Opinion of the Economic and Social Committee on the 'Communication from the Commission to the Council Fostering entrepreneurship in Europe: Priorities for the future'
Date: 1998-05-27
Institutions: European Economic and Social Committee
Subjects: EU programme, business activity, competitiveness, small and medium-sized enterprises

27.7.98

EN

Official Journal of the European Communities

C 235/69

Opinion of the Economic and Social Committee on the ‘Communication from the Commission
to the Council Fostering entrepreneurship in Europe: Priorities for the future’

(98/C 235/16)

On 5 May 1998 the Commission decided to consult the Economic and Social Committee,
under Article 198 of the Treaty establishing the European Community on the above-mentioned
communication.

The Committee instructed the Section for Industry, Commerce, Crafts and Services to
prepare its work on the subject. The Committee decided to appoint Mr Lustenhouwer as
rapporteur-general for its opinion.

At its 355th plenary session (meeting of 27 May 1998) the Economic and Social Committee
adopted the following opinion by 78 votes to three with four abstentions.

1.

Introduction

a matter of changing people’s mentalities and creating
an entrepreneurial, risk-taking culture.

1.1.
The Committee notes with approval the Com-
munication from the Commission to the Council entitled
Fostering entrepreneurship in Europe: priorities for the
future. The Committee sees many of its own ideas
reflected in the Commission’s vision of entrepreneurship
and in the actions proposed and already carried out to
promote independent entrepreneurship. This is of course
to be welcomed.

1.2.
The Commission has done well to comply with
the Council’s call, made at the end of 1997, to submit
ideas to the Cardiff European Summit as to how one of
the components of the employment guidelines, the
promotion of entrepreneurship in the European Union,
could be put into practice.

1.3.
The Commission sees entrepreneurship as a
dynamic process which requires certain qualities. The
Committee endorses this view but would add that
entrepreneurship should in a sense also be seen as a
separate factor of production, alongside labour and
capital for example.

It is the combination of these various factors
1.3.1.
of production which adds value and which determines
the success or failure of a business.

In this sense entrepreneurship is not something
1.3.2.
which is restricted to small businesses, but which is also
identifiable in large firms and in forms of commercial
cooperation between different firms. Here use is often
made of some of the strengths of small, independent
entrepreneurs, leading to the development of concepts
such as ‘intrapreneurship’.

1.5. However easy that may sound, the Committee is
aware that changes of this kind often take a long time
and require great adaptability. The changes to laws and
regulations needed for this must go hand-in-hand with
incentives in other areas, such as, for example, training
and the provision of information on the advantages and
disadvantages of being an entrepreneur.

1.6. Over the last few years there has been growing
interest in entrepreneurship, particularly among younger
people and the better educated. And yet in many cases
the transition from employee to self-employed is not
easy. The Committee points out that a ‘grey area’ has
developed between employment and self-employment,
which is causing problems with regard to the legal, tax
and social security position of people in this grey area.
A person may thus be regarded as self-employed by the
tax authorities, whilst being regarded as an employee
by the bodies responsible for implementing the rules of
the social security scheme! The cause of this problem is
that in most Member States the law is based on the
nineteenth century distinction between employer and
employee, which can however nowadays exist side-by-
side. Thus a growing number of people, often working in
the service sector, are both employee and self-employed.
The Committee feels that the Member States should
address this problem and adopt measures in these
areas to make the situation clearer for those affected.
Uncertainty will tend to deter people from taking
initiatives which would be worthwhile and socially
useful in terms of employment, but also in terms of
developing new products and services.

The Committee also agrees with the Commission
1.4.
that the fostering of entrepreneurship is to a great extent

As stated above, the Committee finds many of
1.7.
its own views reflected in the proposed actions. The

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Committee has recently issued opinions on related fields,
e.g. on electronic commerce (1) and SME access to EU
R&D funds (2). Opinions relating to other fields are
being prepared, e.g. on the draft directive on late
payments (3), access for SMEs to the capital markets (4)
and the proposals for financial assistance for SMEs
in the framework of the growth and employment
initiative (5). A brief mention will be made in this opinion
of subjects on which explicit comment is indicated at
this stage.

posals of the BEST group (Business Environment Simpli-
fication Taskforce) submitted on 7 May. Although the
Committee has not yet had the opportunity to study the
BEST report and its specific proposals in detail, clearly
the idea of setting up Better Regulation Units at the
Commission and Council, as well as at a high political
level in the Member States, is interesting from the point
of view of the ‘think small first’ principle and merits
further development.

2. Priority actions for encouraging enterprise culture

2.1.
The Committee endorses this part of the Com-
mission’s strategy. The promotion of high-quality edu-
cation for aspiring entrepreneurs, e.g. by developing
networks of educational
institutions and dispelling
prejudices about entrepreneurship, fits well here. The
intended change to the law on bankruptcy, needed in a
number of Member States, could also help put an end
to the tendency to regard entrepreneurs who go bankrupt
as ‘losers’.

Of course a balance has to be struck here between
the various interests involved, and certainly those of
creditors, but at the same time a legal framework needs
to be established which does not automatically exclude
a second chance.

The recommendations aimed at the Member
2.2.
States should make it clear how necessary it is to
highlight at an early stage of young people’s education
the opportunities for personal development offered by
entrepreneurship and the social function performed by
entrepreneurs.

3. Priority actions for promoting enterprise culture

3.1.
In the course of their activities entrepreneurs are
faced with any number of rules imposed on them by
society for various reasons. Tax laws, safety regulations,
environmental regulations, establishment requirements,
land-use planning rules, permits etc. are unfortunately
all too often a burden for small firms, and an unnecessary
one at that. Studies have conclusively shown that
administrative costs weigh most heavily on small firms.
The Committee therefore notes with interest the pro-

(1) OJ C 19, 21.1.1998, p. 72.
(2) OJ C 355, 21.11.1997.
(3) COM(98) 126 final.
(4) COM(97) 187 final.
(5) OJ C 157, 25.5.1998.

3.2. One of the most important factors affecting the
business environment is the tax system in the Member
States. The Commission is therefore right to link the tax
system with the question of the financing of small firms.
Tax incentives need to be created for start-ups without
however resulting in unbalanced competition vis à vis
existing firms. The investment of risk capital in small
firms by private individuals needs tax incentives, and it
must also be ensured that the transfer of ownership of
firms as going concerns can be effected without tax
complications. This question of the transfer of ownership
of companies set up by post-war generation of entre-
preneurs will come into sharp focus over the next few
years.

Laws and regulations on intellectual property
3.3.
(including patent law and the proposals for simplified
patents or user law) are an important framework for
the promotion of innovative developments in SMEs.
When combined with improved access for small firms
to knowledge of new technologies and the development
of business clusters, there is potential here for improving
the innovative capacity of small businesses. The combi-
nation of many, often complex factors makes it neces-
sary, as the Commission points out, to set up in Member
States where these do not already exist decentralized
networks of easily accessible, low-cost information and
advice centres by and for small firms.

In this connection, small firms should be given
3.4.
simpler access to Community R& D programmes, which
will probably necessitate changes to the conditions of
access to the programmes. Here too it should no doubt
also be borne in mind that a small business is not
a pocket-sized multinational! The Commission must
ensure that SME organizations are actually involved in
the partnerships set up at local or regional level in the
framework of application of the Structural Funds,
enabling them to contribute their own initiatives on an
equal footing.

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4. Promotion of
economy

entrepreneurship in the

social

the more traditional sectors, such as retailing, crafts,
hotels and tourism and small-scale industry.

4.1.
The Commission rightly highlights the great
potential offered by the social economy for the creation
of jobs. Business and/or organizations in this sector are
not primarily concerned with making a profit. The
extent to which ‘businesses’ of this kind are developed
in the various Member States varies greatly, so that the
development of a true Community policy for this sector
is a laborious process. And it will probably not amount
to much more than an exchange of information between
Member States. This should not however mean the
Member States and the Commission failing to appreciate
the important contribution of the social economy to
society. However the initiatives now announced must,
in consultation with the organizations concerned, be
further developed, which does not yet appear to be
happening so that a final judgement on this part of the
programme is not yet possible. The idea of special
European diploma programmes would however seem at
first sight to be at odds with the European Union’s lack
of powers over educational curricula. The exchange of
experience gained in the Member States of specific
education for persons working in social economy, by
setting up a network of bodies, would seem a more
fruitful and potentially valuable approach.

5. Conclusion

5.1. Many factors play an important part in the
efforts to secure lasting economic growth in Europe.
The promotion of entrepreneurship is only one of these,
but certainly not the least important. But we must avoid
unrealistic expectations at this stage which are likely
only to result in disappointment. There are of course
many fast growing small firms which contribute to the
growth of employment. But at the same time there are
also many microenterprises which offer people working
for them a decent standard of living. These firms are
not growing however and do not want to grow. And yet
these, often locally operating firms make up the bulk of
the small business sector and play an irreplaceable role
in European economies. These are mostly small firms in

Brussels, 27 May 1998.

to emphasize innovative,

The Committee points out that the Commission
5.2.
this important group. The
tends to lose sight of
Commission tends
fast-
growing start-ups. There is a danger that this emphasis
on corporate ‘gazelles’ will mean neglect of measures
needed for existing firms. The Committee feels that the
policy approach should be balanced, so that existing
firms can operate on the market in accordance with the
same conditions of competition as newcomers.

5.3.
It is because entrepreneurship is a dynamic
process of setting up, developing and finally transferring
or winding up businesses that all these stages of the life
cycle of a firm deserve policy consideration. With this
proviso, the Committee wholeheartedly supports the
vision and strategy for its implementation set out in the
Commission’s communication.

The Committee feels however that the annual
5.4.
evaluation of Community and national policy proposed
by the Commission should also be referred for the
Committee’s opinion. Merely consulting the Council
and the European Parliament would be to miss the
opportunity to create broad public support for the
continuation of this policy!

5.5.
The Committee feels that this evaluation should
be more than a traditional report on activities. On the
model of the internal market scoreboard, it should be a
sort of barometer or health check to establish whether
progress has been made by the Union and the individual
Member States in areas of importance to entrepreneurs,
and if so in which. The BEST group referred to above
states in its report that: ‘It is, therefore, time that we
moved from merely talking about the importance of
having the right environment for small business to
putting the needs of enterprise at the centre of policy
making’.

5.6.
The Committee considers that an annual check
list could be a useful instrument for achieving this
objective.

The President

of the Economic and Social Committee

Tom JENKINS