Opinion of the European Economic and Social Committee on the "Green Paper — Entrepreneurship in Europe" (COM(2003) 27 final)
Date: 2003-09-24
Institutions: European Economic and Social Committee
Subjects: EU industrial policy, entrepreneurship, single market

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Opinion of the European Economic and Social Committee on the ‘Green Paper — Entrepreneur-
ship in Europe’

(COM(2003) 27 final)

(2004/C 10/14)

On 21 January 2003, the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, on the ‘Green Paper
on Entrepreneurship in Europe’.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 3 September 2003. The rapporteur was
Mr Butters.

At its 402nd plenary session, held on 24 and 25 September 2003 (meeting of 24 September), the
European Economic and Social Committee adopted the following opinion by 38 votes to three, with two
abstentions.

SUMMARY OF THE OPINION

1.

Introduction

The introduction explains the scope, objectives and context of
the opinion, clarifying in particular the need to work within
the parameters set by the Green Paper in order to contribute,
as constructively as possible,
to the ongoing process of
developing a long-term European policy framework that will
encourage entrepreneurial activity.

— Brief general comments on the Entrepreneurship Green
Paper as a whole are provided in section 2, before raising
two points that are central to this area: promoting the
spirit of entrepreneurship and creating an environment
that encourages entrepreneurial activity, which are dis-
cussed in greater detail in sections 3 and 4.

— Section 5 considers some key elements raised in the

Entrepreneurship Green Paper:

— whether we need to distinguish between different

types of entrepreneurship;

— whether entrepreneurship is for everyone;

— the contribution of entrepreneurship to society;

— the factors that motivate entrepreneurs;

— whether the US model of entrepreneurship is the

right model for Europe;

— the impact of entrepreneurs on society.

— Section 6 of the opinion identifies a number of policy
priorities for encouraging entrepreneurial activity and
makes certain concrete recommendations for action and
a number of suggestions to be taken on board in the
follow-up to the Entrepreneurship Green Paper.

— Section 7 provides brief responses from the Committee
to the ten questions raised in the Entrepreneurship Green
Paper and the conclusions are drawn in section 8.

1.1.
This opinion seeks to contribute to an ongoing process
of understanding and stimulating entrepreneurship. The Lisbon
Agenda and subsequent European Charter for Small Enterprises
underlined the importance of entrepreneurial activity to sus-
tainable development in Europe and the need to engender a
policy environment conducive to promoting enterprise.

1.2.
Entrepreneurship is an all-embracing cultural concept,
a common characteristic of which is a mindset, and is
manifested in many ways. This opinion focuses on the
economic articulation of entrepreneurship,
in the form of
running a business, and the factors that influence people’s
engagement in this activity.

1.3.
The Committee’s opinion will work within the par-
ameters of the Green Paper, its framework and agenda. It will
explore and expand upon the points contained therein and
will contribute positively with recommendations for the
Action Plan (AP) requested by Heads of State and Government
at the 2003 EU Spring Council.

2. General comments

2.1.
The Committee welcomes the Entrepreneurship Green
Paper and congratulates the European Commission for this
excellent piece of work. It considers that the Entrepreneurship
Green Paper provides an extremely useful inventory of the
main challenges faced by future and existing business owner-
managers in Europe, offering a valuable overview of the
reasons why entrepreneurial activity is relatively low in Europe.

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By stimulating a lively debate within the business and
2.2.
policy-making communities, the Commission’s Entrepreneur-
ship Green Paper should be considered a successful initiative
in its own right. However, it will only have a lasting impact if
the Commission now builds on these foundations by setting
out an ambitious and far-reaching plan for concrete actions
and then goes on to ensure implementation of the AP by
policy-makers and stakeholders at local, regional, national and
EU levels.

route to employment and social mobility for some with
otherwise limited opportunities in the labour market, such as
low academic achievers and economic migrants. Yet, society
and the labour market is gradually demonstrating that business
ownership can offer opportunities for all. The AP should
consider how entrepreneurship can be portrayed to people of
all abilities, as a positive option, rather than a response to
limited labour-market opportunities.

2.2.1.
Beyond this, the Committee draws attention to the
vital importance of defining policy based on the needs of
entrepreneurs. This requires the input of the whole SME
community, through the involvement of the widest possible
range of organised business representative organisations, at all
levels of policy-making and from the preliminary stages in the
decision-making process.

2.2.2.
The Committee feels that a distinction should be
made between a policy to promote entrepreneurship, aimed at
bringing enterprise culture to all, and a business support policy
comprising a range of legislative and operational measures
designed to reduce the constraints and stimulate business
development. It recommends that the AP divide its content
into two distinct areas:

— promoting the spirit of entrepreneurship: this action
should be aimed at developing a culture of entrepreneur-
‘restoring’ and improving the reputation of the
ship,
entrepreneur among potential entrepreneurs in schools,
universities and family circles, as well as in public
and private services, especially financial institutions and
European and Member State administrations;

— creating an environment that encourages entrepreneurial
activity:
this is aimed at defining a programme of
operational measures to encourage business activity in
response to the ten questions in the Green Paper.

3. Promoting the spirit of entrepreneurship

As the Green Paper states, entrepreneurship is a
3.1.
mindset. This mindset cannot be taught, but can be stimulated.
A combination of a rounded education and exposure to
entrepreneurship, from an early age, can help by encouraging
children and young adults to think and behave more entre-
preneurially and, ultimately, to consider business ownership
as a career option.

The AP must pay careful attention to introducing the
3.2.
concept of entrepreneurship to boys and girls from school age,
as these formative years are an important socialisation window
for potential owner-managers of the future. For a long time,
business ownership has conventionally been regarded as a

3.3.
Celebrating entrepreneurship is an important part of
improving the public’s perception of entrepreneurs in Europe.
However, changing cultural attitudes to entrepreneurship is
notoriously difficult and a long-term process. The use of role
models and extolling the virtues of entrepreneurship can help,
but practical policies to create the right environment for
enterprise to flourish will be more effective in the long run
and should be the focus of policy-makers’ attention.

3.3.1.
The Committee notes that the curricula taught in
public and private universities and colleges tend to focus on
big business to the detriment of the study of small business.
At present, the term ‘business’ is considered primarily in terms
of capital assets and stock-market value. However, a clearer
understanding of small and micro-businesses requires an
appreciation of the distinctive social aspects of the enterprise
culture, as well as conventional financial considerations.

The Committee calls for economic and scientific studies to be
carried out on models specific to small businesses. This will
allow the promotional campaigns scheduled for the AP to
convey the reality of business on a human scale, enhancing
the image of those who run such businesses; the micro-
enterprise must be perceived by the public as important and
just as much a symbol of professional success, both for its
manager and for its employees.

3.4.
As a precursor to the celebration of entrepreneurship,
the AP needs to appreciate what constitutes an enterprise and
what running a business involves. Running an enterprise
involves the marshalling of a range of resources, including
human, financial and physical (buildings and equipment) for
the purpose of producing goods and services to meet a market
need. Business owners have to manage relations with suppliers,
staff, customers and external stakeholders, including represen-
tative bodies as well as government agencies. In doing so,
business owners also have to maintain their own motivation,
as well as that of their staff. Only an appreciation of these roles
and processes will help form the foundation for the celebration
of entrepreneurship.

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The promotion of the culture of entrepreneurship may
3.5.
involve engagement by a range of public and private sector
organisations. For public institutions, it is important that an
appreciation of entrepreneurship is embedded in the activities
and policies of all agencies, such as the European Commission
and national, regional and local administrations. The spirit
of entrepreneurship and concept of enterprise need to be
understood better by, and inculcated in, administrators in
these institutions, as well as in politicians, and the plethora of
other private and public institutions that either initiate, oversee
or implement policies that impact upon future and existing
entrepreneurs’ businesses.

3.6.
The role of intermediaries is also key to the successful
promotion of an entrepreneurial culture. Many business
membership organisations are keen to cooperate more closely
with policy-makers and are far better placed than public sector
agencies to reach their constituents through promotional
initiatives.

The media play a key role in conveying the spirit of
3.7.
entrepreneurship and an understanding of how business
works. However, there tends to be an over-emphasis on big
business and multinationals. The action plan should define
strategies to highlight the role of the entrepreneur and thus to
put across the image of small businesses and micro-enterprises
and to enhance that of specialised trades and traditional and
craft activities.

4. Creating an environment that encourages entrepre-

neurial activity

There is a certain feeling of disillusionment within the
4.1.
SME community about EU-initiated policy aimed at helping
entrepreneurs. Indeed, there is a commonly held belief that the
way the EU institutions can best help SMEs is to do less in
certain areas. The SME community perceives the EU to be the
source of much onerous legislation whilst, on the other hand,
finding it difficult to grasp and appreciate measures designed
to promote business ownership emanating from the EU.

4.2.
Clearly, more can be done to stimulate entrepreneur-
ship and promote business ownership. Yet, it is important that
a more ‘bottom-up’ approach is adopted than has been done
in the past, drawing on the wealth of experience and practice
and in collaboration with businesses and their stakeholders,
rather than the ‘top-down’ imposition of initiatives, policies
and laws.

4.3.
Given the proliferation of enterprise initiatives at
European level and the disillusionment of the SME community,
the AP demonstrates continuity with
it

is essential

that

previous and ongoing activities and relevance to achieving the
goals of the Lisbon Agenda. In particular, continuity from the
2000 European Charter for Small Enterprises is needed
and the AP must seek to complement and incorporate
recommendations on achieving the Charter’s 10 lines for
action (1).

5. The main points covered in the Entrepreneurship

Green Paper

5.1.
Discussions over the definition of entrepreneurship
will never end and there is no right or wrong answer. However,
the definition of entrepreneurship in II.A.iii (p. 6) and the tone
of the Green Paper, in general, fail to consider properly the
existence of what might be described as ‘routine entrepreneur-
ship’. Not all entrepreneurs blend risk-taking, creativity and/or
innovation with sound management, as the Green Paper’s
definition of entrepreneurship implies. Moreover, the Com-
mittee would argue that any definition of entrepreneurship
equally needs to incorporate the concept of reward and
recognise the broad range of rewards that motivate entre-
preneurs.

5.2.
There are many more examples of business owners
seeking stability and survival than there are of the kind of
entrepreneurs to which the Green Paper refers. SMEs are run
by people with varying aspirations for their enterprise, with
different talents and management capabilities, are based in
prosperous and deprived locations and in a variety of industry
sectors — some traditional, some cutting edge. The follow-up
to the Entrepreneurship Green Paper need not be prescriptive
about what constitutes entrepreneurship and should instead
seek to embrace all types of entrepreneur, running all types of
business and based in different local and sectoral contexts.

5.3.
It is important to underline that entrepreneurship is
not the solution to all of society’s problems and that not
everyone is potentially a successful entrepreneur. The follow-
up to this paper must remember this fact. The AP should
consequently focus on identifying, encouraging and support-
ing those who want to become successful entrepreneurs, rather
than trying to convince people to become entrepreneurs
against
indeed compelling
judgement, or
employees and the unemployed people to become self-
employed.

their better

(1) In its own-initiative opinion on the European Charter for Small
Enterprises, the European Economic and Social Committee called
on the Commission to ‘initiate a genuine multiannual operational
plan of action at Community level and within Member States with
a view to ensuring the effective and efficient implementation of
the Charter’ OJ C 48, 21.2.2002.

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The statistics used by the Commission may suggest
5.4.
that job satisfaction among the self-employed is higher than
among the employed, but a growing proportion of self-
employed workers brings with it new challenges for European
level, self-employment can also
society. On an individual
present problems and, as with entrepreneurship itself, self-
employment is not the right choice for everyone. These issues
need to be considered in the AP.

5.5.
The Green Paper rightly, in B.iii, underlines the fact
that people become entrepreneurs for a variety of reasons, and
financial gain is certainly not always the priority. Other
motivating factors include independence, job satisfaction, the
application of personal competences and skills and the ability
to manage one’s own work-life balance. Thus, although
lowering taxes is an obvious way to increase entrepreneurs’
rewards, the importance of self-realisation must also be a key
consideration when looking at the risk/reward balance.

5.6.
The notion of a single ‘model for entrepreneurship’
implies that policy-makers are seeking to develop a prescriptive
and homogenised view of the entrepreneur across Europe.
This would, in all likelihood, reinforce the commonly held
view within the SME community that policy-makers have little
appreciation of the reality of entrepreneurship and the diversity
of practice it embraces.

Section C of

the Green Paper looks at

5.7.
the EU’s
entrepreneurial gaps and potential and, indirectly through its
choice of data, raises a fundamental question: should the EU
aspire to a US approach to encouraging entrepreneurship?
The data given indicates that compared with the USA,
proportionately fewer Europeans are involved in start-ups and
significantly more prefer employment to self-employment.
Many observers believe that the European social model is one
of the key reasons why more people in Europe prefer to be
employees. The follow-up to the Green Paper needs to consider
a) whether this data is itself sufficient for benchmarking EU
activity between nation states and with the rest of the world b)
this preference for employment over self-
the effect of
employment, c) whether it is directly related to the lack of
entrepreneurial dynamism in Europe and d) whether the
solutions are acceptable to European society.

5.7.1.
The Committee calls for the development, collection
and application of more systematic European benchmarking
data on small firms, using common definitions (1). This will

facilitate measurement of entrepreneurial activity throughout
Europe, between Member States and regions and over periods
of time and thereby providing a sound basis for policy-making.

5.8.
The Committee would argue that the pursuit of greater
entrepreneurial dynamism should concentrate on the quality
of entrepreneurs, not quantity. Encouraging more people to
become self-employed, or even involved in a business start-up
will not necessarily lead to an increase in successful, sustainable
entrepreneurial activity. The displacement effects of an over-
vigorous start-up policy on existing businesses need to be
considered and the AP should include more options for
existing businesses.

5.9.
All enterprises have an impact on society, positive and
intended and unintended. Given the vision for
negative,
European economic development outlined by EU Heads of
State at Lisbon in 2000 and the central role that SMEs play in
this process, it is important that the follow-up to the Green
Paper provides a more comprehensive view of entrepreneurs’
contribution to society (B.iv). Many SMEs may practice ‘respon-
sible entrepreneurship’, while many equally may not. An
appropriate non-legislative policy approach needs to be found
for promoting responsible entrepreneurship.

6. Policy priorities for encouraging entrepreneurship

The impact of policy-making on entrepreneurship is
6.1.
complex and difficult to measure with any precision. However,
the statement ‘Policy can contribute to boosting levels of
entrepreneurship’
is certainly valid and applies to policy-
making at all levels.

6.1.1.
The Committee recognises that views on the policy
priorities for encouraging entrepreneurship will vary according
to different stakeholder perspectives. The Commission’s Euro-
pean Employment Strategy (EES) highlights that
the key
contribution of entrepreneurial activity to competitiveness,
growth and the creation of sustainable and quality jobs relies
on a ‘broad policy mix’, encompassing many of the key areas
that the Committee would also highlight. This mix would
include a better regulatory and administrative framework,
access to a skilled labour force,
fostering more positive
attitudes towards entrepreneurship and managerial skills, a
supportive financial environment, well functioning product
and labour markets and favourable conditions for research and
innovation (2). The Committee urges the Commission to refer
closely to the EES when drafting the AP.

(1) Based on the May 2003 revised Commission definitions of micro,
small and medium-sized enterprises to be applied from 1.1.2005
[C(2003) 1422].

(2) COM(2003) 176 final.

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Beyond this, the Committee also underlines the
6.1.2.
importance of macro-economic stability in encouraging entre-
preneurial activity.

6.1.3.
The Committee highlights the need for the AP to
strike a balance between the often competing demands of
stakeholders when establishing policies for encouraging entre-
preneurship.

6.2. Better policy-making

As the previous reference to the EES clearly illustrates,
6.2.1.
policy options to support small firms must not be pigeon-
holed as ‘enterprise policy’. Rather they should be embedded,
horizontally, into all relevant policy-making areas (employ-
ment, taxation, environment, education, etc.) and, vertically, at
all policy-making levels. This will help ensure that the needs
of existing and future entrepreneurs are taken into account by
a far wider range of officials and politicians than is currently
the case at most administrative and political levels in Europe.

6.2.2.
For example, regional policy is an important mechan-
ism by which enterprise policy can be delivered. The Com-
mittee therefore calls on the Commission to include the
recommendations made in the Charter for Small Enterprises
within the operational priorities of the future Structural Funds
and cohesion policy.

6.2.3.
The Committee believes that an effective, relevant
and deliverable enterprise policy must embrace all of the
appropriate public and private institutions and agencies. The
engagement of national, regional and local institutions is a
pre-requisite to the effective development and delivery of
policy. For example, changes in the fiscal regime cannot be
delivered at European level and depend on Member States’
involvement.

6.2.4.
For policies to be implemented effectively, the Com-
mittee calls for the AP to identify clearly at which level policy
will be developed, delivered, monitored and evaluated. For
example, the promotion of entrepreneurship in schools may
be enshrined at the European level, but delivery can only
take place with the cooperation of local agencies, including
education authorities. This integrated approach will ensure the
delivery of policy and also reduce the development of initiatives
that are not tenable.

greater role, building on the appointment of an SME Envoy by
strengthening its influence across the Commission’s services.
The AP should include a clarification of how the role of the
DG Enterprise will be extended to have an even greater impact
across the Commission. How will DG Enterprise engage SME
representative organisations in policy-making systematically
and from a sufficiently early stage, to be able to contribute
constructively to the policy-making process?

6.2.6.
There is sometimes a considerable gap between
business-owner-managers and policy-makers. This gulf can
be bridged by consulting intermediary organisations and
representative bodies on all relevant policy initiatives through-
out the various stages of drafting. This will allow the SME sector
to embrace the policy process, influence policy outcomes and
better appreciate the efforts of the policy-makers.

6.2.7.
The European Economic and Social Committee has
done much valuable work in the area of better regulation and
simplification in the past, most recently in the form of its
opinion on Simplification (1). This is an area that needs to
continue to improve if policy-making is to be more sympath-
etic to entrepreneurs whilst simultaneously taking into account
the perspectives and interests of other stakeholders. Greater
efforts should be made to engage entrepreneurs directly in the
decision-making process at a much earlier stage.
Impact
assessments need to be carried out thoroughly, based on wide
consultations, systematically taking into account alternative
solutions and,
regulation,
explaining why a non-regulatory option has not been chosen.

in the case of proposals for

Beyond the policy areas identified above, there are of course
innumerable more specific ways that public policy can help
entrepreneurs, some of which are given particular attention in
the next section.

6.3.

Educating potential entrepreneurs

6.3.1.
The Committee reiterates the need to introduce the
concept of entrepreneurship from an early age through
exposing children to positive examples. Beyond this, teaching
across a broad range of subjects in schools and higher
education institutes needs to encourage the development of
entrepreneurial skills and to bring students into contact with
entrepreneurs.

6.3.2.
The education of potential entrepreneurs should also
recognise that people can become entrepreneurs later in life
too and not therefore, concentrate exclusively on the young.

6.2.5. Moving further away from a ring-fenced enterprise
policy approach at EU level does not mean that the Com-
mission’s Directorate-General (DG) for Enterprise has any less
of a role to play. On the contrary, DG Enterprise should play a

(1) OJ C 133, 6.6.2003.

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6.4.

Setting up a new business

However, entrepreneurial dynamism is as much about the
daily management of the business as the innovativeness and
vision of the entrepreneur.

6.4.1.
The Paper refers to the length of time it takes to set
up a new business and policy-makers across Europe have
recently made considerable efforts to reduce this time. How-
ever, the barriers to entrepreneurship before and after the
setting-up process are far more significant and this obsession
with speedy company registration is misplaced. Indeed, this
focus on making company registration quick and inexpensive
may inadvertently encourage a ‘create and destroy’ approach
and, in so doing, curtail the appropriate period of research,
planning, capacity-building and overall consideration before
an entrepreneur embarks on a new business venture.

6.5. Business support

Good business support can certainly contribute to
6.5.1.
more successful enterprises. However, any such support that
is perceived as a state-run service could be flawed, as the public
sector is simply not regarded as a natural source of advice by
some entrepreneurs. Entrepreneurs requiring support will turn
initially to their trusted network of advisers. Evidence shows
that this comprises, firstly, of other entrepreneurs, then their
regular advisers (accountants, banks, solicitors, etc.), sectoral
organisations and professional bodies and only then will they
turn to other sources. This underlines the important role that
mentors can play in supporting entrepreneurs and policies
should therefore build on natural support providers.

6.5.2.
It is also important that EU business support policy
is linked strongly with Member State institutions and policies
to allow successful and efficient delivery and secure help to
achieve intended objectives.

6.5.3.
The AP should consider means by which entrepre-
neurs might be encouraged to ask for and use business support.

6.5.4.
The AP should contain measures to ensure the
provision of support and advice throughout the process of
business formation, namely pre, during and post-launch,
which will greatly improve the chances of an enterprise’s
survival and prosperity.

6.6.

Fostering capacity and skills

6.6.2.
Successful entrepreneurship is more likely if owner-
managers are supported by mentors and other key individuals
that complement their skills.

Promoting apprenticeship and work-linked training
6.6.3.
and encouraging transnational mobility among apprentices
are important ways of passing on entrepreneurship. The
Committee asks that the Action Plan considers the establish-
ment of Community-funded exchange programmes
for
apprentices and entrepreneurs.

6.7.

Informal training

6.7.1.
There is an assumption that smaller firms do not
train their workforces adequately and that business owners
themselves sometimes lack the skills necessary to undertake
their duties. Evidence shows that the bulk of training in smaller
firms, for both owners and employees, is ad hoc, informal and
geared to the specific needs of individuals to perform their
jobs. Much of this activity is not recognised by government
and its training providers in assessing the type and volume of
training undertaken in small firms (1). On the other hand,
public sector-led training schemes for small firms are often
qualifications-based, involve time away from the enterprise
and are structured. As a result,
the take-up on training
initiatives by business owners and their staff is often lower
than expected.

6.7.2.
In developing a more relevant training policy for
small firms, the AP needs to consider this current mismatch
between the provision of training and the needs of businesses
especially in relation to training content and delivery format.
Policy may seek to bridge this gap by moving more towards
how entrepreneurs and their staff train and encouraging a
more flexible mode of delivery. Business owners will also
require convincing of the benefits of training for individuals in
their business and the performance of their enterprise.

6.6.1.
Fostering capacity and skills is essential to increasing
entrepreneurial dynamism in Europe. The personal attributes
the owner-manager are central to successful business.
of

(1) See for example, Kitching J. and Blackburn R. (2003) ‘Measuring
Training in Small Firms’, Small Business Council, London, March.

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6.8. Business transfer and succession planning

6.8.1.
Careful succession planning and owner-manager exit
strategies are fundamental to good and sustainable entrepre-
neurship. Resources therefore need to be devoted to consider-
ing which policies might be employed to alleviate the ‘suc-
cession crisis’, whereby there are plenty of businesses for sale,
but not enough buyers.

6.8.2.
One possibility is to strengthen the market place to
make the process of business transfer more transparent. Other
possibilities include an examination of the legal and tax
systems in the business-transfer process, but
taking into
account existing workers’ rights in this area, already in force at
EU-level (1).

6.9. Access to finance

6.9.1.
Research shows that small firms tend to finance start-
up and growth from their own resources. When they do go
outside for finance, this tends to be with the banks. Take-up of
equity funding, including informal and formal venture capital,
has not been as widespread as originally envisaged and this
may be a result of market deficiencies as well as entrepreneurs’
reluctance to dilute ownership. In general, the current low
interest rates in Europe have provided entrepreneurs with
relatively cheap debt finance for their activities.

6.9.2.
Surveys vary in their emphasis on finance as a barrier
to enterprise. Currently, access to finance for start-up, business
development and growth appears to be a major problem for
specific types of economic activity, for businesses in certain
locations and for entrepreneurs having specific characteristics.
The equity gap up to €1.5m in particular needs addressing.

6.9.3.
There has been a growing interest in the role of
micro-credit as a means of stimulating new businesses. The
significance of this form of finance in the overall context of
funding for SMEs is minor. Nonetheless, evidence to date
suggests that it may be most relevant for specific types of
business owners and for enterprises in less-favoured regions.
For example, micro-credit may fill a significant gap in financing
the activities of micro-businesses in the new Member States.
The Committee suggests that the AP considers the relevance
of micro-credit, the circumstances under which it can be an
effective mechanism for promoting business ownership and
how it can best be promoted.

The AP should consider further the specific types of
6.9.4.
businesses experiencing finance problems. The current market
for finance is complex and crowded. Attempts should be made
to bolster existing channels of finance and initiatives for
financing entrepreneurs should build on existing intermediari-
es’ efforts rather than create new structures.

The Committee feels that the solutions proposed in
6.9.5.
the Green Paper, such as micro-loans and risk capital or
business angels, are only partially suited to the needs of
small businesses. The Commission needs to consider the
development of professional and mutual guarantee funds so as
to facilitate access to credits for the development of the
business. The Committee calls for the European Investment
Fund to reinforce the financial instruments for guaranteeing
loans to SMEs by gearing them more appropriately to the
needs of small and micro enterprises and craft businesses,
particularly for investment associated with standardisation,
the environment and the acquisition of production and
communication technologies.

6.10.

Public procurement

6.10.1.
Amongst the most obvious, efficient and direct
measures that can be taken by public authorities to help
entrepreneurs is to enhance small business access to public
contracts. However, in the same way that small businesses feel
a natural affinity to other small businesses (2), it seems that
public administrations, when allocating contracts, gravitate
more to big businesses that are run in a similar way. This
important cultural barrier, caused by both public authority and
SME attitudes, needs to be surmounted if public procurement is
to be taken up by small firms.

6.10.2.
The need to open up public procurement to smaller
firms may present many challenges. The criteria for winning
contracts from the public sector make it difficult for small
firms because of the large size of contracts, the bundling
together of various services within contracts and the bureau-
cratic procedures linked to bidding for tenders. More recently,
state attempts to ensure that contractors are environmentally
compliant may further militate against opening up public
sector procurement to small firms. The AP needs to consider
these issues in more detail.

(1) European Commission (2002): Final Report of the Expert Group
on the Transfer of Small and Medium-sized Enterprises, May.

(2) The Committee would challenge the assertion in III.B.vi of the
Green Paper that ‘it is natural for firms of all sizes to work
together’.

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6.11. Tax burdens

6.11.1.
Informal investment in enterprises could be greatly
encouraged through a more suitable tax regime. This could
build upon tax incentives for the re-investment of profits by
enterprises. This has the advantage of efficiency of delivery
and fits with the investment preferences of business owner-
managers. It also avoids the dilution of ownership associated
with external investment whilst acting as a major incentive for
business growth.

Business owner-managers will always call for lower
6.11.2.
taxes, but they would also appreciate a lower tax-adminis-
tration burden. The AP should recommend an analysis of
different approaches to support for owner-managers in paying
various taxes. (1)

It is important that the AP recognises the variety of
6.13.3.
enterprises and the experience of those with social objectives.
It is also important that it stimulates support services to meet
their needs.

6.14.

Spin-off

6.14.1.
The AP should pay attention to the encouragement
of spin-off ventures from universities and higher educational
institutions. There is evidence to suggest that, although there
are examples of good practice in the EU, the potential for
developing spin-off has not yet been fully realised. Consider-
ation needs to be paid to the potential for this type of
enterprise, the processes it involves and if appropriate, relevant
policy options.

6.11.3.
This area is another example of the need to embed
enterprise policy into other policy spheres and at European,
national and regional levels.

6.15.

Stigma of failure

6.12.

Social protection for the self-employed

6.12.1.
the self-
The notion of social protection for
employed needs to be considered carefully and the correct
balance found between risk and protection. There is no
obvious contradiction in asking for both lower taxes and
increased social protection. Nonetheless, action is needed to
ensure that there is no discrimination against the self-employed
and owner-managers in the provision of social protection.

6.13.

Entrepreneurship and Social Exclusion

Entrepreneurship touches on all areas of society
6.13.1.
and the Committee emphasises the need for the AP to
appreciate this diversity. In particular, social economy enter-
prises, including co-operatives, mutual societies, foundations
and associations embody entrepreneurial activities, but with
social objectives.

6.15.1.
The Committee welcomes the Green Paper’s recog-
nition of the need to address the damaging tendency in Europe
to stigmatise as a failure an owner-manager who has run a
business that has gone bankrupt. Potential
investors and
financial institutions, in particular, need to take a more positive
attitude to such business experience which, it can be argued, is
a valuable stage in an entrepreneur’s learning curve and often
leads to more successful future business ventures.

6.16. The Internal Market

6.16.1.
The European Single Market still remains a distant
concept to many SMEs, a high proportion of which will never
seek to exploit opportunities beyond their local or national
markets. Nonetheless, other smaller firms are well placed to
sell their goods and services across borders and in other
Member States. They could, in particular, be supported in this
process through the ongoing development of an infrastructure
that supports the movement of goods, people and information
and increased mutual recognition of professional qualifi-
cations.

6.17.

Enlargement

6.13.2.
Business ownership is, equally, one way in which
socially excluded groups can enter the employment market.
However, the Committee recognises that more research is
needed into understanding the contribution of business owner-
ship to overcoming social exclusion.

6.17.1.
As the Committee has stated in the past, SMEs are
‘a pillar of the transition process and make a large contribution
to GNP and employment’ in the new Member States. SMEs in
these countries face exaggerated difficulties in several areas,
notably in terms of access to finance, training, support and
advice (2).

(1) One example is the Belgian approach of using intermediary
agencies to administer employees’ income tax and social security.

(2) OJ C 193, 10.7.2001. Opinion on ‘The employment and social
situation in the central and eastern European applicant States’.

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It is important that the AP considers the effects of
6.17.2.
enlargement on SMEs in the EU15 and in the new member
states. It is also important that the AP considers how existing
policy can accommodate the diversity of needs of small firms
throughout an enlarged EU.

6.17.3.
As previously mentioned, accessing appropriate
forms and levels of finance in these states presents particular
problems and requires particular solutions.

7. Brief response to the ten points raised in the Green

Paper

7.1.
The above paragraphs spell out in detail the Com-
mittee’s opinion on the Green Paper. In briefly answering the
ten questions raised in the Green Paper, however, below are
some of the most important messages in this opinion, together
with suggestions for several key areas for action.

1) What should be the key objectives for an agenda for entrepreneur-
ship in the European Union and how should these relate to
for
other political ambitions? How can we build a model
entrepreneurship in an enlarged Europe?

A European approach to stimulating increased entrepreneurial
activity needs to focus on how to provide the best environment
for existing SMEs through a more favourable risk-reward
balance. In so doing, this will also reduce many of the most
significant deterrents to the creation of new enterprises.

The approach must recognise the broad range of key objectives,
notably: a stable economy, a better regulatory and administrat-
ive framework,
fostering more positive attitudes towards
entrepreneurship and managerial skills, a supportive financial
environment, well functioning labour markets and access to a
skilled labour force and favourable conditions for research and
innovation.

Just as enterprises impact on many areas of society, these
objectives encompass and relate closely to several major EU
policy areas and political ambitions. It is therefore essential
that the views of a wide variety of stakeholders be taken into
account in developing a European approach to stimulating
increased entrepreneurial activity.

firms. However, this should not detract from the long-term
structural finance problems faced by small firms. Improve-
ments should focus on four elements: continuity in the flow
of
finance (at all stages of a business’ development), a
variety of financing options, transparent criteria for enterprises
applying for financial support and fiscal measures to encourage
business development and investment.

One of the main challenges is that entrepreneurs are notori-
ously reluctant to dilute ownership through taking up equity
finance, venture capital and other external sources of finance.
in enterprises could be encouraged
Informal
through a more favourable tax regime, which is both efficient
and preferable to business owner-managers. It is important
that those seeking external finance are encouraged to be
‘investment ready’.

investment

Solutions need to be tailored to different local and regional
requirements, with businesses in several of the new EU member
states in particular facing unique challenges.

Public authorities should identify existing successful solutions,
informal or formal, and consider how they might be developed
or duplicated.

3) Which factors most hinder growth ((lack of) mutual recognition
and EU rules or their (non-) implementation at national level,
national tax provisions or the situation on the labour markets)?
What actions are best
suited to supporting growth and
internationalisation (trade missions, market analyses, clustering
and networking, information and consultancy services)?

The Committee would highlight macro-economic instability,
negative attitudes towards entrepreneurship, poorly func-
tioning labour markets and the burden of excessive and poorly
drafted regulation, as the main hindrances to growth.

2) How can we improve the availability of finance (tax measures,
public-private partnerships, stronger balance sheets, guarantees)
and what alternatives to bank loans should be promoted
(business angel finance, leasing, factoring and micro-loans from
non-bank lenders)? How can entrepreneurs be supported in
obtaining external finance?

In the current economic and financial climate, surveys suggest
that in general there is no lack of finance available to small

Public authorities at local, regional, national and European
level could contribute to the growth of many younger, smaller
businesses very directly by allowing them improved access to
public contracts. The Committee feels that securing a skilled
labour force and meeting small businesses’ recruitment require-
ments are priority European issues, and asks that the requisite
economic and political measures be put forward in the Action
Plan.

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4) To ensure high quality businesses, what training and support
should be offered for a business start-up (basic training —
compulsory or voluntary, incubators, mentoring) and business
development (networks, courses, mentoring, distance learning,
e.g. e-learning)? Should there be services tailored to the needs
of specific groups (women, ethnic minorities) or businesses
(knowledge-based activities)? Should the quality of delivery
of support services be improved (using ICTs, professional
standards)?

6) What can EU Member States do to make the balance between
risk and reward more favourable to promoting entrepreneurship
(reducing the negative effects of bankruptcy, making more social
benefits available for entrepreneurs, reducing the tax burden
either in terms of administration or rates)?

Risk is an unavoidable factor in any entrepreneurial venture.
Nonetheless, the level of risk is perceived by many in Europe
as being disproportionate to the potential rewards.

Support needs to be provided to meet the diversity of needs of
business owners and their enterprises. This involves the
segmenting of support, for example, according to business
sector, the stage in their lifecycle and their geographical
location. The Committee acknowledges the challenge of getting
established businesses to take advantage of support offered,
but would argue that this could be improved by tailoring the
services more to their needs and supplying them in a flexible
manner.

In line with the European social model, the Committee calls
for measures to be taken to ensure that business owner-
managers are not discriminated against in terms of social
protection. This will have the additional advantage of making
the decision to switch from being an employee to becoming
self-employed or an employer less daunting, which is currently
a major obstacle to entrepreneurial activity.

Support targeted specifically at start-ups needs to commence
at the very earliest conceptual stages and be maintained
throughout the preparation, launch and early growth phases.

EU support initiatives and those at national, regional and local
level need to be better joined up.

Lower rates of corporate taxation would contribute to an
increase in the financial rewards to be gained from entreprene-
urship and motivate more people to become entrepreneurs.
However, the AP must also recognise the wide diversity of
reward sought by entrepreneurs and be aware that, while
financial gain clearly remains a significant motivation, there
are numerous other factors that inspire people to become
entrepreneurs.

5) Are the obstacles and incentives for business development and
growth in the European Union similar for entrepreneurs in the
Candidate Countries, and does the forthcoming enlargement call
for specific measures in the Candidate Countries?

Potential and existing business owner-managers undoubtedly
face particular problems in the EU’s new member states. The
development of more systematic European benchmarking data
on small firms would greatly assist comparative analyses of
SME performance and experiences in the EU and the new
member states and thereby help identify areas of policy for
development, delivery and evaluation.

7) How might more prospective entrepreneurs be encouraged to
consider taking over rather than starting a new firm (buyers and
sellers’ databases or marketplaces, special training for family-
owned businesses, management or employee buy-outs)?

The process of business transfer must be made more trans-
parent and better publicised to potential entrepreneurs as an
effective and efficient way of entering business.

The Commission has undertaken some valuable work in
identifying best practice in supporting business transfers. The
Committee expects the Action Plan to build on this and for
Member States to deliver tangible improvements, particularly
in relation to the legal and fiscal aspects of business transfer.

The Committee recommends that policy-makers look more
closely at the experiences of entrepreneurs in the new member
states; having started and run businesses in such a rapidly
changing political and economic environment, they are well-
placed to provide valuable input into the development of a
more entrepreneur-friendly environment across Europe.

The Committee urges attention to developing a clearer under-
standing of the process of business closure and society’s
response to owner-managers’
involved in closures. This
involves raising intelligence on the causes of closure, stake-
holders’ attitudes to those having closed a business and the

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treatment of these owner-managers by financiers, the legal
system and other support bodies. The AP should seek to
stimulate a better understanding of those involved in business
exit by society, government and support agencies.

The use of role models, media campaigns and raising the
profile of entrepreneurs can certainly help, but the Committee
would argue that representative organisations and other inter-
mediary organisations are better placed than public authorities
to fulfil this need.

8) How can spin-offs be made more attractive (management buy-
outs, showcasing, specialised advice, tax or other provisions for
employees and their employers whilst starting a business)?

The Committee calls for a review of existing approaches to
spin-off in different Member States and consideration of how
the potential for developing this process might be realised.

9) How can education support the development of the awareness
and skills necessary for developing an entrepreneurial mindset
and skills (entrepreneurship training as part of a school’s
curriculum, getting entrepreneurs into the classroom, apprentice-
ships for students to work with experienced entrepreneurs, more
entrepreneurial training in universities, more MBA programmes,
matching entrepreneurial training with public research pro-
grammes)?

As already discussed in the main part of this opinion, an
entrepreneurial mindset cannot be taught, but can be stimu-
lated. Currently, too few younger people consider starting and
running their own business as a realistic and appealing career
option.

More young people need to be exposed to the concept of
entrepreneurship from an early age. There also needs to be
greater concentration on entrepreneurship in teaching later
in the education process. This should cross-cut traditional
academic disciplines rather than be merely circumscribed to
business studies.

The Committee also underlines the fact that entrepreneurship
is not the right choice for everyone and any promotional
efforts should therefore focus more on changing public
perceptions rather than trying to encourage as many people as
possible to become entrepreneurs themselves.

8. Concluding remarks

8.1.
The Committee welcomes the Commission’s Green
Paper and the added urgency it has given to reflections on
European enterprise policy among officials, politicians and
stakeholders. In order for this process now to have a lasting
value, it is essential that an ambitious, yet carefully targeted,
AP is delivered efficiently.

It is clear that an improvement of the risk-reward
8.2.
balance for entrepreneurs is central to any increase in entre-
preneurial activity and must be a theme running through the
AP.

8.3.
The Committee stresses that public policy needs to be
targeted and should seek to tackle the most urgent matters
first if ultimately all objectives are to be realised. Within the
broad range of policy areas covered by the Green Paper, it is
therefore imperative that the AP prioritises specific policy
areas.

The Committee highlights several key areas for action

8.4.
that the AP should prioritise:

The potential for people to become entrepreneurs later in life
should also be encouraged.

— improving SMEs’ access to public contracts;

10) What could business organisations, the media and public
authorities do to promote entrepreneurship (role models, media
campaigns, open door days of
firms, award schemes for
entrepreneurs) and at what level (European, national, regional
or local)?

— a review of the fiscal regimes in which SMEs operate
across Europe, assessing taxation levels, administration
and collection;

— a clearer understanding of the process of business closure
and society’s response to owner-managers’ involved in
closures;

The most effective way to promote entrepreneurship is by
ensuring that the risk-reward balance is more favourable to
business owner-managers and practical policies to achieve this
objective should therefore be the priority for policy-makers.
This requires a better understanding of business among policy-
makers, more involvement of representative intermediary
organisations through early, systematic consultation and a
more cohesive approach to enterprise policy at all levels.

— action to promote the spirit of entrepreneurship and to
encourage people of all ages and backgrounds who
demonstrate the appropriate mindset to become entre-
preneurs;

— the development of more systematic benchmarking data
on SMEs in order to facilitate measurement and inform
appropriate policies.

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Better enterprise policy will only have a positive impact
8.5.
if it is also delivered effectively. Commensurate with each of
the priorities identified in the Action Plan, the Committee
therefore calls for a strategy for implementation. Each strategy
should set out policy targets and time-scales. Most importantly,
the priorities must state at which level responsibility for
delivery lies: EU, national, regional or local.

The Committee has frequently stressed that consul-
8.6.
tations with representative business organisations at various
levels, including those representing small businesses in line
with the Charter’s tenth recommendation, is the only way to
ensure that European measures are suited to the different kinds
of businesses and are able to be applied in practice. The
Committee asks that the organisations representing small
businesses continue to be directly involved in developing the
Action Plan through consultation in order to ensure that it —
and the practical measures that will follow — are effective.

8.7.
The Committee feels that, although real progress has
been made in implementing the European Charter for Small
Enterprises at Member State and Community levels, its impact
has been low. The Committee and the Parliament have asked
that the Charter be given legal status. Without this status, the
Charter will remain a mere political declaration of intent
devoid of any genuine, firm and concerted framework. The
Committee has pointed out in a number of opinions that the
Commission has most frequently used the Charter as grounds

Brussels, 24 September 2003.

for measures already planned for enterprises in general, not
for small businesses in particular.

8.8.
The Committee is pleased that the Spring Summit and
recent Competitiveness Councils have called for the Charter to
be applied more effectively. The Committee asks the Council
to improve implementation of the Charter by taking a formal
decision stipulating that:

— no legislative or quasi-legislative text with a potential
impact on SMEs may be submitted by the Commission
unless it has been subject
to consultation with the
organisations representing small businesses;

— impact assessments carried out by the Commission on
policy initiatives of potential significance to SMEs must
include a specific analysis relating to small and micro
enterprises;

— specific measures must be adopted in all Community
programmes that might potentially involve small busi-
nesses to assist them, in line with the Charter.

The Committee deplores the fact that the Convention
8.9.
proposals make no mention of enterprise, entrepreneurs or
entrepreneurship. It calls on the intergovernmental conference
to take up this policy and asks that the future European
constitution make reference to enterprises and small businesses
as opposed to merely industry in general. It also calls on
Member States to support this approach at the IGC.

The President

of the European Economic and Social Committee

Roger BRIESCH