Communication from the Commission to the Council and the European Parliament - Better Environment for Enterprises {SEC(2002) 1212} {SEC(2002) 1213} {SEC(2002) 1214}
Date: 2002-11-07
Institutions: European Commission
Subjects: aid to undertakings, business administration, business management, business policy, business start-up, simplification of formalities, type of business

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 07.11.2002
COM(2002) 610 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Better Environment for Enterprises

{SEC(2002) 1212}

{SEC(2002) 1213}

{SEC(2002) 1214}

Table of content

1.

2.

2.1.

2.2.

2.3.

2.4.

2.5.

2.6.

3.

3.1.

3.2.

4.

Introduction.................................................................................................................. 3

Progress in the Field of Enterprise Policy.................................................................... 4

Entrepreneurship .......................................................................................................... 4

Framework conditions.................................................................................................. 5

Financial resources....................................................................................................... 6

Human resources.......................................................................................................... 8

Innovation, knowledge and ICT diffusion ................................................................... 9

Sustainable development............................................................................................ 11

Quantitative Targets in Enterprise Policy .................................................................. 12

Motivation.................................................................................................................. 12

Member States’ targets in enterprise policy............................................................... 13

Concluding Remarks.................................................................................................. 13

Annex I:………………………………………………………………………………………

Quantitative targets declared by Member States in the Contact Group ................................... 15

Annex II:

List of indicators....................................................................................................................... 18

2

1.

INTRODUCTION

This Communication reviews progress made in the Member States in improving the
environment  within  which  enterprises  can  be  established  and  grow.  This  important
aspect  of  enterprise  policy,  repeatedly  raised  by  the  Commission  in  recent  years1,
directly  affects  Europe’s  ability  to  achieve  the  ambitious  strategy  adopted  at  the
Lisbon  European  Council  in  March 2000.  Member  States,  too,  have  expressed
concern about the contribution of their policies to entrepreneurial dynamism.

A  business  environment  that  strengthens  incentives  to  produce,  to  establish
enterprises, to innovate and to take risk contributes to growth of income and of job
opportunities.  On  the  other  hand,  burdensome  regulations,  inefficient  markets  and
administrative  obstacles,  as  well  as  negative  attitudes  to  risk-taking  and  to
entrepreneurship  hinder  entrepreneurial  dynamism  and  undermine  the  achievement
of Europe’s ambitions.

Using  the  open  method  of  co-ordination  to  engage  in  policy  benchmarking  and
monitoring,  the  Commission  and  the  Member  States  have  been  learning  from  the
diverse  experiences  of  the  Member  States.  They  have  identified  and  disseminated
lessons  of  successful  practice,  in  particular  promoting  the  effectiveness  of  the
institutional structures on whose operation markets depend.

The  Commission’s  Enterprise  Policy  Scoreboard  and  Innovation  Scoreboard  point
to  the  diversity  of  performance  across  the  EU,  while  Best  projects2  point  up
successful practice and monitor progress in areas of importance to enterprises. This
Communication draws on material from these sources.

Starting  from  the  Enterprise  Policy  Scoreboard,  the  Member  States  and  the
Commission  have  worked 
the
improvement of their enterprise policy performance. These will help focus Member
States’ policies on achieving identifiable progress in specific areas of importance to
the business environment.

to  develop  quantitative 

targets  for 

together 

Since the Lisbon European Council, the economic environment has worsened and the
prospects  for  the  early,  robust,  economic  growth  that  underlay  the  Lisbon  strategy
have  dimmed3.  This  merely  adds  to  the  importance  of  improving  the  business

1

2

3

See,  for  example,  The  Lisbon  Strategy  –  Making  Change  Happen,  Communication  from
the  Commission  to  the  Spring  European  Council  in  Barcelona,  COM  (2002)  14  final,  15.1.2002.
 The 2002 Broad Economic Policy Guidelines also stress the need to encourage entrepreneurship; see
“Council  Recommendation  of  21  June  2002  on  the  Broad  Guidelines  of  the  Economic  Policies  of
the Member States and the Community”, Council of  the  European  Union,  10093/02,  Seville,  21 June
2002.
These  are  financed  by  the  Multi-Annual  Program  for  Enterprise  and  Entrepreneurship  and
in  particular  for  Small  and  Medium-sized  Enterprises  (SMEs),  2001-2005,  Council  Decision
2000/819/EC of 20 December 2000. The Best procedure was launched by the Commission in December
2000 in the framework of the Lisbon European Council’s open method of co-ordination.
For  the  period  2000-2010  the  Lisbon  strategy  presupposes  an  average  economic  growth  of  3 %.
In  2000,  GDP  growth  was  3.3 %;  in  2001,  1.7 %  and  according  to  the  Commission’s  forecasts
(see Economic Forecasts, Spring 2002, European Economy, no. 2/2002, DG ECFIN) real GDP growth
was  expected  to  be  1.5 %  in  2002,  rising  to  2.9 %  in  2003;  the  outlook  has,  of  course,  worsened
significantly in recent months.

3

                                                
environment.  In  an  economic  climate  that  reduces  the  returns  to  investment,
discourages new ventures and increases the risk of failure,  the  additional burden of
unbalanced regulation, poor business services, shortage of well-trained workers and
costly finance may finally discourage the entrepreneurship and business ventures on
which Europe’s ambitions depend.

2.

PROGRESS IN THE FIELD OF ENTERPRISE POLICY

This section draws mainly on material from the 2002 Enterprise Policy Scoreboard4
and selectively on results of completed or on-going Best projects5.

2.1.

Entrepreneurship

Entrepreneurial  dynamism  is  a  source  of  productivity,  employment  and  economic
growth  and  signs  of  entrepreneurial  weakness  are  therefore  a  cause  for  concern6.
European  attitudes  to  entrepreneurship  show  two  broad  characteristics.  First,  a
tendency  to  prefer  dependent  employment  to  self-employment  suggests  that
Europeans are less willing to bear business risks than are Americans. Second, those
who  do  shoulder  the  risks  of  entrepreneurship  seem  to  be  less  concerned  to  grow
their businesses than are American entrepreneurs.

Thus, although the number of new businesses grew in the second half of the 1990s7,
there  were  clear  deficits  in  entrepreneurial  activity.  This  reluctance  to  form  new
businesses  may  in  part  reflect  barriers  to  entry  and  relatively  stringent  regulatory
regimes in  the labour and product  markets  in  Europe.  But  it  also  reflects  structural
problems,  for  female  entrepreneurship  stagnated  at  low  levels,  well  below  those
registered in the US8.

Although  Member  States  have  taken  a  number  of  measures  to  promote  female
entrepreneurship  (support  for  start-ups,  information,  funding,  advice/consultancy,
training  and  mentoring),  there  is  clearly  still  room  for  Member  States  to  use
identified  successful  practice  to  improve  their  performance  in  this  field.  Female
entrepreneurship in Europe has remained stagnant since 1995.

4

5

6

7

8

and  Training 

(September  2002); 

for  Entrepreneurship” 

Benchmarking  Enterprise  Policy:  Results  from  the  2002  Scoreboard,  Commission  Staff  Working
Document, SEC (2002) 1213, 07.11.2002.
Best  projects  have  been  completed  on  “Business  Support  Services” 
(December  2001);
the  “Benchmarking  the  Administration  of  Business  Start-ups”  (January  2002);  the  “Management
of  Incubators”  (January  2002);  “Impact  Assessment”  (February  2002);  “Benchmarking  National  and
Regional Policies in Support of e-Business for SMEs” (June 2002); “Transfer of Business” (July 2002);
“Education 
“Business  Angels”
(September 2002); and “ICT Skills” (September 2002). “Promoting Entrepreneurship amongst Women”
will  be  completed  in  March  2003.  A  project  on  “Evaluation  of  the  Economic  Impact  of  Conformity
Assessment  Procedures”  will  be  completed  in  mid-2003;  see  “Highlights  of  the  Results  of  the  Best
Procedure Projects 2001-2002”, Commission Staff Working Document, SEC(2002) 1212, 07.11.2002.
The Commission is currently preparing a Green Paper on entrepreneurship in Europe, partly in response
to this perception that European entrepreneurship is weak.
All Member States registered positive net enterprise growth in the second half  of  the  1990s,  between
0.2 % in Belgium and 6 % in Ireland. However national data on enterprise growth and decay are not yet
harmonised  and  should  be  interpreted  with  caution.  See  Benchmarking  Enterprise  Policy:  Results
from the 2002 Scoreboard, op. cit., footnote 4, chapter IV.
Female entrepreneurship, measured by female participation in self-employment, has stagnated at around
28 %  in  the  EU  compared  to  35 %  in  the  US.  It  is  higher  in  the  EU  service  sector  (34 %)  but
significantly less in industry (11 %).

4

                                                
Further,  ensuring  the  successful  transfer  of  SMEs  when  their  entrepreneurs  reach
retirement  age  has  become  an  important  policy  concern.  Around  600 000  SMEs
change  ownership  each  year,  with  retirement  of  the  entrepreneur  as  a  major  cause,
and  this  affects  around  2.5 million  jobs.  Progress  has  been  made  in  implementing
existing  recommendations9  intended  to  smooth  transfer.  Most  Member  States  now
have  policies  on  taxation  of  inheritance  and  gifts  to  help  keep  the  capital  of
businesses  intact  on  transfer10.  There  has  also  been  wide  progress  in  facilitating
business transfers to third parties11. Less general, although still valuable, have been
measures to make it easier to transfer such businesses to employees, to provide relief
for  entrepreneurs  who  take  early  retirement  and  to  provide  tax  relief  for
entrepreneurs who sell a business and reinvest the proceeds in another SME.

2.2.

Framework conditions

All  Member  States  have  made  progress  in  recent  years  in  simplifying  the
administrative  and  regulatory  framework  to  make  it  more  supportive  of  risk-taking
and  enterprise  development.  As  a  result,  relatively  few  SMEs  now  report
administrative regulations as a major constraint12. However, firms that did so showed
significantly  weaker  employment  growth,  so  there  can  be  no  complacency  on  this
matter.  There  are  important  variations  in  administrative  burdens  on  recruitment
between  Member  States,  for  example,  suggesting  that  there  is  plenty  of  room  for
progress13.

An area of administrative simplification where recent progress has been substantial is
that  of company registration.  Time and cost involved in setting up a  new  company
has  been  substantially  reduced  in  most  Member  States.  Nevertheless,  despite
successful  benchmarking14,  there  is  still  a  substantial  dispersion  of  performance,
suggesting that more gains can still be made from best practice.

Increasingly  in  recent  years  Member  States  have  been  applying  impact  assessment
measures to assure a high-quality regulatory environment. This instrument involves
consultative  processes  that  help  policy  makers  identify  at  an  early  stage  the  likely
effects of legislative proposals, including possible disproportionate compliance costs
for enterprises or new and burdensome administrative procedures15.

9

10

11

12

13

14

15

See  specifically  Commission  “Recommendation  on  the  Transfer  of  Small  and  Medium-size
Enterprises”,  OJ  L  385,  31.12.1994;  and  Commission  “Communication  on  the  Transfer  of  Small  and
Medium-size Enterprises”, OJ C 93, 28.03.1998.
Progress in all Member States except Luxembourg and Portugal.
Progress in all except in Greece, France, Italy, Portugal and Finland.
See  “Highlights  from  the  2001  Survey”,  Observatory  of  European  SMEs,  2002/1,  European
Commission, which found only between 10 % and 13 % of SMEs reporting administrative regulations
as a major constraint.
See  “Recruitment  of  Employees:  Administrative  Burdens  on  SMEs  in  Europe”,  Observatory
of  European  SMEs,  European  Commission,  forthcoming.  The  average  number  of  administrative
procedures  for  the  first  employee  is  3.3,  while  for  an  additional  employee  it  is  2.1.  The  Netherlands,
Belgium, France and Spain stand out for the high number of procedures, followed by Greece, Ireland
and Austria.
“Benchmarking the Administration of Business Start-ups”, Best Project, op. cit., footnote 5. Setting up
a  private  limited  company  can  cost  over  EUR  2,000  in  Austria  but  virtually  nothing  in  the  UK.
This takes 35 days in Italy, but only 6 in the UK. Time and costs to register an individual enterprise are
less, but still widely spread.
See for details “Business Impact Assessment in Member States”, Best Project, op. cit., footnote 5.

5

                                                
Another area of administrative simplification concerns support for SME access to the
new economy. Evidence suggests that European SMEs are not making  wide  use of
ICT  and  e-business  opportunities.  However,  its  growth  is  being  facilitated  by
initiatives  in  the  areas  of  e-business  framework  policies,  in  raising  awareness  and
ICT skills, in promoting SME support networks and in promoting Internet platforms
for SMEs16.

The  Member  States  have  successfully  implemented  over  twenty  New  Approach
directives related to technical harmonization in a large number of areas, establishing
a transparent regulatory framework for enterprises working and ensuring for them a
single market in Europe17. By supporting future legislative initiatives to be based on
New  Approach  principles,  these  benefits  can  be  extended  to  more  enterprises.
Together  with  the  Commission  the  Member  States  have  also  contributed  to  the
development  of  European,  moving  away  from  national,  standards.  There  is  now  a
comprehensive range of European standards that help enterprises to access the whole
European market, communicate easily and make their products compatible. Because
European standards contribute to enterprise competitiveness, Member States  should
continue  to  support  their  national  standards  bodies  to  work  within  European
standardization.

Significant progress has also been made in e-government. Not only does this reduce
the cost of interaction with the public sector but it will also increase the pressure for
simpler and user-friendlier procedures18. Indeed, in recent months all Member States
have  recorded  progress  in  improving  the  quality  of  public  services  aimed  at
businesses. Yet there is much more still to be done.

Finally, in the area of market performance and openness, data show strong intra-EU
trade  links.  State  aid  is  a  factor  distorting  market  performance  but  a  majority  of
Member States has taken steps towards fulfilling the pledge made in the Stockholm
European Council to demonstrate a downward trend of state aid in GDP by 2003 and
to redirect aid towards horizontal objectives19.

2.3.

Financial resources

The availability of finance is critical for the establishment and growth of enterprises
in  general.  For  enterprises  with  innovative  potential,  but  without  collateral,  it  is  a
particular  problem.  It  was  identified  as  the  third  most  important  constraint  to
business  performance  in  the  EU,  especially  for  small  firms,  although  medium  size
firms also reported problems20.

16

17

18

19

20

See  “Benchmarking  National  and  Regional  Policies  in  Support  of  e-Business  for  SMEs”,  op.  cit.,
footnote 5.
The New Approach was initiated in 1985; see “Council Resolution of 7 May 1985 on a new approach
to technical harmonisation and standards”, OJ EC C 136/1 of 4 June 1985.
See  “Benchmarking  National  and  Regional  Policies  in  Support  of  e-Business  for  SMEs”,  op.  cit.,
footnote 5. This study examined eight  measures applying to enterprises  that  are  available  on-line  and
concluded that the best results were in public services involving simple procedures in the fields of VAT,
corporate  taxation  and  customs  declarations,  while  those  concerned  with  building  and  environmental
permits received the lowest scores.
State  aid  issues  are  reviewed  more  thoroughly  in  the  European  Commission’s  “Internal  Market
Scoreboard”; see, for example, the latest issue no. 10, May 2002.
See  “Highlights  from  the  2001  Survey”,  Observatory  of  European  SMEs,  op.  cit.,  footnote  12;  over
20 % of respondents in the UK and around 20 % in Ireland and Italy reported difficulties in this area.

6

                                                
The availability of venture capital is often singled out as playing a critical role in the
new  economy  renaissance  of  the  US  during  the  1990s.  Weak  venture  capital
traditions in the EU have been associated with weak innovation and have been seen
as  obstacles  to  Europe’s  productivity  growth21.  It  is  in  venture  capital  that  the
differences  between  Europe  and  the  US  are  most  marked.  The  US  venture  capital
industry began to develop in the 1950s, in Europe (with the exception of the UK) in
the 1990s, so the EU has a lot of ground to recover. As a result, although the amount
of European venture  capital  has  been  increasing  in  recent  years, it remains  in  most
Member  States  significantly  less  than  that  raised  in  the  US22.  However,  recent
adverse  economic and financial developments, together with the announced closure
of the Neuer Markt at the end of the  year, have  weakened significantly the venture
capital market, raising questions about the prospects for the development of a large
and mature European venture capital market.

Faced  with  this  situation,  Member  States  have  sought  to  foster  the  development  of
the  venture  capital  market  through  structural  reform  and  to  support  early  stage
venture capital funding through instruments such as regional seed funds, tax breaks
or  incubator  support.  Later-stage  development  generally  appears  to  dominate  the
market although replacement and buy-outs play an important role too.

There is a strong positive relationship between the size of the venture capital market
and  the  share  of  venture  capital  in  institutional  investor  portfolios.  A  change  in
institutional behaviour could decisively strengthen the venture capital market.

Business angels networks are closely  associated with venture capital  funding.  They
are more prominent in the US than in Europe, but the number of networks in the EU
has risen from 63 in 1999 to 158 in 200223.

Further,  equity  finance  is  very  important  in  supporting  innovative  enterprises.  A
pattern  has  emerged,  with  Member  States  with  high  innovation  potential  (as
suggested by business expenditure in research and development, BERD, as a proxy)
being  those  with  high  equity  market  capitalisation24.  A  second  group  with  an
intermediate  innovation  record  is  characterised  by  lower  levels  of  BERD  and
correspondingly  lower  stock  market  capitalisation25.  A  third  group  is  characterised
by lower levels of BERD with intermediate capitalisation ratios26.

Institutional capital is an important element in equity markets. European institutional
investors have in general invested less of their portfolios in equity markets than their
American  counterparts,  who  place  some  50 %  of  their  portfolios  in  equities27.

21

22

23

24

25

26

27

These  issues  have  been  addressed  in  detail  in  the  2001  and  2002  editions  of  the  European
Competitiveness Report, Commission Staff Working Paper, SEC(2001) 1705 of 29 October 2001 and
SEC(2002) 528 of 21.05.2002, respectively.
In 2000, for example, a peak year for venture capital funding, it represented 0.9 % of GDP in the US,
compared  to  0.4 %  in  the  Netherlands  and  the  UK,  and  0.2 %  of  GDP  in  Sweden,  the  three  Member
States with the largest venture capital markets in the EU.
See “Business Angels”, op. cit., footnote 5, Final Report, European Commission, Enterprise Directorate
General, September 2002.
Sweden and Finland, less so the UK and the Netherlands, together with the US.
Germany, Denmark, Belgium and France.
Greece, Italy, Portugal and Spain.
As usual, there are exceptions among the Member States. Sweden and the UK institutions have placed
between 57 % and 67 % of their portfolios in equities.

7

                                                
Further, the equity share in institutional portfolios has tended to decline since 2001,
possibly as a result of the economic downturn.

Nonetheless  there  has  been  an  encouraging  development  in  the  growth  of  newly
listed  companies  on  Europe’s  stock  exchanges  in  recent  years.  Good  economic
prospects  certainly  helped  this,  but  it  is  also  a  benefit  flowing  from  advancing
financial  market  liberalisation  and  integration.  Further  progress  in  this  important
field will bring direct benefits to EU industry and innovation.

Stock  options  granted  to  employees  of  small,  growth-oriented  firms,  have  been  a
feature of the 1990s in the US. By giving employees a stake in future gains, they help
companies  retain  skilled  employees.  They  are  also  present  in  venture  capital
portfolios. Notwithstanding recent scandals in certain US corporations that have used
stock options, they remain a valid and innovative way to share in the future profits of
enterprises, but they obviously need to be designed in a proper manner.

Yet  framework  conditions  for  stock  options  are  poorly  defined  in  a  majority  of
Member  States.  The  resulting  legal  uncertainty  deters  their  use.  Further,  they  are
often  taxed  both  as  employment  income  and  as  capital  gains  on  subsequent  sale.
Effective  tax  rates  average  30 %  in  the  EU  compared  to  20 %  in  the  US28.  It  is
therefore hardly surprising that EU companies have made relatively little use of this
instrument29.

2.4.

Human resources

In  recent  years  a  particular  issue  of  skill  shortages  and  imbalances  has  become  a
policy concern30. High (but since 1997 generally decreasing levels of) unemployment
in  the  EU  has  coincided  with  labour  shortages  of  especially  high-skilled
individuals31. At the same time, the demand for medium– to high–skilled employees
in the high-growth period of the late 1990s  has been  the  most  marked  in  the EU32.
These shortages constitute a significant obstacle to economic growth. The problem is
not  just  one  of  inadequate  labour  mobility  or  of  insufficient  (lifetime)  income
differentials  across  professions,  but  also  one  of  a  mismatch  of  the  supply  of  skills
originating  in  the  educational  system  of  the  Member  States  and  of  the  demand  for
labour33.  In  recent  years,  firms  at  the  frontiers  of  technology  apparently  report

28

29

30

31

32

33

Rates  range  from  over  60 %  in  Denmark  to  a  little  over  10 %  in  the  UK;  the  Netherlands,  Ireland,
Greece,  France  and  Belgium  apply  a  special  rate;  see  “Taxation  of  Stock  Options  in  the  EU  and
the  US”,  study  prepared  by  Price  Waterhouse  Coopers  for  the  European  Commission,  2002;
the estimates are preliminary.
See “Highlights  from the 2001  Survey”,  op.  cit.,  footnote  12;  only  2 %  of  European  SMEs  use  stock
options  and  another  4 %  plan  to  do  so.  The  Commission  has  recently  set  out  ideas  for  encouraging
the financial participation of employees in “On a Framework for the Promotion of Employee Financial
Participation”, COM(2002) 364 final, 05 July 2002.
The 2001 European Competitiveness Report raised this issue and the 2002 Report addressed it in more
detail,  specifically  in  the  context  of  the  supply  of  the  educational  system  and  the  demand  for  skill-
disaggregated labour; see 2001 and 2002 European Competitiveness Report, op. cit., footnote 21.
The  2002  European  Competitiveness  Report  indicated  that,  while  secularly  increasing,  the  ratio
of average years of educational attainment of the working population in the EU in 1999 relative to the
US was around 89 % compared to 97 % in Japan; see 2002 European Competitiveness Report, op. cit.,
footnote 21, chapter II.
See Employment in Europe 2001, European Commission, 2001.
The  ECB  found  that  the  educational  mismatch  has  worsened  markedly  in  the  period  1992  to  2000;
see “Labour Market Mismatches in the Euro Area Countries”, ECB, March 2002.

8

                                                
shortages of scientists, in contrast to the US where such shortages have been less of a
problem.  Greater  awareness  of  the  possible  need  for  reforms  in  the  educational
systems  is  necessary  especially  in  times  of  technological  and  organisational
innovations; the Commission is contributing in a variety of ways to this area.

The  area  of  ICT  has  recorded  most  difficulties.  In  2002,  across  all  Member  States
between 7 % and 13 % of the demand for ICT skills could not be satisfied. Estimates
for 2005 suggest that, while there will be a generally balanced growth in demand for
and supply of ICT skills, the shortage will increase34. This signals an important need
for steps to be taken urgently to correct the underlying forces that give rise to such
labour  market  difficulties.  Shortages  are  also  appearing  in  some  areas  of  natural
sciences.

To become the (most) knowledge-based economy by 2010, the Member States must
accelerate their efforts in the development of human capital and, in particular, must
target  more  precisely  the  characteristics  of  the  educational  systems35.  Furthermore,
while  the  percentage  of  population  (aged  25-64 years)  participating  as  life-long
learners in education and training has been increasing, it still remains very low; even
though  some  Member  States  have  considerably  higher  scores  than  the  average,  the
majority scores rather poorly36. The evidence suggests the need for urgent action in
these areas.

Finally, while some Member States score very well in literacy and mathematics and
scientific  skills,  this  may  not  be  enough:  several  other  nations  (Japan,  Canada  and
Korea for example) score even better.

2.5.

Innovation, knowledge and ICT diffusion

A  record  of  weak  innovation  in  Europe  stands  parallel  to  and  mirrors  one  of  weak
diffusion  and  of  insufficient  exploitation  of  the  cumulativeness  of  knowledge37.
Innovation  is  highly  correlated  with  expenditure  on  R&D.  Recognising  this,  the
Commission  suggested  in  its  2002  Spring  Report  a  target  of  3 %  of  GDP  to  be
achieved  by  2010  and 
this
recommendation;  in  September  2002  the  Commission  adopted  a  corresponding

the  Barcelona  European  Council  adopted 

34

35

36

37

This  is  estimated  to  amount  to  1.7  million  employees  in  absolute  terms,  across  all  Member  States,
corresponding to between 8 % and 14 % of the demand, depending on the Member State.
Only  12 %  of  graduates  in  the  EU  in  1999  had  graduate  including  doctoral  (tertiary  type–A  and
advanced) studies compared to 27 %  in  the  US.  Among  the  Member  States  the  Netherlands  recorded
the highest score (20 %) while in several this ratio was a little over 5 %. Particularly low percentages
are also found in mathematics and computer science (4.4 %) but this is a better performance compared
to the US (3.2 %).
The  percent  of  population  participating  as  life-long  learners  in  education  and  training  has  risen  from
5.7 % to 8.4 % between 1996 and 2001; in 2001, in Sweden and the UK this was around 22 %, followed
by Finland at 19.3 %, Denmark at 17.8 % and the Netherlands at 16.3 %; in Greece it was the lowest at
1.4 %. Clearly, to promote social inclusion it is also necessary to increase the participation of medium–
and  low–skilded  workers  in  training  and  life–long  learning;  in  2001,  15.7 %  of  high  skilled,  9.8 %
of medium skilled and only 2.5 % of low skilled workers were involved in these activities.
These have been discussed extensively in the 2001 and 2002 editions of the European Competitiveness
Report, op. cit., footnote 21, and especially evidence on the former has been provided in, for example,
the  2001  Innovation  Scoreboard,  Commission  Staff  Working  Document,  SEC(2001)  1414,
14 September 2001.

9

                                                
Communication38.  Member  States  have,  without  exception,  acknowledged  the
importance of strengthening their performance in R&D and innovation and have all
committed themselves to contributing to the achievement of the 3 % of GDP target
for the EU39.

Innovation  capacity  has  become  a  critical  determinant  of  the  competitiveness  of
advanced  nations.  Recent  evidence  suggests  that  ten  of  the  fifteen  Member  States
belong  to  the  group  of  twenty  nations  with  the  highest  values  of  the  national
innovative capacity40. While these estimates are encouraging, these are still not good
enough and the conditions for realising sustained innovation performance have yet to
become firmly established in the EU.

Total  R&D  spending  is  considerably  higher  in  the  US  than  the  EU.  However,  the
picture  here  is  diverse  with  data  ranging  from  3.8 %  of  GDP  in  Sweden  to  a  little
over  0.5 %  of  GDP  in  Greece  and  Portugal41.  Clearly,  all  Member  States  need  to
improve  the  environment  for  R&D  spending  and,  acknowledging  its  importance,
several Member States have now adopted quantitative targets for this variable42.

The extent of ICT diffusion is an important signal of the modernisation process under
way  in  an  economy.  The  2001  European  Competitiveness  Report  addressed
extensively  the  role  of  ICT  in  productivity  growth  and  concluded  that  low  ICT
investment  and  diffusion  explain  in  part  the  slowdown  in  Europe’s  productivity
growth in recent years43. Reflecting the burst of the dot.com bubble in late 2001, ICT
expenditure as percent of GDP has declined both in the US and in the EU but in the
latter the slowdown has been less pronounced.

Access to the  Internet has  grown  substantially  in  recent  years  and  in  2001  close  to
90 % of EU enterprises had access to the Internet. While a large number of them had
their own web sites few could accept orders and conduct commercial transactions on
the  web.  Household  Internet  access  has  risen  as  well  between  2000  and  2001  in  a
majority  of Member States. Clearly,  government policies  aimed  at  modernising  the
national economic environment and making it possible for citizens to take advantage
of  the  benefits  from  electronic  transaction  are  reflected  in  this  growth.  Rapid
progress  has  taken  place  in  broadband  penetration,  with  twice  as  many  of  EU

38

39

40

41

42

43

See The Lisbon Strategy – Making Change Happen, op. cit., footnote 1; see also “More Research  for
Europe,  Towards  3 %  of  GDP”,  Communication  from  the  Commission,  COM(2002)  499  of
11  September  2002.  In  2000  the  share  of  R&D  in  GDP  was  1.9 %  in  Europe,  2.7 %  in  the  US  and
3 % in Japan.
Clearly,  the  individual  targets  set  by  each  Member  State  for  R&D  expenditure,  which  are  discussed
later, are set within the overall objective of achieving the EU target of 3 % of GDP R&D spending by
2010, of which 2/3 is undertaken by the private sector.
The evidence is based on an index aggregating the following four sub-indices: scientific and technical
personnel, innovation policy, cluster innovation environment and linkages; see M. Porter and S. Stern
(2002): “National Innovative Capacity”, chapter 2.2 in The Global Competitiveness Report 2001-2002,
World Economic Forum, Oxford University Press. The highest value of the index, with data for 2001,
is  registered  by  the  US  (30.3)  but  Finland  (29.1),  Germany  (27.2),  the  UK  (27.0),  the  Netherlands
(26.9), Sweden (26.9) and France 26.8) belong to the group of the first ten. Another four Member States
(Belgium, Ireland, Austria and Denmark) belong to the group of the next ten.
Greece’s  share  is  0.51 %  of  GDP  and  Portugal’s  0.7 %  of  GDP.  For  the  complete  R&D  data  see
Towards a European Research Area, Key Figures 2001, Special Edition, Indicators for Benchmarking
of National Research Policies, European Commission, figure 2.1.1.
See the discussion in section 3 below.
See 2001 European Competitiveness Report, op. cit., footnote 21, especially chapter III.

10

                                                
households (14 %) reporting  access  in 2001  compared  to  a  year  ago  and  should  be
further encouraged44.

The  percentage  of  purchases  and  sales  conducted  through  the  Internet  remains
extremely small45, reflecting among other things the nature of products but also the
legal  framework  where  electronic  commerce  is  taking  place.  Familiarity  and
traditions may also play an important role here.

The  2001  Enterprise  Policy  Scoreboard  reported  the  presence  of  a  negative
relationship  between  the  cost  of  residential  communication  and  household  Internet
penetration, while professional access was found to be less elastic to cost46. Access
costs  have  continued  to  decline  across  the  Member  States  thus  underpinning  the
increased penetration rates recorded. Nevertheless, significant differences remain. On
the basis of PPS prices, the dial-up cost of the Internet ranged from euro 20.7 PPS for
30 hours  of  use  per  month  in  Finland  to  euro 45.8  PPS  in  Belgium  and,  with  the
exception of Germany  and  the UK  in addition  to Finland,  the  cost was higher than
euro 30 PPS; in the US the corresponding cost was euro 20.4 PPS.

2.6.

Sustainable development

A new section related to sustainable development has been incorporated for the first
time  in  the  2002  Enterprise  Scoreboard.  Currently  only  indicators  referring  to
sustainable development in EU manufacturing have been developed. This is clearly
only one aspect of work on sustainable development and does not reflect the progress
that has been or still needs to be made in the other areas of sustainable development.

The  key  concept  in the area of manufacturing  is  that  of  eco-efficiency,  the  ratio  of
economic output to environmental pressure measured either by emission of pollutant
or  resources  used47.  In  the  years  1990-2000  industry  in  the  Member  States  has
recorded significant environmental gains across four indicators.

Industrial  eco-efficiency in the EU has improved  by  some  13 %  between  1990  and
2000,  broadly  in  line  with  the  growth  in  manufacturing  output.  Over  this  period,  a
major  improvement  in  eco-efficiency  of  energy  consumption  (by  over  25 %)  has
been recorded in  the  case  of  Ireland,  Luxembourg,  Sweden,  Germany,  Finland  and
France,  but  there  was  deterioration  in  the  case  of  Greece,  Portugal,  Spain  and  the
UK.  The  eco-efficiency  of  manufacturing  in  the  area  of  greenhouse  gas  emissions
has improved by almost 30 %, leading to a fall in industrial greenhouse emissions by
10 %,  despite  the  increase  in  industrial  output.  Improvements  were  recorded  in  a

44

45

46

47

Already in  five Member States (Denmark, Germany,  Luxembourg, the Netherlands and  Austria)  over
20 % of households have broadband Internet access.
In 2001 for the EU as a whole, Internet sales correspond to less than 2 % of the total while purchases
somewhat higher than 3 %. Danish, German, Irish, Austrian and Finnish enterprises executed between
4 % and 6 % of their purchases through the Internet.
See Benchmarking Enterprise Policy:  Results  from  the  2001  Scoreboard,  Commission  Staff  Working
Document, SEC(2001) 1900, 21 November 2001, indicators VII.5.b and VII.5.c.
See 2002 European Competitiveness Report, op. cit., footnote 21, chapter V for more details. Note that
care  is  required  in  interpreting  eco-efficiency  ratios  between  countries,  not  least  because  differences
between countries in the measured ratio may partly reflect differences in industrial structure, rather than
environmental performance. Nevertheless examining the pattern of changes in the eco-efficiencies over
longer time periods is a way of  giving some general indication of the direction of relative changes in
environmental performance.

11

                                                
majority  of  Member  States  especially  in  Luxembourg,  Ireland,  Finland  and
Germany;  there  were,  however,  some  small  reductions  in  Greece,  Portugal,  Spain
and Denmark.

Industrial emissions of acidifying gasses, responsible for acid rain, have declined by
some  48 %  during  the  ten  years  despite  the  rise  of  11 %  in  manufacturing  output
during  this  period.  All  Member  States  have  recorded  improvements  in  this  area,
which were especially marked in Germany, Finland, Ireland and Luxembourg while
smallest improvement occurred in Portugal.

Finally,  European  manufacturing  improved  its  eco-efficiency  of  ozone-precursors48
by over 40 % and overall emissions of such gases has fallen by some 27 % despite
the rise in manufacturing output during the 1990s. A majority of Member States has
recorded improvements in eco-efficiency, with the largest occurring in Luxembourg,
Ireland  and  the  Netherlands  and  amounting  to  over  100 %.  Small  deterioration  has
occurred in the case of Denmark, Greece and Portugal.

3.

QUANTITATIVE TARGETS IN ENTERPRISE POLICY

3.1.

Motivation

The  open  method  of  co-ordination  established  in  the  Lisbon  European  Council
encourages the Commission and the Member States to work together, learning from
best  practice  and  developing  better  policy  in  the  light  of  all  the  relevant
circumstances. In many cases, it involves agreeing targets for EU level performance
while not necessarily requiring individual Member States to set the same targets for
national  action.  The  Europe-wide  targets  have  generally  been  either  Community
targets  or  uniform  national  targets.  Targeting  in  enterprise  policy  offers  the
possibility  of  tailor-made  targets  adapted  to  the  unique  conditions  in  each  Member
State.  The  effectiveness  of  enterprise  policy  depends  not  just  on  the  ability  of
Member States to draw on the experience of policy initiatives in other Member States
or elsewhere, but on their determination to implement the measures. Benchmarking
exercises  are  serving  to  identify  the  areas  where  improvements  can  be  made.
Quantitative  targets  in  enterprise  policy  offer  an  instrument  to  help  achieve  the
follow  through  by  committing  each  Member  States  while  respecting  fully  the
principle of subsidiarity.

Targets have been used already in other areas of EU policy, most famously for entry
into EMU. But Member States also use targets elsewhere– such as for inflation, for
spending and revenue – suggesting that their benefits can be significant.

In the  case of enterprise policy, the Commission and the Member  States have been
invited by both the Industry Council and the European Council to make progress in
implementing  quantitative  targets49.  This  is  the  first  time  now  that  Commission
formally reports on the progress made in response to this invitation.

48

49

Ground-level ozone is a secondary pollutant formed by the oxidation of volatile organic compounds and
carbon monoxide in the presence of nitrogen oxides and sunlight. Ozone-precursor gases consist of non-
methane volatile compounds, nitrogen oxides, carbon monoxides and methane.
See  Council  Conclusions,  Energy/Industry,  Competitiveness  and  Enterprise  Policy-Conclusions,
14837/01  (Presse  452-6),  4/5  XII.2001;  Stockholm  European  Council  Presidency  Conclusions

12

                                                
3.2.

Member States’ targets in enterprise policy

As  a  result  of  co-operation  between  the  Commission  and  the  Member  States  a
common  framework  for  quantitative  targets  has  been  developed.  This  provides  for
Member  States  that  feel  ready  to  do  so  to  declare  targets  on  the  basis  of  agreed
indicators in the seven areas monitored in the Enterprise Scoreboard50:

– 

– 

– 

– 

– 

– 

– 

Entrepreneurship;

The regulatory and administrative environment;

Access to finance;

Access to human capital;

Innovation and knowledge diffusion;

Access to ICT;

Open and well-functioning markets.

A  number  of  Member  States  have  communicated  to  the  Commission  and  to  the
Member  States,  in  the  framework  of  discussions  within  a  Contact  Group,  their
intentions  with  reference  to  particular  objectives  or  targets  in  these  areas.  The
definition  and  choice  of  targets  by  the  Member  States  is,  of  course,  voluntary.  At
present,  every  monitoring  area  has  at  least  one  target  declared  by  a  Member  State.
Indeed, a number of Member States have declared several targets51.

Member  States  have  generally  found  it  easier  to  declare  targets  in  the  area  of
innovation  and  knowledge  diffusion  than  elsewhere.  There  may  be  all  sorts  of
reasons  for  this:  the  notion  that  lesser  improvements  are  needed  in  other  areas;
constitutional  difficulties  or  traditions;  perceptions  as  to  the  key  issues.  But  what
matters is that a significant start has been made. A framework has been established
and a first significant array of targets has been declared.

4.

CONCLUDING REMARKS

The  review  of  recent  enterprise-related  work  suggests  the  following  principal
conclusions:

24  March  2001  NR.  100/1/01;  Council  Meeting,  Industry/Energy,  2433  RO  Press:  164  NR.  9311/02
6 and 7 June 2002; and Council Conclusions SN 2340/3/02 REV 3, 21 May 2002; see also “Informal
Industry  Ministerial  in  Manchester  to  discuss  EU  Enterprise  Policy  Targets  Plan”,  IP/01/229,
19 February 2001 for a joint announcement made by Commissioners Bolkestein, Busquin and Liikanen
on this and related issues.
The list of these indicators, which are considered as suitable for targeting in the area of enterprise policy
and has also been accepted as basis for further work in the Contact Group, is at annex. Some relevant
discussion  about  the  Contact  Group  and  related  details  is  presented  in  “Quantitative  Targets  in
Enterprise  Policy  Steps  towards  the  Lisbon  Objectives”,  Commission  Staff  Working  Document,
SEC(2002) 1214, 07.11.2002.
The Netherlands (12), Ireland (11), Sweden (8), France (7) and Portugal (7) are the leaders.

50

51

13

                                                                                                                                                        
– 

There have been significant improvements in  several  areas  that determine the
environment  for  the  start-up  and  growth  of  enterprises.  Progress  continues  to
take place and, compared to recent years, the prospects for enterprise growth in
the EU are improving significantly.

–  Member States are taking steps to modernise their economies and to implement
structural reforms that will ultimately bring the EU closer to the objectives of
the  Lisbon  strategy.  While  these  steps  may  be  concentrated  in  small  and
apparently  special  areas  of  policy  importance,  the  cumulative  effect  of  these
improvements  is  creating  an  environment  where  a  more  vigorous  enterprise
culture  can  flourish.  Together  with  reforms  in  product,  labour  and  capital
markets, these will create an environment favourable to enterprise growth.

– 

– 

Clearly,  progress  cannot  stop  here.  It  is  not  only  the  EU  that  is  making
progress.  The  resurgence of  productivity  abroad  and  the  EU’s  late  start  leave
no room for complacency. It is not enough to be doing better. The Lisbon goal
is to become the best. That is still some way off.

Appropriately  chosen  quantitative  targets  are  an  instrument  that  could  help
strengthen the drive towards a better enterprise environment in the EU, not just
by focusing the effort for change, but by signalling progress really achieved. In
turn, this feeds business confidence, as vital an element in success as any.

A set of targets declared by Member States within the scope of the open method of
co-ordination is attached at annex. This is an important declaration of intent. What is
now  needed  is  implementation  of  policies  that  will  ensure  the  realisation  of  these
targets.

Therefore,  the Commission proposes that,  in  the  framework  of  the  open  method  of
co-ordination, the Member States and the Commission continue work to:

(1) 

(2) 

Further develop the array of declared targets, adapting them where necessary;

Take appropriate steps to develop policies to ensure that the targets are met,
taking account of best practice;

(3)  Monitor and report on progress achieved.

The  Commission  invites  the  Council  to  endorse  this  approach.  With  quantitative
targets,  enterprise  policy  in  the  Member  States  and  in  the  EU  could  take  a  precise
and  concrete  dimension.  Fulfilment  of  the  targets  proposed  by  the  Member  States
will bring the EU closer to realising the broader objectives about our economy  and
society set in the Lisbon strategy.

14

ANNEX I:

QUANTITATIVE TARGETS DECLARED BY MEMBER STATES IN THE CONTACT GROUP

Member State

Table 1: Quantitative Targets in Enterprise Policy
Indicator

Current position (year)

Target (year)

A. Entrepreneurship

France
France
Ireland

New enterprises
New enterprises created through public incubators
Real birth rates of high potential start ups

Netherlands

Churning of enterprises (shut down and new enterprises)

Number of real start-ups
Number of self-employed
Number of people considering to go into business

170,000 per year
550
48 (1999)

144.175 (1998-2001)
357.600

B. Regulatory and Administrative Environment

Administrative burdens
Administrative burdens
Share of federal government services on-line
Time to set up a company
Share of government services on-line
Impact assessment of primary legislation
Administrative burdens
Time to set up a company
Time to obtain an industry license
Share of government services on-line
Impact assessment
Impact assessment
Share of government services on-line

84 days

0 % (2001)

10 – 25 days
About 150 days

100 % (2001)

Sweden
Sweden
UK

Belgium
Denmark
Germany
Spain
Spain
Ireland
Netherlands
Portugal
Portugal
Portugal
Sweden
UK
UK

220,000 per year (2007)
865 (2005)
520 (accumulated) (2006)
Higher 
than 
France and UK
150.000 (2003-2006)
380.000 (2006)
Raise

in  Belgium,  Germany,

Reduction by 25 %
Reduction by 25 % (2010)
100 % (2005)
Reduction by 50 % = 42 days (2006)
40 % (2006)
100 % (2006)
Reduction by 25 %
Reduction by 50 % (2003)
Reduction by 50 % = 75 days (2003)
100 % (2005)
100 % (2001-2010)
100 % (2005)
100 % (2005)

France

Investment in risk capital

Euro 487 million

Euro 1 billion (2010)

C. Access to finance

15

Ireland
Ireland

Number of newly listed companies
Venture capital investment (% GDP)

1 per year (2002)
0,22 % (2000)

2-3 per year (2006)
0,80 % (2006)

Denmark
Germany
Netherlands
Sweden
Sweden
Sweden
Sweden
Sweden
UK

UK

Austria
Denmark
Denmark
Germany
Spain
Spain
France
France
Ireland
Ireland
Ireland
Ireland
Netherlands
Netherlands

D. Human capital

Number of young people completing training and education skills
Share of youth beginning studies, percent of total
Participation in education and training
The number of new research graduates
Number of new graduated engineers and architects
Number of new graduated teachers
Math/science/technology teachers, percent of total new teachers
Number of new university graduates with Master’s degrees
Participation in higher education of those aged 18-30 years
Number  of  adults  in  the  labour  force  lacking  NVQ2  or  equivalent
qualifications

8750 (1997-2000)
14812 (1997-2000)
6158 (2001)
23 %
21053 (1997-2000)

E. Innovation and knowledge diffusion

GERD % of GDP
BERD % of GDP
GERD % of GDP
GERD % of GDP
BERD % of GDP
Patents per mio. people
GERD % of GDP
BERD % of GDP
Patents applied for per mio. people
Patents granted per mio. people
GERD % of GDP
BERD % of GDP
GERD % of GDP
BERD % of GDP

1,9 %
0,7 %
2 %
2,4 % (2000)
0,5 % (2000)
13 (2000)
2,19 %
1,37 %
340,3 (2001)
95,3 (2001)
0,88 % (1999)
0,33 % (1999)
Marginally greater than EU average
Marginally greater than EU average

Netherlands

R&D expenditure on ICT by enterprises and research institutions

Netherlands

Innovative enterprises

16

Increase
40 % (2010)
To be in the leading group (2010)
9170 (2001-2004)
16500 (2001-2004)
28000 (2001-2004)
33 % (2001-2004)
25100 (2001-2004)
Raise towards 50 % (2010)

Reduce by at least 40 % (2010)

2,5 % (2005)
1 % (2010)
3 % (2010)
3 % (2010)
0,84 % (2003)
26 (2006), 42 (2010)
3 % (2010)
2 % (2010)
350 (2006)
100 (2006)
2 % (2006)
0,80 % (2006)
Among the leading EU nations (2010)
Higher than EU average (2005)
Higher  growth  than  other  technology
areas
In the leading group (2010)

Netherlands
Netherlands
Netherlands
Netherlands
Portugal
Finland

Germany
Germany
Spain
Spain
France
France
Ireland
Ireland
Ireland
Netherlands
Portugal
Portugal
Portugal

Co-operating innovative enterprises
Innovative enterprises co-operating with research
Share in EPO patents
Profits from innovations
GERD % of GDP
GERD % of GDP

4th in EU

0,8 % (2002)
3,3 % (2000)

F. Access to ICT

SMEs with e-strategy, percent of total
Internet users, percent of population
Internet access of enterprises (with more than ten employees)
Access to broadband
SME access to internet, percent of total
Household access to broadband, in percent
Enterprise access to internet, percent of total
Business telephone charges, relative to OECD countries
Household access to broadband
SMEs with on-line transactions, percent of total
Portuguese information on the Internet
Number of people with basic ICT skills
Households access to PCs

92 % (2001)
2,07 % (2002)
65 %
5 %
90 % (2000)
Top quartile (2002)
0 % (2000)

In the leading group (2010)
In the leading group (2010)
In the leading group (2010)
In the leading group (2010)
1 % (2003)
3,5 % (2004)

20 % (2005)
70 % (2005)
97 % (2006), 99 % (2010)
13,75 % (2006), 22 % (2010)
90 % (2006)
25 % (2006)
95 % (2006)
Top decile (2006)
5 % (2006)
66 % (2005)
times 10 (2006)
2 mio. (2006)
50 % (2003)

Denmark

Markets where competitive conditions are problematic

Reduced by 50 % (2010)

G. Open and well-functioning markets

17

ANNEX II:

LIST OF INDICATORS

The  list  of  indicators,  considered  as  suitable  for  targeting  in  the  area  of  enterprise
policy, which has also been accepted as basis for further work in the Contact Group,
as well as the corresponding section where they are discussed in the 2002 Enterprise
Policy Scoreboard, is shown in the Table.

Enterprise policy area Indicator

Entrepreneurship

Regulatory and
administrative
environment

Access to finance

Human capital

Innovation and
knowledge diffusion

Access to ICT

Real birth rates of enterprises
Company registration – time and
costs
Business incubators per million
employed
Use of Business Impact Assessment
(Index)
e-Government (information, emails,
forms)
Number of newly listed companies
relative to listed companies
Early/later stage venture capital
investments, % of GDP
Share of population (aged 25-64
years) with tertiary education
Number of new graduates in science,
engineering and business
administration
Participation (25-64) in education
and training
Business expenditure on R&D
Public financing of business R&D
Number of patents per million
employees
Internet access in enterprises
Broadband penetration
(in percentage of households)
Communications costs (business
telephone charges)

Open and well-
functioning markets

State aid

Reference to the
2002 Enterprise
Scoreboard
5.1
4.4

Comment

To develop further

To develop further

3-year average

To develop further

4.5

2.2

1.2

1.4

5.1

5.2

5.3

6.1
6.2

6.3

7.2

7.4

7.5

3.2

18