Opinion of the European Economic and Social Committee on the Value and supply chain development in a European and global context
Date: 2007-04-25
Institutions: European Economic and Social Committee
Subjects: ESC opinion, business policy, competitiveness, globalisation, industrial policy, industrial restructuring, organisation of production

20.7.2007

EN

Official Journal of the European Union

C 168/1

III

(Preparatory Acts)

EUROPEAN ECONOMIC AND SOCIAL COMMITTEE

435th PLENARY SESSION HELD ON 25 AND 26 APRIL 2007

Opinion of the European Economic and Social Committee on the Value and supply chain develop-
ment in a European and global context

(2007/C 168/01)

On 6 July 2006 the European Economic and Social Committee, under Rule 29(2) of its Rules of Procedure,
decided to draw up an opinion on Value and supply chain development in a European and global context.

This decision was confirmed on 26 October 2006.

The Consultative Commission on Industrial Change, which was responsible for preparing the Committee's
work on the subject, adopted its opinion on 6 March 2007. The rapporteur was Mr van Iersel. The co-rap-
porteur was Mr Gibellieri.

At its 435th plenary session, held on 25 and 26 April 2007 (meeting of 25 April), the European Economic
and Social Committee adopted the following opinion by 130 votes to one, with four abstentions.

Part I — Conclusions and recommendations

companies — a term coined specifically for the purposes of this
opinion) (1).

The EESC requires the focused attention of decision-
A.
makers, together with interactive EU and national approaches,
on the concept of value and supply chain development or,
rather, that of networked industry and corporate interaction.

B.
These dynamic processes call for adaptation and adapt-
ability in running all aspects of companies, including product
definition and design, services, marketing and management of
financial
are often
outsourced. Networking means that companies are becoming
more and more interwoven worldwide and that manufacturing
and services are becoming ever more integrated.

and human resources. These

tasks

There are substantial differences in how companies are
C.
affected by this state of affairs, depending on their size, their
position in supply chains/networks and the sectors in which
they operate. Large multinational companies are generally well
placed in this networking process at all stages. By contrast, rela-
tively small and medium-sized suppliers, which intervene at
initial or intermediate stages (first, second, third … supplier),
often come up against obstacles, as set out in Part II. In this
document, they are referred to as IICs (initial and intermediate

D.
The overwhelming majority of jobs in the private sector
are in ‘less-than-large’ companies (see item C). The most innova-
tive and creative of these firms are of decisive importance in the
networked economy. The volume of this development is so
significant that it has not only a considerable impact at microe-
conomic level, but also in macroeconomic terms.

The EESC deems it necessary to improve the environment
E.
in which IICs operate. This opinion (see sections 3 and 4 in
Part
identifies the main challenges and puts forward a
number of policy proposals such as:

II)

— changing attitudes towards IICs;

(1) Accordingly, this opinion does not refer to small and medium -sized
enterprises as defined by the European Commission and most Member
States (‘SMEs’). The smaller companies referred to are suppliers that
may have several hundreds of employees, whilst medium-sized
suppliers may have as many as thousands of employees. Both of these
occupy an initial or intermediate position in value chains; in other
words, they are not the final — usually larger — producers/providers.
These companies are not defined in terms of measurable corporate data
(turnover, employment) but rather in terms of their position in the
value and supply chains. Suppliers of raw materials, tending to be large
companies, do not fall within the scope of this opinion although they
occupy the opening stage in production processes.

C 168/2

EN

Official Journal of the European Union

20.7.2007

— improving cooperation and mutual

trust amongst

these

companies;

— facilitating access to finance;

— reducing lock-in/lock-out effects;

— enforcing intellectual property rights;

— combating distortions of competition by the consistent,
more efficient and timely use of EU trade defence instru-
ments in order to avoid unfair imports;

— fostering skills and entrepreneurship;

— attracting qualified young people, especially in engineering

fields, to IICs;

— implementing the EU new-style industrial policy, including

its sectoral approach;

— making optimum use of FP7;

— enacting focused legislation and cutting red tape.

F.
The lack of an established definition of IICs makes it diffi-
cult to grasp their full significance in industrial change and
globalisation processes. Much more should be done to increase
the awareness of the part they play. If any/all of the proposals
under E are to be implemented, a number of prerequisites must
be met by companies themselves, others by policy makers and
yet more by a combination of the two. In any event, any such
implementation must be carried out in close cooperation with
all relevant stakeholders.
In the same vein, sectoral dialogue
committees operating at European and national levels should be
able to provide a credible shared orientation to policy makers.

Part II — Reasons

1. Introduction

Talk of

1.1
the advent of supply chains as a modern
phenomenon is misguided, as these have existed, in one form or
another, since the onset of organised production.

1.2
It is fair to note, however, that a keen interest in supply
chains has developed in the last few decades as an offshoot of
the fierce environment engendered by technological progress
and globalisation, and all the associated effects of
these on
markets. This topic is discussed extensively in countless publica-
tions and conferences around the world. Conventional
linear
sequencing is replaced by complex networks and integrated
manufacturing processes that often operate across multiple
companies and countries.

1.3
Nowadays, value and supply chains are increasingly inter-
woven and a genuinely global network now exists in many
areas. This justifies the use of the term ‘networks’ rather than
‘chains’, the former being undoubtedly more ephemeral than the
latter.

1.4
‘value
Networks of value creation (or, quite simply,
networks’) are themselves becoming more global and extensive.
Part of this process is a pan-European value network, enhanced
by the recent enlargement of the EU.

1.5
It is now realised that self-improvement is no longer
sufficient to meet companies' needs. The gains derived from
introspective programmes within companies, whilst helpful and
desirable, do not enable them to seize the opportunities posed
by a genuinely global system of doing business. Companies
must look outside of themselves if they are to survive in the
modern world.

1.6
As a result, network management and logistics have
gained pride of place, as companies spend increasing amounts
time and money on ensuring optimum returns through
of
streamlining and coordinating the ever more complicated web
of activities and services that are crucial to modern industrial
and commercial operations.

1.7
The nature of managerial responsibility and of the requi-
site skills of the workforce at all levels has changed drastically,
as decisions and attitudes are required that ensure optimum
levels of cooperation between buyers, suppliers and companies.

1.8
This is the state of the art for all categories of companies,
big, medium-sized and small, notwithstanding differences and
large
interaction between sectors.
multinational companies are better placed in the current
processes than IICs (2).

It appears, however,

that

1.9
In fact, two-thirds of private-sector employees in Europe
work for small and medium-sized companies. Many of these are
IICs. Accordingly, the well-being of this type of companies has
not only a microeconomic dimension, but also a macroeco-
nomic impact.

Although the subject of

1.10
this opinion is value and
supply chain development, the focus is primarily on innovative
(high-tech and high-quality) IICs with the potential to grow and
to operate internationally or those that are already present on
the global market (3).

1.11
Consequently, ways and means must be developed and
improved to create a healthy and sustainable environment for
this type of company to thrive and to make the most of their
potential.

Although supply chains/networks differ from one sector
1.12
to another,
it has been deemed appropriate to illustrate the
analysis carried out in this paper by focusing on one sector.
Appendix 2 of this opinion is therefore devoted to presenting a
case study in the automotive sector, which illustrates well some
of the issues at stake. This sector has been chosen because it is
conspicuous by the complexity of its supply chains/networks, as
shown in Appendix 1.

(2) See item C and footnote 1.
(3) See footnote 1.

20.7.2007

EN

Official Journal of the European Union

C 168/3

1.13
European companies are often choosing to outsource
one or several links in supply chains. Subsequently they import
the outcome thereof and add value to this before passing it on
in the value network. It is important to create the conditions
that ensure, throughout the process, the retention of the greatest
possible levels of profit, employment and know-how in Europe.
This is critical as know-how is increasingly becoming a factor of
production in its own right, which is driven across value-crea-
than simply
tion networks principally by borderless rather
cross-border finance (4).

1.14
This paper discusses the way the EU can better contri-
bute to maintaining important (value-added) parts of the supply
chain in Europe (5).

2. Value networks and industrial change

2.1
Industrial change is closely linked to value creation in the
network society, involving a significant role for services, such as
consulting, engineering, logistics or marketing. As vertical inte-
gration is reduced, the value creation in processing often shifts
to the supplier. This process becomes all the more multidimen-
sional as many of
these suppliers are also part of global
networks, which creates new interdependencies between
suppliers.

so-called BRIC nations

2.2
But what does the term ‘global’ really entail? Along with
the obvious role played by the USA and Japan, other world
regions have burst on to the scene over the last decades such as
the
India, China).
However, it should be pointed out that a two-tier membership
of this group exists, with the influence, particularly, of India and
China ‘dramatically shaking up the entire supply chain and
value-creation geoscape’ (6).

(Brazil, Russia,

2.3
Taking this into account, the EU must strengthen its
ability to compete by adding value, since purely cost-based
competition is not realistic and does not meet the Union's social
and sustainability values.

(4) See, along these lines, ‘The Three Rounds of Globalisation’, Ashutosh
Sheshabalaya (author), The Globalist, ed. Thursday 19 October 2006
(http://www.theglobalist.com/DBWeb/printStoryId.aspx?StoryId=5687).
(5) The scope of this opinion builds on earlier and ongoing opinions:
‘Services and European manufacturing industries: Interactions and
impacts on employment, competitiveness and productivity’ (CCMI/035
— CESE 1146/2006 — OJ C 318, 23.12.2006); ‘Innovation: Impact
on industrial change and the role of EIB’ (CCMI/038, ongoing); ‘The
territorial governance of industrial change: the role of the social part-
ners and the contribution of the Competitiveness and Innovation
Programme’
(CCMI/031 — CESE 1144/2006 — OJ C 318,
23.12.2006); ‘European logistics policy’ (TEN/240, CESE 210/2007,
not yet published in the OJ); ‘Proposal for a Regulation of the European
Parliament and of the Council on enhancing supply chain security —
transport of goods’
(TEN/249 — CESE 1580/2006, OJ C 325,
30.12.2006); ‘The large retail sector — trends and impacts on farmers
and consumers’
(NAT/262 — CESE 381/2005 — OJ C 255,
14.10.2005).
(6) See footnote 4.

2.4
Supply chains and networks are expanding, as industrial
processes are increasingly characterised by the fragmentation of
production lines and the specialisation of products by means of
technologies and customisation. Producers may standardise core
parts of products and, at the same time, leave room for customi-
sation. This is known as ‘mass customisation’.

2.5
These factors are stimulated by the interaction between
manufacturing industry and services (7), which leads to a blur-
ring of boundaries between sectors.
Information and
communication technologies (ICT) contribute to this state of
affairs by increasing interoperability and electronically-provided
services.

European firms should aim at creating supply networks
(a system of products and
targeting high value-added niche markets. Even

2.6
that process ‘extended products’
services)
factories themselves have become tradable complex products.

2.7
New technological cycles put an ever-greater emphasis
on human resources management at all levels and stresses the
lifelong learning as an essential component of
urgency of
competitiveness and employability.

The life cycle of products is shortening and changing
2.8
due to increasing interaction between services and manufac-
turing and as competition and (pre-competitive) cooperation in
many areas becomes global.

2.9
The structure of companies and the dynamic relationship
between companies are strongly influenced by these ongoing
changes. They constantly require adaptation and reorganisa-
tion. Specialisation of production processes, customisation, and
the development of manufacturing-related services increasingly
lead to outsourcing. Conversely, outsourcing can result
in
further specialisation and decentralisation.

2.10
Concentration through mergers and acquisitions is
occurring in parallel to these processes; the further one gets
away from the consumer, the more concentration and consoli-
dation take place.

2.11 Outsourcing and offshoring are taking place on a
global scale (8). Emerging economies in the new Member States
as well as in Asia are heavily involved in this process, each

(7) This topic has been dealt with extensively in the EESC opinion on
‘Services and European manufacturing industries: Interactions and
impacts
productivity’
and
(CCMI/035; CESE 1146/2006; OJ C 318, 23.12.2006).

competitiveness

employment,

on

(8) The CCMI has examined in depth company relocation, its scope and
effects, challenges and opportunities. The outcome of
this work
(opinion, information report, external study, conference) is presented
in a publication entitled ‘Relocation — Challenges and Opportu-
nities’. (ISBN: 92-830-0668-2;
http://www.eesc.europa.eu/documents/publications/index_en.asp?
culture=EN&id=141&details=1).

C 168/4

EN

Official Journal of the European Union

20.7.2007

offering its own cost advantages and its own market potential.
Asia is becoming the undisputed centre of low-cost production
and service provision. In China and India,
independent tech-
nology is being developed. Such processes may involve reloca-
tion of activities, with real job losses. This can create a feeling of
precariousness among employees. On the other hand, relocation
can also boost employment in companies in Europe (9).

2.12
Complicated developments arising from the countless
transactions, mergers and acquisitions taking place around the
world show that relocation, as a result of changes in produc-
tion and service lines is not a linear or unidirectional process.
Production costs make for only a part of the wider spectrum of
considerations. A number of other factors, which do not form
the subject-matter of this opinion, enter the equation. These
include complex logistics, high transport costs, environmental
concerns,
intellectual
regulatory frameworks, protection of
property and availability of raw materials as well as technology
and specific expertise. When all these considerations are taken
into account, it is sometimes beneficial for manufacturing and
services to return to Europe.

2.13
On the other hand, relocation may also concern inno-
vative activities, which would entail a loss of know-how for
Europe. Indeed, relocation can erode the capacity for innovation
of European industries in the long term if the knowledge and
research base in the EU is not reinforced. In this perspective the
growing number of engineers in India and China (45 % of all
engineers worldwide) is a telling point.

Furthermore, the fact that young highly qualified people
2.14
are leaving Europe or are displaying preference for working in
big companies (10) may result in a shortage of qualified people
in European IICs.

2.15
Large companies are often better placed than IICs to
deal with the above-mentioned challenges. In general, they have
relatively easy access to banks and capital markets, are involved
in all sorts of interaction and interoperability with other compa-
nies, have access to a broad range of markets and lead the way
in the process of outsourcing. However, they are less flexible
than smaller companies.

(9) The Offshoring Research Network, a transatlantic consortium of
6 research institutes, recently carried out its latest biennial study on the
developments in business relocations. The Rotterdam-based Erasmus
Strategic Renewal Centre conducted the research for Dutch companies
and concluded the following: ‘Transferring business activities had no
effect on the number of jobs at the Dutch company for 57 % of the
offshore implementations. In 39 % of the transfer activities it did mean
losses in employment however, and new jobs were created in the Neth-
erlands in only 4 % of the transfers. The research shows that an average
of 37.8 new jobs are created at the offshore location and an average of
3.5 are lost in the Netherlands. In other words, for every job which is
lost in the Netherlands, 10.8 new ones are created at the foreign loca-
tion’.

(10) See point 3.22.

3. Challenges for IICs

3.1
All indicators show that the process of fragmentation of
production, of customisation and of global networks will
continue. In most areas, large multinational companies act as
strategic leaders, but much of the work is done by an increasing
number of IICs.

3.2
Sometimes, IICs, despite high potential, out of necessity
adopt shorter-term approaches, have to work very hard to
access new markets, are frequently dependent on regular orders
from certain large customers and often do not have such good
access to capital markets. Moreover, they are highly exposed to
the risk of disruptions in the supply chain, associated with cost
reductions constantly demanded by the major clients. In the
following points, attention is drawn to the most significant chal-
lenges they encounter.

Finding the right mindset

3.3 Many improvements in the framework conditions of rela-
tively small and medium-sized companies simply depend on
attitudes in society and within companies themselves. In some
Member States and regions attitudes to this type of companies
are more positive than in others. Best practice exchange should
therefore be encouraged.

Mutual trust and cooperation amongst IICs

3.4
IICs must be encouraged to be open to cooperation and
to develop joint projects. Such cooperation and projects can
strengthen market positions and support suppliers' negotiations
with big customers. They could also help to offset the harmful
effects of being locked in or locked out.

Use of open source software (11) and free access to engi-
3.5
neering technologies and standards should be encouraged. Effec-
tive interfacing of IICs with research institutes is very important.

Clustering and networks around leading companies and
3.6
industrial zones in highly industrialised and high-tech environ-
ments can be very supportive to that end (12), as they will
encourage collaborative schemes between companies. Open

(11) See a recent study on the impact of open source software on the
ICT sector
the European
in the EU, published by MERIT for
Commission (DG ENTR) on 26.1.2007 (final report prepared on
20.11.2006):
http://ec.europa.eu/enterprise/ict/policy/doc/2006-11-20-flossim-
pact.pdf

(12) One example amongst many is the Eindhoven-Leuven region, where
interaction between universities and companies (centred on the
leading multinational company Philips) creates a beneficial environ-
ment for many high-tech SMEs.

20.7.2007

EN

Official Journal of the European Union

C 168/5

attitudes at neighbouring universities and technological
insti-
tutes, coupled with an appropriate approach by local and
regional authorities, are crucial.
‘Industrial zones’ around tech-
nological centres, scientific parks and universities can be very
beneficial to smaller companies.

3.11
The same can happen to suppliers who are locked out
because they do not have the tools needed to access additional
markets and to participate in other supply chains or networks.

Financial environment

Banks and financial stakeholders at

3.7
large should be
encouraged to adopt a more positive attitude to risk-taking.
Statistical evidence shows that in the US financial world there is
a more positive stance on risk that yields rich rewards. Open
access to the capital market in Europe is, in any event, necessary
— all the more so since in many cases the financial burden in
production processes tends to shift from large companies to
smaller suppliers.

3.8
In the automotive industry, for example, outsourcing has
created a financing problem for many companies, since both
and the pay-back period are
the development process
long, often involving a 3 to 5-year development period and a 5
to 7-year pay-back period. In the USA, this problem is partly
solved by easier access to private capital and, in many devel-
oping countries, by very generous tax rules and state aid. In this
area, conditions in Europe badly need to be improved, particu-
larly as concerns IICs and their needs to finance R&D for tech-
nological
innovation. Apart from measures by governments,
banks — including the European Investment Bank (EIB)
working in close cooperation with banking partners across
Europe — and private equity must also play their roles.

interest

The EESC notes with great

the orientations
3.9
contained in the Commission Communication entitled ‘Imple-
menting the Community Lisbon Programme: Financing SME
Growth — Adding European Value’ (13). A more convenient
bridge is needed between financial
institutions and private
equity, on the one hand, and SMEs, on the other.

Lock-in/lock-out effects

3.12
Large companies, however, do not want to be entirely
dependent on one supplier, although this sometimes happens.
In a number of cases, the major car manufacturers prefer single
suppliers, particularly as concerns research, development and
the end
production of new components and systems for
product. The normal scenario,
is that competition
between suppliers is fierce.

though,

3.13
In some instances, mainly in the automotive industry, it
has been noted that technical development costs have been
handed on to the supplier, which has also been asked to share
knowledge with competitors. This can be a problem, especially
for non-monopolistic suppliers.

Lock-in and lock-out effects tend to grow as

3.14
the
number of ICT applications increases, although the lock-in/lock-
out effect is certainly not an IT issue alone. Licences are often
difficult to acquire. The lack of standardisation and of interoper-
ability, on the one hand, and the scarce use of open-source tech-
nology, on the other, hamper investments.

3.15
Here again (see point 3.6), cooperation and clustering
can help to overcome shortcomings arising from the above-
mentioned processes, notably in mono-industrial regions.

Intellectual property rights (IPR)

Intellectual property is key (14). Protection of IPR poses
3.16
a particular challenge to IICs, many of which are small and
medium-sized companies. The problems encountered by these
firms in financing R&D generally have already been alluded to
and things should not be made worse by the creation of a situa-
tion that results in their competitors reaping the rewards.

Dependence on major customers is a cause for concern,
3.10
particularly in mono-industrial regions, when IICs are locked in
or out of supply chains. When cooperating with large compa-
nies, the supplier will often have to make use of the required
technology. Supplying one big client can lock a supplier into
using one specific technology.

(13) COM(2006) 349 final, which is being examined by the Committee in
the framework of its own-initiative opinion entitled ‘Business poten-
tial, especially of SMEs (Lisbon Strategy)’ (INT/324, ongoing). This
opinion is part of the work undertaken in response to a request by the
European Council of 23-24 March 2006 to the EESC (point 12 of the
Presidency Conclusions) to draw up a summary report in support of
the Partnership for growth and employment in early 2008.

Patents play a vital role. The EESC has expressed in
3.17
numerous opinions
‘the repeated
its deep concern about
setbacks over the introduction of the Community patent’, which
have dented the credibility of the EU research policy and have
failed to encourage ‘innovative research geared to improving
competitiveness’ (15). Failure to address this important
issue
makes the protection of
innovation very expensive (notably
when compared to the USA and Japan), indeed sometimes unaf-
fordable for IICs.

(14) See point 16 of the Annex 2, which refers to IPR abuse/counterfeiting

in automotive supplies.

(15) See opinions CESE 89/2007 (not yet published in the OJ), point 1.1.4,

and CESE 729/2006 (OJ C 195, 18.8.2006), point 3.3.4.

C 168/6

EN

Official Journal of the European Union

20.7.2007

3.18
The problem of costly IPR protection procedures is
further compounded by a level of ineffectiveness often brought
about by a lack of enforcement. In trade relations with China,
counterfeiting should be addressed as a matter of priority. As a
result of this counterfeiting problem, many high-tech companies
are unwilling to increase their investments in China or even
withdraw them (16).

3.24
In addition to the direct correlation between efficient
education systems and quality of employee skills, the impor-
tance of the education/innovation/research triangle cannot be
overestimated. In this connection, the new EU initiative ‘Regions
for economic change’ can be most helpful as it emphasises the
regional dimension and impact of research, technological skills
and economic clusters (18).

3.19
counterfeiting in automotive components.

Appendix 2 illustrates the gravity of

IPR abuse and

3.25
In order to take full advantage of the opportunities
offered to IICs through improving skills and entrepreneurship,
the importance of the territorial dimension cannot be disre-
garded. Globalisation, which implies an ever-increasing interna-
tionalisation, brings with it a requirement for the corresponding
reinforcement of regional proximity. This could be brought
about through:

Seizing new opportunities — the importance of skills and entrepre-
neurship

— regional strategic programmes;

— territorial social dialogue;

3.20
Specialised IICs have their own assets. New opportu-
nities arise in the switch from large-scale operations to decentra-
lisation and tailor-made approaches, providing that the corres-
ponding skills are also developed.

3.21
A point of concern is that across Europe the majority
of young graduates prefer to work for large companies. There is
an obvious need to encourage people to work in IICs by
improving career prospects. The problem for IICs is especially
acute when the overall number of graduates is insufficient, e.g.
in engineering disciplines.

— bottom-up initiatives and regional partnerships driven by

regional specialties;

— mobility of researchers between companies and universities.

Entrepreneurship is very important and so are creativity
3.26
and flexibility,
i.e. the capacity to adapt quickly to changing
circumstances. Small and medium-sized companies have often a
greater capacity to respond to challenges than large ones. These
factors may well help the former to profit from the fragmenta-
tion and customisation of networks (19).

So-called ‘dual-training

3.22
and
working — currently employed in some Member States such as
Germany, Austria and Luxembourg (‘duale Ausbildung’) may
prove very valuable for IICs.

systems’ — learning

3.23
Enhancing employees' qualification and skills is essen-
tial; people themselves as well as business can contribute to
rising standards (17).
Improvement of the workplace environ-
in this regard. Modern concepts of
ment can be beneficial
human resources management, including the systematic review
of educational and training schemes, may help to create jobs.
These points have to be addressed in the framework of sectoral
approaches, including dialogue between social partners.

(16) NRC Handelsblad, a leading Dutch newspaper, 4 November 2006.
(17) ‘Knowledge must be identified, acquired, stored, developed and
shared to increase the value and effectiveness of a firm. This means
that companies must develop into “learning organisations” and
workplaces must be changed into a continuous working-learning
environment’. To this purpose, the KNOWMOVE Project ‘has devel-
oped and pilot-tested knowledge management approaches that can
map, organise and store older workers' experiences and examples of
good practices in a repository ready for use by every employee in
the company.’
(See
20events/maintopics_KnowMove%202%20Final%20Event.htm,
which presents the conference ‘Securing Growth, Innovation and
Employment
in a Changing Automotive Industry’, organised by
CLEPA as part of the final dissemination phase of KNOWMOVE).

http://www.clepa.be/htm/main/promo%20banner/CLEPA%

4. Policy proposals

4.1
In order to enhance value and supply chain efficiency it
is essential to create a sound business environment for IICs. The
EESC is of the opinion that there are two main instruments that
the presence of European IICs in worldwide
will support
networks: new-style industrial policy (including its sectoral
approach) and the FP7.

Industrial policy

IICs should be more systematically involved in the frame-
4.2
work of industrial policy. The Commission and the Council
should carry out prior and more accurate assessments of the
impact on high-tech companies of upcoming legislation in areas

(18) This initiative for the period 2007-2013 was adopted on 8 November
2006 by the European Commission under the ‘Territorial Coopera-
tion’ objective. (http://ec.europa.eu/regional_policy/cooperation/inter-
regional/ecochange/index_en.cfm).

(19) See, for example, Hidden Champions, Lessons from 500 of the World's Best
Unknown Companies, by Hermann Simon (Harvard Business School
Press, 1996). Hidden Champions provides a description of mostly
German world leaders in their markets, such as bottle-labelling
machines, model railways, incense, potting soil and museum display
cases.

20.7.2007

EN

Official Journal of the European Union

C 168/7

such as technical development and standard-setting. ‘Industry’ is
too often limited to large companies. IICs — often overlooked
— should be consulted separately.

products and the mixture of manufacturing and services, on the
one hand, and regarding innovative forms of production, on the
other (23).

4.3
The EESC stresses the importance of ICT for IICs. It fully
agrees with the objectives the Commission has defined in its
Communication, entitled ‘Enhancing Trust and Confidence in
Business-to-Business Electronic Markets’ (20).

4.9 Moreover, lock-in and lock-out effects concerning supply
chains often hamper effective participation in the platforms
when IICs — even those with considerable potential — are not
able to participate in interoperable systems.

4.4
The Commission has also established a European e-Busi-
ness Support Network for SMEs (eBSN). The EESC agrees with
the main objective of eBSN, which is to bring together e-busi-
ness experts in Europe and to share experience and good prac-
tice.

The EESC is of

4.10
the opinion that a strategic vision
should be developed for IICs, which might help to overcome
handicaps that arise as a result of being locked-in or locked-out.
Interoperability should be the objective. This could be attained
by:

A vital aspect of EU industrial policy is an open dialogue
4.5
about
from a sectoral
future directions and technologies
perspective, as foreseen in the ongoing European technology
platforms. Although the boundaries between sectors are fading,
a sector-specific approach is still quite appropriate in this area
and offers welcome opportunities for IICs.

The importance of

innovation cannot be overempha-
4.6
sised. The EESC supports the Commission proposal to develop
innovation-friendly markets by launching a new lead-market
initiative aiming at facilitating the creation and marketing of
new innovative products and services in promising areas (21).

4.7
It is important that IICs participate in technology plat-
forms. Hopefully, further ways and means will be found to
remove obstacles in this area. A Strategic Research Agenda must
be set up, including IICs. Nonetheless, traditional weaknesses of
many of these firms, such as a lack of mutual trust, time, avail-
able representatives and, often, of strategic focus are also visible
in the day-to-day experience of those platforms.

the
In order to define a Strategic Research Agenda,
4.8
Manufuture High-Level Group (22) has made an analysis that
contains similar ideas on change regarding new added-value

(20) COM(2004) 479 final.
(21) See the Commission Communications entitled ‘Putting knowledge
the EU’
into practice: A broad-based innovation strategy for
(COM(2006)
innovation-friendly, modern
‘An
Europe’ (COM(2006) 589 final) and ‘Economic reform and competi-
tiveness: key messages from the European Competitiveness Report
2006’ (COM(2006) 697 final). The CCMI, for its part, is drafting an
Impact on industrial
own-initiative opinion entitled ‘Innovation:
change and the role of EIB’ (CCMI/038).

final),

502

(22) The Manufuture HLG is the governing body of the Manufuture Euro-
pean Technology Platform, launched in December 2004 with a view
to propose a strategy based on research and innovation, capable of
speeding up the rate of industrial transformation in Europe, securing
high added value employment and winning a major share of world
manufacturing output in the future knowledge-driven economy. For
more information:
http://www.manufuture.org/platform.html.

a) an ad-hoc initiative aimed at collaboration between software

suppliers so as to service more clients;

b) lowering the price of, or even providing for free, the tools
required by those firms (24), the goal being to enable IICs to
supply more clients (25).

According to the EESC,

4.11
the same goal could be
promoted by the creation of EU fora for cooperation between
IICs in order to pool creativity and innovation across Europe.

4.12

A main issue is to ease access to finance markets.

The EESC considers that banks and other financial
4.12.1
stakeholders, such as venture capital funds, should be encour-
aged to adopt a more positive attitude to risk-taking,
for
example by investing in high-tech IICs.

4.12.2
A specific example would be to give IICs easier access
to the capital market and private equity alike in adapting the
delays that can result from long development and pay-back
periods, which can cause problems. In this context the role of

(23) In its report published in September 2006 (available in English only),
the Manufuture High-Level Group argues that, because of the demand
for customised products with short delivery times, business must shift
from designing and selling physical products to supplying a system of
products and services that are jointly capable of fulfilling users'
demands, while also reducing total life-cycle costs and environmental
impacts (see point 4, page 15). Innovating production‘embraces new
business models, new modes of “manufacturing engineering” and an
ability to profit from ground-breaking manufacturing sciences and
technologies’ (executive summary, page 9). ‘Networked and integrated
manufacturing replaces the conventional linear sequencing of processes
with complex manufacturing networks that often operate across
multiple companies and countries (point 5, page 15).’

(24) An existing example is Digital Business Eco-systems.
(25) Two successful examples are the universal diagnostic machine, which
makes garages interoperable, and the GSM, whose success is due to the
fact that the industry agreed right from the beginning on basic
formats, standards and exchange methods.

C 168/8

EN

Official Journal of the European Union

20.7.2007

the European Investment Bank (EIB) and the European Invest-
ment Fund (EIF) should be reinforced to facilitate access to risk-
lending instruments, venture capital and guarantee schemes (26).

FP7

4.12.3
The EESC believes that financial institutions such as
the EIB can play a wider supportive role, especially in consortia
that include local banks, which have a good knowledge of the
companies in their area.

4.12.4
In view of new-style industrial policy and of industry-
research partnerships the EIB is now working on a new joint
financial
instrument with DG RTD, called the Risk Sharing
Finance facility (RSFF). Its objective is to improve access to debt
financing, notably for private sector research and related acti-
vities with a higher than average risk profile, that is not covered
by the market

4.17
In the FP7, which is related to the objectives of new-
style industrial policy, special attention should be given to links
with small and medium-sized companies, including appropriate
use of the new RSFF instrument developed jointly with the
EIB (29). In advanced ICT projects sponsored by FP7, the partici-
pation of
in order to enable them to join
advanced networks and to enter into cooperation.

IICs is critical

4.18
In the EESC's view, the FP7 can contribute to the crea-
tion of a permanent innovation policy involving close links
between knowledge centres (universities, technology institutes,
vocational training schools) and industrial activity. Value and
supply chains or networks are essential to such a policy, since
the programme is aimed at helping the development of new
‘extended products’
‘product/services’ or
(also known as
‘product-integrated services’) and new processes. The purpose of
all of this is to create a single viable network environment in
Europe, which is also beneficial to IICs.

4.13
Tax policy is the responsibility of Member States.
This notwithstanding, it would be most welcome to discuss at
EU-level desirable tax measures aimed at reinforcing the position
of European business in worldwide value and supply networks.

4.19
The EESC notes that it is difficult to engage small and
medium-sized companies in R&D programmes due to red tape.
Selection procedures of at least one year are far too long for
these companies.

4.14
The EU must integrate in its trade policy objectives the
protection of smaller and medium sized companies' IPR, given
the often unfair and unreliable attitudes of
(large) emerging
markets towards European companies.

It is highly desirable that the right conditions for the
4.20
development of strong network enterprises with transparent
inter-connecting structures are created. The EESC advocates that
the FP7 should help to develop systematically optimal network
designs and operations in a dynamic and complex industrial
environment.

4.15
Human resources are crucial. More than ever, education
systems are an indispensable pillar of sustained economic
growth. Education, vocational training and life-long learning are
a shared responsibility of individuals, companies, social partners
and public authorities (27).

4.16
Sectoral discussions between social partners should
encompass tailor-made approaches to human resources manage-
ment, including the development of training schemes designed
to confer the requisite professional qualifications. They should
also take into account
industrial
change and the EU initiative ‘Regions for economic change’ (28).

the regional dimension of

(26) Access to finance for SMEs should be improved through the new
opportunities offered by the Competitiveness and Innovation
Programme (CIP) in terms of venture capital and guarantees, managed
by the European Investment Fund (EIF), as well as the new initiative
developed in partnership between the EIF and DGREGIO (JEREMIE)
for enhancing the access to finance for SMEs in Regional Development
areas.

(27) EU structural

funds

(chiefly the European Social Fund) and
programmes (such as Lifelong Learning 2007-2013) endorse a stra-
tegic approach towards strengthening human and physical capital.
Furthermore, the European Globalisation adjustment Fund (EGF) is
designed to provide additional support in re-training and job-seeking
for workers made redundant as a result of major structural changes in
world trade patterns.

(28) See footnote 13.

Similarly,

4.21
logistic and supply chain
management structures at both strategic and operational levels
should be encouraged.

the creation of

In the case of

industries that are
4.22
physically tied to Europe, research programmes can support
continuous gains in productivity and efficiency in order to
maintain a competitive edge.

less technological

is

4.23
Among the many aspects that businesses have to take
into account in order to take full advantage of EU research
programmes
establishing adequate
importance of
networks. Although not currently part of the mindset of IICs in
Europe, pre-competitive cooperation between companies may
prove very useful, and the same applies to promoting coopera-
tive relationships.

the

(29) In order to develop more risk-oriented financial products, the EIB is
working on a new joint financial instrument with the Commission
(DG RTD), called the Risk Sharing Finance Facility (RSFF). The objec-
tive is to improve access to debt financing, notably for private sector
research and related activities with a higher than average risk profile
not easily covered by the market. RSFF will be available for eligible
beneficiaries irrespective of their size and ownership. This Facility will
also support European research initiatives such as Research Infrastruc-
tures, European Technology Platforms (ETP), Joint Technology Initia-
tives or projects undertaken under Eureka.

20.7.2007

EN

Official Journal of the European Union

C 168/9

4.24
Accordingly, the FP7 aims to contribute to a know-
ledge-oriented network industry, based on European standards,
which are an important element for cooperation, connection
and interoperability.

other enabling technologies — such as nanotechnology.

4.25
The EESC is of the view that the FP7 offers a great
opportunity to enhance the efficiency of value and supply
networks and calls upon relevant stakeholders to ensure its full
implementation. This applies not only to technologies that
improve network interconnectivity (mainly ICT) but also to

4.26
In parallel to developments in industrial policy, regional
and local contexts and actions are also important in the FP7, in
particular as regards cooperation of IICs with large companies,
neighbouring universities, technological institutes and vocational
training centres (30).

Brussels, 25 April 2007.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS

(30) See EESC Opinion on ‘The territorial governance of industrial change:
the role of the social partners and the contribution of the Competitive-
ness and Innovation Programme’ (CCMI/031 — CESE 1144/2006;
OJ C 318, 23.12.2006), in particular its sections 1 (‘Conclusions and
recommendations’) and 4 (‘The integrated territorial approach (ITA)
and foresight systems for local and regional research and innovation’).