better Regulation in the European Union, COM(2008) 32 
final 
47 Commission Communication: Mid-term Review on the Implementation of the Modern SME Policy, 
(COM(2007) 592 final) 
EN 14   EN 2.2.3.  Remaining problems for SMEs, in  spite of existing policies, which might need further 
public action 
EU SMEs are facing remaining probl ems in a number of policy areas: 
Remaining problems for SMEs as regards the im plementation of the “Thin k Small First” approach  
• Implementation of the “Think Small First” principle at EU level 
The results of the stakeholder consultation on this  initiative (see Annex II), has confirmed that the 
administrative burden, overregulation and bureaucracy  are by far the main general concerns for 
SMEs. At EU level, as seen above, a compre hensive policy has already been underway since 
January 2007. This policy is currently being implemented and will take more time to deliver fully. 
In line with the objective of this programme, it is essential to make sure that future legislation 
developed at EU and national level takes into c onsideration SMEs’ specifi c requirements from the 
start. This is crucial as smaller enterprises, especially very small businesses, bear higher than average regulatory costs. Estimates indicate th at where a big company spends one Euro per 
employee because of a regulatory duty, a small bus iness might have to spend on average up to ten 
Euros
48. 
However, a remaining difficulty for SMEs comes from  the fact that new EU legislation coming into 
force is introduced at many different dates during th e year, depending on the ne gotiation process. In 
the public consultation, the suppo rt for common commencement da tes reached 68%, although there 
are arguments that the initiative should be implem ented only at national level and not at EU level. 
• Heterogeneity of the implementation of the “T hink Small First” principle at national level 
Five priority actions we re established at the Spring European  Council in 2006 – start-up time/one 
stop shops, recruiting the first employee, entrepre neurship education, “Think Small first”, and 
access to public procurement. Overall, the implementa tion of the five priority  actions is going in the 
right direction49. However, policy actions need to be intens ified and coordinated at EU level in the 
framework of the Lisbon Partnershi p. Particular attention is given here to start-ups and bankruptcy 
procedures at national le vel, due to their role in the churning process identified before as an 
important determinant of productivity growth (more details on each priority action can be found in 
annex III, table 2). 
– Start ups: 
One of the 2006 Spring European C ouncil priority actions was that st art-up times should not exceed 
one week. The latest evaluation carried out by the Co mmission states that only 13 out of 27 
Member States comply with this objective. The same source also indicates that although 23 out of 
27 Member States comply with the main objec tive concerning the costs involved in starting a 
business, there remain significant differences betw een Member States. These facts are reciprocated 
                                                 
48 European Commission, Report from the Expert Group on “Models to Reduce the Disproportionate Regulatory 
burden on SMEs”, May 2007  
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/regmod/regmod_en.pdf 
49 The analysis on the Member States’ achievements come from the Communication from the Commission to the 
European Council: Strategic report on the renewed Lisbon strategy for growth and jobs: launching the new cycle (2008-2010), COM(2007) 803 final, PART III, available at:  
http://ec.europa.eu/growthandjobs/pdf/european-dimension-200712-annual-progress-report/200712-annual-
report-annex3_en.pdf 
EN 15   EN by the feelings of the main stak eholders. Around 60% of replies to the public consul tation indicated 
that there is still a need to reduce the time and costs to set up a business.  Some respondents pointed 
out that significant differences exist even within  Member States. The lack of information and the 
lack of appropriate support for newly created enterprises were identified as additional problems. Although the real responsibility for acting in this area clearly rests w ith the Member States, the fact 
that these huge disparities still exist is also an indication that the coordina tion role at EU-level has 
not performed as well as intended. 
– Bankruptcy/stigma of failure  
Lower exit rates have been analysed above as the main explanation for the less dynamic churning 
process in the EU than in the US. Different elemen ts determine the level of exit of companies out of 
the market. Bankruptcy/insolvency law is one crucia l element in allowing easier exits, in particular 
by reducing the time and costs incurred. Bankrupt cies account for some 15% of all company 
closures
50. In the EU, the stigma of failure is still present in the business environment, the legal 
framework and also in cultural and societal behaviour. This creates unnecessary hurdles to 
entrepreneurs who wish to restart. 47%  of Europeans would be reluctan t to order from a previously 
failed business; 51%  of them would never invest in businesse s in financial difficulties. To correct 
this stigma, one important element is to clearly  distinguish between fr audulent and non-fraudulent 
bankruptcy. In the EU, only 4-6% of bankruptcies are fraudulent51. However, this policy area is 
essentially in the remit of Member States. Gi ven its limited competencies in the area, the 
Commission can only flag up the need  to improve bankruptcy procedures52 and has recently 
published a Communication on overcoming the stig ma of business failure53. Additional action at 
EU level in this domain can ther efore only concentrate on a better implementation at Member State 
level. 
Remaining problems affecti ng entrepreneurial activity  
• Education system/ entrepreneurship 
All EU Member States are well aware of the need  to integrate entrepreneurship training into the 
education curricula, but it is still far from universal in schools and further and higher education institutions. And whilst there are many examples of  initiatives which have had great results in 
encouraging young people to think in a more entrep reneurial way, entreprene urship is a recognised 
objective of the education systems a nd is embedded explicitly in fr amework curricula in only a few 
EU Member States. Even in those Member Stat es, implementing means (teacher training, teaching 
materials) still need to be stepped up
54. In line with this analysis, 84% of the respondents to the 
public consultation think th at the education system, and in part icular the school curriculum, does 
not focus enough on entrepreneurship. They therefor e consider it important to intervene in the 
education system with more systematic measures.  
                                                 
50 A.C.P. de Koning, Business failure and entrepreneursh ip in international perspective, EIM Small Business 
Research and Consultancy, 1999 
51 The percentage would be 3-4% in Italy and the UK and 7% in Austria (2003-2006 national data) 
52 The European Commission has limited itself to collecting data on the legal and social consequences of 
business failure, facilitating the identification and disse mination of good practices and recently to working on 
early warning tools as a means of reducing the stigma of failure. 
53 COM(2007) 584 final 
54 European Commission, Assessment of compliance with th e entrepreneurship educatio n objective in the context 
of the 2006 Spring Council conclusions 
EN 16   EN • Entrepreneurial gap between men and women  
Today female entrepreneurs constitute only 34.4% of self-employed people in the EU25 . Their 
share in start ups is around 30%. In terms of preferences, only 39.4%  of women would choose to be 
self-employed compared to 50.2% of men, which show s that women are more reluctant than men to 
become entrepreneurs55. In addition to economic and soci ological elements common to both 
genders, the lack of social protec tion or the reduced level of protection available to self-employed 
women, notably in the case of maternity protect ion, constitutes an additional obstacle to the 
participation of women in self-employed activities56. 
Remaining problems affecting SMEs’ access to markets  
• Standardisation 
SMEs still face difficulties when participating in and benefiting from European standardisation, 
which helps them to do busin ess in other Member States57. According to the 2002 Observatory of 
European SMEs, the main problems SMEs face ar e the lack of information on new standards (26 
%), the lack of information on which standards have to be met (23 %), difficulties in applying 
standards correctly (21 %), difficu lties in obtaining certification of  compliance with  standards (16 
%) and finally the lack of opportuni ties to participate in the devel opment of new standards (16 %). 
• SMEs’ access to the public procurement market 
More than 70% of the stakeholders answering th e consultation on this initiative see a need to 
improve SMEs’ access to public procurement and consid er it very useful to increase transparency in 
EU procurement procedures. Indeed public procurem ent is an important market capable of boosting 
innovation, stimulating companies’ growth and cr eating jobs. According to estimates from DG 
Internal Market58, the total value of public procurement in  the then 25 Member States amounted to 
some €1,800 billion in 2006, corresponding to 16% of total EU-25 GDP59, of which €370 billion are 
above the thresholds of the EU Directives.  
A 2007 study performed on behalf of the Eur opean Commission estimat ed that in 2005 the 
proportion of the value of public procurement a bove EU thresholds secured by SMEs was 42%, 
which corresponds to 64% of the number of contracts60. Obviously, these figur es relate only to 
                                                 
55 In line with these data, Reynolds, Bygrave, Autio, Cox and Hay (2002) have shown that men are about twice 
as likely involved in entrepreneurial activity than women: Reynolds, P.D. Bygrave, W.D., Autio, E. Cox, 
L.W.& Hay, M., 2002, Global Entrepreneurship Monitor, 2002, executive report, Babson College, London 
Business School and Kauffman Foundation  
56 European Commission; Good practices on social protection of new entrepreneurs and assisting partners and the 
impact on business creation" EIM Business and Policy Research:  
http://ec.europa.eu/enterprise/e ntrepreneurship/craft/craft-
studies/documents/social_protection_final_report_en.pdf 
57 The Council Conclusions on Euro pean standardisation of December 2004, Document 14790/2/04 REV 2, 
noted that: “adequate participation in standardisatio n of all parties concerned (social partners, NGOs, 
environmental interest groups, consumers, SMEs, authorities, etc.) is not sufficiently implemented at present 
within all Member States. European standardisatio n should be recognised as a strategic tool for 
competitiveness and for the uniform application of technical legislation in the internal market” 
58 http://ec.europa.eu/internal_market/publicprocurement/index_en.htm 
59 These estimates were based on data provided by Na tional Statistical Institutes to Eurostat for National 
Accounts and from annual reports an d other sources for the Utilities sector. 
60 Evaluation of SME Access to Public Procurement Markets in the EU, Final Report by GHK and Technopolis, 
available at: http://ec.europa.eu/enterprise/entrepreneurship/public_procurement.htm 
EN 17   EN public contracts above the thresholds set by th e EU Directives and do not take account of 
subcontracts of all sizes won by SMEs. However, while the share of medium-sized companies in 
the total value of public procur ement contracts above the EU th resholds is quite positive as 
compared to their importance in the economy, the analysis suggests that s ituations differ greatly 
from one Member State to the other: SMEs’ shar e of public procurement a bove the EU thresholds 
ranges from 78% and 77 % in Slove nia and Slovakia to 35% and 31% in France and the UK. While 
such discrepancies might be partly  explained by the relatively high sh are of large enterprises in the 
economy of certain Member States, the compar ison between the respective combined company 
turnovers generated by SMEs and the value of the public contracts won by SMEs would suggest 
that there is still room for improvement  and more coordination at EU level. 
In addition, SMEs continue to face difficul ties in accessing public procurement due to the 
administrative burden61. This means that to reach the share of public procurement they have, SMEs 
have to bear high transaction cost s. The EU Public Procurement Dir ectives include a set of flexible 
rules which leave a certain discreti on to tendering authorities. Howe ver, the procurement culture in 
many Member States is focused on short-term cost  savings which often means in practice lumping 
together smaller lots into a big tender often not accessible to SMEs, as well as weighting too heavily 
the price criteria at the expense of, for exampl e, innovative, environmenta lly-friendly and more 
sustainable products. Therefore th e promotion of principles and best practices and a tighter 
monitoring at EU level of the im plementation of rules reducing the administrative burden could be 
needed. 
Remaining problems affecting SMEs  when undertaking research and de velopment as we ll as putting 
innovative ideas into practice  
According to the 2007 Observatory of European SMEs, only around 3 out of 10 SMEs in the EU 
indicated that they have new products or have income from new products. In addition, EU SMEs 
are less R&D intensive than US SMEs62. In Europe, more than 60% of  the overall turnover is made 
by SMEs while these companies only account for 25% of the business financed research 
expenditure63. Moreover, R&D expenditure as a proportion of turnover is, on average, lower in EU 
SMEs than in their larger counterparts. 
The EU SMEs’ lack of innovation and their lower level of R&D in tensity compared to larger 
companies is partly due to a limited access to finan ce, which is crucial for developing R&D, and is 
limited by market risk aversion, as seen in the previous section. In addition, part of SMEs’ remaining difficulties in this field stems from the fact that SMEs face higher relative costs for patenting and maintaining a patent than large comp anies or their US counterparts. In Europe, SMEs 
are approximately five times less lik ely to apply for a patent than large companies and are estimated 
to account for less than 20% of pa tent applications from EU firm s at the European Patent Office
64. 
                                                 
61 This includes: difficulties in obtaining information (as they cannot allocate sufficient resources to information 
collection); lack of knowledge about tender procedures; th e large size of the contracts;  too short time span to 
prepare the proposal; cost of preparing the proposal (sin ce many costs are fixed, SM Es face disproportionately 
high costs in comparison with larger enterprises); high  qualification levels and required certification; financial 
guarantees required, discrimination against foreign tenderers /favouring local or national enterprises; finding 
collaboration partners abroad. 
62 The average R&D intensity of SMEs in Europe is 0.34% versus 0.53% in the US. This compares to an overall 
average R&D intensity in Europe of 1.17% versus 1.57% in the US. Source: DGRTD Key Figures 2007 
63 OECD, SME and Entrepreneurship Outlook 2005, Data for 2001. The same result is found in respect to 
innovation activities. See: Eurostat (2004) Innovation in Europe, p. 40 
64 For example, a company of 50 employees with a turnover of 5 million euro would need to spend over 300,000 
euro a year to maintain a portfolio of 50 patents, amounting to nearly 7% of turnover. Source: 2006 Trendchart 
EN 18   EN Moreover, EU SMEs do not access patent protectio n under the same economic conditions as their 
competitors on the global market and face higher patent ing costs in procedural fees, external service 
costs and translation costs65. In addition, European SMEs have  difficulties in managing their 
intellectual property abroad. They ar e usually not aware of the rules that can help them protect their 
inventions and are ignorant of the wa ys to fight piracy  and counterfeiting. 
This problem was identified many years ago and a Community Patent and an EU-wide Patent 
Jurisdiction would be a major impr ovement of which in particular  SMEs would benefit most. The 
remaining problem here is the delay in the adoption of these improvements. 
Remaining problems affecting SMEs’ acce ss to specific segments of financing  
First, the European venture capital market is sti ll fragmented and hence inefficient. Because of the 
cost, time and effort needed to invest acros s borders in Europe, ma ny funds cannot become 
sufficiently specialised and their management team s cannot develop the sect oral expertise required 
for long-term profitability. Alt hough the European venture capital  industry has shown an upward 
trend since 200466 and the number of venture-backed firm s is higher in the EU, the volume of 
capital such European firms receive  is much lower than in the US. 
Secondly, EU SMEs have insufficient access to mezzanine finance (combining features of equity 
and debt). SMEs face a situation where they do not have access to (further) debt financing, yet they 
do not wish to share ownership and are thus unwilling to consider equity finance as an alternative – 
or they do not have the potential for rapid growth  required by venture capitalists. The discussions 
from the Fifth Round Table between bankers and SM Es demonstrated that there is practically no 
supply of mezzanine finance between €100 000 and €1 million. 
Third, the lack of microcredit can specifically hinder the expans ion of SMEs, especially micro-
enterprises. For European SMEs, borrowing small am ounts for business purposes  is also difficult as 
the overhead costs are high for banks and there are not enough non-bank mi crofinance institutions. 
This makes self employment and the deve lopment of micro enterprises difficult. 
SMEs’ insufficient access to finance is partially in trinsic because of the larger volatility of their 
profitability and growth compared to large firms, but it is partia lly due to market imperfections 
caused by principal/agent problems and asymmetric information. Such imperfections are worsened 
                                                                                                                                                                  
report "Patent applications by SMEs". Data from the 3rd Community Innovation Survey for 16 European 
countries and from 2000 EPO data for six EU countries 
65 According to a ULB-Solvay study (WP_CEB 06-002, 2006), the direct cost to patent and maintain a patent 
including translation and external service costs in only 13 Member States for 10 years (corresponding to the 
average approximate lifetime of a pate nt), amounted to 56292 Euros for an SME, as opposed to 10062 Euros in 
the USA. For the European patent in  13 Member States, 33100 Euros are translation and external services 
costs, and 23172 Euros are processing and renewal fees. Therefore, the application of a reduction of 50% of 
the taxes to SMEs for application and maintenance fees would represent an advantage of 11585 Euros for 13 Member States only corresponding to a reduction of about 20% on the overall costs for a 10 year patent. This 
advantage is less than the total of the translation costs (13600 Euros). It is to be noted that these calculations 
are limited to 13 Member States and do not take into account the additional cost of defending a patent in 27 Member States. The US Patent Office and the Japanese Patent Office apply a 50% reduction in fees for SMEs. 
At an EU conference on IPR Policy in Berlin in 2007, it was calculated that the total cost of application and 
maintenance of a patent for 20 years per million inhabitant s is 30 times lower in the USA than in the EU 27.  
66 European venture capital industry ha s shown an upward trend since 2004. In  2006, out of €71  billion of total 
equity capital invested, venture capital investments amounted to €17.2 billion and more than 30% of the equity 
investment volume has flowed into the small enterprises. In figures this means nothing less than more of 70% 
of all investment decisions had been taken to finance companies with less than 100 employees. EVCA 
Yearbook 2007; BVK Special “Private Equity in Europa 2006, 17.07.2007, page7. 
EN 19   EN by structural rigidities like low national savings, an inappropriate  regulatory framework and the 
structure of the financial system67. Consequently, for many finance pr oviders financing SMEs is an 
unattractive activity. This is particularly problematic for innova tive firms that need large amounts of 
investment in an untested idea. The due diligence costs are considerable and the mortality rate of such firms is high, lowering the overall return on portfolios of i nvestment in such firms. This 
problem concerns more specifically young, fast growing, and innovative enterprises
68. 
New problems stemming from globalisation  
• SMEs and the environment: persistent lack of information and awareness 
SMEs still lack information and expertise as rega rds their own environmental impact, and they are 
not always well informed about their obl igations under environmental legislation69. This persisting 
difficulty prevents SMEs from fully exploiti ng the opportunities for increased efficiency, 
competitiveness, innovation and growth offered by a sound environmental management. Indeed, the 
current SME uptake of environmental management sc hemes (EMS) or simple measures to preserve 
environmental resources and energy is low70. The 2007 Observatory of EU SMEs indicates that 
only 6% of SMEs have an Environmental Manage ment System (EMS) in place and that only 29% 
of SMEs have instituted some measures for pres erving energy and resources (46% in the case of 
large enterprises). Only 4% of EU SMEs have a comprehensive system in place for energy efficiency, which is much lower than for large en terprises (19%). Half of  the respondents to the 
consultation on this initiative found that easier a ccess to the European Environmental Management 
and Audit system (EMAS) would be potentially useful. 
This problem particularly affects SMEs. The bigger the company, the more likely it is to have a pro-
active environmental policy
71, which is linked to the scarcity of  dedicated human resources in the 
smallest firms. Data shows that  “93% of firms with more than 500 employees usually have an 
employee to deal with environmental matters. Among smaller firms with 50-99 employees, only 
55% have a designated person to de al with environmental affairs72”. 
• Barriers still hinder SMEs’ access to international markets 
Many European SMEs still remain focused on th eir national markets: th e 2007 Observatory of 
European SMEs indicates that only 8% of EU SM Es reported turnover from exports (7% of micro-
enterprises reported exports), wh ich is significantly lower than the respective share of large 
enterprises (28%). Moreover, only 12% of the inputs of an average SME are purchased abroad. This 
average percentage includes, however, a high level of disparities amongst Member States. 
According to the final report of th e Commission’s Expert  Group “Supporting the 
internationalisation of SMEs73”, this lack of knowledge of foreign markets is mostly the 
                                                 
67 OECD, The SME Financing Gap: Volume I, Theory and Evidence, 2006 
68 According to the European Investment Bank’s SME consultation of 2007/2008, there is a “lack of adequate 
financing tools for a variety of SME segments, e.g. micro-enterprises without business or personal assets to 
offer as security, young, fast growing, innovative enterprises or those facing the challenge of transmission.”  
69 Idem . See also European commission, Impact  Assessment on the ECAP programme:  
http://ec.europa.eu/environment/sme/pdf/impact_assess_906_en.pdf 
70 European Commission: Public Policy Initiatives to promote the uptake of environmental management systems 
in small and medium-sized enterprises, Final Report of the BEST project expert group, January 2004 
71 See for instance: NUTEK, E nvironmental Work in small enterprises – a pure gain?, R 2003:7, page 9-10  
72 http://ec.europa.eu/environment/sme/pdf/impact_assess_906_en.pdf 
73 European Commission, Supporting the internationalisa tion of SMEs, Final Report of the Expert Group, 
December 2007:  
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/internationalisation/report_internat.pdf 
EN 20   EN consequence of two elements: insufficient ma nagerial time and/or skills required for 
internationalisation and the lack  of financial resources. This is the reason why, indeed, many 
national and local actors have already created many services to help SMEs go international, i.e. 
traditional business incubator services and a broad range of other services (going from dissemination of information, legal a ssistance, cultural educat ion to activities in the field of science 
and technology)
74. 
The remaining problem however is that these servi ces are very heterogeneous and therefore not all 
service providers provide all services and not all provided services are accessible to SMEs, 
regardless of their home country. In  China, for example, only 43% of the service providers offer 
cultural education and networking ac tivities. In addition, onl y 37% of them provide  activities in the 
area of science and technology compared to 80% that provide dissemination of information 
activities75. Moreover, access to these services is trad itionally based on nationality. Only in the 
recent past has there been an opening of servic es to non-national SMEs. Therefore some SMEs do 
not have access to special services. Others must  rely on specific service providers and therefore 
cannot benefit from competition.  
The nature of the problem is therefore not a lack of existing services for EU SMEs wanting to go 
international, but the lack of existing schemes’ accessibility an d also the suboptimal level of 
services due to the lack of competition. This an alysis is confirmed by th e answers to the public 
consultation on this initiative in which coordina tion and synergies with all the actors involved 
(Member States, business organisations, Chambers) and existing centres/networks is considered a 
key element for the success of th e EU centres (and crucial to avoi d duplication with market based 
service providers). 
                                                 
74 See : Feasibility study on setting-up of a European Centre in China for European SMEs and other activities 
(TRADE07/B2/B0) April 2008 
75 Idem  
EN 21   EN 2.3. Summary of the remaining problems, in spite of the existing policies 
The major remaining problems EU SMEs are s till facing can be divided into two groups: 
• coordination and/or implementati on issues of existing policies; 
• remaining market or regulatory gaps not  addressed at all by existing policies. 
The remaining problems can therefore be summari zed in the table below,  by policy area and by 
category of problems. Depending on the category in to which a particular problem falls, it may 
determine whether a harder or softer policy res ponse is required and whether the use of existing 
instruments or new ones is appropriate. 
Remaining problems Implementation 
/coordination problems  Remaining market or 
regulatory gaps 
Impact of future EU legislation on SMEs   
Heterogeneity of the implementation of the “Think Small 
First” principle at national level, including:  
– Start-ups 
– Stigma of failure + bankruptcy procedures.   
Entrepreneurship is still not sufficiently reflected in 
educational and training policies   
Insufficient level of women’s entrepreneurship    
SMEs’ difficult access to markets   
SMEs’ access to public procurement and culture of 
tendering authorities   
SMEs’ difficulty in accessing, using and participating in 
the development of standards   
Insufficient access to finance 
• Availability of mezzanine finance 
• Availability of micro-credit 
• Fragmentation of venture capital   
Difficulty taking advantage of the opportunities linked to 
the environment   
SMEs’ difficulties in accessing international markets and 
especially fast growing markets    
2.4. Who is affected?  
• The target population of this in itiative is both Community and Member States’ administrations 
and other public administrations  at regional and local level; 
• through concrete new actions, this  initiative will also  affect all types of  SME from micro- 
enterprises to medium sized enterprises opera ting throughout the European Union. These SMEs 
cover an enormous variety of sectors, legal fo rms and organisational st ructure, including craft 
businesses. 
• however, certain specific actions described below could be particul arly beneficial  to micro and 
small enterprises, such as the General Block Exemption Regulation for State Aid, mobility 
schemes for apprentices and young en trepreneurs, actions to develop the avai lability of micro-
funds or reduced VAT rates principally for locally supplied services.  
EN 22   EN 3. WHAT IS THE OVERALL POLICY OBJECTIVE IN TERMS OF EXPECTED IMPACTS ? 
General objective: 
The overall objective of this proposal is to fully unlock the growth and jobs potential of European 
SMEs and make full use of their innovative capacities , in order to contribute to the objective of the 
renewed Lisbon Partnership for Gr owth and Jobs decided in 2005. 
Specific objectives:  
To reach this general objective, two different ty pes of specific objectives have to be fulfilled: 
1) Improve the implementation of the “Think Small First” principle and the coordination 
of existing policies, by:  
• increasing the partnership with Member Stat es to better implement and coordinate 
existing policies: 
– create synergies and spill overs between Member States  (e.g. by giving SMEs better 
access to existing national and local servi ce providers which help SMEs to access 
international markets); 
– reinforce the monitoring of the implementation of existing policies at EU and national 
level, in the framework of the Li sbon Partnership (e .g. strengthening the 
implementation of the conclu sions of the 2006 Spring Eu ropean Council at Member 
State level); 
– encourage the exchange of experiences at EU level, e.g. to promote the teaching of 
entrepreneurship in education systems. 
• anchoring the “Think Small First” in po licy making at EU and national level: 
– develop a set of common principles to be  applied at EU and national level when 
conceiving and implementing policies, in orde r to generate political commitment to act 
in favour of SMEs; 
– propose concrete initiatives to make SMEs’ life easier; 
– avoid overlaps between policies; 
– simplify State Aid rules by proposing a ne w General Block Exemption Regulation; 
– reducing cross-border difficulties in the Single Market by proposing a European 
Company Statute. 
2) Address the remaining regulatory and market gaps  
• fostering entrepreneurship, by: 
– promoting entrepreneurship and the image of entrepreneurs in education curricula; 
– encouraging new entrepreneurs, in particular female entrepreneurs ; 
• further improve SMEs’ access to finance, by:  
– increasing the availability of micro- credit and mezzanine finance for SMEs; 
– reducing venture capital market fragmentation at EU level ; 
• increasing SMEs’ access to markets, by: 
– fostering a more SME-friendly cu lture among tendering authorities; 
• improving SMEs’ access to, use of and particip ation in the development of standards; 
• increasing SMEs’ awareness of the opportunities  of sustainable products and processes by 
developing on-the-ground envir onmental and energy advice; 
• improving SMEs’ access to international markets a nd especially fast growing markets such as 
China and India. 
EN 23   EN 3.1. Has account been taken of any previously established objectives?  
The present initiative from the Commission takes into account: 
• The Lisbon objective  of the EU becoming the world’s most competitive and dynamic 
knowledge-based economy capable of sustainable economic growth with more and better jobs, 
greater social cohesion and respect for the envi ronment. To reach this goal, the coordinated 
European reform agenda put in place under th e renewed Lisbon Partnership for Growth and 
Jobs76 has, inter alia, encouraged an increasing number of  Member States to integrate the 
interests of SMEs into their policy-making processes. 
• The EU’s Better Regulation Agenda  in which the reduction of the administrative burden by 25% 
by 2012 and the simplification of existing legislation are main priorities. The existing 164 
simplification initiativ es selected by the Commission fo r the period 2005-2009 aim at making 
rules clear, easy to understand and user-frien dly without watering down  essential regulatory 
protection. Effort is being focussed on projects  bringing significant bene fits to business and 
citizens, in particular small and medium sized enterprises. 
• The Single Market review77 announced that the Commission w ill examine a range of initiatives 
to back SMEs, in the form of a Sm all Business Act for Europe in 2008. 
• In the Commission’s Communicat ion to the October 2007 Meet ing of Heads of State and 
Government: “The European Interest: Succeeding in the age of globalisation ” the Commission 
underlined the need to fully unlock the growth a nd jobs potential of SMEs and make full use of 
their innovative capacities. 
• The existing EU Modern SME policy  (see annex III, table 3, for a detailed analysis). 
4. WHAT ARE THE MAIN POLICY OPTIONS AVAILABLE TO REACH THE OBJECTIVE ? 
4.1. Which policy options have been considered? 
The previous sections of this document have mapped the existing pr oblems in different policy fields 
which explain the lack of sustainable growth of EU SMEs, and analysed the EU’s entitlement to 
address these problems. The present section focu ses on how these problems could most efficiently 
be tackled, by comparing different options. Howeve r, while the problems id entified above cover a 
broad range of areas, the analysis hereafter will not scrutinise every specific option to tackle each 
specific problem but instead will establish the best  approach to achieve the general policy objective. 
In addition, each individual action covered in th is initiative which normally requires an impact 
assessment will either be subject to an individual impact assessment or has already been subject to 
such an assessment.  
There are 4 possible basic options  for how the EU may address th e problems identified above: i.e. 
the insufficient implementation of the “Think Small First” principle, the insufficient coordination and coherence of certain SME policies at nationa l and EU level and the persistence of certain 
market and regulatory gaps facing EU SMEs:  
• Option 0 : to withdraw existing SME policy measures at EU level and let Member States and 
local authorities develop their own policies de pending on their specific needs and particular 
remaining market or regulatory gaps; 
• Option 1 : no additional action (baseline scenario); 
                                                
 
76 Commission Communication: Working together for growth and jobs. A new start of the Lisbon strategy, 
COM(2005)24 
77 Commission Communication: A single market for 21st century Europe, COM(2007) 724 final  
EN 24   EN • Option 2 : stepping up EU SME policy through a political  partnership approach with the Member 
States, aimed at enhancing fr amework conditions for SMEs a nd entrepreneurship including 
specific additional policies to address remaining market and regulatory gaps; 
• Option 3 : developing and implementing a fully-fl edged Community approach to SME policy 
with legally binding objectives and principles to be implemented at EU and Member State level 
and far-reaching Community programmes to address the remaining market and regulatory gaps 
EU SMEs are facing.  
4.1.1.  Options discarded at an early stage 
• Option 0 : the option to withdraw existing SME policy measures at EU level and let Member 
States and local authorities develop their ow n policies would deny the positive experience with 
SME policy introduced as part of the renewed Li sbon Strategy as eviden ced by the assessment of 
the results of the first 2005-2007 cycle (and analys ed in detail in Annex III, table 3). Moreover, 
this option would not be credible  from a political point of view. Indeed the stakeholders’ answers 
to the public consultation on this initiative rev ealed an apparent clash between a number of 
opinions arguing for less EU-level action and those favouring more EU intervention and 
universality in the field of SME policy. However, the latter view  prevails, as an overwhelming 
majority of business organisations argue for a legally binding SBA. The “cut back” option is not 
a credible option from both an economic and a pol itical perspective and w ill therefore not be 
analysed further. 
• Option 3 : Developing and implementing a fully-fle dged Community approach to SME policy 
with legally binding objectives and principles to be implemented at EU and Member State level 
and far-reaching Community programmes will not be  further analysed either. This option was 
seriously considered at the begi nning of this exercise, as many business organisations argue for a 
legally binding SBA. However, as many of the areas relevant to SMEs’ growth potential are 
mainly or partly in the remit of Member States  (e.g. education, start-up, insolvency law), setting 
legally binding objectives is clearly  in contradiction with the subsidiarity principle, which is a 
requirement and presupposition for Community acti on. This was confirmed by the answers to the 
public consultation where the systematic application of the subsidiarity and proportionality principles was considered helpful by 70% of th e respondents. Moreover, this option would not 
differ fundamentally from option 2 in terms of  its potential impacts (economic, social and 
environmental), as its main incremental benefits as compared to the baseline option would be the 
same as those of option 2, i.e. the development of synergies between polic y areas and spillovers 
between local and EU level. In fact the effect of an increased level of implementation of the “think small first” principle as compared to the baseline scenario would be almost impossible to 
assess due to the reason that the non-respect of th e subsidiarity principle could to a large extent 
increase the resistance to implementation on th e ground. For these reasons, option 3 has not been 
selected for further assessment. 
4.1.2.  Options selected for further assessment of their impacts 
• Option 1 (no additional ac tion or baseline option) : This option consists of the existing EU 
SME policy, which is mainly composed of the existing Modern SME polic y as endorsed by the 
Council and specific targeted EU support programme s, as well as a number of measures already 
planned or in implementation phase, as described in the table 3 in annex III. The “no additional 
action” option will serve as the baseline against which option 2, which is the only credible option, will be assessed. 
• Option 2: This option consists of stepping up the ex isting EU SME policy through a political 
partnership approach with the Member States , aiming at enhancing framework conditions for 
EN 25   EN SMEs and entrepreneurship and including targeted  policies to address the remaining market and 
regulatory gaps facing EU SMEs, as analysed in th e problem definition. It aims at establishing a 
true political dynamic between the EU and Member State level to put SMEs at the forefront of 
economic policies as part of a long-term vision. In substance, this requires an improvement in the 
policy approach towards SMEs both at Commun ity and national levels by making sure that 
legislation and programmes are conceived from th e start and then implemented in a way that 
respects the needs and specific ch aracteristics of SMEs (the “Think Small First” principle). A set 
of new actions, compared with the existing EU po licy, could be developed – in partnership – into 
a coherent framework in the policy areas where a ju stification to act has been ascertained in the 
problem definition. The content of these new actions  will be described in the next section, on a 
case by case basis, when comparing the im pact of this option with the baseline.  
5. ANALYSIS OF IMPACTS  
5.1. Impacts of option 1: No additi onal Action (baseline option) 
The problem definition has singled out two types of remaining problems SMEs are facing, in spite 
of existing polices: 
• problems of implementation and coordi nation of existing policies and; 
• remaining market or regulatory gaps, not covered by established or planned policies. 
Therefore, the main negative impact of option 1, i. e. keeping EU SME policy as it is, would be not 
to address the remaining gaps a nd would therefore maintain some barriers to EU SMEs’ growth. As 
regards coordination and implementation issues, it is  difficult to foresee what type of progress could 
be achieved over the long run at EU and Member Stat e level, but the main impact of option 1 in this 
respect would be a lower pace of reforms favour able to SMEs. However, the current SME policy 
would continue to produce its be neficial effects. The following type of economic, social and 
environmental impacts might consequently arise: 
Economic impacts 
Even if it is very difficult to give a quantitative estimation of the impact of the current EU SME 
policy on economic growth, what is clear is that th is policy delivers and will continue to deliver 
several key actions focussed on some main determ inants of growth incl uding R&D and innovation, 
investment and access to finance. To give just so me examples, the Structural Funds could remain 
the largest Community funding instruments benefiting SMEs78. Around 16-18% of the total 
allocation for Cohesion Policy of €347.4 billion is  planned to be spent in relation to SMEs. 
Moreover, the Seventh Framework Programme fo r Research and Technological Development (FP 
7) includes a number of incentiv es for SME participation, incl uding an increased upper rate of 
reimbursement for research and technological development activities from 50% to 70%. The 
results79 of the first calls for proposals show that the proportion allocated to SMEs in the main 
proposals listed (e.g. after ev aluation) is just below 20%80. Moreover, the Competitiveness and 
Innovation Framework Programme (CIP)81, with a budget of approximately €3.6 billion, provides 
better access to finance for SMEs and support for entrepreneurship, innovation, ICT as well as to a 
                                                 
78 http://ec.europa.eu/regional_policy/index_en.htm 
79 1st progress report of the FP7 SME inter-services task force 
80 Data show that this result can have a positive correlation with GDP. For example, a 1-euro increase in public 
spending on research and development (in EU countries) results in an additional 0.93-euro of expenditure on 
research and development in the private sector, , Competitiveness Report, 2004 
81 http://ec.europa.eu/enterprise/enterprise_policy/cip/index_en.htm 
EN 26   EN wider uptake of new and renewabl e energies and improving energy efficiency. Lastly, the European 
Agricultural Fund for Rural Development (EAFRD)82 will spend up to €10 billion during the 
programming period 2007-2013 to support the cr eation and development of non-agricultural 
enterprises in rural areas, skill s acquisition and training, as well as  SMEs in agriculture, food 
industry and forestry.  
Social impacts 
From a social point of view, one im pact of keeping the EU SME policy as it is would be to maintain 
the contribution of EU SMEs’ growth to job creation and regional cohesion. Of course, “the 
implementation of the Modern European SME policy has been carried out in a context of increasing 
economic growth: in 2006, EU GDP growth reached  3.0% – almost twice the rate of 2005 – and 
about 3.5 million new jobs were created” and it is difficult to establish a cl ear causal link between 
the EU SME policy and these results at aggregate le vel. However, SMEs being the main driver of 
employment growth (see problem definition), part icularly in sectors like construction, transport, 
communication or tourism, this option would con tinue to influence job creation positively. In 
addition, current actions under the EU SME policy may have a positive impact on employment in 
the future by fostering entrepreneurial mindsets and by making education and training more broadly 
available through the existing Life Long Learning programme. For instance, it is estimated that 
more than 200,000 secondary school students already pa rticipated in a practic ally-oriented training 
scheme, launched by the Commission, whereby they r un mini-companies to familiarise themselves 
with basic business concepts and skills. However, option 1 will not sufficiently address the gender 
gap which would have a negative impact on a speci fic category of entrepreneurs, particularly 
important for local development. Neither would this  option address in the short run the insufficient 
extent to which entrepreneurship is embedded in national framework curricula. 
Environmental impacts 
Part of SMEs’ difficulty in comply ing with environmental legislation is their relatively high fixed 
costs. The Commission has therefore develope d a programme to help SMEs to integrate 
environmental concerns into production processe s and products starting w ith a better compliance 
with environmental legislation83. The environmental benefit of su ch an approach can be very 
significant as the collective impact of SMEs on the environment is high. Although precise data are 
scarce, a frequently quoted estimate is that SMEs, taken together, could be responsible for up to 70 per cent of all industrial pollution
84 and 60% of total carbon emissions85. However, in the current 
situation, a remaining problem is SMEs’ lack of awareness of their own impact on the environment 
and of the opportunities stemming from more sustainable produc ts and processes. Existing policies 
as summarized in table 3 in annex III alre ady provide many opportuni ties. Some room for 
improvement seems to exist in the area of increas ing awareness of the environmental challenge and 
existing opportunities. For instance,  half of the respondents to the consultation on this initiative 
found Community support for energy  audits potentially useful. 
                                                 
82 Council Regulation (EC) No. 1698/2005 of 20 September 2005 
83 http://ec.europa.eu/environment/sme/programme/programme_en.htm 
84 See: European Commission: Public Policy Initiatives to promote the uptake of environmental management 
systems in small and medium-sized enterprises, Final Report of the BEST project expert group, January 2004, p. 15. See also: Smith, M.A., Kemp, R., Small firms and the Environment 1998: A Grounded Report, 1998, 
Groundwork, Birmingham 
85 Marshall: Economic Instruments and the Business Use of Energy, 1998, Stationery Office, London 
 
EN 27   EN 5.2. Impacts of option 2 as compared to option 1 
Economic impact of option 2 as compared to option 1 
• Policy areas  • Baseline (option 1) • Option 2 
• Improving the 
administrative 
and regulatory 
burden on SMEs • In January 2007, the Commission presented an 
Action Programme to reduce administrative 
burdens on businesses in  the EU by 25% by 
201286. According to the Impact Assessment on 
the Action Programme87, various studies using 
different economic models point to potential 
rises in the level of GDP from a 25% reduction of the administrative burden of between 1.4% 
and 1.8% of GDP. The 10 ‘fast track actions’ 
identified within the Action Programme alone are expected to generate significant benefits 
(estimated at € 1.3 billion) through relatively 
minor changes in the underlying legislation
88. 
This would benefit all businesses including 
SMEs. 
• New EU legislation coming into force is 
introduced at many different dates along the 
year, depending on the negotiation process. • Potential new actions:  
• Further guidance in IA guidel ines to measure SME impacts 
• Examine the possibility to establish common commencement dates at EU level 
• Incremental economic effect as compared to option 1:  
• SMEs have specific cost sensitivity89: where a big company spen ds one Euro per employee 
because of a regulatory duty, a small business might have to spend on average up to ten Euros.  
• Usually three explanations are offered for the disproportionate regulatory burden on smaller 
businesses, i.e. the fixed-cost nature of regulation, the lower efficiency of smaller businesses in 
dealing with regulation and the fact that in sm all businesses the most important resource, the 
entrepreneur himself, has to deal with regulation. 
• Therefore option 2, by increasing the focus on SMEs’ specific needs in future legislation would 
bring a additional particular benefit to SMEs.  
• According to the Small Business Research Trust survey  (2001) in the UK, a small business with 
10-14 employees spends 31 hours a month complying with government regulation and paperwork, 
while an owner of a business with 50 or more workers needs 43.4 hours a month to comply, with business indicating that introducing common commencement dates would lead to an estimated10% 
reduction of costs overall.  
• Data from the US illustrate, ceteri paribus, the potential magnitude of the benefit resulting from 
administrative burden reduction for SMEs. In fi scal year 2003 alone, the US Small Business 
Administration Office of Advocacy documented more than USD $6 .3 billion in regulatory cost 
savings and more than $5.7 billion in recurring annual savings on behalf of small business
90. 
• Entrepreneurship • In the current situation, entrepreneurship is a 
recognised objective of  the education systems 
and is embedded explicitly in national framework curricula in only a few EU Member • Potential new actions:  
• Promote teaching of entrepreneurship in na tional curricula and improve the image of 
entrepreneurs. 
• Promote women’s entrepreneurship by establishing an EU network of female entrepreneur 
                                                 
86 COM(2007) 23 
87 SEC(2007) 84 
88 European Commission, Second strategic review of Better Regulation in the European Union, COM(2008) 32 final 
89 http://ec.europa.eu/enterprise/entrepreneurship/support_measures/regmod/regmod_en.pdf 
90 Office of Advocacy of the U.S. Small Busi ness Administration, The Small Business Ec onomy: A Report to th e President, 2004 
 
EN 28   EN States. Even in these Member States, 
implementing means (teach er training, teaching 
materials) still need to be stepped up. 
• There is remaining a gap in terms of 
entrepreneurship between men and women. ambassadors and promoting mentoring schemes to inspire women to set up their own business and 
promote entrepreneurship to women graduates 
• Incremental economic effect as compared to option 1:  
• Promoting entrepreneurship in education system thanks to an increased partnership with Member 
States in the framework of the Lisbon Strategy could increase implementation of this policy.  
• In turn, this could increase the entrepreneurial mi ndset in Europe, which is largely determined by 
cultural and societal determinants. For instan ce, the Commission has estimated that students 
having participated in mini-companies projects to familiarise themselves with basic business 
concepts and skills are four times more likely to create their own company than others91. 
• Higher level entrepreneurship has a correlation w ith economic growth, particularly in high-income 
countries92, although GDP growth is influenced by many other factors. In particular, countries 
exhibiting a greater increase in en trepreneurship rates tend to exhibit greater subsequent decreases 
in unemployment rates93. 
• Increased women’s entrepreneurship could contribute to higher economic growth. As shown by the 
OECD LEED programmes, countries with low rates of enterprise creation are also those in which 
business creation is significantly lower among women than men. In contrast, in countries that 
experienced robust growth in the late 1990s, such as the United States, Australia, Canada, Korea, Spain and Norway, levels of women’s entrepreneurship were highest
94. 
• Innovation and 
R&D • The EU’s 7th Framework programme for 
research and development (FP7) established the 
target of allocating 15% of the budget of its Co-operation programme to SMEs.  
• The results
95 of the first calls for proposals show 
that the proportion allocated to SMEs in the 
main proposals listed (e.g. after evaluation) is 
just below 20%. • Potential new actions:  
• Continue efforts over time to ensure a relevant level of participation of SMEs to FP7. 
• Adapt FP7 participation rules to  encourage the growth of SMEs, by ensuring that an SME 
participating in a FP7 project can keep the benefit of SME treatment for the whole duration of that 
project, even if it exceeds the SM E ceilings during that period. 
• Incremental economic effect as compared to option 1:  
• An increased partnership between the EU and Memb er States to increase the level of R&D in 
SMEs, including through research programmes could generate spillovers, whose mechanism can be exemplified by what happened in the framework of the existing Lisbon Partnership. Looking at 
EU R&D in general (not SME-specific), it has been  estimated that if Member States achieve the 
R&D intensity targets announced in their Lisbon National Reform Programmes, R&D expenditures in the EU will increase from 1.9% of  GDP in 2004 to around 2.7% in 2010, whereas 
                                                                                                                                                                                                                                                    
91 Commission Communication: Fostering entrepreneurial mindsets through education and learning:  
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 
92 Global Entrepreneurship Monitor 2004 
93 D. Audretsch, Entrepreneurship: A survey of the literature, October 2002 
94 See: OECD, Entrepreneurship and Local Economic Development, Programme and Policy Recommendation, Paris, 2003 
95 1st progress report of the FP7 SME inter-services task force 
 
EN 29   EN this could lead to an increase in output of 3.3%  for the European Union as whole. Cross-border 
knowledge spillovers would account for roughly half of these gains96. 
• Access to finance • The current policy has already improved SMEs’ 
access to finance. Th e Competitiveness and 
Innovation Framework Programme (CIP)97, 
with a budget of approximately €3.6 billion, 
provides for improving access to finance for 
SMEs.  
• However, the following remaining problems 
would not be solved:  • Potential new actions:  
• Increase SMEs’ access to finance (see below) 
• Incremental economic effect as compared to option 1:  
• In general, option 1 would keep the benefits of the baseline and, in addition, push for better 
Member State framework conditions in order to over come the barriers that restrict the development 
of a Single Market for financing, especially risk capital financing, within Europe.  
• Long term impacts could include an improved financing structure of European firms (more 
equity), more efficient financial markets; and better matching of supply and demand of finance.  
• This option would provide impetus to the further development of European markets for financing 
SMEs, acting as a catalyst for private fundin g and complementing in areas where market 
imperfections are still large and private investors scarce.  
• Availability of micro-credits 
• Option 1 already provides support for increasing 
the availability of micro-credit. For example, 
the financial guarantees of the Multiannual 
Programme for Enterprises and 
Entrepreneurship have benefited over 177 000 micro-enterprises. 
• However, if no additional action is developed to 
support microfinance institutions, many potential entrepreneurs will still not get access 
to microcredit because ba nks consider them too 
risky.  • Potential new actions/option 1
 
• Support microfinance institutions through a new "Microfund" providing additional support for 
non-bank microfinance institutions, with an initial capital of about €40 million. 
• Ensure that accompanying business support serv ices are available for entrepreneurs getting 
microcredit. 
• Ensure that microfinance institutions benefit from appropriate regulation 
• Incremental economic effect as compared to option 1:  
• Option 1 would encourage the further emergence of microcredit institutions that could also attract 
private investments, thus benefiting risk ier entrepreneurs and microenterprises.  
 
• Availability of mezzanine finance 
• In the basic alternativ e, the mezzanine finance 
market would develop slowly due to the limited 
number of private finance providers (mostly 
public institutions for the promotion of SMEs).  • Potential new actions/option 1:  
• Developing markets for mezzanine financing in cooperation with the EIB, including for High 
Growth SMEs or SMEs that wish to internationalise. 
• Member States should develop financing progra mmes that address the availability of mezzanine 
funding between €100 000 and €1 million. 
• Incremental economic effect as compared to option 1:  
                                                                                                                                                                                                                                                    
96 European commission, Spillovers and complementarities in the context of the Lisbon Growth and Jobs Strategy including economic  effects of the Community Lisbon 
Programme 
97 http://ec.europa.eu/enterprise/enterprise_policy/cip/index_en.htm 
 
EN 30   EN • The availability of attractive in struments would help to develo p the mezzanine finance market 
more quickly, especially in countries that have no tradition in such instruments. The goal is also to 
attract private investors.  
 • Venture capital 
• In the current situation, many Member States 
are too small to develop a market where venture 
capital funds can have a sufficient volume of 
deals that would allow them to specialise and 
develop world-class expertise in specific 
industries.  
• The drawback in the current situation is that the 
growth potential of innovative firms is limited 
by the small amount of venture investments per deal
98, which can slow down the growth of 
those firms that have the highest potential to 
grow into big ones and give an edge to competitors from elsewhere with comparable 
technology or service. In the end, this shortage 
also leads to a higher probability of failure of those investments in Europe. • Potential new actions:
 
• Member States to review tax systems so that private investors (like business angels) have 
incentives to invest in SMEs either directly  or indirectly through investment funds.  
• The Commission to define a set of benchmarks for the content of investment readiness 
programmes; and establish easily accessible quality criteria. 
• Establish a standing network linking the Commission, the EIF and Member States and regions 
implementing JEREMIE 
• Incremental economic effect as compared to option 1:  
• Option 1, in comparison, would incr ease the efficiency of the ventur e capital market in Europe by 
allowing easier operations across Europe. This would expand the benefits of the Single Market to venture capital. 
• This would help venture capital funds to specialise and grow, would raise the profitability of 
venture capital, and increase its attractiven ess for private institutional investors. 
• Standardisation  • In the current situation the Commission is 
already increasing its co -funding to support the 
participation of experts representing SMEs’ interests in the process that establishes 
European standards. 
• However, in practice SMEs still face difficulties 
when participating in, and benefiting from 
European standardisation
 which helps them to 
do business in other Member States. • Potential new actions:  
• Increasing EU financial support to promote SM Es’ access to standards and the standardisation 
process. 
• Promoting the publication of abstracts of Europe an Standards with unrestricted access in all 
languages. 
• Create an “SME Help Desk” in the European Standard Organisations. 
• Incremental economic effect as compared to option 1:  
• An increased use of standards could help SM Es benefit more from interoperability and 
complementary products/services within the Single Market, in particular as regards the 
introduction of complex systems, such as the expa nsion of the Internet. Facilitating interoperability 
would increase competition between new and already existing products, services and processes among all businesses, including SMEs. 
                                                 
98 The average deal size for European early- stage investment is just €0.4 million agai nst €2.2 million in the US. Source: Recent Developments in the European private equity 
markets, ECFIN/REP/55145/07-EN, 12 November 2007 
 
EN 31   EN • Increased SMEs’ participation in the standardisatio n process could foster their innovation capacity. 
Indeed, the use of standards contributes to diff using knowledge and facilitating the application of 
technology; this may then trigger innovation, in particular non technological innovation in the service sector where SMEs are the dominant form of business. 
• Standards provide customers with trust in the sa fety and performance of new products and allow 
differentiation of products through reference to standardised methods and are therefore key for SMEs to enter niche markets. 
• Public 
procurement  • SMEs, in particular medium size companies, 
have reached a proporti onal share of public 
procurement as compared to their weigh in the economy. In 2005 the proportion of the value of 
public procurement above EU thresholds 
secured by SMEs was 42% which corresponds 
to 64% of the number of contracts. 
• Situations differ greatly from one Member State 
to the other and more coordination at EU level 
would be useful. 
• Moreover, SMEs face higher costs to access 
public procurement, due to the remaining 
administrative burden at all levels and 
culturally-related difficulties as regards awarding authorities. This reduces SMEs’ 
overall competitiveness as they have to 
reallocate compara tively more resources to gain 
their share in public procurement. 
• From an economic point of view, this means 
that their productivity is hampered compared to 
big companies. • Potential new actions:
 
• Option 2 would improve transparen cy and SMEs’ access to public procurement through exchange 
of best practices and the development of a code of conduct to awarding authorities, in order to reach a proportion of the value of  public procurement above EU th resholds secured by SMEs that 
would reflect even better their share in the total added value (57.6 % of the EU-27’s non financial 
business economy value added). 
• An additional action at EU level would be to encourage the development of e-procurement. 
• Incremental economic effect as compared to option 1:
 
• As the main problem faced by SM Es is the transaction cost to access public tenders, option 2 as 
compared to the baseline scenario would help SMEs to reallocate resources to other activities 
(R&D, innovation) and increase their productivity. 
• Even an incremental increase of SME participation in public procurement could have an important 
multiplication effect, due to the volume of the mark et at stake. According to estimates from DG 
Internal Market99, the total value of public procurement in the then 25 Member States amounted to 
some €1,800 billion in 2006, corresponding to 16% of total EU-25 GDP100, of which €370 billion 
is above the thresholds of the EU Directives. 
• Another indirect positive effect c ould be, by changing the tendering authorities’ culture, to create 
positive social and environmental impacts by weighting less heavily the price criteria at the 
expense of, for example, innovative, environm entally-friendly and more sustainable products. 
• SMEs difficulty 
to take advantage from the 
opportunities 
linked to the • Policies already exist to increase SMEs’ 
environmental up-take. This includes the ECAP Programme, which already helps SMEs to 
integrate environmental concerns into 
production processes and products starting with • Potential new actions:
 
• Establish a network of environment and energy efficiency experts in the new Enterprise Europe 
business and innovation support Network, financed by the CIP programme. 
• Incremental economic effect as compared to option 1:  
• This approach could help SMEs to understand the economic benefit of sustainable production. 
                                                 
99 http://ec.europa.eu/internal_market/publicprocurement/index_en.htm 
100 These estimates were based on data provided by National Statisti cal Institutes to Eurostat for National Accounts and from annu al reports and other sources for the Utilities 
sector. 
 
EN 32   EN environment a better compliance with environmental 
legislation101. 
• However, SMEs still lack awareness of the 
opportunities linked to sustainability and of 
their own impact on the environment. • Once their lack of awareness has been tackle d, SMEs would be well placed to devise and 
implement effective environmental strategies, due to shorter lines of communication, close 
personal links, less bureaucracy and the ability to initiate change quickly102. 
• Access to 
international market  • A certain number of SMEs, especially from the 
old Member States, have at  least, by a restricted 
number of service providers, access to nearly all 
relevant services to go international and to do 
business in China. 
• However, under the current situation, many 
other SMEs are excluded  from services/service 
providers who would help them to go 
international. 
• Service providers do not face serious 
competition and services are therefore 
suboptimal. 
 • Potential new actions:
 
• Establish European Business Centres in selected markets, starting with fast growing economies 
such as India and China. 
• Member States to encourage coaching from of SMEs  by large companies in order to bring them to 
international markets. 
• Incremental economic effect as compared to option 1:  
• EU Centres will not be a genuine service provider.  SMEs themselves will benefit more from this 
information than big companies as they do not have  sufficient resources to gather such information 
by themselves. 
• Moreover, the EU Centres could compensate for the potentially higher transaction costs for EU 
non-national SMEs using the services of another EU national service provider by establishing a 
kind of voucher support scheme. 
• Therefore all groups of SMEs would benefit from these EU Centres. SMEs that do not have access 
at the moment will get it. SMEs that do already have it could expect higher quality services related 
to increased competition. Lastly, existin g centres could gain more customers. 
• This option would most likely be very cost efficient because it takes stock of the already existing 
expertise on the ground. 
• In addition, encouraging coaching of SMEs by large companies could provide SME suppliers with 
access to global markets at lower costs than those f aced by individual small-scale producers, due to 
the intermediation function assured by the larger contractor103. 
• By the fact that this option is more likely to attr act more SMEs abroad than  the baseline scenario, it 
could lead to higher competitiveness and economi c growth. Effectively, the 2002 OECD study 
“High-Growth SMEs and Employment” demonstrates that exporting is a precursor of strong 
growth. The link between exports and enhanced productivity/competitiveness is clearly established by numerous studies
104and, specifically, firms with international sales have higher sales growth 
than firms that sell only domestically 
                                                                                                                                                                                                                                                    
101 http://ec.europa.eu/environment/sme/programme/programme_en.htm 
102 Correa, JA, Hurtado-Torres, N, Sharma, S and García-Morales, VJ - Environmental strategy and performance in small firms: A res ource-based perspective, Journal of 
Environmental Management, vol. 86, Issue 1, 2008, pp. 88-103 
103 Idem  
104 As an example: Establishment level empirical study of links between exporting, innovation and productivity-CIS4” Richard Harri s and Q Cher Li, September 2006 
 
EN 33   EN Social impacts of option 2 as compared to option 1 
Overall, option 2 could foster SMEs’ growth poten tial more than option 1. As  seen in the problem 
definition, SMEs have a particular capacity to generate net job creation. Therefore the main 
incremental social impact of opt ion 2 would be to foster empl oyment. To give one example, 
providing easier access to even small amounts of finance can have a large job creation effect by 
facilitating self-employment. Ho wever, no aggregate qua ntitative estimation of this effect is 
available as it would require complex modelli ng beyond of the remit of this exercise.  
In addition, the partnership appr oach of option 2 could be partic ularly efficient in influencing 
entrepreneurship preferences. These preference s are based on cultural determinants and are 
therefore difficult to change. Ag ainst this background, option 2 pr oposes a new action to promote 
teaching of entrepreneurship in national curricula and improve the image of entrepreneurs. This action would typically be based on increased c ooperation between EU and Member Sates, as 
education is a national competence. Exchanges of best practices at EU level could increase the 
knowledge of how to teach entrepre neurship. In addition, synergies between EU policies could help 
develop a favourable regulatory a nd societal environment, multiplyin g the effect of a new action in 
the field of education
105. By the same logic, another complementary action of option 2 could 
promote women’s entrepreneurship by establishi ng an EU network of female entrepreneur 
ambassadors and by promoting mentoring schemes to  inspire women to set up their own business 
and promote entrepreneurship to women graduate s. This would have a positive effect on female 
entrepreneurs but also bring additional opportunities for economic growth and therefore employment. Increased women entrep reneurship could contribute to higher economic growth and at 
the same time favour the inclusion of women in the labour market.  
Lastly, the creation of political momentum in fa vour of SMEs, through incr eased cooperation at EU 
and national level could create political spillove rs in the social field, e.g. the SME focus may 
facilitate accompanying measures in the re spective policy domains or facilitate other 
complementary reforms. The eff ects stemming from such political  economy complementarities can 
be potentially powerful. For inst ance, Community action directed  at improving SME performance 
can generate political momentum for na tionally-driven labour market reforms. 
Environmental impacts of option  2 as compared to option 1 
Overall, option 2, as compared to option 1, could have a more positive environmental impact. As 
seen above in the problem definition, one difficulty SMEs are facing in this field is complying with 
environmental legislation. A part nership approach between the EU and Member States could 
improve this situation for SMEs, on the one hand by making sure that legisl ation is conceived from 
the start in a way that ensures a high level of protection of the environment but also respects the 
specific needs of SMEs, and on the other hand by avoiding a situation whereby the terms of 
Community directives are exceeded signifi cantly when implemented in national law  (so called gold 
plating issue). This approach could therefore help  to prevent negative cross border externalities 
(such as pollution), while ensu ring a reduction of the administra tive burden for SMEs. In addition, 
in the environmental field, the increased synergy e ffect between policy areas will again play a role. 
Option 2, however, would consist of a series of meas ures with different leve ls of relevance for the 
environment. Some of them would have a direct positive impact; others would have an indirect or 
an insignificant impact on the environment. 
• Potential new actions with direct positive environmental impacts 
                                                
 
105 See: European Commission, Green paper, entrepreneurship in Europe, COM(2003) 27 final 
 
EN 34   EN As seen in the problem definition, SMEs lack awareness of their own impact on the environment 
and of the economic opportunities associated with sustainable production. Option 2 therefore 
proposes establishing a network of environment and energy efficiency experts in the new Enterprise 
Europe business and innovation support Network, financed by the CIP progr amme. This new action 
could increase SMEs’ awareness through direct cont act at local level, environmental advice and 
sharing of best practices. As a consequence, SMEs could bette r seize the opport unity linked to 
sustainability through savings stemming from ener gy and environmental efficiency and new market 
opportunities. 
As regards savings, few aggregate da ta are available at EU level, but  national estimates can give an 
order of magnitude of their potentia l impacts. To give one example “Stimular”, a Dutch initiative to 
stimulate environmental innovation, estimates th at €1 spent on this programme can save €13.50 in 
costs for the SMEs, e.g. energy savings , waste and emissions reductions, etc106. Another example 
comes from the UK Carbon Trust and concerns the pot ential benefit of a more widespread adoption 
of advanced metering systems in the UK SME community. According to the Carbon Trust study107, 
a total of 5.1 MtCO2 savings coul d be identified and 2.5 MtCO2 sa vings could be implemented per 
year. This level of identified savings is equiva lent to over 2% of all carbon emissions from UK 
businesses. Scaling up the results in financial term s indicates that total cost savings of £650 million 
could be identified and £300 million implemen ted per year across the UK SME community. 
As regards market opportunities,  SMEs are well placed to devise and implement effective 
environmental strategies, due to shorter line s of communication, close personal links, less 
bureaucracy and the ability to initiate change quickly108. In addition, SMEs (as analysed in section 
2.1.3) already play a key role in creating radica lly new innovations that open up entirely new 
markets or revolutionise them. The environmen tal and energy efficien cy field provides new 
opportunities. Examples include the extraction, s upply, distribution and c onversion of renewable 
energy, but there is also fertile ground in the deli very of services through low-carbon means, the re-
design of existing products, the management of energy demand, changing behaviour and the 
adaptation of existing infrastructure. UK estimates109 indicate that on the basis of the UK 
Government’s plans to tackle climate change and the emerging voluntary market, the UK market 
opportunity alone will be worth £4 billion a year by 2010. The comp liance market resulting from 
the UK Government’s climate change programme over the next 10 years will be worth around £30 billion or more. 
Moreover, option 2, by increasing partnership between EU and Me mber States could generate 
political momentum, and reaching out at local level would help to spread information and examples 
of the opportunities offered by sust ainable products and processes. 
• Potential new actions with indirect positive environmental impacts (synergy effect) 
Option 2 would aim at developing a proper Single Mark et for venture capital in Europe. This in turn 
could bring synergies in th e environmental field, sinc e it has been estimated that venture capital is 
becoming increasingly important for environmenta l sustainability (€1.25 b illion was raised in 
                                                
 
106 EIM, Stimular naar het jaar 2000, een evaluatie van 5 jaar Stimular, 1996. For more examples, see: 
http://www.environmental-savi ngs.com/. For additional example see: http://www.environmental-savings.com/ 
107 Carbon Trust, Advanced metering for SMEs, Carbon and cost savings, 2007. 
108 Correa, JA, Hurtado-Torres , N, Sharma, S and García-Morales, VJ - Environmental strategy and performance 
in small firms: A resource-based perspective, Journal of Environmental Management, vol. 86, Issue 1, 2008, pp. 88-103 
109 Opportunities for innovation, the business opportunities for SMEs in tackling the causes of climate change, 
Shell Springboard, October 2006 
 
EN 35   EN 2006). Sustainable venture capital f unds invest in the range of €1- 5 million with a focus on early-
stage and typical investments in rene wable energies and clean technologies110 which could be 
particularly beneficial to SM Es focusing on niche markets. 
The same type of benefit could stem from an incr eased participation of SMEs in the standardisation 
process and the use of standards. Indeed, standards are essential to improve the energy and resource 
efficiency of products, processes and services  and the competitiveness of European industry, 
including SMEs. Standardisation is important  in enabling the upta ke of eco-innovation and 
environmental technologies, facilitating their di ssemination in the Single Market, and accessing 
global markets111. In addition, advanced performance benc hmarks and wider use of labelling are 
key to informing consumers about product perfor mance and rewarding frontrunners. This could 
enable SMEs to increase the return on investment in environmental and energy efficiency. 
Option 2 would also strive to chan ge the culture of awarding auth orities in the public procurement 
field. This also could have a po sitive effect on SMEs’ uptake of environmental practices. Indeed, 
the procurement culture in many Member States is focused on short-term cost, weighting too 
heavily the price criteria at the expense of, fo r example, innovative, environmentally-friendly and 
more sustainable products. A more sustainable culture could help SMEs  market sustainable, 
innovative products, for instance in the field of en ergy efficiency equipment, where many producers 
are SMEs. 
• Potential new actions with no relation to the environment 
Potential measures proposed in option 2 focusing on direct determinants of SME growth (start-
up/bankruptcy policy implementati on) would not have any direct  impact on the environment. 
However, by fostering SMEs’ growth, they could l ead to more production a nd therefore to a more 
extensive use of natu ral resources. However, this side eff ect would be offset by the accompanying 
use of the above mentioned measures. 
6. COMPARISON OF THE OPTIONS  
The proposal for a “Small Business Act” is a packag e of different measures  of various natures. 
Therefore, the impacts of options 1 and 2 ar e compared on a qualitative basis only, since a 
comprehensive quantitative assessment would require complex modelling that goes beyond the scope of proportionality for this impact assessment. 
Two main categories of problems were singled out in the problem setting section: 
• implementation/coordinati on of existing policies 
• remaining regulatory or market gaps not addressed by existing policies. 
As regards the second category of issues, option 2 evidently has a cl ear benefit, as the continuation 
of option 1 would not address sponta neously the remaining problems.  
Looking at the first category of i ssues, option 1 and 2 would differ in terms of timescale. One can 
argue that option 1, business as usual, could solv e the implementation problem over the long run in 
the framework of the Lisbon Pa rtnership. In contrast, option 2 would bring the benefit of 
                                                
 
110 Meyer, T., Venture Capital in Europe: Spice for European Economies, Deutsche Bank Research, Oct. 2006 
111 See : Commission Communication : Towards an increased contribution from standardisation to innovation in 
Europe, COM(2008) 133 final 
 
EN 36   EN accelerating the pace of reforms at  EU and national level to set the right framework conditions for 
SMEs. 
However, option 2, by increasing the level of coordination at EU and national level and by 
widening the scope of the curren t SME policy would bring a speci fic added value for Community 
action, including: 
• The cross border dimension of the re maining specific problems of EU SMEs: Section 2 above 
has highlighted a number of remaining problems that hamper the development of EU SMEs and 
which clearly have a major cross-border EU  dimension. One example relates to the 
fragmentation of the European venture capital ma rket along national border s that contributes to 
small funds, small invested amounts and low prof itability of venture cap ital in Europe. The 
environmental challenge facing SMEs clearly also  has, by definition, a cr oss-border dimension. 
In these fields, the EU level, by virtue of its scale and scope, is best suited to fostering the 
compatibility of systems, ensuring a minimum level of harmonisation and tackling negative 
cross-border externalities such as pollution.  
• Spillovers and synergies  For most of the issues mentioned above, the EU and the Member States 
each appear to have an important complementary ro le to play. There is th erefore a strong case, in 
line with the Lisbon strategy for Growth and Jobs, to develop in ter-linkages between national 
policies and to coordinate their approach to generate spillovers and complementarities. Actions taken by one national government for its own SM Es and for its economy in general have an 
impact on the performance of other countries’ SM Es and affect EU markets. In such cases, 
purely national, uncoordinated, action would be suboptimal because the important cross-border 
externalities or economies of scale would be left  unexploited. For example, the creation of an EU 
Business Centre in China could take stock of  the already existing e xpertise on the ground and 
multiply its efficiency through networking and enhanced competition. SME policy being 
essentially interdisciplinary, there are also important complementarities between reform 
measures within or across policy domains which gi ve rise to potentially  strong synergies from 
their coordinated implementation. For instance, be tter access to finance and innovation and skills 
as well as a reduced administra tive burden and increased entreprene urship are also intrinsically 
interrelated.
 
• Increased monitoring : Some issues seem more clearly in th e remit of Member States than others. 
This is typically the case of start-up procedures and insolvency laws which have a major role in 
the churning process and therefore on SMEs’ growth potential. These problems, however, 
depend essentially on national legislation and are mainly or partly outside EU competence. At 
Community level, however, useful actions can consist of mutual learning and an increased 
monitoring of the implementation of SME-friendl y reforms in the framework of the Lisbon 
Partnership.  
Against this background, it appears that option 2 does not bring negative impacts as compared to 
option 1 but does address gaps that  option 1 does not address and adds value to the current SME 
policy framework. 
Therefore option 2 should be the preferred option. 
6.1. Justification for action at EU level 
6.1.1.  Subsidiarity test and impact on budget 
It has to be underlined once more that the prop osal for a “Small Business Act” is a package of 
different measures. This impact assessment will ther efore not check the subsidiarity case for each of 
the specific possible action. In fact, under optio n 2, the Commission would announce a number of 
 
EN 37   EN new initiatives (both legisla tive and non legislativ e) to support SMEs’ growth. While some 
initiatives will be adopted at the same time as the main document, others will be adopted at a later 
stage. Where appropriate, the Commission will carry out detailed impact assessments of the specific initiatives in accordance with the impact assessment guidelines
112. 
Currently an overall subsidiar ity check can be provided for the following list of measures: 
(1) Initiatives to be included in option 2, of legisl ative nature that have already been subject to 
an impact assessment: 
• Proposal for a European Private Company (SPE) 
(2) Initiatives to be included  in option 2 that do not need an impact assessment: 
• Proposal for a General Block Exemption Regulation 
• A Code of Practice (public procurement) 
(3) Initiatives of non legislative nature that  have a substantia l budgetary impact: 
The initiatives falling under this category will be developed within the current EU budget (CIP, 
FP7, Structural funds, Cohesion fund). They would correspond to marginal relocation of public 
funds within certain programmes taking into consideration remaining problems. 
• Increased EU financial suppor t to SMEs’ information on, 
and use of European standards. • No EU or MS budgetary implication 
• Support increased to €1 million in 2008 and €2.1 million 
from 2009 onwards  
• CIP budget 
• New micro-fund to be set up and managed by the EIF, 
providing additional support for non-bank micro-finance 
institutions through capital and technical assistance to 
such institutions and with an initial capital of 40 million 
euro. • No EU or MS budgetary implication 
• No EU or MS budgetary implication 
• €40 million: €20 million will come from the EIB, the rest 
will come from private sources 
• Financing a network of environmental and energy 
efficiency experts. • No EU or MS budgetary implication 
• €4 million earmarked for 2009, CIP budget 
• European Business Centres 
 European Business Centres  
• €5 million in 2008 (DG RELEX) 
• Final decision to establish a Centre in China by end of 2008 
(after presentation of feasibility study) 
European Business and Technology Centre in India  
• Budget for preparatory action: €7 million in 2007and €5 
million in 2008. (DG RELEX) 
• Call for Proposal closed end May 2008 
• Contract signature in August 2008 and start of the Centre by 
spring 2009 
6.1.2.  Are there especially severe impacts on a pa rticular social group, economic sector 
(including size-class of enterprises) or region? 
This initiative intends to bring positive impacts to all SMEs , but also to address specific target 
groups (e.g. young innovative firms, women entrepreneur s). However, if this objective is reached 
through a balanced approach, it will foster economic growth and theref ore benefit other players, e.g. 
large companies. 
6.2. Are there impacts outside the Union (“external impacts”)?  
• Should this initiative contain legally binding  elements, it will have some impacts on non EU 
Member States. For the Candidates Countri es which have to integrate the “acquis 
communautaire” in their national legislation (Croatia, Turkey and the Former Yugoslav Republic 
of Macedonia), it will have the positive impacts described above. 
                                                 
112 SEC(2005)791 
 
EN 38   EN • Moreover, any provisions of this  initiative concerning the Singl e Market will apply to the 
EEA/EFTA countries (Norway, Ic eland and Liechtenstein). 
• Support measures in this initiative to increase environmental sustainability and energy efficiency 
in SMEs will also help with tackling global challenges such as climate change and would 
therefore have a potentially positive internationa l impact. The development and transfer of eco-
efficient technologies would therefore also help  developing countries and economies in transition 
to use resources more efficiently  and thus save financial resour ces for their development needs. 
• The SBA could be a source of inspiration and guidance for neighbouring countries when 
developing their SME policy. 
7. IMPLEMENTATION AND MONITORING  
7.1. Implementation 
Option 2 is the preferred option. This option aims  at ensuring a balanced approach between the 
ownership of the SME policy needed at all levels a nd a necessary degree of peer pressure through a 
regular monitoring of a high level political commitment. Therefore, this option needs 
implementation measures that combine the respect of  the subsidiarity principle but also a higher 
level of enforceability of the SME focus, to br ing an added value as compared to the current 
situation. Taking these elements into considerat ion, this option could best be implemented as 
follows: 
The initiative could take the form of a Communication from the Commission  containing common 
principles for EU and national leve l and defining specific actions targ eted at SMEs in a wide range 
of policy areas. An eventual endorsement of thes e principles and objectives by the European 
Council would secure the highest degree of Member States’ political commitment.  
In addition, the European Council could establish a mechanism of regular review of the progress 
made in relation to SMEs’ framework conditions  and monitoring of progress in achieving the 
agreed objectives. 
7.2. Monitoring and evaluation 
A thorough implementation of the SBA is of prim ary importance and requires the full commitment 
of both the Community and the Me mber States. The Commission therefore expects the European 
Council to endorse the SBA in orde r to demonstrate its recognition of  the role played by SMEs and 
the need to unlock their gr owth and jobs potential.  
The Small Business Act for Europe being a key co mponent of the Lisbon Strategy for Growth and 
Jobs, the monitoring of its implementation needs to take place within this framework. In practice, 
Member States could be invited to integrate th e SBA in their National Reform plans, taking 
advantage of the update of the Li sbon cycle which is foreseen fo r the end of 2008 and which will 
influence the setting-up of na tional SME policies for the next three years. Subsequently, the 
progress made in implementing these SBA principl es and actions would have to be reported in 
Members States’ annual implementation reports . As for the Commission, it would assess the 
progress made in implementing the SBA, in th e framework of its Community Lisbon Programme 
(CLP). Progress made both at national and community  level would be presented as a result in the 
annual Lisbon strategic report prepared by the Commission. That would allow the European 
Council to review progress made in the field of  SME policy in its spring meeting and may adopt 
where appropriate policy target s based on the SBA objectives. 
 
EN 39   EN ANNEX I  
References 
SMEs, economic and social performances  
General studies:  
• European Commission, Observatory of EU SMEs, SMEs in Europe 2003. This report coordinated by David B. 
Audretsch (Max Planck Institute), A. Roy Thurik (Era smus University Rotterdam), Ton Kwaak and Niels Bosma 
(both EIM Business & Policy Research) has developed inter alia  a comprehensive literature review on the 
theoretical framework linking entrep reneurship and economic growth 
• Handbook of research on Entrepreneurship Policy, edited by  David B. Audretsch, Isabel Grilo and A. Roy Thurik, 
Max Plank Institute of economics and EIM Business and policy research, Edward Elgar publishing, 2007 
• OECD, SME and Entrepreneurship Outlook, 2005 
Commission’s documents : 
• Commission Communication: Implementing the Community Lisbon Programme Modern SME policy for Growth 
and Employment, (COM(2005)551) 
• Commission Communication: Mid-term Review on the Implementation of the Modern SME Policy, (COM(2007) 
592 final) 
• Commission Communication: Working together for growth and jobs. A new start of the Lisbon strategy, 
Communication to the European Spring Council, COM(2005)24 
• Commission Communication: The European Interest: Succeeding in the age of globalisation (COM(2007) 581 final) 
• European Commission, Community Innovation Surveys 
• European Commission, Lisbon Strategy for Growth and Jobs: 2007 Strategic Report Country – Assessment of the 
National Reform Programmes, 11 December 2007 
• European Commission, BEPA Monthly Brief – Issue 10, D ecember 2007, The role of SM Es in EU’s growth and 
jobs , By Reinhilde Veugelers, Isabel Grilo (ENTR) and Josefa Monteagudo (ENTR) 
• European Commission, BEPA Monthly Brief - Issue 11, January 2008, The role of SMEs in Innovation in the EU, 
By Reinhilde Veugelers, Is abel Grilo (ENTR) and Josefa Monteagudo (ENTR) 
• European commission, Spillovers and complementarities in the context of the Lisbon Growth and Jobs Strategy 
including economic effects of the Community Lisbon Programme 
• Observatory of European SMEs, 2007 
• Eurostat: SMEs and entrepreneurship in the EU 2006:  
http://epp.eurostat.ec. europa.eu/cache/ITY_OFFPUB/KS-NP -06-024/EN/KS-NP -06-024-EN.PDF  
• Eurostat, Enterprises by size class - overview of SMEs in the EU, 2008 
• Eurostat, European busine ss, Facts and figures 2007 
External studies:  
• Aghion, P., R. Blundell, R. Griffith, P. Howitt and S. Prantl: “Entry and Productivity Growth: Evidence from micro-
level data”, Journal of the European Economic Association , 2003 
• Almus, Matthias and Eric A. Nerlinge r, Testing Gibrat's Law for Young Firms - Empirical Results for West 
Germany, Small Business Economics, 15(1), August, 1-12, 2000 
• Audretsch, D. B., Innovation and Industry Evolution, Cambridge: MIT Press, 1995 
• Baumol, W. J., The Free-Market Innovation Machine, Princeton University Press, 2002 
• Baumol, W. J., Macroeconomics of unbalanced growth: the anatomy of urban crisis, American Economic Review, 
57 (3), 1967,  
• Baumol, W. J., “Paradox of the Services: exploding costs, persistent demand”, Chapter 1 in “The growth of Service 
Industries – The Paradox of Exploding Costs and Persistent  Demand” edited by T. ten Raa and R. Schettkat, Edward 
Elgar Publishing Limited, 2001 
• Bartelsman E., Haltiwanger J. and Scarpetta S., Microecono mic evidence of creative destruction in industrial and 
developing countries, Industrial and Developing Countries,” IZA Discussion Paper Series No. 1374 
• Berry A., SME Competitiveness: The Power of Netw orking and Subcontracting, No. IFM 105, 1997 
• Birch D., Haggerty A., Parsons W., Who’s creating job?, Cambridge, MA, Cognetics Inc, 1997 
• Caves, Richard E., Industrial Organization and New Findin gs on the Turnover and Mobility of Firms, Journal of 
Economic Literature, 36(4),  December, 1947-1982, 1998 
• Cincera, M.,and O. Galgau: “Impact of Market Entry and Exit on EU Productivity and Growth Performance,” 
Economic Papers 222, European Commission, 2005 
 
EN 40   EN • Ericson, Richard and A. Pakes, Markov-Perfect Industry Dynamics: A Framework for Empirical Work, Review of 
Economic Studies, 62, 53-82, 1995 
• Geroski, Paul A., What Do We Know  About Entry, International Journal of Industrial Organization, 13(4), 
December, 1995 
• Global Entrepreneurship Monitor 2007:  
http://www.gemconsortium.org/download/1207219104975/GEM_2007_Executive_Report.pdf  
• Harhoff, D., K. Stahl and M. Woywode, Legal Form, Growth and Exit of West-German Firms: Empirical Results 
for Manufacturing, Construction, Trade and Service Industries, Journal of Industrial Organization 46, 453- 488, 
1998 
• Harris R. and Q Cher Li, Establishment level empiri cal study of links between exporting, innovation and 
productivity-CIS4”, 2006 
• Hopenhayn, H.A., Entry, Exit and Firm Dynamics in Long Run Equilibrium, Econom etrica, 60, 1127-1150, 1992 
• Klepper, Steven, Entry, Exit, Growth, and Innovation ov er the Product Life Cycle,  American Economic Review, 
86(3), 562-583, 1996 
• Lambson, Val E., Industry Evolution with Sunk Costs and Uncertain Market Conditions, International Journal of 
Industrial Organization, 9, 171-196, 1991 
• OECD, Entrepreneurship and Local Economic Development, Programme and Policy Recommendation, Paris, 2003 
• OECD, High-Growth SMEs and Employment, 2002 
• OECD Working Party on SMEs and Entrepreneurship (WPSMEE) study on Enhancing the Role of SMEs in Global 
Value Chains, 2007 
• OSEO, Quels emplois pour les PME? Etude sur les PME et l’emploi en France, 2007 
• Sutton, J., Gibrat's Legacy, Journal of Economic Literature 35, 40-59, 1997 
• U.S. Small Business Administration, The Small Business Economy, Report to the President, 2005 
• Van Reenen, J., Economic Performance of the EU and the Structural Reforms Agenda: Firm Level Evidence, GEPA 
Meeting of 9th July, 2007 
Administrative burden 
Commission’s documents:  
• European, Commission: Action Programme to reduce administrative burdens on businesses in the EU by 25% by 
2012, COM(2007) 23 
• European Commission, Second strategic review of Better Regulation in the European Union, COM(2008) 32 final 
• European Commission, Observatory of EU SMEs, 2007 
• European Commission, Models to reduce the disproportionate regulatory burden on SMEs, 2007:  
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/regmod/regmod_en.pdf 
External studies:  
• OECD, SMEs Statistics: Towards a more Systematic Statistical Measurement of  SME Behaviour, Second 
Conference of Ministers responsible for Small and Medium-sized Enterprises (SMEs) on Promoting 
Entrepreneurship and Innovative SMEs in a Global Economy held in Istanbul on 3-5 June 2004 
• Rapport de la Commission pour la libération de la croissa nce française, Sous la présidence de Jacques Attali) :  
http://www.liberationdelacroissance. fr/files/rapports/rapportCLCF.pdf  
• UK Department for Business, Enterprise and Regulatory Reform, Better Regulation and Policy Team, Policy and 
Challenge Directorate, Business, Enterprise and Regulatory Reform, Full and Final Impact Assessment for Common Commencement Dates 
• World Bank, Doing Business in 2008:  
http://www.doingbusiness.org/documents/F ullReport/2008/DB08_Full_Report.pdf 
Entrepreneurship 
Commission’s documents:
 
• 2007 Flash Eurobarometer on entrepreneurial mindsets 
• Commisssion Communication: Fostering entrepreneur ial mindsets through education and learning: 
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 
• European Commission, Good Practices in the Promotion of Female Entrepreneurship Examples from Europe and 
other OECD Countries, 2002:  
http://ec.europa.eu/enterprise/entrepreneurship/craft/craft-women/documents/study-female-entrepreneurship-en.pdf  
 
EN 41   EN • European Commission; Good practices on social protection of new entrepreneurs and assisting partners and the 
impact on business creation" EIM Business and Policy Research:  
http://ec.europa.eu/enterprise/entrepreneurship/craft/craft-studies/documents/social_protection_final_report_en.pdf  
• European Commission, Assessment of compliance with the entrepreneurship education ob jective in the context of 
the 2006 Spring Council conclusions 
• European Commission, Green Paper on Entrepreneurship in Europe (2003) 27 final 
• European Commission, Observatory on EU SMEs, SMEs in Europe 2003 
External studies:  
• De Koning A.C.P., Business failure and entrepreneurship in  international perspective, EIM Small Business Research 
and Consultancy, 1999 
• Grilo I., Irigoyen J-M, Entrepreneurship in then EU: to wish and not to be, Small Business Economics 26, 2006 
• Reynolds, P.D. Bygrave, W.D., Autio, E. Cox, L.W.& Hay,M., 2002, Global Entrepreneurship Monitor, 2002, 
executive report, Babson College, London Business School and Kauffman Foundation 
Bankruptcy, second chance 
Commission’s documents:  
• European Commission Communication, Overcoming the stigma of business failure – for a second chance policy 
implementing the Lisbon partnership for growth and jobs, COM(2007) 584 final 
External studies:  
• Armour and Cumming, Bankruptcy Law and Entrepreneurship, University of Cambridge Centre for Business 
Research Working Paper No. 300, 2005 
• Baldwin et al, Failing Concerns: Business Bankruptcy in Canada, Statistics Canada, Ottawa, 1997 
• De Koning, A.C.P., Business failure and entrepreneurship in international perspective , EIM Small Business 
Research and Consultancy, 1999 
• OECD, Bankruptcy legislation in OECD member and non-member economies, 2006 
• World Bank, Doing Business in 2008 :  
http://www.doingbusiness.org/documents/fu llreport/2008/DB08_Closing_Business.pdf 
SMES and Information and Comm unication Technologies (ICT) 
Commission’s documents:  
• The European e-Business Report 2006/07 edition:  
http://www.ebusiness-watch.org/k ey_reports/documents/EBR06.pdf  
External studies:  
• Capgemini Consulting, Researching the impact of SEPA on the payments market and its stakeholders, 2007 
• IDC White Paper, Networking Skills in Europe, September 2005 
SMEs, labour force and sills 
Commission’s documents:  
• European Commission: Joint employment report 2006/2007, doc number 6706/07, adopted on 23rd of February 
2007 
• European Commission, Observatory of EU SMEs, SMEs in Europe 2003 
• European Commission, Observatory of SMEs , Competence development in SMEs, 2003/1 
• European Commission, Report of the Expert Group: First Employee Obstacles to Growth – Recruiting the First 
Employee, final version, 2005 
• European Commission, Eurobarometer survey, 2004 
• Eurostat: labour cost surveys: http://europa.eu.int/estatref/info/sdds/en/lc/lc_lcs_sm.htm  
• Eurostat (2002) SMEs in Europe – “Competitiveness, innovation and the knowledge-driven society 
External studies:  
• EIM/SEOR, Policy instruments to Foster Training of the Employed, Vol. 1. Main Report, 2005 
• Mäki, K.; Pukkinen, T., Työnantajaksi ryhtymisen kynnykset (Barriers to employment among Finish self-
employed), Studies and reports, Ministry of Trade and Industry, Helsinki, 2000 
• OECD, Employment Outlook, 2007 
 
EN 42   EN • OECD, Knowledge, Work Orga nisation and Economic Growth, Labour Market and Social Policy-Occasional 
Papers No 50, Paris, 2001 
• OSEO, Quels emplois pour les PME? Etude sur les PME et l’emploi en France, 2007 
SMEs and the Single Market 
For more references see:  
• European Commission: Impact assessmen t on the proposal for a European Priv ate Company Statute (reference to be 
added)  
• Feasibility Study of a European Statute for SMEs – Final Report, Contract letter No FIF 20030950: 
http://www.ec.europa.eu/enterprise/e ntrepreneurship/sme_statute.htm  
SMEs and public procurement 
Commission’s documents:  
• European commission, The European Ob servatory for SMEs Sixth Report,  
2000:http://ec.europa.eu/enterprise/enterprise_policy/analysis/doc/ensr_6th_report_en.pdf 
• European commission, Evaluation of Public Procurement Directives Markt/2004/10/D, Final Report 
External studies:  
• Evaluation of SME Access to Public Procurement Markets in the EU, Final Report by GHK and Technopolis:  
http://ec.europa.eu/enterprise/entrepreneurship/public_procurement.htm 
SMEs and internationalisation 
Commission’s documents:  
• European Commission, S upporting the internationalisa tion of SMEs, Final Report of  the Expert Group, December 
2007:  
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/internationalisation/report_internat.pdf  
• European Commission, 2003 Observatory of EU SMEs, Internationalisation of SMEs:  
http://ec.europa.eu/enterprise/enterprise_policy/ analysis/doc/smes_observatory_2003_report4_en.pdf  
External studies:  
• Fliess, B. and C. Busquets, The Role of Trade Barriers in SME Internati onalisation, OECD Trade Policy Working 
Papers, No. 45, OECD Publishing, 2006 
SMEs and finance 
Commission’s documents:  
• European Commission Communication : Removing obstacles to cross-border investments by venture capital funds, 
COM(2007) 853 final 
• European Commission, Recent Developments in the European private equity markets, ECFIN/REP/55145/07-EN, 
12 November 2007 
• European Commission, Observatory of SMEs, SMEs and access to finance, 2003/2 
External studies:  
• EVCA Yearbook 2007; BVK Special “Private Equity in Europa 2006, 17.07.2007 
• OECD, The SME Financing Gap: Theory and Evidence, volume I, 2006 
• Meyer T. ,Venture Capital in Europe: Spice for Euro pean Economies, Deutsche Bank Research, Oct. 2006 
• Murray, Venture Capital and government policy, in Handbook of research on venture capital, ed. by Hans 
Landström, Edward Elgar, 2007 
SMES, research and development and innovation 
Commission’s documents:  
• European Commission, Observatory of European SMEs, High-tech SMEs in Europe, 2002 / No 6 
• European Commission, Revised Community Framework for State aid for research, development and innovation. 
See: http://ec.europa.eu/competition/state_aid/reform/rdi_en.pdf 
• European Commission, DGRTD, Key Figures 2007 
• European Commission, SMEs and Innovation, Note for the Economic Policy Committee, 26 October 2007 
 
EN 43   EN • European commission, 3rd Community Innovation Survey 
• European Commission, Innobarometer; European Innovation Scoreboard thematic report on non-R&D innovation , 
2007, (both forthcoming) 
• European Commission Communication: Towards an increased contribution from standardisation to innovation in 
Europe, COM(2008) 133 final 
External studies:  
• Derwent Information, Dismantling the Barriers: A pan-European survey on the use of patents and patent information 
by Small and Medium-sized Enterprises (SMEs) 
• Drews, S, U. Sukowski: Der Staat als Partner in novativer Unternehmen: Die mittelstandorientierte 
Innovationsförderung des BMWi, in: VDMA (editor) Innovationsmanagement in der Investitionsgüterindustrie 
treffsicher voranbringen, Frankfurt am Main, 2006 
• Klette, T.J., J.Moen, Z. Grilliches: Do Subsidies to Co mmercial R&D Reduce Market Failures? Microeconometric 
Evaluation Studies, in NBER Working Paper Nr. w6947; Jones, C.I. 1998: Introduction to Economic Growth, New 
York, 1998 
• OECD, Understanding Economic Growth, Paris, 2004 
• Van Pottlesberghe and Francois, The Cost Factor in Pate nt Systems". Solvay Business School Working Paper WP-
CEB 06-002 
• Veugelers & Schneider, Working Paper in progress on Young Innovative Companies, (reference to be added), 2008 
SMEs and the environment 
Commission’s documents:  
• European commission, Impact Asse ssment on the ECAP programme:  
http://ec.europa.eu/environment/sme/pdf/impact_assess_906_en.pdf  
• European Commission, Sectoral Costs of Environmental Policy, Final Report, 2007:  
http://ec.europa.eu/environmen t/enveco/industry_employment/pdf/sectoral_costs_report.pdf  
• European Commission: Public Policy Initiatives to promote the uptake of environmental management systems in 
small and medium-sized enterprises, Final Report of the BEST project expert group, January 2004 
• European Commission, The effects of environmental policy on European business and its competitiveness a 
framework for analysis, SEC(2004) 769 
• European Commission, Community Guidelines on State Aid for Environmental Protection:  
http://ec.europa.eu/comm/competition/state_aid/reform/environmental_guidelines_en.pdf 
External studies:  
• Centre for Strategy & Evaluation Services LLP, Environment Related Regulatory Burdens for SMEs, 2006 
• Correa, JA, Hurtado-Torres, N, Sharma, S and García-Mor ales, VJ - Environmental strategy and performance in 
small firms: A resource-based perspective, Journal of Environmental Management, vol. 86, 2008 
• EIM, Stimular naar het jaar 2000, een  evaluatie van 5 jaar Stimular, 1996 
• Labonne J., A Comparative Analysis of  the Environmental Management, Performance and Innovation of SMEs and 
Larger Firms based on the OECD database, 2006 
• Marshall: Economic Instruments and the Business Us e of Energy, 1998, Stationery Office, London 
• Smith, M.A., Kemp, R., Small firms and the Environment 1998: A Grounded Report, Groundwork, Birmingham, 
1998 
 
EN 44   EN ANNEX II  
Report on the results of the open consultati on on the “Small Business Act" for Europe 
INTRODUCTION 
Over the past few years, the European Commissi on has implemented a specific policy in favour of 
SMEs and has committed itself to improving the bus iness environment in which they operate by 
applying the “Think Small First” principle113. This policy has alread y produced significant 
improvements in creating a more SME-friendly business environment.  
However, the need to fully unlock SMEs potential for growth, innovation and job creation remains. 
As a major contribution to this objective, the Co mmission has proposed the preparation of a Small 
Business Act for Europe whose main aim will be to  set out principles and concrete measures to 
improve the framework conditions for European SMEs , while taking full account of their diversity.  
Consequently, an open on-line consu ltation was launched to allow all interested parties to give their 
opinion. 
Profile of respondents 
Respondents
Other
6%No answ er
2%
Non-profit 
organisation
6%Public 
authority/Gov.body
5%
Business 
association
17%
Citizen
8%Company
56%
 
More than 500 contributions we re received (499 via the IPM tool114) as well as a number of position 
papers from SME stakeholders a nd regional and national administra tions. This report focuses on the 
replies received via IPM but all the contributions received will be taken into account in the 
preparation of the SBA.  
                                                 
113 See Communications on Modern SME Policy and on Mid-term review of Modern SME Policy 
(http://ec.europa.eu/enterprise/entrepreneurship/sme_policy.htm ). 
114 A statistical overview of the IPM replies is also available 
 
EN 45   EN The majority of the respondents are companies and in  particular micro- and small enterprises. The 
respondents are based in 25 of the EU Member St ates with a large part icipation from France, 
Germany, UK and Italy. 
A significant number of comments/ suggestions were provided in answer to the open questions. 
Countr y 
020406080100120140
FR DE U K I T BE BG RO PT ES SE Other
EUOther
not EUNo
answer Number of respondents
 
Main problems that European SMEs are facing 
What are the most important problems that Eur opean SMEs are facing and which prevent their 
growth? How to tackle them? 
The administrative burden, overregulation and bureau cracy are by far the main general concerns, 
followed by access to finance, taxation, lack of skills, access to public procurement, unfair 
competition and labour law. Excessive payment de lays are also described by many respondents as 
an important problem for SMEs.  
 
EN 46   EN Most important problems EU SMEs are facing 
0 20 40 60 80 100 120 140 160
Administrative and regulatory burden
Access to finance
Taxation
Lack of skills
Access to public procurements
Unfair/too strong competition
Labour law
Access to Single Market
Access to EU programmes
Late payments
Access to international markets
Access to information and advice
Instability w orld economy/ energy costs
SME definition Number of replies
N.B.: It w as possible to give several replies 
1. BETTER REGULATION FOR THE BENEFIT OF SMES 
Questions 
• 1.1 Is the current EU SME definition an obsta cle to targeting support for SME growth in 
the right way? If so why? 
• 1.2 In addition to the systematic applicatio n of the subsidiarity  and proportionality 
principles in legislation (see question 6.2) , could differentiation regarding the way 
legislation is elaborated and applied according to the size of the company be useful (e.g. 
lower fees, fewer reporting requirements, thre sholds or longer tr ansition periods)?  
• 1.3 Do you consider that directly  applicable EU-level legisla tion in certain areas creates a 
disproportionate and un-necessary administra tive burden on SMEs? If yes, in which 
areas? Would excluding SMEs from such dir ect application of EU  legislation be a 
solution? 
• 1.4 Would the introduction of common comm encement dates for all SME-relevant 
legislation coming into force and/or publicatio n of an annual legislation statement be 
useful for SMEs? 
• 1.5 Do you think additional focused measures to alleviate the administrative burden on 
SMEs would be useful? If yes, in  which specific areas or topics? 
• 1.6 Would you suggest any other obstacles or additional issues to address?  
 
The majority of respondents (around 60%) think that  EU legislation creates an unnecessary burden 
on SMEs. Concerning the solutions, there is a mixed picture about the possibi lity to fully exclude 
SMEs from the direct application of EU legisla tion as half of those who have an opinion are in 
favour and half are against. Ther e is, however, a large consensus (m ore than 80%) on the fact that 
focused measures to alleviate the ad ministrative burden would be helpful. 
 
EN 47   EN About two thirds of respondents do not think that the SME definition represent an obstacle to SME 
growth and should be modified. However, differentia tion regarding the way legi slation is elaborated 
and applied according to the size of the company (including differentiation between micro, small 
and medium-sized enterprises) is largely advocated  by all types of stakehol ders. More than eighty 
percent consider it usefu l/very useful. However, some opinions warn about the danger of adding to 
the complexity of the legisla tive landscape. The support for co mmon commencement dates reaches 
68%, although there are arguments that the initiativ e should be implemented only at national level 
and not at EU level.  
Differentiation
Not useful at all
2%
Not very useful
5%No opinion
4%No answer
6%
Useful
29%Very useful
54%Common dates
No answer
6%
No opinion
11%
Not useful at all
3%
Not very useful
12%
Useful
39%Very useful
29%
 
The areas of employment and social affairs, health  and safety including hygi ene and labelling rules, 
public procurement, environment, and VAT and tax issues are most commonl y quoted as sources of 
disproportionate burden on SMEs. CE marking, c onsumer protection, sta tistical requirements, 
accounting rules and standardisation add to the list. Participation in R&D projects and EU 
programmes is also often quoted as being difficult and bureaucratic. Access to IPR and in particular 
the cost of patents is also pr oblematic. Furthermore, some res pondents consider that measures 
should be taken against competition from third c ountry enterprises which are not subject to the 
stringent EU rules.  
Some participants preferred to remain general and advocate an overall reduc tion of red tape and the 
administrative burden. These include the argument th at many of the concerns and complaints about 
red tape emanating from business relate to nationa l administrative practices such as licensing and 
authorisations, and should be tackled at national level. Others have forwarded concrete proposals 
such as an increase of the tur nover level required for VAT regist ration, the simplification of cross-
border VAT rules, simplification of the Directive on qualifications, the oblig ation to apply payment 
terms of a maximum of 30 days, longer implemen tation periods for labell ing, prohibiting public 
authorities in the case of public tenders from demanding documents that are already in possession of the State (e.g. tax or social contribution cer tificates) and greater use of electronic services. 
Exemptions from legislation from SMEs and mitig ating measures facilitating the implementation of 
legislation by SMEs are also advocated. Implem entation of the Services Directive and the 
establishment of portals, via which all applicable regulations are visible to  businesses, are other 
measures deemed important to alleviate the bur den on SMEs. Finally, financial and other support 
for entrepreneurs and SMEs is advised.  
Overall there is strong support for the “Think Small First” principle based on reinforced 
consultation of SME representatives, ex ante and ex post impact assessment of legislation on SMEs 
and a stronger role of the SME Envoy especially in  screening legislation. The implementation of the 
proportionality principle, the safeguard principle (w ithdrawal of the proposal if cost/benefit-ratio is 
 
EN 48   EN inappropriate) and the ‘only once’  principle (avoid the situation where the same information or 
administrative requirements are asked several tim es by public authorities)  have been strongly 
mentioned and supported.  
A particular emphasis is put on the problem of gold-plating and there ar e suggestions that the 
Commission should regularly analys e the level of gold-plating in each Member State when EU 
legislation is implemented. 
2. PUTTING SMEs AT THE FOREFRONT OF SOCIETY 
Ensuring full recognition by societ y of the role of entrepreneurs 
Questions 
• 2.1 Do you see a need for additional measures in  the Member States or at EU level to 
stimulate entrepreneursh ip through education?  
• 2.2 Is entrepreneurship sufficien tly reflected in school  curricula and if not, how could the 
situation be improved? 
• 2.3 Do you see a need for the media to take a stronger role in fighting negative stereotypes 
towards entrepreneurship? 
• 2.4 Would you suggest any other obstacles or additional issues to address?  
Different concrete issues discouraging young peopl e from becoming entrepreneurs are mentioned. 
They range from burdensome administrative proce dures to a lack of a ppropriate training and 
financing. However there is a common acknowledgeme nt that the main problem is the cultural 
attitude, and in particular the bad image of entrepre neurs as well as a generally  risk-averse culture.  
A large majority of respondents (84 %) think that the education system , and in particular the school 
curricula does not focus enough on entrepreneurshi p. They therefore consider it important to 
intervene in the education system with more syst ematic measures. Generally speaking, curricula are 
considered to be important but th e crucial element for encouraging an entrepreneurial mindset is a 
closer link between the SME community (including all types of companies and SME stakeholders) 
and schools. Firstly, it is essentia l to change teachers' negative attitudes about entrepreneurship by 
bringing them closer to the real world of SMEs . Practical training/semin ars for pupils should be 
organised at every educational leve l, starting at an early stage with  the involvement of all types of 
local SMEs. Basic economic principles with a speci al focus on difficulties and constraints linked to 
creating and running an enterprise should be included in school curr icula and not limited to specific 
studies. Mini and virtual companies are also  mentioned as useful tools for developing 
entrepreneurial attitudes especially am ong younger pupils (i.e. in primary schools). 
The media, for their part, do not recognise the im portant role played by entrepreneurs and when 
they do they focus on large enterprises mos tly ignoring SMEs. SME su ccess stories are not 
sufficiently highlighted, while the risks related to  creating and running an en terprise are emphasized 
too much. 
 
EN 49   EN Need of media support 
No opinion
5%No answer
7%
Not needed at 
all
5%
Not much need
9%
Need
28%Strong need
46%
 
Setting up or transferring a business and second chance 
Questions 
• 2.5 Would it make a significant difference to  further reduce the time and costs for 
registering a company?  
• 2.6 Do you think it would be useful to propose additional measures to  facilitate business 
transfer and tackle bankruptcy? 
• 2.7 Would you suggest any other obstacles or additional issues to address?  
Around 60% of replies indicated that there is stil l a need to reduce the tim e and costs to set-up a 
business. Some respondents pointed out, that signifi cant differences exist within Member States in 
this regard. The lack of information and the lack of appropriate support for newly created 
enterprises are identified as additional problems.  
In general, new measures for facilitating business transfer and tackling bankruptcy are considered 
useful (around 80% of replies) and should be ta ken up at Member State le vel. Fiscal incentives, 
specific training, financial/technical  support and promotion of differen t transfer models (succession, 
cooperatives of employees etc.) are mentioned as possible suppor ting initiatives fo r facilitating the 
transfer of companies. Respondents think that a second chance should be given, as failure is a 
"normal" event in the life of an enterprise. Howeve r there is a clear orientation towards the need to 
distinguish "honest" failures fr om fraudulent ones and to clearly  avoid encouraging the latter. 
Helping SMEs acquire the skills they need 
Questions 
• 2.8 Do EU education systems deliver the necessa ry basic skills needed by entrepreneurs? 
• 2.9 How adequate are the existing measures for recognising qualifications at EU level?  
• 2.10 Do you see the need for cross-border mo bility programmes for entrepreneurs and 
apprentices? 
• 2.11 Would the development of a programme to fo ster the e-skills of entrepreneurs at EU 
level be useful? 
• 2.12 Would you suggest any other obstacle s or additional issues to address?  
 
 
EN 50   EN There is a recognised need to improve the way in which skills are acquired. EU schools do not 
provide the technical competences needed for more than 60% of companies responding. There is a 
more mixed picture on the evaluatio n of existing measures, which are considered to be inadequate 
by about 45% of respondents.  
Recognition of informal training, training courses be tter tailored to SMEs’ needs and taking into 
account the different types of comp any, more practical education a nd the improvement of technical 
skills are among the suggestions made. There is in  particular a lack of ICT skills which are 
considered essential to better exploit the opportunities offered by new technologies (and also for 
training itself, considering that small entrepreneurs often cannot follow traditional courses). Some ask for uniform requirements for qualification w ithin EU countries and mobility programmes for 
entrepreneurs/apprentices. In this context, EU  programmes for cross-border mobility and e-skills 
would be useful/very useful for the majority of respondents (66% and 61% respectively). Finally, 
the necessity of bringing together all the re levant actors (SME stakeholders, schools and 
administrations at EU, national and re gional/local level) is underlined. 
Mobility programmes
No answer
6%
No opinion
8%
Not needed at 
all
5%
Not much 
need
15%Need
37%Strong need
29%EU programme for e-skills
Very useful
27%
Useful
34%Not very useful
16%Not useful at 
all
6%No opinion
9%No answer
8%
 
3. FACILITATING SMEs’ ACCESS TO MARKETS 
Supporting SMEs to go beyond their local ma rkets and better use the Single Market 
Questions 
• 3.1 What are the areas where standards are not  yet widely applicable and where SMEs 
would benefit from them? 
• 3.2 Do you see a need to increase the particip ation of SMEs and their representative 
organisations in standardisation and imp rove the dissemination of standards? 
• 3.3 Do you see a need for improving the situa tion of SMEs in the area of direct and 
indirect taxation; if yes, which measures w ould be the most signifi cant? In particular, 
should VAT rules be further reviewed? 
• 3.4 Which additional measures would you suggest to help SMEs to better use the potential 
of the Single Market including th e EEA and Candidate Countries?  
 
Common standards are in genera l considered important for th e good functioning of the Single 
Market and only a few think that there are enough or even too ma ny. However, the replies suggest 
that standards should be developed according to th e needs of each specific sector and should not be 
too costly or too complicated to  understand and use (e.g. provide free guidance). A total exemption 
from all costs was not explicitly mentioned. There is general agreement on the fact that SMEs and 
their representatives need to be be tter involved in the standardisation process. In particular, there is 
 
EN 51   EN a lack of information and dissemination of sta ndards and SME are not represented enough in the 
standardisation bodies. 
SME participation in standardisation
No opinion
9,0%
Not needed at 
all
4,0%No answer
10,0%
Not much 
need
6,8%
Need
29,9%Strong need
40,3%
 
Concerning taxation, there is a clea r need to improve the situati on through reducti on, simplification 
and harmonisation, especially for VAT. Refund procedures and VAT rules in general are 
considered too complicated for small companies, espe cially when related to cross-border activities. 
Dedicated one-stop-shops could be  a useful tool for some of the respondents. Reduced VAT is 
asked for certain sectors and especially for loca l and labour intensive serv ices, while specific tax 
measures are requested for R&D activities. A number of differe nt proposals for taking better 
advantage of the Single Market are suggested. They  include the European Private Company Statute, 
full and effective implementation of the Single Market , specific training acti ons to help SMEs going 
abroad (including foreign languag es), improved information sy stems/networks, transnational 
cooperation between SMEs, etc. Some of the sugges tions focus on issues already raised in other 
questions (late payments, standards, simplifica tion, and improved access to public procurement).  
Facilitating SMEs’ access to public procurement 
Questions 
• 3.5 Do you see a need to improve SMES’ acce ss to public procurement and if so how? 
• 3.6 Would increased transparency of EU proc urement opportunities be low the thresholds 
make a difference (e.g. through a volunta ry database disseminating procurement 
opportunities, central databases in the Member  States or a broader use of electronic 
platforms)?  
• 3.7 Would you suggest any other obstacles or additional issues to address?  
More than 70% of the companies and of all the responding stakeholders in general see a need to 
improve SMEs’ access to public procurement and consid er it very useful to increase transparency in 
EU procurement procedures. It is  also worth mentioning that SM Es’ access to public procurement 
appears as an issue in the answ ers of various other questions th roughout the consultation paper.  
 
EN 52   EN Improve SMEs access to public procurement
050100150200250300350400
Yes No Don't know No answ erNumber of repliesIncreas ed trans parency in EU procurements
050100150200250300350400
Yes No Don't know No answ erNumber of replies
 
The idea of having special quotas in  the field of public procurement, whether this is for SMEs, only 
for micro- or for young enterprises, is mentione d by some. Proposals going in the same direction 
suggest giving bonus points to offers involving SMEs.  
An overwhelming majority of those responding pr opose, however, other solutions to facilitating 
SMEs’ access to public procurement. First, it is necessary to improve information on public tenders 
including on tender opportunities below the threshol ds of the EU Directiv es. Concrete proposals 
suggest ensuring that web portals publishing public procurement oppor tunities are free of charge, 
the introduction of centralised tendering platform s for each Member State,  a review of the EU 
publication system (OJ), consis tent publishing of pr ior information notices, systematically 
publishing the winner and the amount of the tender and giving feedback to unsuccessful enterprises, 
setting up tools to facilitate the search for comple mentary partners in view of collaborating for bids 
for larger contracts. Secondly, a major administra tive simplification is required, which would imply 
less paperwork, more use of e-procurement and electronic signatures, and increased time for 
responding to tenders. Simplification and improveme nts are also required as far as technical 
specifications are concerned. Dividing markets per type of activity and divi ding tenders into lots, 
better application of the proportiona lity principle as far as previous  references and financial and 
insurance requirements are concerned, especially in view of improving th e participation of young 
enterprises, leaving more scope for innovation in the technical specifications, prohibiting the 
restrictive condition of minimal tu rnover or obliging r tendering auth orities to justify this condition, 
allowing for better cooperation between SMEs. In addition, organisations of  cooperatives consider 
that special attention should be gi ven to tenders that include soci al or environmental clauses.  
Further training for SMEs on how to prepar e tenders, increased di alogue between large 
organisations and SMEs to discuss how best they can work together, and encouraging the expansion 
of preferred supplie r arrangements are advocated as well.  
Special attention needs to be paid  to the activities of municipaliti es which might in some cases be 
biased when buying goods and services. Furthermore,  the issue of subcontracting has also been 
pointed out and particularly the need to improv e the conditions of subcontracting, for instance 
through direct payments to subcon tractors or by imposing minimum st andards or standard contracts. 
Finally, too long payment periods are an obsta cle to SMEs’ access to public procurement. 
Encouraging SMEs to tap opportunities outside the Single Market 
Questions 
• 3.8 In general, how can SMEs be  helped to go global? Whic h countries/areas should be 
given priority? 
 
EN 53   EN • 3.9 Is there a need to establish European Busi ness Centres in some fast-growing countries 
and, if yes, in which ones? 
• 3.10 Do you see the need for new programmes supporting SMEs entering these markets, 
following the example of Gateway to Japa n and the Executive Training Programme?  
 
Concerning access to markets outside the EU, th e identified areas for action range from the 
provision of information and practical support (i ncluding the exchange of good practices), to 
linguistic and technical training better tailored to  SMEs. The respondents think that the EU has an 
important role to play in multilateral and bilatera l negotiations in order to reduce trade barriers. 
Some replies ask for more reciprocity with third countries and propose that trade defence 
instruments should be better adapted to SMEs. Networks among SMEs and among SMEs and large 
companies and financing for going abroad are among the specific suggestions for helping SMEs to 
go global. The neighbour countries (Mediterranean, Eastern Europe), Asia and South America are 
considered the most interesting markets followed by Africa and the US. In particular, the so-called 
BRIC countries (Brazil, Russi a, India and China) are mentioned most frequently.  
More than half of the respondents are favourable to establishing EU centres in the fast-growing 
countries. The places mentioned most frequently for these centres are - by far - China and India, and in general the Asian countries followed by South America (Brazil) and Russia. Coordination and 
synergies with all the actors involved (Member States, busine ss organisations, chambers) and 
existing centres/networks is considered a key elem ent for the success of the EU centres (and crucial 
to avoid duplications with mark et based service providers). 
European Business Centres in third c ountries
0 5 10 15 20 25 30 35 40
China
India
Brazil
Asian countries
Russia
Eas ter n Eur ope
South America
Korea
United States
Middle East countries
Japan
North Africa
Angol a
Other areas/countriesNumber of replies
N.B.: I t w as possible to give several replies 
4. SUPPORTING SMEs’ ACCESS TO FINANCE AND INNOVATION 
Improving SMEs’ access to finan ce at EU and national level 
 
EN 54   EN Questions 
• 4.1 How could public policies and instruments to facilitate SMEs’ access to finance be 
improved (e.g. awareness, procedures, cost , or better adequacy of products)? 
• 4.2 What are the main problems SMEs face in accessing various EU support programmes 
such as the 7th Framework Programme for Research and Development, the 
Competitiveness and Innovation Framework Progr amme (CIP) or the Structural Funds 
(including the JEREMIE initiative)? 
• 4.3 What are the main obstacles for SMEs in accessing micro-credit (less than 25000 
Euros)?  
• 4.4 Would you suggest any other obstacles or additional issues to address?  
 
Respondents agreed on the necessity of improving current policies and instruments. Important 
points were making it possible to deal with a bank in another EU country (e.g. to get a loan) and 
developing pan-European venture capital markets. It is also pr oposed to extend the use of the Small 
Firms Loan Guarantee Scheme, to create a specific EU instrument for the financing of start-ups, to 
promote mezzanine finance and to improve the di stribution of EU instruments by the banking 
sector. As for the CIP Financial in struments, it is suggested that  they should incl ude pilot-type 
instruments to finance specific operations such as business transfers or innovation.  
The main problems identified regarding SMEs’ ac cess to EU programmes were the lack of 
awareness of these programmes, the difficulty creat ed by the need to have a consortium and, finally, 
the administrative burden together with the long timescale asso ciated with any application, in 
particular in the context of the 7th Framework Programme for R&D and the JEREMIE initiative.  
To overcome these difficulties, the creation of singl e contact points at national level, both to better 
inform SMEs about EU schemes but also to fac ilitate the supply of financial instruments was 
suggested in several replies. So me mention the key role of busin ess intermediaries  not only to 
inform SMEs about these programmes but also to provide guidance and practical support. E-
solutions in the context of support sc hemes should also be encouraged.  
Several obstacles to access to mi cro-credit were identif ied and several responde nts regretted that 
banks usually wanted to lend agains t property, request colla teral and are in general risk-averse. As a 
solution, it was proposed to promote mutual guar antee schemes for SMEs a nd to establish an EU 
fund to support micro-credit sc hemes at national level. For so me, banks should communicate better 
on their credit decision criteria and rating systems, while for some ot hers it would be important to 
allow non-banks to provide micro-loans.  
Encouraging a knowledge-based economy 
Questions 
• 4.5 Is there a need to help SMEs deal with IPR protection, to improve awareness and 
provide support services for SMEs  to protect their innovation? 
• 4.6 What are the most significant problem s SMEs face in the use of patents? 
• 4.7 Would you suggest any other obstacles or additional issues to address to further 
enhance the innovation capacity of SMEs?  
 
 
EN 55   EN In the field of innovation, several replies insist on the need to be tter consider no n-technological 
innovation. The importance of knowle dge transfer for SMEs and of better cooperation between 
SMEs, universities and research centres is al so pointed out. The lin k between innovation and 
finance is often made, and the av ailability of strong equity is mentioned as a key factor for 
innovation. Moreover, for several respondents a key action would be to support cluster management 
and to favour cross-border c ooperation between clusters.  
In the field of Intellectu al Property Rights, the ma in obstacles identified wide ly in responses are the 
high level of patent fees and the f act that SMEs have difficulties in  defending their rights because of 
their lack of legal knowledge and because this  usually implies complex and costly procedures, 
especially if the violation of the IP rights occurs outside the European Union. In addition, many 
replies also mention the need for harmonisation of IPR legislation and insist on the need to have a 
Community patent adopted soon. Several respondent s propose to improve pa tent litigation system 
to help especially SMEs, a simplified linguistic regi me and a significant reduc tion of patent fees, in 
particular for the first patent submission of by SM E. Finally, the detrimental effect of counterfeiting 
is described as a worry for many European SMEs a nd it is suggested that an  EU-wide alert system 
and confiscation procedure for count erfeited goods should be introduced.  
From a general point of view a large majority of  stakeholders (more than 70%) think that SMEs 
need support in the area of IPR protection. 
5. TURNING THE ENVIRONMENTAL CHAL LENGE INTO OPPORTUNITIES FOR 
SMEs 
Questions 
• 5.1 How could SMEs best benefit from policy measures on a sustainable industrial policy 
such as voluntary standards for particul arly environmentally friendly products? 
• 5.2 Would Community support for energy audits in SMEs be useful?  
• 5.3 Do you see the need for facilitated access to the European Environmental 
Management and Audit system (EMAS)? 
• 5.4 Would you suggest any other obstacles or additional issues to address? 
Half of the respondents found potentially useful  both Community support for energy audits and 
facilitated access to European Environmenta l Management and Audit system. Simplified 
implementation and proof of compliance through self-certification without third party intervention would help in that respect. It was also sugges ted that EMAS should be better explained to 
entrepreneurs. 
Support for energy audits in SMEs
No answer
13%
No opinion
12%
Not useful at all
8%
Not very useful
14%Useful
27%Very useful
26%Facilitated access to EMAS
No answer
15%
No opinion
15%
Not needed at 
all
4%
Not much need
17%Need
27%Strong need
22%
 
 
EN 56   EN While some suggest that 'standards' are inheren tly not SME friendly or th at voluntary standards 
could confuse and divide markets, others consider them useful to tackle the lack of clarity and 
legislative divergence of environmental legisla tion, provided they do not involve excessive costs 
and bureaucracy and that they create a competitive advantage. Hence, financial support or (tax) incentive schemes to help SMEs to adopt these st andards are part of the proposals. In the same 
spirit, free education/informati on on voluntary standards addressing how to increase a product's 
environmental performance are considered useful.  
In general it is stated that SM Es tend to be very innovative and can adapt to new needs for products 
and production methods. However, incentives (such as  reduced interest rates for investment in 
green technology, tax reduction, VAT reduced rates et c.) for SMEs are needed since investments in 
energy saving and environmental protection have lo wer or zero return on i nvestment compared to 
other investments.  
Some see green public procurement as the ultimate solution and in particular the idea of local SMEs 
providing local products and se rvices thus minimising GHG (greenhouse gas) emissions. 
Furthermore, it is argued that labels should be pr actical and not administratively burdensome. The 
need for awareness raising activities and more and better communication is also stressed. Finally, 
understanding the functioning of SMEs and th e necessity of including them – and their 
representative organisations - in policy debates and consultati on on environmental problems have 
been highlighted as key elements since environm ent legislation in increasingly affecting SMEs’ 
activities.  
In general there is widespread support for rapi d implementation of the Environmental Compliance 
Assistance Programme for SMEs.  
6. ENHANCING THE IMPLEMENTATION OF EU SME POLICY PRINCIPLES 
Questions 
• 6.1 What is the right way to agree on princi ples of SME policy across the EU and to 
ensure their implementation at EU and Member  States level? Is there still an untapped 
potential within the SME Charter Process?  
• 6.2 Would a systematic application of the subsid iarity and proportionality principles at EU 
level help to further strengthe n the application of the ‘thi nk small first’ principle?  
• 6.3 Would you suggest any other obstacles or additional issues to address?  
The systematic application of the subsidiarity a nd proportionality principl es (question 6.2) is 
considered helpful by 70% of the respondents.  
A relatively limited number of co ntributions on the two other que stions were received from 
individual companies or citizens, as most opinions come from organisations. There is an apparent 
clash between a number of opinions arguing for le ss EU-level action and t hose favouring more EU 
intervention and universality in the field of SME policy. However, the latter view seems to prevail 
as an overwhelming majority of business organisa tions argue for a legally binding SBA. The raison 
d’être of the SBA is considered to be primarily making the “think small first” principle effective at Community level and making Member States more proactive in the SME policy field. 
Many consider that the adoption of the SBA w ould render the Charter pr ocess unnecessary, while 
others believe that the Charter could continue.  
 
EN 57   EN As in the part on Better Regulation, the importance of consultation with SME representatives is 
given special emphasis. Suggestions were made to  have permanent consultations with national and 
European SME representatives (both privat e and public) on an annual basis followed by 
dissemination of the results  and conclusions across EU States. Others argued for longer and sector-
specific consultations. One interesting contri bution suggests making consultation documents 
available through business organisations at one tim e every year. This way, SMEs would come to 
know that their input is required at a certain time each year. Dir ect consultations of SMEs on 
concrete legislative proposals are also menti oned as a good solution. Finally, the Enterprise 
Experience programme for EU officials is strongly encour aged (also for other DGs).  
Overall there is strong support for the re-launch of the activities of the SME Observatory as a basis 
for developing SME policy. In addition, there are ar guments that the implem entation of the “think 
small first” principle needs to be monitored through a series of indicators and that the 
implementation of SME Policy should be based on annual priorities and improved reporting (e.g. 
via Lisbon or Competitiveness Council). 
 
EN 58   EN ANNEX III  
Identification process of the remaining problems EU SMEs are facing, despite the existing 
policies 
I. identification of  the problem areas  
Step 1: Problem areas identified in the context of the Modern SME policy115 
• Administrative and regulatory burden (red tape). 
• Insufficient access to markets (Internal market, international markets and public procurement 
market) 
• Lack entrepreneurship and skills issues: 
– negative effects of business fa ilure on entrepreneurship; 
– shortcomings in bankruptcy procedures; 
– inadequate educational and training po licies at Member States’ as regards 
entrepreneurship; 
– needs of women entrepreneurs are still not being sufficiently met. 
• Direct sustainable gr owth constraints : 
– insufficient access to finance; 
– insufficient innovation and R&D; 
– insufficient ICT uptake; 
– difficulty to turn environmenta l challenges into  opportunities. 
• Insufficient dialogue with and c onsultation of SME stakeholders 
Step 2: New problem areas identi fied by recent surveys, including  the public consultation on 
the SBA 
• Main problems identified by the public consultation: 
– The results of the public cons ultation (for a complete anal ysis see Annex II) confirmed 
that the administrative burde n, overregulation and bureaucracy ar e by far the main 
general concerns, followed by access to finance,  taxation, lack of skills, access to public 
procurement, unfair competition and labour la w. Excessive payment delays are also 
described by many respondents as an important problem for SMEs. 
– New problems in the context of globalisation: th ere is a feeling that the EU has a role to 
play in multilateral and bilateral negotiations  in order to reduce trade barriers. Some 
respondents ask for more reciprocity in nego tiations with third c ountries and propose 
that trade defence instruments s hould be better adapted to SMEs. 
                                                 
115 Commission Communication, Implementing the Lisbon Programme. Modern SME Policy for Growth and 
Employment, (COM(2005)551) 
 
EN 59   EN 
 
• Main problem areas identified by the 2007 Observatory of EU SMEs116 
 
• Reported problem areas in above surveys that are however clearly outside the EU's remit or not 
specific to SMEs 
– limited demand  
– labour force too expensive 
– problems of infrastructure 
– instability of world economy 
                                                 
116 The majority of the respondents are companies and in particular micro- a nd small enterprises. The respondents 
are based in 25 of the EU Member St ates with a large participation from  France, Germany, UK and Italy. For 
more detailed analysis see annex II 
 
EN 60   EN Step 3: Synthesis 
Table 1: Overview of the potential remaini ng problem areas to be compared with 
existing or planned policies  
• Interests of SMEs not sufficiently taken into 
consideration in policy making (Think Small 
First Principle)   
 Need to further simplify the business environment for 
SMEs 
 Implementation of the Conclusions of the 2006 Spring 
European council at Member States’ level  
 Need for an enhanced dialogue and consultation with 
SME stakeholders 
 Late payments 
• Lack of entrepreneurship and skills  
 Educational and training policies 
 Insufficient level of women entrepreneurship  
 Lack of skilled labour and managerial skills 
• Direct sustainable growth constraints   
 Lack of productivity growth  correlated to a lower 
churning effect, due in particular to less exit in EU 
than in the US, including: 
– Start-ups (time + costs needed) 
– Stigma of failure + bankruptcy procedures. 
 Insufficient access to finance 
 Insufficient innovation and R&D 
 Insufficient ICT uptake 
 Insufficient access to markets: 
– Internal markets 
– Public procurement 
– Standardisation 
– Difficulties to access international markets and 
especially fast growing markets  
• New problems for EU SMEs arising in the 
context of globalisation  
 Difficulty to use and defend Intellectual Property 
Rights (IPR) by SMEs 
 Difficulty to take advantages from the opportunities 
linked to the environment 
 
EN 61   EN II. Comparison of the above detailed potential remaining problem areas with the existing or plan ned policies at EU and national  level  
Table 2: Implementation of the co nclusions of the 2006 Spring European Council at Member States’ level 
Member States’ level: 
 
The conclusions of the 2006 
Spring European Council  
called on the Member States 
to unlock the EU’s business 
potential by taking five 
priority actions: Overall, the measures and initiativ es in the area of SME policies undertaken by Me mber States since the re-launch of the Lisbon  partnership for 
growth and jobs in 2005 are going in the right direction117 Progress has been particularly visible in improving the start-up procedures but also in 
the integration of the "think small first" principle into the policy-making process. In the area of entrepreneurship education,  SME access to 
public procurement and recruitment of the first employee, policy actions have been initiated in almost all Member States while their results 
have not yet materialised. Most of the priorities set at the Sp ring European Council 2006 – start-ups, recruiting the first emp loyee, 
entrepreneurship education, think small first – need to be seen in a long term perspective, and related policy actions need to be intensified. 
Establish a one-stop-shop for 
setting up a company in a 
quick and simple way and to 
reduce the average time for 
setting up a business to one 
week 
 • Average time and cost to start up  a private limited company is 12 days and cost is € 485 (see following Table). This is substantially lower 
than the 24 days and € 830 for an equivalent company in 2002. Many Member States have established a one-stop-shop or equivalent  
arrangement even though in some cases they do not cover all types of companies: only 2 out of 3 one stop shop systems offer the  possibility 
to register a private limited co mpany. Member States th at fully comply with all three objectives (one-stop-shop, time and cost)  are BE, DK, 
EE, FR, HU, PT, RO, SI and UK. 
• In general registration times have improved and in 13 Member States, it is now possible to register a company within one week. It should be 
noted, however, that this analysis only look s at the steps to get a company registered. 
• In many countries there are further admini strative steps and more time is required be fore a new SME can start its business oper ations118. 
Encourage entrepreneurship, 
including through 
entrepreneurship education and training 
 • Awareness of the need to enhance entrepreneurship education  at school is constantly increasing in the Member States and in the last couple 
of years new plans and individual initiatives have been flourishing in this area. 
• However reforms planned in a number of countries are sometimes de scribed in rather generic terms and their implementation in pr actice 
will have to be monitored. In a few Member States, entrepreneur ship is already a recognised objective of the education systems and is 
embedded explicitly in national framework curricula (ES, FI, IE , CY, PL, UK) but implementing m eans (teacher training, teaching  
materials) still need to be stepped up. In some cases, elements of entrepreneurship are found horizontally throughout the curri culum, or 
entrepreneurship forms part of economic subjects (LV). Other Memb er States are starting to implem ent or are planning reforms in  the same 
direction. However, Member States wher e entrepreneurship is well established in  the curricula are still a small minority. 
The recruitment of a first 
employee should not involve 
more than one public • Since 2005, some limited progress has taken place in the simplification of procedures for recruiting a first employee. Overall,  the average 
number of mandatory external contacts (social security organisa tions, tax offices, labour offices, etc.) has been reduced from 3 to 2.5 and 
the average number of procedures (filing forms, etc.) from 3.5 to 3. 
                                                 
117 The analysis on the Member States’ achievements come from the Communication from the Commission to the European Council: Strat egic report on the renewed Lisbon 
strategy for growth and jobs: launching the new cycle (2008-2010), COM(2007) 803 final, PART III, available at:  http://ec.europa.eu/growthandjobs/pdf/european-dimension-200712-annual-progress-report/200712-annual-report-annex3_en.pdf 
118 In this context, the timely implementation of the points of singl e contact foreseen in the Servi ces Directive, to be implement ed by end 2009, will also be an important task 
for Member States. 
 
EN 62   EN administration point 
 • However, the target of having no more than one public administration point in that process is still far and the situation varie s significantly 
from a Member State to another. Only three Member States (e.g . ES, MT, and PT) have a special one-stopshop system for recruitme nt of 
first employee or one-stop-shops for start-up s that can also take care of recruitment. Several other Member States have procedu res that are 
so simple that only one contact with a public administration is required (e.g. BG, FR, IE, LV, LT, SE). In others, at least the  social security 
registration is organised as a one-stop-shop or one-window-system, i.e. one branch of the social security collects the registra tion and 
distributes the information to the other branches (e.g. DE, SK or  the UK). BE is a special case where "social secretariats" tak e care of all 
employment related procedures for businesses, including the registration of new employees etc. but have to be paid by businesse s. 
Make the ‘Think Small First’ 
principle a guiding principle 
in all relevant legislation and apply it systematically 
 • Member States are increasingly in tegrating the "think small first"  principle into the policy-making process. While only few have set up a 
specific body to represent SMEs interests, almost all of them consult SMEs representatives. 
• A number of Member States (for example BE, DK, ET, MT, NL, SE, FI, UK) evaluates or is planning to evaluate the impact of new 
legislation on SMEs. Examples of specific provisions to alleviat e the administrative burden on SM Es go from the simplified cond itions for 
accessing subsidised finance (FR) to longer payment time for VA T (DK) or development of dedi cated electronic services (FI). 
• However, further national efforts are needed in the application of this principle in order to meet the specific needs of micro and small 
enterprises but also to maximise its positive contribution to the target of reducing by 25%, at EU level, the administrative bu rden by 2012. 
Facilitate SMEs’ access to 
public procurement  • Almost all Member States have already taken or are currently in troducing measures to raise SMEs ’ awareness on public tenders an d to 
provide them with easy access to tender information (single elect ronic access points or electronic procurement, training and co unselling, 
etc.). 
• However, only a handful of Member States report on more specific measures to help SMEs’ to participate in public procurement (u se of 
prior information notices, dividing contracts into small lots) and only very few ha ve put in place a strategy or specific measu res to help 
SMEs to participate in public procurement (e.g. UK, IT, FR). 
• A study published by the Commission in November 2007
119 showed that 42% of the value of pub lic procurement contracts above the EU 
Directives’ thresholds goes to SMEs. This share is smaller than  the economic importance of SMEs in the EU, but above the SME qu ota for 
federal public procurement in the US (23%). 
 
                                                 
119 Evaluation of SME Access to Public Procurement Markets in the EU, Final Report by GHK and Technopolis, available at: 
http://ec.europa.eu/enterprise/entrepreneurship/public_procurement.htm 
 
EN 63   EN Table 3: Existing SME policies at  Community and National level, planned measures, remaining problems and potential new actions 
Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Lack of implementation of the “Think Small First Principle” 
• Administrative 
burden  • EU better Regulation Agenda 
• The Commission regularly assesses the 
impact of a new piece of Community  
legislation  
• The Commission has started proposing 
specific rules for micro and small 
enterprises  
• A number of Member States (for example 
BE, DK, ET, MT, NL, SE, FI, UK) 
evaluates or is planning to evaluate the 
impact of new legislation on SMEs. 
Examples of specific provisions to 
alleviate the administrative burden on 
SMEs go from the simplified conditions for accessing subsidised finance (FR) to 
longer payment time for VAT (DK) or 
development of de dicated electronic 
services (FI).  
 • Administrative Burden 
Reduction programme: reducing the  administrative 
burden arising from 
Community legislation by 
25% by 2012 in a  number 
of priority areas. 
• Commission Is proposing 
fast track administrative 
burden reductions in 2008 
which will quickly simplify legislation hampering the 
success of business, notably 
in the areas of company 
law, accounting and 
statistical reporting 
• Conduct a more focused 
screening of EU legislation 
to identify possibilities for 
de-burdening SMEs from 
unnecessary requirements, 
in the framework of the 
Better Regulation • The administrative burden created by public 
authorities is still a major concern for SMEs.  
• New legislations do not always take into 
account SMEs specificities 
• Heterogeneity of im plementation of SME 
policy at national level 
• New EU legislation coming into force is 
introduced at many different dates along the 
year, depending on the negotiation process. • Further guidance in IA 
guidelines to measure SME impacts (COM) 
• Guiding principles 
such as Common 
Commencement 
Dates, tacit approval, 
once for all, etc. 
(COM/MS) 
• Implementation of 
the think small first principle in the 
framework of the 
Lisbon Partnership  • Conclusions of the 2006 Spring European 
Council set up five priority actions: 
• Establish a one-stop-shop for setting up a 
company in a quick and simple way and to 
reduce the average time for setting up a 
business to one week. 
• Encourage entrepreneurship, including 
through entrepreneurship education and 
training. 
• The recruitment of a first employee should 
not involve more than one public 
administration point. • Monitoring in the 
framework of the Lisbon Partnership 
• Member States are 
increasingly integrating the 
"think small first"  principle 
into the policy-making 
process. While only few 
have set up a specific body 
to represent SMEs interests, 
almost all of them consult 
SMEs representatives.  • Further national efforts are needed in the 
application of this principle in order to meet the specific needs of micro and small enterprises 
but also to maximise its positive contribution to 
the target of reducing by 25%, at EU level, the 
administrative burden by 2012 • Increase 
implementation and coordination between 
EU and Member 
States 
• Reinforced monitoring 
and governance of 
SME policy, trough 
SBA reporting 
(COM/MS)  
 
EN 64   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Make the ‘Think Small First’ principle a 
guiding principle in all relevant legislation and apply it systematically 
• Facilitate SMEs’ access to public 
procurement 
• Need for an enhanced 
dialogue and 
consultation with 
SME stakeholders • Regular information and discussion 
meetings with European business 
organisations chaired by the SME Envoy 
• Several high-level stakeholder conferences 
with a wide variety of representatives from the European Parliament, Member States 
and business community, • On going activity   
• Late payments • Directive 2000/35/EC  • Currently, one out of four insolvencies in 
Europe is due to late payment. This leads to the 
loss of 450,000 jobs each year, adding to the 
high unemployment level in Europe. In 
addition, outstanding debts worth 23.6 billion 
Euros are lost every year through insolvencies 
caused by late payment.  • Proposal to be made to 
fight late payments by 
simplifying the 
Directive 2000/35/EC. 
Impact Assessment to 
be carried out at later 
stage, if relevant 
(COM) 
• Lack of entreprene urship and skills 
   • Lack of entrepreneurship in Europe: The 2007 
Flash Eurobarometer on entrepreneurial 
mindsets shows that 45 % of Europeans prefer 
to be self-employed whereas the 
entrepreneurial urge reaches 61 % in the US • Increase 
entrepreneurship 
mindset in Europe 
(MS) 
• Educational and 
training policies • Entrepreneurship Action Plan 
(COM(2004) 70 final) 
• 2006 Communication on fostering 
entrepreneurial mindsets through 
education and learning, providing 
examples of good practices which were discussed at the Oslo conference on 
entrepreneurship education
120. • Mobility scheme for young 
(would be) entrepreneurs 
• Mobility scheme for 
apprentices 
• EU SME week • In only a few EU Member States, is 
entrepreneurship already a recognised objective 
of the education syst ems and is embedded 
explicitly in national framework curricula. 
Even in these Member States, implementing 
means (teacher training, teaching materials) 
still need to be stepped up 
• Young entrepreneurs and apprentices do not • Promote teaching of 
entrepreneurship in 
national curricula and 
improve the image of 
entrepreneurs (MS) 
• Step up cooperation 
between different 
departments of the 
                                                 
120 http://ec.europa.eu/enterprise/entrepreneurship/support_measures/training_education/commplan.htm 
 
EN 65   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• The Commission launched a pilot action 
for an ERASMUS-type exchange programme for apprentices to encourage 
them to get professional experience in 
another Member State sufficiently use the possibilities offered by 
cross-border mobility to enhance their skills 
potential. According to a recent Eurobarometer 
survey on a planned pilot project “ERASMUS 
for young entrepreneurs”
12181% of young 
would-be entrepreneurs and 71% of those who 
are already entrepreneurs say that participation 
in such a mobility action for young 
entrepreneurs could be useful for them. These 
results were confirmed by the answers to the 
consultation on this initiative122 public administrations 
(MS) 
• Extend commission’s 
mobility schemes (COM) 
• Insufficient level of 
women entrepreneurship    • There is remaining a gap in terms of 
entrepreneurship between men and women.  • Establishing an EU 
network of female entrepreneur 
ambassadors and 
promoting mentoring 
schemes to inspire 
women to set up their 
own business (COM) 
• Promote 
entrepreneurship to 
women graduates  
(MS) 
• Lack of skilled labour 
and basic skills • At EU level, the importance of improving 
the competencies and skills (in particular ICT skills) of enterprises' human capital 
been recognised as a key element for 
Europe's future under the Lisbon 
Partnership and a comprehensive set of 
actions have alread y been developed
123 • Develop on-line services to 
promote e-skills 
• Supporting the 
development by 
stakeholders of an online e-
Skills and Career Portal in 
2008 that will enable firms • SMEs suffer in particular from the lack of 
skilled labour in the field of new technologies. A 2005 industry report predicted that there 
would be a shortage in 2008, across Europe, of 
up to half a million people with advanced 
networking technology skills
124 A sectoral 
survey on e-business in 2006 reported that • Study in 2009 to 
identify the jobs and skills needs up to 2020 
and paying particular 
to attention small 
businesses (COM) 
                                                                                                                                                                                                                                                    
121 Flash Eurobarometer 212, November 2007  
http://ec.europa.eu/enterprise/entrepreneurship/support_measures/erasmus/eurobaro.htm 
122 EU programmes for cross-border mobility and e-skills would be usef ul/very useful for the majority of respondents (66% and 61% respectively) 
123 See: http://ec.europa.eu/enterprise/sme/competitive_en.htm 
124 IDC White Paper, Networking Skills in Europe, September 2005 
 
EN 66   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• To facilitate the take-up of e-skills, not 
least by SMEs the Commission has proposed a new e-skills policy agenda to self-assess their e-skills 
needs and find out how to 
develop the careers and 
qualifications of their staff.  enterprises are anticipating skills shortfalls for 
ICT practitioners, particularly in ICT strategy, 
security and new business solutions
125 
• Lack of managerial 
skills • Mini-companies: secondary school 
students participate in a practically-
oriented training scheme launched by the 
Commission,   • SMEs lack managerial skills. According to the 
2007 Observatory on EU SMEs, 11% of EU 
SMEs reported that a lack of quality 
management had constr ained their business 
activities over the past two years.  • Provide training and 
related tools (e.g. 
schoolbooks) 
reflecting correctly the 
role of 
entrepreneurship (MS) 
• SMEs’ growth constraints 
• Insufficient churning process, including:  
• Start-ups 
 • March 2006 Council Conclusions  • Start up : In general regist ration times have 
improved and in 13 Member States, it is now possible to register a company within one 
week. It should be noted, however, that this 
analysis only looks at  the steps to get a 
company registered. In addition, in many 
countries there are further administrative steps 
and more time is requi red before a new SME 
can start its business operations
126. • Increase 
implementation of the conclusions of the 
March 2006 Council 
in the framework of 
the Lisbon Partnership 
(MS) 
                                                                                                                                                                                                                                                    
125 E-Business Watch Survey 2006 
126 In this context, the timely implementation of the points of singl e contact foreseen in the Servi ces Directive, to be implement ed by end 2009, will also be an important task 
for Member States. 
 
EN 67   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Stigma of failure  
• Bankruptcy 
procedures 
 • Communication on Overcoming the 
stigma of business failure – for a second chance policy” where some areas of action 
for facilitating the fresh start of honestly 
failed entrepreneurs are put forward.
127 
• In the context of the renewed Lisbon 
Strategy, around one third of Member 
States have already put forward plans to 
reform the national insolvency legislation 
in their National Reform Programmes128  • The 2007 Flash Eurobarometer on 
entrepreneurship shows that around 50% of EU citizens agree that “ one should not start a 
business if there is a risk it might fail” 
compared to just 20% in the US.  
• Exit rates and hence gross turnover rates (the 
sum of entry
129 and exit rates) are higher in the 
U.S. than in the EU 
 • Improve bankruptcy 
procedures based on the implementation of 
the Communication 
(MS) 
                                                 
127 COM(2007) 584 final 
128 Annex to the Communication from the Commission to the Spring Eu ropean Council: Implementing the renewed Lisbon Strategy for Gr owth and Jobs - "A year of delivery". 
European Commission, COM(2006)816 final 
129 Based on data for a sample of nine EU15 countries and the U.S. both entry and exit rates are lowe r in the EU than in the U.S. though the differences in exit rates are 
substantially larger. Exit rates in EU range between 1/10 and 1/3 of US rates, while EU entry ra tes represent between 0.4 and 0 .8 of the U.S. entry ra tes. See Van Reenen, J. 
(2007): Economic Performance of the EU and the Structural Reforms Agenda: Firm Level Evidence, GEPA Meeting of 9th July. Cincer a, M.,and O. Galgau (2005): 
“Impact of Market Entry and Exit on EU Productivity and Growth Performance,” Economic Papers 222, European Commission 
 
EN 68   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Transfer of business  • Further to a Commission 
Communication130, a pilot action aims to 
promote mentoring schemes in EU 
Member States in order to enhance the 
knowledge and core competences that are 
essential for the successful transfer of 
business ownership 
  • SMEs still face the challenge of transfer from 
one generation to another represents a challenge for Europe. Some 700 000 SMEs are 
concerned on average every year, and some 2.8 
million jobs are involved throughout Europe on 
an annual basis. “To obt ain bank financing for 
the transfer is difficult since the appraisal is 
complex and does not allow for standardised 
procedures. Smaller transfers (most transferees 
need less than 120 000 EUR in total for their 
investment) often do not generate the fees 
necessary to cover the higher transaction costs 
incurred by the banks. Equity providers are 
only interested in high-yield cases which are 
not the majority”
131. • Improve transfer of 
business following the Communication (MS) 
• Insufficient access to finance 
• Access to finance • To improve SMEs’ access to finance, 1.1 
billion has been earmarked for financial 
instruments within the Competitiveness 
and Innovation Framework Programme 
(CIP) for the period 2007-2013 
• To allow efficient use of financial 
instruments at regional level, the Commission with the European 
Investment Bank (EIB) and the European 
Investment Fund (EIF) launched the 
JEREMIE initiative of the Structural 
Funds
132 
• The European Agricultural Fund for Rural 
Development (EAFRD)133 will spend up 
to €10 billion to support the creation and   • Member States should 
ensure that their legal 
and administrative 
frameworks favour the 
use of ERDF funding 
to support the starting 
and growing of 
businesses (MS) 
                                                 
130 Implementing the Lisbon Community Programme for Growth and Jobs: Transfer of Businesses - Continuity through a new beginning C OM (2006)117 
131 European Investment Bank SME consultation 2007/2008, p.52 
132 http://ec.europa.eu/regional_policy/funds/2007/jjj/jeremie_en.htm 
133 Council Regulation (EC) No. 1698/2005 of 20 September 2005 
 
EN 69   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
development of non-agricultural 
enterprises in rural areas, skills acquisition 
and training, as well as SMEs in 
agriculture, food industry and forestry 
• Mezzanine finance • Guarantees under the Competitiveness and 
Innovation Framework Programme (CIP) 
can be used also for guaranteeing 
mezzanine finance  • Insufficient provision of mezzanine finance, 
(combining features of  equity and debt), 
especially for High Growth SMEs and SMEs 
that want to internationalise • Developing markets 
for mezzanine 
financing in 
cooperation with the 
EIB, including for 
High Growth SMEs or 
SMEs that wish to 
internationalise 
(European Investment 
Bank). 
• Member States should 
develop financing 
programmes that 
address the availability 
of mezzanine funding 
between €100 000 and 
€1 million (MS) 
• Micro-credit • The Commission has also promoted active 
dialogue and cooperation between bankers and SMEs which has lead to improved 
mutual understanding and more. The 5th 
Round Table of Bankers and SMEs
134 
discussed transparency issues as well as 
innovative financing tools like mezzanine 
finance and SME securitisation 
• Micro-credit Communication  • Insufficient availability of micro-credit for 
SMEs prevents potential entrepreneurs and small businesses from achieving their goals and 
slows down the growth of the European 
economy • Supporting 
microfinance institutions through a 
new "Microfund" 
providing additional 
support for non-bank 
microfinance 
institutions, with an 
initial capital of about 
€40 million (European 
Investment Bank/ 
COM/ MS) 
• Ensure that 
                                                 
134 See the final report at:  
http://ec.europa.eu/enterprise/entrepreneurship/financing/round_table.htm  
 
EN 70   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
accompanying 
business support 
services are available 
for entrepreneurs 
getting microcredit 
(MS) 
• Ensure that 
microfinance institutions benefit 
from appropriate 
regulation (MS) 
• Venture capital  • The Commission has identified, in its 
recent Communication: Removing 
Obstacles to Cross-border Investments by 
Venture Capital Funds135, together with 
Member States and industry, the main 
obstacles to the development of cross 
border capital markets in order to 
encourage the development of a truly 
European venture capital market  • Fragmentation of European venture capital 
market along national borders contributing to 
small funds, small invested amounts and low 
profitability • Review tax systems so 
that private investors 
(like business angels) 
have incentives to 
invest in SMEs either 
directly or indirectly 
through investment 
funds (MS) 
• Define a set of 
benchmarks for the 
content of investment 
readiness 
programmes; and 
establish easily 
accessible quality 
criteria (COM) 
• Establish a standing 
network linking the 
Commission, the EIF 
and Member States 
and regions 
implementing JEREMIE ((European 
Investment Bank/ 
                                                 
135 COM(2007) 853 final, 21.12.2007 
 
EN 71   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
COM/ MS) 
• State Aids  • Revision of the Community state aid rules 
has increased the de minimis threshold 
under which aid need not be reported to 
€200,000.  
• New Community framework for State aid 
for research and innovation (introduces 
more flexible rules for SMEs’ costs related 
to Intellectual Property Rights (IPR), 
hiring highly qualifie d staff and accessing  
innovation support services)  
• Environmental State Aids Guidelines   • Various existing exemption regulations:  
• Lack of consistency 
• Need to update according to recent changes in 
Community Guidelines  
• Opportunity to increase aid intensity for SMEs  • General Block 
Exemption Regulation 
to be adopted the same 
day as the SBA. 
Proposal analysed 
separately by DG 
COMP services 
(COM) 
• Innovation and R&D  
 
EN 72   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Innovation policy  • The launch of a new, broad-based 
Innovation Strategy with a ten-point action plan addresses several key issues for 
SMEs, including skills, standardisation 
and IPR 
• The Commission has also published a 
practical Guide on the promotion of 
innovation
136 
• The Commission adopted in November 
2006 a revised Community Framework for 
State aid for research, development and 
innovation137  
• The Commission is also actively 
promoting cluster policies in the Member 
States and ensures the co-ordination of 
clusters at EU level to help the emergence 
of world-class European clusters 
• Communication on clusters • Implementation of the lead- 
markets initiative 
• Action plan to promote the 
use of interoperable 
electronic signatures and 
electronic authentication 
between Member States 
• Actions in the second 
quarter of 2009 to help SMEs participate in global 
supply chains by 
harmonising data exchange 
standards and e-business 
processes across Europe, 
both within and between 
particular industrial sectors 
• An online e-Business 
Guide, to be published by 
mid-2008, will help SMEs 
to self-diagnose their e-business needs and options 
and then locate local 
providers of e-business 
solutions • SMEs are not sufficiently R&D intensive: 
According to the 2007 Observatory of European SMEs, only around 3 out of 10 SMEs 
in the EU indicated that they have new products 
or have income from new products. 
• Problems still hinder the use of electronic 
invoicing as a mean to transfer invoicing 
information (billing a nd payment) between 
business partners in the Single Market
138. 
Currently, the proliferation of different 
standards, legal uncertainty, and operational 
constraints are the main barriers which prevent 
the take up of cross-border interoperable e-
invoicing solutions, especially for SMEs, which 
face particular difficulties with the take up of 
ICT • Encourage SMEs’ 
participation in the lead market initiative 
(MS) 
• Implement the actions 
from the 
Communication on 
clusters (MS) 
• Patent  • Pending proposal for a 
Community Patent and an 
EU-wide Patent 
Jurisdiction  • Adopt the Community 
Patent. (MS) 
                                                 
136 http://ec.europa.eu/enterprise/innovation/documents_en.htm 
137 .See: http://ec.europa.eu/competition/state_aid/reform/rdi_en.pdf 
138 The essential features of e-invoicing ar e the replacement of manual paper-based routin es, with new integrated systems and proc esses to integrate supply chains and make 
them more cost effective and faster 
 
EN 73   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Support programmes  • FP7 programme 
• A significant share of the Structural Funds 
(2007-2013) will be spent to support the 
creation and growth of SMEs, notably to 
improve their innovative capacity, their 
investment in RTD and skills • EU’s 7th Framework 
programme for research and development (FP7) 
established the target of 
allocating 15% of the 
budget of its Co-operation 
programme to SMEs.  
• The results
139 of the first 
calls for proposals show 
that the part allocated to 
SMEs in the main 
proposals listed (e.g. after 
evaluation) is just below 
20% • Access to finance for innovative companies 
especially for High Growth SMEs • Continue efforts over 
time (COM) 
• Adapts FP7 
participation rules to 
encourage the growth 
of SMEs, by ensuring 
that an SME 
participating in a FP7 
project can keep the 
benefit of SME 
treatment for the 
whole duration of that 
project, even if it 
exceeds the SME 
ceilings during that 
period (COM) 
• Insufficient access to markets 
• Access to the Internal 
Market  • An integrated business and innovation 
support network (the European Enterprise Network) was set up in 2007 and became 
fully operational in 2008 to assist SMEs in 
benefiting more from the opportunities of 
the Single Market 
• The Commission has tabled a proposal for 
a regulation which will require national 
authorities who deny market access to 
duly justify their decision
140 • Full and timely 
implementation of the Services Directive
141 by 
end 2009 will help to 
remove legal and 
administrative barriers to 
the development of services 
activities, it will free up the 
establishment of businesses 
and the cross-border 
provision of services, in 
particular for SMEs • The participation of SMEs in the Internal 
Market remains low.  
• SMEs face legal and administrative obstacles 
when creating and operating their business in 
the Single Market.  
• Difficulties and high costs of setting-up and 
operating business in a nother Member State 
due to differences of the national legal regimes 
and the national company legal forms. • Proposal for a 
European Private Company Statute for 
SMEs. Proposal that 
has been subject to a 
separate Impact 
Assessment (COM) 
                                                 
139 1st progress report of the FP7 SME inter-services task force 
140 http://ec.europa.eu/enterprise/r egulation/goods/mutrec_en.htm 
141 Directive 2006/123/EC of the European Par liament and of the Council of 12 December 20 06 on Services in th e Internal Market, OJ  L376 of 27.12.2006, p. 36 
 
EN 74   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Standardisation 
 • The Commission is increasing its co-
funding to support the participation of experts representing the SMEs’ interests in 
the process that establishes European 
standards   • Increasing EU 
financial support to promote SMEs’ access 
to standards and 
standardisation 
process (COM) 
• Promoting the 
publication of 
abstracts of European 
Standards without 
access restriction in all 
languages (COM 
ESOs) 
• A “SME Help Desk” 
in the ESOs (COM/ ESOs) 
• Public Procurement  • The Public Procurement Directives 
provide a framework to foster competitive 
public procurement markets to the benefit 
of SMEs. In response to the 2006 Spring 
European Council, the Commission has 
also taken action in analysing how public 
procurement markets, which account for 
about 16% of EU GDP, could be better 
used to promote the growth and 
competitiveness of SMEs  • Remaining administrative burden  
• Culture of tendering authorities not always 
SME friendly  • Code of conduct for 
awarding authorities 
(COM) 
• Foster e-procurement 
(COM) 
• New problems for EU SMEs arising in the context of globalisation  
• SMEs have difficulty 
to use and defend 
their Intellectual 
Property Rights in 
foreign markets  • Reduced fees for 
Community Trade Mark • SMEs often do not have  a representative in 
foreign markets and have difficulty to defend 
their intellectual property rights • Develop IPR support 
services (MS) 
 
EN 75   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Need to improve 
SMEs’ growth potential in a 
sustainable way  • Environmental State Aids Guidelines (23 
of January 2008). The various measures which can be adopted under these 
Guidelines provide for a bonus of 10% for 
medium and 20% for small enterprises in 
addition to the already high aid intensities 
allowed for the promotion of 
environmental policy measures
142 
• Significant amount of the European 
Agricultural Fund for Rural Development 
2007-2013, supplemented by additional 
national/regional and private co-financing, 
is devoted to business creation and 
development of SMEs in rural areas, 
improving the skills of their management 
and personnel as well as to the 
implementation of new and innovative 
practice • The forthcoming Action 
Plans on Sustainable Industrial Policy and 
Sustainable Consumption 
and Production will 
contribute towards boosting 
the competitiveness and 
sustainability of SMEs • SMEs lack of awareness and information • Establish a network of 
environment and energy efficiency 
experts in the new 
enterprise Europe 
business and 
innovation support 
network, financed by 
the CIP programme 
(COM) 
• Provide incentives for 
eco-efficient 
businesses and 
products (e.g. tax 
incentive schemes and 
subsidies prioritisation 
to funding sustainable 
business) in line with 
the Community Guidelines on State 
Aid for Environment 
protection (MS) 
• Difficulty to comply 
with environmental legislation  • ECAP Programme to help SMEs to 
integrate environmental concerns into production processes and products starting 
with a better compliance with 
environmental legislation
143  • SMEs still report to have difficulty to comply 
with environmental legislation. • Better examine 
existing environment-related subsidy 
structures to remove 
disadvantages to 
SMEs (MS) 
                                                 
142 See: Community Guidelines on State Aid for Environmental Protection. The General Block Exemption Regulation (GBER) also contai ns different categories of 
environmental investment aid which could be used by eco-efficient business (see articles 16 – 20 GBER). Article 22 GBER concern ing environmental tax reductions could 
also be used. Member States could also use general investment aid provisions, like article 12 GBER on SME investment aid, to pr omote environmental objectives 
143 http://ec.europa.eu/environment/sme/programme/programme_en.htm 
 
EN 76   EN Problems  • Existing policies • Measures already 
planned or in 
implementation phase  • Remaining problems  • Need for further 
public action? 
• COM: Commission 
• MS: Member States  
• Difficulty to access 
international markets  • Development of trade facilitation 
provisions in future free-trade agreements (FTAs) and in the WTO and regulatory 
and industrial policy dialogues with third 
countries to tackle re gulatory obstacles to 
trade . In addition, specific measures such 
as information and awareness-raising 
campaigns and match-making events to 
facilitate SMEs’ access to third-country 
markets, such as AL-INVEST, 
MEDINVEST and PR OINVEST have 
proven successful and will be continued • Continue WTO 
negotiations on the Government Procurement 
Agreement (GPA) 
• Actively seek mutual and 
reciprocal opening up of 
third countries' 
procurement markets in its 
bilateral negotiations with 
fast growing third countries • A certain number of SMEs  have, at least by a 
restricted number of service providers, access to nearly all relevant services to go 
international and to make business in China 
• However, under the current situation, many 
other SMEs are excluded from services/ service 
providers 
• Service providers do not face serious 
competition and services are therefore suboptimal • Establish European 
Business Centres in selected markets, 
starting with fast 
growing economies 
India and China 
(COM) 
• Launch in 2010 a 
‘Gateway to China’ 
scheme, with 
particular focus on 
establishing an 
Executive Training 
Programme in China 
to promote European 
SMEs’ access to the 
Chinese market 
(COM) 
• Encourage coaching 
from large companies 
to SMEs in order to 
bring them to 
international markets 
(MS) 
 
EN 77   EN ANNEX IV  
Fact and figures 
Box 1: EU Definition of SMES 
On 6 May 2003, the European Commission adopted a new Recommendation 2003/361/EC144 
regarding its definition of small and medium-si zed enterprises (SMEs), which took effect in 1 
January 2005. Under this recommenda tion, enterprises are classified as SMEs when they have fewer 
than 250 employees. Furthermore, the annual tu rnover of enterprises should not exceed EUR 50 
million, or their annual balance sheet total should not exceed EUR 43 million145 In order to provide 
a realistic picture of an  enterprise's economic situation, a dis tinction has been introduced between 
the different categories of enterprises (autonomous,  partner and linked), each  of them corresponding 
to a type of relationship which an enterprise  might have with another one. Depending on the 
category in which an enterprise fits it may then need to add some, or all, of the data from those enterprises to its own. 
Enterprise category Headcount Turnover or Balance sheet total 
medium-sized < 250 ≤ € 50 million ≤ € 43 million 
small < 50 ≤ € 10 million ≤ € 10 million 
micro < 10 ≤ € 2 million ≤ € 2 million 
 
 
Figure 1: Breakdown of value added and numb er of persons employed by enterprise size-
class, non-financial business economy (NACE S ections C to I and K), EU-25, 2003 (% share of 
total)146 
                                                 
144 Commission Recommendation of 6 May 2003, OJ L 124 of 20.5.2003, p. 36 
145 More details can be found on the web-site for the Direct orate-General for Enterprise and Industry, available at: 
http://ec.europa.eu/enterprise/enterprise_policy/sme_definition/index_en.htm  
146 Eurostat, European business,  Facts and figures, 2007 
 
EN 78   EN Figure 2: SMEs' employment share: manufacturing and services, 2003 
00,10,20,30,40,50,60,70,80,91
sibgde skfiptdkfrbehu seieatukczro ltnl lveees itpl
eu-25
SME's employment share: manufacturing SME's employment share:services
 
Figure 3: Development of employment by  size-class, Europe-19 (index, 1988 = 100) 
 
The figure 3 “depicts the size-class pa ttern of employment development in Euro pe-19. It can be clearly seen that 
employment growth is negatively related to enterprise size. In the 1991/1993 period of slow economic growth, 
employment decline is smallest in micro enterprises and largest in large enterprises. Also, during the recovery from 
1994 onwards employment growth was strongest in micro enterprises”147. 
                                                 
147 European Commission, Observatory on EU SMEs, SMEs in Europe 2003,  
http://ec.europa.eu/enterprise/enterprise_policy/an alysis/doc/smes_observatory_2003_report7_en.pdf 
 
EN 79   EN Figure 4: listing breakthrough innovations made by small firms during the 20th century)148. 
 
Figure 5: Intensity of innovation per size class 
 
                                                 
148 Other studies on the distribution of innovations certified as "significant" by industry experts, confirmed that 
small (as well as large) firms outperform medium-sized firms for the US (see OECD 2006 for an overview) 
 
EN 80   EN Figure6:
 
Figure 7: Average firm size relative to entry, by age  
 
Figure 8: complementarities between small and large innovative firms Aggregated entry, exit and net entry rates (in %) by country (1997-2003) 
Source: “Impact of Market Entry and Exit on EU Productivity and Growth Performance”, M. Cincera  
and O. Galgau  (2005). EC Economic Papers 222. 
 
EN 81   EN