European SMEs and their markets

Author: Jeremie

I strongly believe that SMEs have an important role to play in the European economy. In fact, they are a significant source of growth, jobs and innovation. The European Union seems to share my point of view as Erkki Liikanen, European Enterprise Commissioner stated in 2002: “SMEs are the backbone of EU economy”.

Thus how can the European Union create a friendly environment for SME?

The European Union has implemented many directives and recommendations to foster SMEs development over the past few years. In fact, the EU tries to improve the access to finance for SME, to reduce bureaucracy, to protect their innovation…

Regulatory environment aside, can SMEs not find useful help from large companies that used to be small?

SMEs face some difficulties in accessing markets because they are too risky, too weak and experience a lack of visibility. By offering a part of their contracts to SMEs, large scale companies and public procurement agencies could give a chance to SMEs that would like to grow, innovate and prove what they are able to do. This is called the 2005 European SME pact, first implemented in France.

This pact is directly inspired by the US Small Business Act which stated that a given share of public procurement has to be reserved for SME. Although the European SME pact is claimed to be more ambitious and broader than the American one, I think that it may have some weaknesses. The SME pact deals with large scale companies and public procurement agencies whereas the American Small Business Act only deals with the latter one. However, the American Small Business Act is mandatory and public procurement agencies have to offer a given share of their contracts to US SME. This is not the case for the SME pact which is based on the willingness of these two previous agents to offer contracts to European SMEs. So I think the US Small Business Act may be more efficient than the SME pact.

But for its second year of activity, the SME pact has seduced 30 French large companies and 1200 SMEs.

The monitoring of the impact of the programme is done though several indicators such as the number of contracts awarded by SMEs and SME share in the public procurement.
To my mind, these two ways of monitoring are quiet good and relevant as it will be easy to set objectives and compare the success of the SME pact over the years. The number of contracts issued by large companies and public procurement agencies and awarded by SMEs is easily accountable.

Only the next couple of years will let us know if the SME pact proves to be as successful as the American Small Business Act.