SME Observatories and the Small Business Environment Research/SMME Research General/Journal … ·...

SME Observatories and the Small Business Environment

Conference Proceedings: Speakers’ Papers

This project is funded by the European Union

The Ministry of Entrepreneurship

and Crafts

Improvment ofAdministrative Efficiency

on National Level

International Conference

Friday 26th October 2012 09.30 to 16.15

Hotel InternationalMiramarska 24Zagreb 10000

Robert D. McKean is the Leader of the Technical Assistance Team which is assisting the Ministry of Entrepreneurship and Crafts in improving its efficiency in relation to the support which it provides to Croatia`s SMEs. Bob McKean is an experienced consultant with over twenty years` experience in advising the services of the European Commission mainly in relation to SME development and regional development issues, projects and programmes. He was SME Advisor to the EU Tacis Programme responsible for all SME projects in the NIS 1992-1995, and has been involved in the implementation of SME projects in a number of countries, often in Team Leader positions. He has acted as an Advisor to the OECD and as consultant on World Bank, UK DFID, and OSCE projects. He has been the owner of two successful small businesses.

Mr. Jose Antonio Lopez Lopez is currently working in the position of SME Policy Specialist under the technical assistance project IAENL to support the Ministry of Entrepreneurship and Craft in Croatia. Mr. Lopez Lopez has a Post-Master degree in Economics. His professional work started at the World Bank/International Finance Corporation, Washington D.C., USA, working as Country Economist and Investment Officer for the time span of eight years. Over his 30 years of work experience, Mr. Lopez Lopez has specialized in issues of economic development, possessing vast experience as senior policy advisor in stabilization programs, SME sector development, investment climate assessments, and restructuration and privatization of large state companies.

Miroslav Rebernik, PhD., is Professor of Entrepreneurship and Business Economics, Head of Department for Entrepreneurship and Business Economics, and Director of Institute for Entrepreneurship and Small Business Management at the Faculty of Economics and Business, University of Maribor, Slovenia. His bibliography contains over 600 bibliographic units. Since 1999 he has been running the Slovenian Entrepreneurship Observatory. He has been responsible for the Global Entrepreneurship Monitor research for Slovenia over the same period, and since 2004, the research program “Entrepreneurship for Innovative Society”. He chairs International Entrepreneurship Conference PODIM, co-chairs International Conference STIQE, chairs the Selection Committee for the national competition for the best start-up of the year, “Start:up Slovenia”, and is permanently running and/or cooperates as researcher and consultant in national and international projects.

Prior to joining EIM Rob worked for the Netherlands Economic Institute NEI in Rotterdam carrying out applied regional economic studies for national and international clients. He has an MA in Regional Economics from Erasmus University Rotterdam.

Ludger Odenthal is, since 2008, Head of the SME Performance Review (SPR) team within the SME Directorate of DG ENTR at the European Commission in Brussels. In this capacity he is coordinating policy research on SMEs. A central part of this task is the annual production of the Small Business Act (SBA) country fact sheets which DG ENTR produces over the last four years and which have become crucial tool for monitoring the SBA´s implementation in Member States. He is also coordinating all research and policy analysis on SMEs and the DG ENTR focal point for craft policy issues. In addition, he is the DG ENTR-interlocutor for SME policy in Germany and Malta. Before joining DG ENTR, he was for 3 years in charge of Statistics on Multinational Enterprises at Eurostat in Luxembourg. He headed the drafting and represented Eurostat in the negotiations of fundamental piece of legislation and chaired the work of a Member States´ expert group in this area.

He is a member of the Working group on "Policy-relevant Research on Entrepreneurship and SMEs" organised by the European Commission and was until recently a member of the ECSB Board of Directors. He is engaged in editorial and reviewer's boards of Journal of Small Business Management, International Journal of Entrepreneurial Venturing, Economic Review: Journal of Economics and Business and, and the Journal of Global Entrepreneurship Research.

Rob van der Horst (Panteia/EIM Business & Policy Research, The Netherlands), has more than 25 years experience in carrying out and managing international applied economic research and consultancy projects on SMEs and entrepreneurship. Subjects included fast growing companies, administrative burdens, demography of firms, innovation & technology, export, internationalisation, subcontracting, environmental issues, co-operation, finance, standardisation, and public procurement. He is an expert on SME policy development. He was a consultant on SME policy to the European Commission, OECD and UNIDO. Since 1999 he has been director of Panteia/EIM’s office in Brussels. He is the Executive Director of the European Network for Social and Economic Research (ENSR), bringing together research organisations in 33 European countries: www.ensr.eu. From 1992 until 2004 he was the project director of 'The Observatory of European SMEs', a research project for the European Commission, covering 32 countries. From 2008 to 2012 he was the project director of the Framework Contract for SME Studies with DG Enterprise of the European Commission. He is past-President of the International Council for Small Business (ICSB).

Prior to his career with the European Commission, Ludger worked for 10 years for the United Nations Conference on Trade and Development (UNCTAD) in Geneva/Switzerland where he did advisory work on foreign direct investment (FDI) policies in developing countries. In this role, he co-authored assessments of FDI policy frameworks in more than 10 countries in Asia and Africa. In addition, he was member of the team that produces the yearly UN flagship publication "World Investment Report". Ludger holds a Master in Economics from the Free University in Berlin and the German Development Policy Institute .

Slavica Singer is a professor of strategy and entrepreneurship and the head of entrepreneurial studies (undergraduate, graduate, postgraduate level) at the J.J. Strossmayer University in Osijek, Croatia. In year 2000 she and her team were pioneering in entrepreneurship education in Croatia, by starting the first graduate program in entrepreneurship. In 2011, the doctoral program ENTREPRENEURSHIP AND INNOVATIVENESS enrolled the first cohort, as a result of EU funded collaborative efforts of five universities (Osijek, Croatia; Turku, Finland; Maribor, Slovenia; Klagenfurt, Austria and Durham, UK). In the last twenty years she has been very active in establishing small business development service providers (like Center for Entrepreneurship in Osijek, but also providing support to centres in Dubrovnik, Čakovec, Pula, Split), the SME think tank (CEPOR in Zagreb) and a microfinance institution (NOA in Osijek).

Her research activities are focused on entrepreneurship, competitiveness, regional development, the Triple Helix concept of cooperation between university, business sector and government as well as on entrepreneurship education. From 2002 she has led Croatian Global Entrepreneurship Monitor research team. She led the team developing the Strategy for Women Entrepreneurship, approved by the Government of Croatia in 2010. She is the member of Croatian Competitiveness Council and the Club of Rome, Croatian Chapter, and the European Council of Small Business (Vice President for Croatia). As a result of contribution to the development of university based entrepreneurship education (entrepreneurship across campus) with a inter-disciplinary approach and the international promotion of entrepreneurship education, she was awarded the UNESCO Chair in Entrepreneurship in 2008 and a honorary doctorate by the University of Turku, Turku School of Economics in 2010.

Welcome and Introduction Bob McKean, Team Leader IAENL Project I would like to add my welcome to that extended by Deputy Minister Pros. For those among you who are having their first contact with the “Improvement of Administrative Efficiency on National Level” Project, a few words about what we do, and how today`s proceedings fit into our overall scheme of things. We are a Technical Assistance project funded by the EU, under the IPA, Regional Competitiveness Programme IIIC. We are working closely with the Ministry of Entrepreneurship and Crafts and HAMAG INVEST to improve the effectiveness of the support which these bodies provide to SMEs in Croatia. This we do in two broad ways: (1) improve information which is available on the SME sector and the way this information is used (2) develop procedures and capacities for the assessment of the effectiveness of support to SMEs. We are required to support the activity of a SME Observatory in Croatia, which at this time does not exist in any formal sense. Indeed, consideration how possible ways to establish a mechanism to support observatory functions is the subject of this afternoon`s presentations. We have, however, produced the SME Observatory Report (slide 1). This was published in June 2012 and a copy of the report has been provided for you. This has not been our sole achievement in terms of improving the information flow to the policy makers. Earlier this year, we commissioned a survey of over 1000 SMEs on the grants provided by the Ministry of Economy, Labour and Entrepreneurship, 2008-2012 (slide 2) and this is reported on in Section 2, Part 2 of the Observatory Review. Our project also undertook a study on the “Assessment of the Impact of EU Accession on Croatian SMEs”, (slide 3). We still have some hard copies of the Final Report, for those interested or the Final Report, like the Observatory Report can be downloaded from the project website. Our most recent achievement is the design of the Croatian SME Observatory Website (slide 4). The website will be operational from 19

th November.

We are also currently advising the Ministry and HAMEG INVEST on monitoring information to be collected in relation to the grants awarded under Poduzetnički Impuls 2012, so that the effectiveness of the grants can be analysed. Future project activities will include: i. meetings of Public-Private Dialogue for a, to establish a communication channel between

entrepreneurs, business support organization and the Ministry (starting next month) ii. a second large-scale SME survey iii. workshops for BSOs on collecting business information through surveys iv. developing capacity in the beneficiaries to assess the effectiveness of support to SMEs v. support the Ministry to establish the SME Observatory which takes us back to the direct subject for today`s discussions. You have all the papers to be presented in the folder which you have been given. Following the conference the slideshow presentations will be added, as will a record of the 2 Q and A sessions. I will prepare some observations and recommendations on the basis of the presentations and discussions

here, today, and this will all be available in one single document which will be the “Proceedings of the Conference of SME Observatories and the Analysis of the Business Environment”. This will be a sizeable document and the costs of printing this and distributing to you and other interested parties will be prohibitive. For this reason the document will be made downloadable to you from both the Project and the Observatory website.

Improvement of Administrative Efficiency on National LevelImprovement of Administrative Efficiency on National LevelImprovement of Administrative Efficiency on National LevelImprovement of Administrative Efficiency on National Level

A project supported by the European UniA project supported by the European UniA project supported by the European UniA project supported by the European Union being implemented by a consortium led byon being implemented by a consortium led byon being implemented by a consortium led byon being implemented by a consortium led by ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)


Ministry of Entrepreneurship and Crafts

ACE International Consultants S. L.

Introductory Comments : Morning Session

Jose Antonio Lopez Lopez, IAENL Project

The Importance of the Small Business Environment and the Role of the SME Observatory in

the Support and Development of the SME Sector in Croatia.

I. General Background:

The question of SME sector performance in Croatia has never been more important than it is now,

especially after three consecutive years of negative GDP growth and the accompanying level of

unemployment. The forthcoming accession of Croatia to the European Union adds to these and

concerns, and poses questions about the capacity of the SME sector to compete on an equal basis

within the single market.

In the near future, the SME sector in Croatia will be confronted with a series of challenges arising from

new market rules and regulations and more severe competition from European partners.

The extent to which the SME sector is able to successfully confront the challenges which the single

market will bring and will be able respond to the demands on the single market also represents a

major challenge for Croatia's policy makers.

The Croatian SME Observatory Report 2012, prepared by the IAENL Project which supports the

Ministry of Entrepreneurship and Crafts, identifies the main challenges and constraints as well as the

strengths and weaknesses of the SME sector based upon the analysis of time series data collected for

the period 2002 – 2010.

The SME Observatory Report also introduces also some basic benchmarking of enterprise

performance by size groups as a basis for cross-country analysis and points to a number of policy

objectives and instruments which can address the major imbalances identified. The report provides an

overall view of the SME sector in Croatia, showing its importance and relevance in terms of value

added, contribution to GDP, export performance and employment generation. Moreover, the report

identifies the contribution of each size group and its weight in the overall SME performance.

The SME Observatory Report is divided in two main sections. Section I is divided in three parts. Part I

presents a brief description of the macro-economic environment in Croatia during the period 2002 –

2010. It presents key economic indicators, carries out benchmarking against EU performance, and

examines the trends, observable during the period. Part II presents a description of the SME sector in

Croatia, identifying its key economic indicators. It presents an overview and analysis of the size and

structure of the SME sector, its principal sub-sectors, as well as an examination of the spatial

distribution of SME activity across the national territory. Part III presents a brief assessment of past

financial support programmes to the overall economy and particular to the SME sector. Section II of

the report introduces a brief description of the SME Performance Review and the Small Business Act

(SBA) Fact Sheet, the SME policy framework adapted by the EU at the end of 2008 as well as an

analysis of the results of a survey on grants given to SMEs in Croatia.

II. SME Observatory Report and SBA Factsheets Framework

A. The SME Observatory Report:

The report was produced with two main objectives in mind. These were: 1. To analyse the SME sector by size (micro-small-medium) and main economic activity (NACE

2007 division break down at four digit level), identifying the importance of each group in GDP






creation, employment and exports results;

2. To present a time-series data analysis based on key economic variables to analyse the context of

GDP growth potential, export performance and employment generation, providing some key

economic parameters such as fiscal and monetary information, exchange rate dynamics, inflation,

gross and net salaries, etc, to understand the main forces behind composition and growth in

GDP;

B. The SBA Fact Sheets

These record progress in terms of the implementation of the 10 principles set out in the EU Small

Business Act, with a view to influencing the design and implementation of policies both at EU and

National level, creating a level playing field for SMEs development across all EU member states.

The SBA policy framework emphasises the importance of the 'business environment' for the

nurturing and growth of the whole SME sector. The policy framework identifies 10 key policy areas,

derived from the Small Business Act which affects the performance of SMEs, and specifies, currently a

series of 89 indicators across these 10 policy areas.

III. The SME Observatory Report and the SBA Fact Sheets Compared

The SME Observatory Report has followed a quite different, but complementary approach to that

adopted in the SBA Fact Sheets.

The SME Observatory Report has presented and analysed a key number of macro-economic short

and medium term indicators to provide a context for the analysis of the performance of the SME

sector. These indicators include: real and nominal annual GDP growth, unemployment rates, evolution

of internal and external private/public debt, passive/ active interest rates, and exchange rate

movements for the period 2002 to 2011.

The report provides a dynamic interpretation of the SME sector, by size and economic activity, and

provides information disaggregated to sub-sectors and product group headings, in terms of their

contribution to growth, value added, profits, exports and employment generation. The ultimate purpose

of the analyses is to help identify key policy instruments and variables to enhance/improve to overall

SME performance.

The SBA Fact Sheets approach is based upon an analysis of the present state of the 'business

environment' in Croatia in terms of the adoption of the 10 policy areas identified under the Small

Business Act.

Three main conclusions are mentioned under the latest published SBA Fact Sheet 2010/2011:

• Croatia's SME sector mirrors that of the EU average closely and is an important driver of growth

and jobs,

• Croatia is on par with the EU average in two out of six SBA areas, namely Responsive

Administration and Skills and Innovations, for the remaining areas it falls behind the EU average.

However, in almost all areas where Croatia lags behind, it has achieved considerable progress

over the past years,

• In 2010/2011, Croatia was able to address eight out of ten SBA areas by means of targeted

policy measures, focusing in particular on entrepreneurship and skills an innovation.

We will be listening attentively to Mr. Odenthal, our first guess speaker of this session, from DG

Enterprise and Industry, Directorate E.4, to hear about Croatia's recent performance in relation to the

latest SBA Fact Sheet for 2012.






Of particular interest, in what Mr. Odenthal has to say, will be his analysis of the areas where Croatia

has made the most progress in recent years. Equally, it will be very interesting to hear what he has to

say about those areas where progress has been slower or difficult to track and/or document.

The work of the SME Observatory can provide additional information in four main areas of SBA Fact

Sheets, improving the quantity and quality of available information. These areas are: I) Second chance

(improving the quality and quantity of data on closures based on Ministry of Justice data base,

information on liquidation/bankruptcy proceedings); ii) Think Small First (improving the performance of

the Business Advisory Council through Public Private Dialogue consultation process); iii) State Aid and

Public Procurement Area (providing the appropriate state aid scoreboard indicator), and iv)

Responsive Administration – through a more accurate survey of business environment, and the

tracking data on main business issues.

With Croatia's membership 8 months away, it will be interesting to look at Croatia’s performance vis-a-

vis EU members.

We should follow very closely Mr. Odenthal presentation to gain a broad understanding of the situation

of the SME sector in Croatia.

IV. The SME Observatory Report and the CEPOR SME Report

The SME Observatory Report, and the CEPOR Report and the SBA Fact Sheet framework contain

information which is complemented by three major external documents produced by international

organizations: i) the Doing Business Review, World Bank/IFC, ii) the Global Entrepreneurship Report,

(GEM is the largest study of entrepreneurship collected in over 85 countries), and iii) the global

competitiveness Index which assesses the competitiveness landscape of 144 economies.

These three reports provide a ranking of all the countries surveyed. They summarize the international

perception of countries and their ranking in relation to: i) the business environment ii) entrepreneurship

issues, and iii) the competitiveness of countries’ economies.

The three sets of issues examined in these publications are encapsulated in a common heading: ‘The

Business Environment’. The business environment is fundamental if we are to develop a robust and

vibrant small business sector which will contribute to GDP growth and employment generation.

CEPOR, Croatia`s SME and Entrepreneurship Policy Centre, is the first think tank organization in

Croatia, which deals with the problems of the SME sector. It is a non-profit organization established in

2001 based on the Agreement between the Republic of Croatia and the Open Society Institute in

Croatia. It has ten founder institutions which are the leaders in their area of activities, from the

academic community to economists associations, development agencies and entrepreneurial centres.

CEPOR’s mission is to bring an understanding of the situation facing SMEs to bear upon policy

making and policy makers in Croatia.

The latest CEPOR SME report summarises the institutional and legal framework as well as the current

state of business environment in Croatia. In this sense it complements the work done under the SME

Observatory Report.

The SME Observatory and the CEPOR Report provide an overview of the state of the SME sector in

Croatia. They are prepared by Croatian institutions, representing a Croatian view of the major trends

and issues taking place in the country.

I encourage you to listen carefully to the presentation of Prof. Singer, our second guest of this

morning. Prof. Singer is the Croatia’s leading expert on the analysis of the ‘Business Environment’.






Prof. Singer will present a brief description of the ‘Business Environment’ in Croatia and point out the

priority areas which require the most urgent government attention.

Following the presentations of Mr. Odenthal and Prof. Singer, there will be a question and answer

section.

I thank you for your kind attention and I now invite Mr. Odenthal to the rostrum.

SBA Fact Sheet 2012 – Croatia

1

EN Enterprise and Industry

CROATIASBA Fact Sheet 2012

1. SMEs in Croatia — basic figures

EU27 EU27 EU27

Number Share Share Number Share Share Million € Share ShareMicro 156.848 92,1% 92,2% 338.258 31,5% 29,7% 4.191 20,3% 21,5%Small 11.137 6,5% 6,5% 208.090 19,4% 20,6% 4.037 19,6% 18,6%

Medium-sized 1.929 1,1% 1,1% 197.276 18,4% 17,2% 3.940 19,1% 18,3%SMEs 169.914 99,7% 99,8% 743.624 69,2% 67,5% 12.168 58,9% 58,4%Large 430 0,3% 0,2% 331.177 30,8% 32,5% 8.480 41,1% 41,6%Total 170.344 100,0% 100,0% 1.074.801 100,0% 100,0% 20.648 100,0% 100,0%

Estimates for 2010, based on 2008-2009 figures from the Structural Business Statistics Database (Eurostat). EU27 estimates for 2011, based on 2005-2009 figures from the same source and have been produced by Cambridge Econometrics. The data cover the 'business economy' which includes industry, construction, trade, and services (NACE Rev. 2 Sections B to J, L, M and N) based on equivalent shares in NACE rev 1. The data does not cover the enterprises in agriculture, forestry, fishing or the largely non-market services such as education and health. The advantage of using Eurostat data is that the statistics from different countries have been harmonised and are comparable across countries. The disadvantage is that for some countries these data may be different from data published by national authorities. Data for Croatia refer to 2010, except Value Added which refers to 2009.

Number of Enterprises Employment Value addedCroatia Croatia Croatia

The SME sector in Croatia closely reflects that in the European Union in general. It has almost exactly the same number of SMEs, namely 99.7 % of all enterprises, with micro–enterprises dominating. With 4.7 employees, the average Croatian SME is slightly bigger than the average EU SME, with 4.2 employees. The high number of SMEs in Croatia account for 69.2 % of overall employment. This figure is higher than in the EU in general. However, the

value that SMEs add to the overall economy is in line with the EU average. The SME sector in Croatia is dominated by wholesale and retail trade, followed by professional, scientific and technical activities, manufacturing, and accommodation and food services. The data available up to 2010 show a positive trend in terms of the number of SMEs in Croatia. This seems to indicate that the sector experienced some growth after the crisis hit.

In a nutshell: • The SME sector is estimated to have grown by 13 % in 2010 compared to 2009, resulting in an increase

in employment of almost 10 %.

• Croatia is on a par with the EU average in ‘Responsive administration’ and ‘Access to finance’. It has made progress in areas such as ‘Skills and innovation’, ‘Internationalisation’, and ‘Access to finance’.

• In 2011, Croatia tackled eight out of 10 of the SBA areas, focusing on ‘Entrepreneurship’ and ‘Access to finance’.

About the SBA Fact Sheets1: The Small Business Act for Europe (SBA) is the EU’s flagship policy initiative to support small and medium-sized enterprises (SMEs). The aim of the annually updated Fact Sheets is to improve understanding of recent trends and national policies affecting SMEs.

http://ec.europa.eu/enterprise/policies/sme/small-business-act/


2

This also explains the corresponding increase in employment after 2009. However, a decrease in value-added, in line with the general trend in the EU, is forecast.

SME trends in Croatia2


3

2. Croatia’s SBA profile

According to the SBA categories profile, Croatia’s overall performance is fairly even, with most indicators such as ‘Skills and innovation’, ‘Environment’, ‘Responsive administration’ and ‘Access to finance’ performing within the EU average. Values for ‘Second chance’ and ‘Internationalisation’ show that there is room for improvement. However, the trend for 2007–12 was positive in most areas, with some improvements to create a more SME-friendly environment. In 2011, the government tackled most areas. Some of the measures3 taken appear to have an effect in the long term.

Croatia’s SBA performance: Status quo and development over 2007-20124

4

6

8

9

2 1

10

-15%

-10%

-5%

0%

5%

10%

15%

-2,5 -1,5 -0,5 0,5 1,5 2,5Performance

(Distance from the EU average, in standard deviations, EU avg.=0)

(Com

poun

d an

nual

gro

wth

rate

200

7-20

12)

Prog

ress

ove

r tim

e

Low Performance, Progress

High Performance, Progress

Low performance, Deterioration

High Performance, Deterioration

Legend:1. Entrepreneurship2. Second chance3. Think small first4. Responsive administration5. State aid & public procurement6. Access to finance7. Single market8. Skills and innovation9. Environment10. Internationalization

Note: Due to a lack of data, it is not possible to calculate the progress rate for Area 9 - Environment. In the graph to the left, the progress rate was set to 0% by default, for all countries.

0,0

0,2

0,4

0,6

0,8

1,0

1. Entrepreneurship

2. Second chance

3. Think small first

4. Responsiveadministration

5. State aid & public procurement

6. Access to finance

7. Single market

8. Skills and

innovation

9. Environment

10. Internationalization

Croatia

EU average +/- 0,5 standard deviations


4

I. Entrepreneurship

Croatia’s performance in this category is slightly below the EU average. The entrepreneurship rate in Croatia is 10 %. This is 2 % lower than in the EU. The percentage of people who prefer to be self-employed is also 2 % lower than in the EU. A lower percentage of people also think being self-employed is a feasible option. These results reflect the public’s view of entrepreneurship in Croatia — a comparatively low share of the population agrees that entrepreneurs have a high social status (47 % versus 69 % in the EU) and that they do not get enough media attention. On the positive side, entrepreneurial intent is greater in Croatia than in the EU. This could be a good sign in the long run. In terms of policy, the focus has been on implementing the Strategy for Women’s Entrepreneurship through a three-year project called ‘Women’s Entrepreneurship — a job creation engine for South East Europe (SEE)’. The project is being

coordinated by the Croatian Ministry of Economy, Labour and Entrepreneurship and the Gender Task Force (GTF). It aims to promote best practice and capacity building for women’s entrepreneurship initiatives. To support the project, the government’s office for gender equality has provided loans and credit line facilities for women entrepreneurs at a lower interest rate. Progress aimed at long-term results was also made in the area of learning and development, by introducing entrepreneurship as a subject, especially in secondary education, through the South East European Centre for Entrepreneurial Learning (SEECEL).


5

II. Second chance

Croatia’s performance in this area is significantly below the EU average. The same is true of the individual indicators, which have not changed significantly since the previous year. Croatia gives businesses much fewer second chances than its EU

peers. It takes more time and money to close a business (almost 15 % of the debtor’s estate, which is quite high compared with the EU). No significant policy measures were implemented in this category.

III. Think small first

-2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0

Burden of government regulations (1=burdensome, 7=notburdensome); 2011; Croatia : 2,2; EU-avg: 3,09

Note: Data bars pointing right show stronger than EU-average performance and data bars pointing left show weaker performance.

Distance from the EU-average (measured in standard deviations, EU-

average=0)

‘Think small first’ is an easy category to assess as its only indicator clearly shows the extent of the administrative burden on SMEs. In Croatia, businesses have to comply with a lot of government regulations. The most important policy measures in 2011 were the adoption of a law on the prohibition and prevention of unregistered activities and the setting

up of a Business Advisory Council to work with the business community. Its members include the Chamber of Commerce, the Chamber of Crafts, the National Competitiveness Council, the Exporters Association and the Employers Association.


6

IV. Responsive Administration

‘Responsive administration’ is another area where Croatia has been having difficulties in recent years. Its overall performance is almost in line with the EU in general, with a few exceptions. In Croatia, it takes half the time needed in the EU to start a business, namely seven days, and the initial capital paid in is relatively lower. It costs 14 % of the claim to enforce contracts in Croatia, which is also less than in the EU Member States. However, the actual cost of starting a business is almost twice as high as in the EU and it takes almost three times longer to transfer property. The number of tax payments, the time it takes to deal with them and the online availability of public services are closely aligned with the EU average. In terms of policy, an amendment to the Electronic Communications Act was adopted in July 2011,

bringing Croatian businesses into line with the EU’s 2009 electronic communications reform package. An online registration system called e-Company was set up to simplify the registration process. It takes the system one working day to register a company online. Furthermore, the introduction of immediate online name reservation via any public notary, HITRO.HR office, or any court registry in Croatia has further improved the registration process. It is also an effective way of monitoring the registration process, because all cases are electronically followed up and time-stamped. This has made the business start-up process easier, but there is still a long way to go with regard to the administrative and judicial pitfalls of Croatian administration.


7

V. State aid and public procurement

‘State aid and public procurement’ is another area where there is only one indicator by which to judge Croatia’s performance. The availability of e-procurement is twice as limited as in the EU. Some effective policy measures were taken in this area. The new Public Procurement Law was adopted. It entered into force on 1 January 2012 and was harmonised with the relevant EU directives. It has made it mandatory to complete some stages of the procurement process electronically, from e-notification to the publication of the Electronic Public Procurement Official Gazette, and making procurement notices and tender documents

available online. Training, guidelines and daily assistance from the Public Procurement Directorate and the Ministry of Economics have helped with its implementation. A gradual transition towards fully electronic communication is planned. The next step in the transition is the electronic submission of tenders to some contracting authorities and/or sectors, like central purchasing bodies for high-value procurement in the IT sector. Some progress was also made in the area of state aid, where 73 cases involving aid schemes and measures were resolved.

VI. Access to finance

-2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0

Depth of credit information index; 2012; Croatia: 5; EU-avg: 4

Strength of legal rights; 2012; Croatia: 6; EU-avg: 7

Willingness of banks to provide a loan (% of respondentd that indicated adeterioration); 2011; Croatia: 14; EU-avg: 27

Access to public financial support including guarantees (% of respondents thatindicated a deterioration); 2011; Croatia: 17; EU-avg: 22


Distance from the EU-average (measured in standard deviations, EU-average=0)

Despite the lack of data, this is an area where Croatia performs above the EU average for the available indicators. There is evidence that the conditions for credit-based financing have improved more than in the EU. Only 17 % of SMEs reported a deterioration in access to public financial support, compared to the EU average of 22 %, while 14 %

said banks were less willing to provide loans, compared to the EU average of 27 %. Credit information in Croatia is also better on average than in the EU, although the strength of legal rights is slightly below the EU average. On the policy front, access to finance, which until this year was seen as an impediment to


8

entrepreneurship in Croatia, has also been tackled, with a new regulatory programme to encourage women’s entrepreneurship by facilitating access to finance. Other measures relate to corporate accounting, banks and financial conglomerates, the issue of guarantees, and company law. The Agriculture Guarantee Programme was amended, enabling agriculture and fisheries firms to obtain guarantees if they are eligible for co-funding from the IPA Rural

Development Programme (IPARD). The Certification Authority Supervisory Board will issue guarantees for projects in the IPARD Programme of 50 % equity loans to finance investments in fixed and/or current assets. The maximum loan for the IPARD project is 20 million kuna, and the share of current assets allowed is 15 %. The Companies Act was amended to align it with EU law. The Electronic Money Law and implementing legislation relating to banks and financial conglomerates was also adopted.

VII. Single market No data are available, so no conclusions can be drawn. On the policy front, some measures were taken to implement the New Legal Framework and Sector Guidance for Single Markets. The aim is to ensure that the mutual recognition principle is

correctly applied. Progress on accreditation was made. So far, according to the Agency’s website (www.akreditacija.hr), it has accredited 296 conformity assessment bodies.

VIII. Skills and innovation

-2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0

Employees ' participation rate in education and tra ining (% of tota l noof employees in microfi rms) ; 2010; Croatia : 3; EU-avg: 11

SMEs purchas ing onl ine (% of SMEs); 2010; Croatia : 23; EU-avg: 28

SMEs sel l ing onl ine (% of SMEs); 2011; Croatia : 18; EU-avg: 13

SMEs parti cipating in EU funded research (number per 100.000 SMEs);2010; Croatia : 10; EU-avg: 23

Sales of new-to-market and new-to-fi rm innovations (% of turnover);2008; Croatia : 14; EU-avg: 13

Innovative SMEs col laborating with others (% of SMEs); 2008; Croatia :12; EU-avg: 11

SMEs innovating in-house (% of SMEs); 2008; Croatia : 26; EU-avg: 30

SMEs introducing marketing or organizational innovations (% ofSMEs); 2008; Croatia : 33; EU-avg: 39

SMEs introducing product or process innovations (% of SMEs); 2008;Croatia : 32; EU-avg: 34



‘Skills and innovation’ is an area where Croatia’s performance is mixed, with its overall performance just below the EU average. Compared to the EU in

general, a higher percentage of SMEs collaborate with other SMEs, and more SMEs sell online (18 %). Croatia needs to significantly improve its

http://www.akreditacija.hr/


9

performance in terms of the academic and research bases of innovation: the contribution of SMEs to research funded by the EU is less than half the EU average. At 3 %, the participation rate of employees in education and training is less than a third of the EU average. Although these percentages are quite low, progress was made on research. More needs to be done however, especially in the private sector. Under the Seventh EU Research Framework Programme, Croatia is ensuring that it continues to make progress on research innovation.

IX. Environment

Croatia performs below the EU average in this area. This is because most of the indicators have negative scores. On average, the number of SMEs that have taken resource-efficiency measures (90 % versus 93 %) is relatively high. This bodes well for the country’s ‘green future’. At 21 %, the percentage of green products available is lower than the EU average, but the SMEs that do offer such products specialise more often than their EU peers in green goods and services (generating a turnover share of more than 50 %). This performance should be seen against the backdrop of what appears to be very limited public support. Almost no Croatian SME said

they benefited from public support, while the EU average was 8 %. In connection with the relatively good performance of SMEs in terms of resource efficiency, some amendments to related legislation were made to incentivise the production of electricity from renewable energy sources. They include tax incentive schemes and prioritising subsidies for sustainable business. The government also aligned and implemented legislation on water quality, chemicals, and energy efficiency. The law on biofuels was amended to align it with the 2009 renewable energy directive. Some progress was also made in energy efficiency. Legislation on energy audits of buildings and


10

authorisations for such audits continued to be implemented, in particular regarding the training and accreditation of experts. The implementation of horizontal legislation, in particular on public participation in and access to

justice, needs to be improved. A lot still needs to be done to strengthen administrative capacity, especially with regard to the protection of nature and climate change.

X. Internationalisation

-2,0 -1,5 -1,0 -0,5 0,0 0,5 1,0 1,5 2,0

Number of documents required toexport; 2012; Croatia : 7; EU-avg: 5

Time required to export (in days );2012; Croatia: 20; EU-avg: 11

Cost required to export (in USD);2012; Croatia : 1300; EU-avg: 1032

Number of documents required toimport; 2012; Croatia : 8; EU-avg: 5

Time requi red to import (in days );2012; Croatia : 16; EU-avg: 11

Cost required to import (in USD);2012; Croatia : 1180; EU-avg: 1101



In terms of ‘Internationalisation’, Croatia is lagging behind the EU average, and its performance has not improved significantly since last year. In fact, the increased costs of importing ($ 40) and exporting ($ 19) have made trading conditions in Croatia more difficult. On average, it also takes much longer to trade than in the EU, and more documentation is needed to do so. This shows that the general conditions for international trade in Croatia still need to be significantly improved.

No significant policy measures were taken in 2011 or in the first quarter of 2012.


11

3. Good practice

To show what the government is doing to promote SMEs, we include an example of good practice.

Implementation of the Strategy for Women’s Entrepreneurship began in 2010 with the launch of the three-year project ‘Women’s entrepreneurship — a job creation engine for South East Europe’. It aims to boost women’s entrepreneurship in south-east Europe with the help of the public and private sectors. It promotes best practice in women’s entrepreneurship and provides capacity-building support for associations of women entrepreneurs in south-east Europe. It reflects the Regional Cooperation Council’s (RCC) priorities for economic and social development. They are set out in the RCC’s Strategy and 2011–13 Work Programme: promoting a single investment space through the SEE Investment Committee, identifying ways to improve access to finance, incorporating employment and the social agenda in discussions about economic reform. The project, supervised and coordinated by the RCC, will be implemented by two regional organisations: the South East European Centre for Entrepreneurial Learning (SEECEL)*, coordinated by the Ministry of Economy, Labour and Entrepreneurship, and the Gender Task Force (GTF). The inception phase of the project starts immediately, but it will be fully implemented over the course of three years (2012–14). *In 2007, the Croatian Ministry of Economy, Labour and Entrepreneurship established structured cooperation amongst the countries of south-east Europe on lifelong entrepreneurial learning. At a meeting on 15 October 2008, governments of the region, with Turkey, agreed to set up the SEECEL, with Croatia as the host country.

About the SBA Fact Sheets The Small Business Act (SBA) Fact Sheets are produced by DG ENTR as part of the SME Performance Review (SPR), which is its main vehicle providing an economic analysis of SME issues. They combine the latest available statistical and policy information for the 27 EU Member States and another ten non-member countries. They also feed in to the EU’s Competitiveness and Innovation Framework Programme (CIP). The Fact Sheets — produced annually — help to marshal the available information to facilitate SME policy assessments and monitor SBA implementation. They document the status quo and progress. They are not an assessment of Member State policies, but should be regarded as an additional source of information to underpin evidence-based policy making. For example, the Fact Sheets cite only those policy measures deemed relevant by local SME policy experts. They do not, and cannot, reflect all measures taken by the government over the reference period. More policy information can be found on a database accessible from the SPR website. Please also see the end notes overleaf.

For more information SME Performance Review: http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm Small Business Act: http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm The European Small Business Portal: http://ec.europa.eu/small-business/index_en.htm [email protected]

http://ec.europa.eu/cip/

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm

http://ec.europa.eu/enterprise/policies/sme/small-business-act/index_en.htm

http://ec.europa.eu/small-business/index_en.htm

mailto:[email protected]


12

1 The SBA Fact Sheets 2012 benefited substantially from input by the European Commission’s Joint Research Centre (JRC) in Ispra, Italy. The JRC made major improvements to the methodological approach, statistical work on the dataset and the visual presentation of the data. 2 The three graphs below describe the trend over time for the variables. They consist of index values for the years since 2005, with the base year 2008 set at a value of 100. As from 2010, the graphs show estimates based on 2008–09 figures from the Structural Business Statistics Database (Eurostat). Cambridge Econometrics produced EU-27 estimates for 2011, based on 2005–09 figures from the same source. The data cover the ‘business economy’ which includes industry, construction, trade, and services (NACE Rev. 2 Sections B to J, L, M and N) based on equivalent shares in NACE Rev 1. They do not cover enterprises in agriculture, forestry, fishing or largely non-market services such as education and health. The advantage of using Eurostat data is that the statistics from different countries have been harmonised and are comparable across countries. The disadvantage is that for some countries these data may be different from data published by national authorities. Data for Croatia refer to 2010, except value-added, which refers to 2009. 3 The policy measures presented in this SBA Fact Sheet may be only a selection of the measures taken by the government in 2011 and the first three months of 2012. The selection was made by the national SME policy country expert contracted by Ecorys (DG ENTR's lead contractor for the 2012 Fact Sheets). The experts were asked to select only those measures that, in their view, were the most important, i.e. were expected to have the highest impact in the specific SBA area. The complete range of measures that the experts compiled while producing this year’s Fact Sheets will be published alongside the Fact Sheets in the form of a policy database on the DG ENTR website. 4 The quadrant chart combines two sets of information. Firstly it shows the status quo performance based on data for the latest available years. This information is plotted along the X-axis measured in standard deviations of the simple, non-weighted arithmetical average for EU-27. The vertical corridor marked by the dotted lines defines the EU average. Secondly, it reveals progress over time, i.e. the average annual growth rates for the period 2007–12. The growth rates are those of the individual indicators which make up the SBA area averages. Hence, the location of a particular SBA area average in any of the four quadrants indicates not only where the country is located in this SBA area relative to the rest of the EU at a given point in time, but also the extent of progress made in the period 2007–12.


A project supported bA project supported bA project supported bA project supported by the European Union being implemented by a consortium led byy the European Union being implemented by a consortium led byy the European Union being implemented by a consortium led byy the European Union being implemented by a consortium led by ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)

Small Business Environment in Croatia

Prof. Dr. Slavica Singer

CEPOR – SME and Entrepreneurship Policy Center, Zagreb, Croatia

Faculty of Economics, J.J. Strossmayer University in Osijek, Croatia

1. What do we know about small business environment in Croatia?

Croatia is involved in several international surveys which collect information on business environment as

a main focus (World Bank - Doing Business, from 2004), or as a part other focuses (World Economic

Forum - Global Competitiveness Report, from 2002; Global Entrepreneurship Research Association -

Global Entrepreneurship Monitor, from 2002, Transparency International – Corruption Perception Index,

from 2004). This overview will be mainly focused on information collected through the Global

Entrepreneurship Monitor survey, with some complementing information from Doing Business and

Global Competitiveness reports.

Global Entrepreneurship Monitor - GEM surveys entrepreneurial attitudes, attributes and activities of

individuals across countries in the context of general macroeconomic1 conditions and entrepreneurial

2

conditions in surveyed countries. Main areas within entrepreneurial conditions (out of 9 areas) where

there is need for improvement are: education, government policies and R&D transfer to the small and

medium enterprise sector.

GEM results are confirmed by other international surveys that analyse different aspects of national

economies. Global Competitiveness Report identify as the most problematic factors for doing business

in Croatia: low efficiency of public administration, corruption, instability of policies, tax rates, restrictive

labour legislation, access to financial resources, tax regulations and poor work ethics of national

workforce.

Transparency International identifies corruption as a significant problem for functioning of Croatian

economy. Croatian Corruption Perceptions Index3 keeps Croatia for years on the level of scores

1 General macroeconomic conditions include openness of the national economy, financial market efficiency, level of investment in

research and development, availability and the level of development of physical infrastructure, managerial competences, labour market flexibility and efficiency of legal and social institutions. 2 Entrepreneurial conditions framework includes availability of financial resources for business venture start-up, government policies

and programs, quality of education and training for entrepreneurs, openness of the internal market and competitiveness, R&D transfer, access to physical infrastructure, as well as cultural and social norms. 3 Out of 178 countries included in the survey in 2011 as much as two thirds have result lower than 5, which shows that corruption is

a serious problem worldwide. Croatia is in 62nd

place with corruption perceptions index value of 4.1. Slovenia (6.4) has the best result in the surrounding, and Bulgaria (3.6), Serbia (3.5) and Bosnia and Herzegovina (3.2) have lower levels of corruption perceptions index than Croatia. Croatia has been involved in this survey since 1999 and the best result was achieved in 2008 with index value of 4.4; www.transparency.hr



between 2.9 and 4.4. According to the scale from 10 (no corruption) to 0 (total corruption) those scores

show that corruption is a serious problem.

World Bank survey Doing Business warns Croatia on several issues related to the quality of business

environment: getting construction permits, protecting investors, registering property, trading across

borders, resolving insolvency.

2. Obstacles to the development of the SME sector in Croatia

All mentioned worldwide studies in which Croatia is included identify the main obstacles to the

development of entrepreneurship in Croatia:

- Administrative obstacles (long and expensive procedures for start-up and termination of an

enterprise)

- Inefficiency of the judiciary system

- Long ownership registration procedures

- Low focus on entrepreneurial education

- Bad perception of entrepreneurship as a desired career choice

- Underdevelopment of non-formal financing forms in business ventures start-up.

Table 1

Entrepreneurial conditions framework, 2010 – average scores (Likert scale 1= lowest, 5= highest)

Components Croatia All GEM countries The best

Access to Finance 2.42 2.39 3.43 Maleysia

Government Policy

- general – SMEs, entrepreneurship 2.27 2.51 4.55 Tunisia

- toward regulations (ease, speed) 1.96 2.34 3.42 Tunisia

Government Programs 2.49 2.51 3.71 Germany

Education

- primary and secondary 2.11 1.97 2.82 Latvia

- post-secondary 2.76 2.83 3.58 Mexico

R&D transfer 2.30 2.33 3.38 Switzerland

Intellectual Property Protection 2.62 2.70 4.24 Switzerland

Commercial and Services Infrastructure 2.83 2.95 3.66 Israel

Internal Market

- dynamics 3.31 2.98 4.06 South

Korea

- openness 2.17 2.46 3.07 Zambia



Physical Infrastructure 3.62 3.62 4.05 Iceland

Cultural and Social Norms 2.42 2.75 3.97 Israel

Source: CEPOR – GEM database

In order to get insight in changes, Table 2 presents experts’ scores for entrepreneurial conditions

framework in Croatia from 2002 to 2010:

Table 2 - Entrepreneurial conditions framework, Croatia, 2002-2010 – average scores (Likert scale 1=

lowest, 5= highest)

2002. 2004. 2006. 2008. 2010.

Access to

Finance

3,21 2,32 2,68 2,78 2,42

Government

Policy

- general – SMEs,

entrepreneurship

2,27 2,1 2,41 2,19 2,27

- toward

regulations

(ease, speed)

1,81 1,81 2,17 1,88 1,96

Government

Programs

2,11 2,18 2,64 2,65 2,49

Education

- primary and

secondary

1,63 2,05 2,21 2,17 2,11

- post-secondary 2,01 2,63 2,86 2,79 2,76

R&D transfer 2,05 2,18 2,19 2,20 2,30

Intellectual

Property

Protection

2,36 2,52 2,63 2,66 2,62

Commercial and

Services

Infrastructure

2,43 2,6 2,92 2,74 2,83

Internal Market

- dynamics 3,05 3,65 3,47 3,87 3,31

- openness 2,04 2,11 2,3 2,18 2,17

Physical

Infrastructure

3,08 3,36 3,75 3,77 3,62

Cultural and

Social Norms

2,2 2,17 2,45 3,29 2,42




Corruption and regulatory framework

Having in mind that corruption was reported in all mentioned surveys as one of the biggest obstacle in

doing business in Croatia, the information that government policies toward regulatory framework have

been evaluated with lowest scores in the period of 2002 to 2010 is worrying. Making regulatory

framework for doing business simple and transparent will not only attract businesses but also eliminate

many sources of corruption (complicated regulatory system is a fertile ground for corruption).

This finding is additionally confirmed through the World’s Bank Doing Business survey for 20104. To

provide better insight into main regulatory obstacles connected with start-up and exit procedures in

Croatia, below is an overview of regulatory framework quality indicators, as evaluated by Doing Business

survey: regulations for enterprise start-up and enterprise termination:

Table 3: Overview of selected regulatory framework quality indicators according to Doing Business

research for 2010

Regulatory area

Indicator

Croatia Best indicator

(country) EU (average)

Regulations for enterprise start-up

Number of procedures

Time (days)

Cost (% of income per capita)

Minimum capital (% of income per capita)

6

7

8.6

13.8

New Zealand

1

1

0.4

0.0

6

14

5.1

15.9

Bankruptcy

Time of insolvency (years)

Cost of insolvency (% of assets)

Recovery rate (cents per 1 USD)

3.1

15.0

29.7

Japan

0.6

4

92.7

2.0

10

60.6

Source: Doing Business in 2011, Croatia – Country Profile, International Bank for Reconstruction and

Development / World Bank

Also, it should be noted that some countries in close neighbourhood made very radical changes in the

respect of making regulatory conditions for doing business more attractive for investors: e.g. while

Croatia keeps in 2010 57th

place regarding the complexity of regulatory framework for enterprise start-

4 This part is based on SME Report for Croatia 2011, CEPOR, Zagreb, 2011



up measured by number of procedures and number of days required for enterprise registration,

registration costs and minimal capital required for enterprise start-up, Macedonia is ranked on high 5th

place. Namely, in contrast to Croatia, where the registration process lasts 7 days and requires 6

procedures, in Macedonia 3 days and 3 procedures are required for the same thing.

Access to finance

Another painful condition for SMEs in Croatia is quite limited access to finance. Abundance of banking

loans are not the most appropriate for businesses either in their start-up phase or in high-growth phase,

the two riskiest phases in the business life cycle.

Almost all banks offer loans to small and medium enterprises in a wide range of products/services (loans

for tourism services, young people, women, new technologies, Croatian war veterans, export,

investments, working capital, start-ups…).

Lack of informal investors, like business angels and venture capitalists is an important obstacle,

identified in the whole period of surveying entrepreneurial conditions in Croatia, using GEM survey.

CRANE (CRoatian Angel NEtwork) - Croatian Association of Business Angels (www.crane.hr) is a non-

profit association, which connects entrepreneurs that need capital for their business ventures (mostly

start-ups) and business angels, since September 2008. From 2008 to 2010 CRANE had financed just a

few projects which indicates poor development of this type of financing of business ventures in Croatia.

Venture capital funds have invested 13 million EUR in Croatia in 2010, which is, measured by share in

GDP, one third of the European average5. Croatian Private Equity and Venture Capital Association –

CVCA (www.cvca.hr) is active in this field, but still most of their activities are not focused on small

businesses. Information about conditions of venture capital funds financing in Croatia is provided by the

Croatian Private Equity and Venture Capital Association whose members are the following venture

capital funds: Quaestus Private Equity d.o.o. (www.quaestus.hr), Alternative Private Equity d.o.o.

(www.alternative-pe.hr), Nexus Private Equity Partners d.o.o. (www.nexus-pe.hr), Prosperus-Invest

d.o.o. (www.prosperus-invest.hr), Honestas Private Equity Partners (www.honestas-pe.hr).

There is no special legal provision for microfinance institutions, though some of credit unions have

microfinance programs. They are confronted with issues of territorial restrictions, guarantees,

inadequate financial products and services, demanding documentation, too high interest rated and lack

of information among users regarding financial products.6

5 Source: : SME Report for Croatia 2011, CEPOR, Zagreb, 2011

6 Source: SME Report for Croatia 2011, CEPOR, Zagreb, 2011 – based on information collected through the

Microfinance Workshop, jointly organized by CEPOR and HBOR in 2010.



Both, GEM and Global Competitiveness Report outline the access to finance as an obstacle, lack of

adequate guarantee schemes and the inefficiency of the judicial system. The World Bank also confirms

this, using the following indicators (Table 4):

- Registering property: ownership transfer regulation

- Protecting investors: corporate management.

Table 4: Overview of regulatory environment quality indicators related to credits market according to

Doing Business research 2010

Regulatory area Indicator

Croatia Best indicator (country) EU (average)

Registering property

Number of procedures

Time (days)

Cost (% of property value)

5

104

5.0

Saudi Arabia

2

2

0.0

Georgia

5

32

4.8

Protecting investors

Extent of disclosure index (0-10)

1

New Zealand

10

6

The index moves in the range of 0-10 where the highest value indicates a high level of corporate

management transparency, and it includes 5 aspects of corporate management transparency.

Source: Doing Business 2011, Croatia – Country Profile, International Bank for Reconstruction and

Development /World Bank

Education

In contrast to 2002, when Croatia was rated below the GEM average (1.63 compared with 2.06 as the

average value of GEM countries) in the field of education and training (for entrepreneurship) at primary

and secondary education level, in 2010 Croatia has above-average values (2.11) in relation to other GEM

countries (1.97). However, at the tertiary education level Croatia had below-average results both in

2002 and 2010 (Table 5).

Table 5: Perception of quality of education supporting SME development in 2010

Score 5 shows: Average Croatia

Education and

training – (primary

Primary and secondary education level encourages

creativity, independence and proactivity; it gives 1.97

2.11

(2.17 in 2008)



and secondary

education level)

information about market principles and puts

emphasis on entrepreneurship

Education and

training – (tertiary

education level)

There are enough university courses about

entrepreneurship; business education is at the

global level; vocational, professional and

continuous education give a good basis for self-

employment

2.83 2.76

(2.79 in 2008)

Source: CEPOR, GEM database

In primary school education entrepreneurship still isn’t recognized as knowledge and skill for achieving

competency of initiative and it is only sporadically mentioned in the curriculum and is promoted

depending on teacher’s and/or principal’s preferences and knowledge.

In secondary school education entrepreneurship is recognized as a set of knowledge and skills only in

vocational schools. In 2003, Ministry of Science, Education and Sport began to systematically promote

spreading the idea of “training firm”, by joining the ECO NET7 project, and now it is a quite popular

elective course.

The first entrepreneurial programs at the tertiary level of education were started in 2000 at the J.J.

Strossmayer University of Osijek, Faculty of Economics, at the postgraduate level8 (www.pspefos.hr) and

at the Vern Polytechnic in Zagreb (www.vern.hr), but it is still not recognized as an infrastructural

competence, and that it should be offered to all students across campus.

3. Entrepreneurial activity in Croatia

Entrepreneurial activity in Croatia reflects not only individual intentions, but it results from interaction

of individuals with entrepreneurial conditions in the country (regulatory framework, access to finance,

education and others as listed in table 1).

In such context following information should be interpreted:

Table 6

7 It is a good example how NGOs activities as well as some bilateral government initiatives helped to bring such novelties in

curricula. From 2000 to 2006 Norwegian non-profit organisation Business Innovation Program (BIP) in cooperation with the Center for Entrepreneurship in Osijek conducted the tender for the best business plan among pupils of 5 high schools. The program was funded by the Norwegian Development Agency (NORAD). Project ECO NET (www.econet-see.com) is jointly implemented by the Government of the Republic of Croatia (through the Ministry of Science, Education and Sport, i.e. Agency for Vocational Education and Training and Adult Education) and the Government of the Republic of Austria. Government of the Republic of Austria is represented in this project by: Ministry for Education, Arts and Culture, association KulturKontakt Austria and Austrian Agency for International Cooperation – ADA. 8 Graduate Program in Entrepreneurship was started in 2000 at the Faculty of Economics in Osijek with financial support of the

Open Society Institute New York.



Basic information on entrepreneurial activity in Croatia – GEM survey

2002 2004 2006 2008 2010

TEA –

CROATIA

3,62 3,73 8,58 7,59 5,52

TEA – AVG 7,99 9,42 9,43 10,49 11,72

TEA - OPP 2,18 2,04 4,41 5,43 3,52

TEA OPP –

AVG

5,62 6,81 6,82 7,15 7,80

TEA NEC 0,85 1,57 3,81 2,16 1,78

TEA NEC –

AVG

1,95 2,34 2,35 2,88 3,52

OPP/NEC –

motivational

index

2,56 1,3 1,16 2,51 1,97

OPP/NEC –

motivational

index - AVG

5,73 5,55 6,06 4,29 3,40

TEA MALE 5,4 5,76 12,35 10,76 7,15

TEA MALE –

AVG

10,26 11,61 11,38 12,97 13,71

TEA FEMALE 1,83 1,74 4,87 4,47 3,91

TEA

FEMALE –

AVG

5,69 7,18 7,51 8 9,65

Avg values are related to all countries involved in GEM survey in the specific year

Legend:

TEA – total entrepreneurial activity (number of adults 18-64 year old, starting own business in last 42

months

TEA Opportunity – total entrepreneurial activity – those who started their own business because of

identified opportunity

TEA Necessity – total entrepreneurial activity – those who started their own business because of

necessity (being forced to enter selfemployment, e.g. they lost job…)

OPP/NEC – motivational index showing the ratio between those starting the business because of

opportunity recognition and those who were forced to do it (necessity)

Source: GEM database, CEPOR, 2002-2010

In all surveyed years, entrepreneurial activity in Croatia was lower than in all countries participating in

GEM survey. But, the more disturbing information is very low motivational index showing that the

number of those who started the business out of opportunity or necessity is almost the same.

Benchmark information is that in Slovenia such ratio is 6.9, and in Norway 20 – i.e. in Slovenia there are



6.9 times more opportunity based entrepreneurs or in Norway even 20 times more. Opportunity based

entrepreneurs are more optimistic, they look at their venture in longer horizons than necessity based

entrepreneurs. From the policymakers side, it is important to provide such a climate in country to have

more opportunity based entrepreneurs than necessity based entrepreneurs.

Along this discussion it is important to identify some features of entrepreneurs in Croatia:

Table 7 – Features of entrepreneurial capacity of individuals in Croatia, 2010

Features Croatia All GEM countries The best

Entrepreneurial capacity (knowledge,

skills)

2.28 2.41 3.54 Iceland

- knowledge, skills 2.28 2.41 3.54 Iceland

- motivation 2.97 3.45 4.35 Israel


There are three other source of entrepreneurial activity in a country, which should be recognized

especially by policymakers, educational institutions and researchers: small businesses with growing

potential, innovations and women:

Table 8 – Specific sources of entrepreneurial activity in Croatia, 2010

Sources of entrepreneurial activity Croatia All GEM countries The best

Growing small businesses 2.59 2.91 4.02 Ireland

Valuation of innovation

- from the company’s point of view 2.74 3.12 3.94 Taiwan

- from the consumer’s point of view 3.43 3.57 4.09 Iceland

Public attitude toward female

entrepreneurs

2.83 3.13 4.42 Iceland


4. Recommendations: monitor, benchmark, evaluate, change

Croatian policies and programs related to SMEs must be aligned with the Small Business Act for Europe

defined by EU in 2008, which reflects the political will of the European Union to recognize the key

importance of small and medium enterprises in the EU economy, because its relevance for employment

and generating GDP. SBA Fact Sheet9 for Croatia in 2010/2011 shows that Croatia reaches the European

9 SBA Fact Sheet represents European Union’s annual report that analyses changes in trends in the environment and regulatory

framework on the national level for the small and medium enterprise sector. Areas of analysis are: Entrepreneurship, Second



Union in two of six areas (for which data were available out of ten in total), and these are Responsive

Administration and Skills and innovation. In eight of ten areas Government of the Republic of Croatia is

implementing changes in regulatory framework in order to harmonize it with principles of the Small

Business Act. In comparison with previous periods Croatian progress in the process of harmonization is

visible in almost all policy areas in which Croatia lagged in comparison with the European Union.

However, there are areas where progress was minimal, which necessarily demand greater intensity of

changes: Second chance (speed and cost of bankruptcy), Think Small First (pressure of regulatory

framework on enterprises) and Internationalisation (bureaucracy as obstacle for exporters)10

.

In 2010 the GEM project identified lack of consistent government policies focused on issues of small and

medium enterprises as one of the biggest weaknesses of the SME sector during all years of

implementation of GEM survey in Croatia. Lower grade of Government policies (1.96 in 2010) than the

grade given to Government programs (2.49 in 2010), as well as in all previous years, only confirms the

need for urgent reaction and development of consistent policies focused on the SME sector.

Therefore, there is a need to implement consistently and continuously the chain of activities:

monitoring, benchmarking, evaluating and acting accordingly, i.e. performing needed changes.

References:

Corruption Perception Index, Transparency International, 1999-2010

Doing Business, World Bank, 2010-2011

Global Entrepreneurship Monitor database, CEPOR, Zagreb, 2002-2010

Global Competitiveness Report, World Economic Forum, 2002-2010

SBA Fact Sheet Croatia 2010/2011, European Commision – Enterprise and Industry, 2011

SME Report for Croatia 2011, CEPOR, Zagreb, 2011

chance, Think Small First, Responsive Administration, State aid and Public procurement, Access to finance, Single market, Skills and innovation, Environment and Internationalisation. 10

SBA Fact Sheet Croatia 2010/2011, European Commission Enterprise and Industry, 2011


A project supported by the European Union being implemented by a consortium led byA project supported by the European Union being implemented by a consortium led byA project supported by the European Union being implemented by a consortium led byA project supported by the European Union being implemented by a consortium led by ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)ACE International Consultants (ES) and including DTI (DK), GDSI (IRL) and Hauska & Partner (HR)




Introductory Comments : Afternoon Session

Robert D McKean, Team Leader, IAENL Project

SME Observatories : The Basic Facts

INTRODUCTION

The importance of SMEs and the small business sector in economic life is no longer questioned. Gone

(or largely gone) is the pejorative view of small business people as crooks and shysters exemplified

here on Croatian TV by that lovable scamp Delboy! The contribution which SMEs can make in terms

of employment is critical for all countries and some of the small enterprises of today will become the

large firms of the future.

In the EU (27) SMEs represent more than 98% of all enterprises with some 20.7 million firms and more than 87 million people employees or 67.4 per cent of all jobs in the non-financial business economy in

2012. 92.2% of SMEs are micro firms with fewer than ten employees. In Croatia equivalent figures are 99.5% of all enterprises, 92.5% for micro-enterprises share in SMEs, and 50% of all jobs When such enterprises occupy such a position it is beyond any doubt that up to date information has to be collected on them. Their role in the performance of our economies is so important for us to be in the dark about them. The job creating potential of SMEs in a time of austerity and long-term de-industrialisation, which has seen many large employers in traditional sectors shed jobs, is what attracts policy makers to SME promotion, that, and the flexibility which the small firms offer against larger employers. Policy makers have responded to these opportunities by trying to put in place a supportive environment to facilitate further SME development and to elaborate strategies, programmes, plans and policies to provide support to small enterprises. In order to be able to elaborate effective policies it is necessary for policy makers to have the best possible information at their disposal. This calls for the collection, processing, publication, and analysis of information on SMEs and the SME sector. Most of this information is quantitative in nature and is expressed through descriptive statistics. Frequently this statistical information is collected by statutory bodies as part of their competences and responsibilities (the tax authorities, business registrations courts etc.). It commonplace nowadays for SME information to be collected by National Statistical Offices (in Croatia the Central Bureau of Statistics), however it is unlikely that the databases will ever be fully comprehensive, in view the costs of collection, so there will always be a need to supplement this information by collecting information through surveys. SME OBSERVATORIES AND OBSERVATORY TYPE FUNCTIONS The idea behind the SME Observatory is that it sits over the SME sector and looks on to note changes which are taking place over time, in the same way that an astronomical or stellar observatory looks over our universe to detect changes in it. So the focus of an SME Observatory is the SME sector and the changes which are taking place within it. To be able to benefit from an awareness of the changes which are taking place in the sector an Observatory has to report from time to time. The production of an annual report on the state of the SME sector is therefore them main activity of any SME Observatory, making it a key observatory function. The regular publishing of an observatory report creates possibilities to identify trends and patterns which can emerge over time, however for such analyses continuity in terms of the statistical information in required. This means that areas of SME performance which require information which is not collected as a matter of course by the National Statistical Authorities cannot be included in such comparative static analysis.






There are a number of areas which fall into this category, such as innovation in SMEs, recruitment and employment of staff with specific skills, and the extent of small business links with HEIs and research institutions, amongst others. Where information is sought in relation to these and other similar issues, then survey work is usually called for. Such survey work is frequently commissioned or undertaken by observatories depending upon how cash rich the organisation is and what skills are to be found amongst its staff. The publication of the results of such ad hoc analysis can form part of the annual Observatory Report or can be the basis for a special Observatory report. Decisions on when such surveys should be repeated, so that change can be identified, will depend upon the resourcing available but it is unlikely to be on an annual basis. Another option open to those involved in observatory work is to take on commissioned research in which case revenue will be generated from the exercise. In such cases, the nature of the work will not be determined by those involved in the observatory work but by the client and in extreme cases conditions could be imposed by the client about the use of the information once the work has been done. Such tensions may be minimised when the Government or public agencies arte the client but will never be totally absent.

More detailed treatment of the outputs of observatories will be presented by our international speakers, Professor Rebernik (with specific reference to Slovenia), and Mr. van der Horst, as a result of his detailed knowledge of the network of EU supported SME Observatories.

ORGANISING SME OBSERVATORY WORK

The work which has taken place so far in Croatia (the publication of the Croatian SME Observatory Report 2012) is the product of the “Improvement of Administrative Efficiency on National Level” project with support from MEC and HAMAG INVEST. However this is a fixed duration technical assistance project, which must end (3

rd July 2013), begging the question what happens afterwards, or how to

sustain the work of the Observatory?

In this particular instance, there is no observatory, as such. The project has arranged for resources (expert time, funds to purchase data and document printing) to be made available in order that the first annual report could be produced. This will be repeated again for 2013, with the Croatian SME Observatory Report 2013 being launched in June 2013. Indeed we are already working on this.

What will happen when the project has ended? This is the critical question, and it is to help us all, but primarily, the Ministry, to consider possibilities, that is the raison d`être for this conference. A number of possible options come in to consideration: (i) the MEC continues to undertake Observatory work, replacing project manpower with Ministry staff; (ii) the Ministry creates a formal structure with freshly recruited, dedicated staff; (iii) the Ministry supports Observatory work which is undertaken by a team comprising of Ministry staff and researchers from outside government; and, (iv) the Observatory work takes place completely outside of Government.

The IAENL Project and the MEC have put at the disposal of the conference audience 2 international experts with direct, practical SME Observatory experience. It is our expectation that the speakers will draw upon their extensive experience provide some recommendations concerning the pros and cons relating to options (i) to (iv) above, and of course, the question and answer session provides you, in the audience, with the opportunity to directly seek an opinion of these issues.

In the case of SME Observatories there is some experience to consult in search of some help to consider the relevance of these options to the situation here in Croatia. There has been little interest in the establishment of new dedicated Observatory structures. Only in Greece does such an organisation exist (the Greek National SME Observatory). This organisation was established by EOMMEX (the not for profit Greek Organisation for Şmall and Medium Enterprises and Handicrafts) under the framework of the Competitiveness Operational Programme. EOMMEX, itself, was under the responsibility of the Ministry of Development.






The project team tried its utmost to have a speaker from the Greek National SME Observatory here today. However, EOMMEX has recently been closed down, the sitting Director of the Observatory left her position, and our attempts to encourage the new Director to attend today`s conference did not succeed.

In Russia, an SME Resource Centre was established in 1999, also by an EU (Tacis) technical assistance project. A SME Observatory Report was published for 2001 (with support from a second Tacis technical assistance project) however no further such reports were produced. The Resource Centre, however, continues to carry out SME research. The Russian SME Resource Centre now operates as foundation carrying out paid research for clients and various studies and projects on a consultancy basis.

By far the richest experience in this field arose out of the succession on contracts let by the EU (DG Enterprise and Industry) to produce the EU SME Observatory Reports. 8 such reports were produced between 1993 and 2004. These reports were the distillation of the information collected and reported on by teams of researchers in each of the participating countries (EU, EFTA, Switzerland and EU candidate countries).

There was no uniformity regarding the way these researchers were organised to undertake this observatory work. Taking 2003 as an example, involved in the collection and presentation of country SME information were 20 research/policy institutes (often based in universities), 7 research companies, 1 NGO, and 5 representative bodies.

Over this period, the work to which we are referring was the subject of a contract which was managed by EIM Business and Policy Research through the European Network for Social and Economic Research (ENSR). The Manager for this contract was Mr. Rob van der Horst, who we are lucky enough to have present with us today.

HOW TO DEVELOP A CROATIAN SME OBSERVATORY

Is there a need for a new discrete institution? This question is difficult to answer, without knowing what it would involve in terms of an annual budget and it would be staff costs which would be the largest budgetary component. So we shall look to the presentations of Professor Rebernik and Mr. van der Horst, for some enlightenment here.

Of course the number of staff and the expertise required will depend upon the quantity and the quality of work to be done/outputs to be produced, another issue on which we look to our speakers for some guidance.

Since funding will always be the key issue and we have just raised the question of the Observatory’s outputs we will be looking to our speakers to raise the issue, not just of the overall funding, but also the extent to which funding can be raised by sales of products and services, the danger here being that the observatory would be in danger of becoming a (research based) consultancy company if it adopts revenue maximisation as its defining objective.

There are many questions to be answered before the future, in Observatory terms, can become clearer. Some, but not all of the questions, have been flagged up in this short introduction. Others will be raised in the presentations of Professor Rebernik and Mr. van der Horst, and yet more you will ask during the Q and A session.

If this conference can provide some views in relation to the key questions and some recommendations for the future of observatory type work in Croatia, it will have fulfilled its expectations.

It is now up to us to make sure it does.

Thank you.



Slovenian Entrepreneurship Observatory

Prof. Dr. Miroslav Rebernik

Institute for Entrepreneurship and Small Business Management

Faculty of Economics and Business, University of Maribor, Slovenia

1. European background of Slovenian Entrepreneurship Observatory

The first Slovenian Entrepreneurship Observatory was published in 2000. At that time, the European

Observatory for SMES was the leading and most reliable source of information on European SMEs and

entrepreneurship, and the Slovenian Entrepreneurship Observatory was largely modelled after it in the

content and structure of the research. Because of the impact of European Observatory for SMEs on the

structure and content Slovenian Entrepreneurship Observatory we first give a brief overview of its

evolution in order to better understand the context in which we started to make our analysis of

entrepreneurship in Slovenia. When European Observatory was transformed to Small Business Review

with SBA Fact Sheets, Slovenian Entrepreneurship Observatory adapted accordingly.

1.1. European Observatory of SMEs

The Observatory of European SMEs was established at the end of 1992 by the European Commission to

monitor the economic performance of SMEs in Europe. The overview of the situation in the SME sector

was published in annual reports until 2004. Today, these reports still contain valuable information on

SMEs at that time, not only for researchers and economists interested in SMEs and entrepreneurship

but also for policy-makers. The reports has been coordinated by EIM and prepared in co-operation with

the European Network for Social and Economic Research (ENSR), where national members provided

country expertise. Reports 1 to 5 are supposedly still available from Panteia/EIM. The Sixth (2000),

Seventh (2002) and Eighth (2003) Observatory - can be downloaded from the website of the European

Commission (http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-

observatory/index_en.htm .

In Table 1, the Content of European Observatory of SMEs 1992 – 2000 is displayed and can still serve as

a reminder for areas that are still important for monitoring the SME performance today.

Table 1: Content of European Observatory of SMEs 1992 - 2000

1st

2nd

3rd

4th

5th

6th

SME demography x x x x x x

Business environment x x x x x

SME policy x x x x x x

The impact of the common market x x x x x

Business dynamics and entrepreneurship x x x x x

Labour market and employment x x x x x x



Capital and finance x x x x

Technology and innovation x x x x

Policy issues x x x x x

Regional aspects x x x x

Interdependence between large and small companies

Cooperation between SMEs x x x

Education and training x

Infrastructure x x

Legal aspects x

Management in SMEs x

Succession in SMEs x

Working conditions x x

External information and counselling x

Failures and bankruptcies x

Export and internationalization x x x

Crafts • x x x

Administrative burdens •

After-sale services •

Women in SMEs •

Cooperatives, associations and non-profit organizations •

Tourism •

Environment •

Functioning of the market for products and services x

Access to finance x

Electronic commerce x

Access to community programs x

Social economy x

Vocational training •

Monitoring •

• = In depth thematic studies

After the 6th Report the methodological approach to overview and analysis of European SMEs has

changed. Instead of one comprehensive report, a series of thematic reports were prepared and

published. In 2002 topics were gathered around two broad themes, i.e. SMEs: the real giants of the

European economy; and SMEs: drivers of competitiveness. Within these frameworks, following

separates were published in 2002: Highlights from the 2001 Survey, SMEs in Europe, including a first

glance at EU Candidate Countries, Regional Clusters in Europe, European SMEs and Social and

Environmental Responsibility, Business Demography in Europe, High Tech SMEs in Europe, Recruitment

of Employees: Administrative Burdens on SMEs in Europe and, Highlights from the 2002 Survey.

The next Observatory was again carried out by the ENSR (the European Network for SME Research),

coordinated by EIM and published either in 2003 or 2004, and consists of a series of reports on SME-

related issues: Competence development in SMEs, SMEs and Access to Finance, SMEs and the

Liberalization of Network Industries: telecommunications and electricity markets, Internationalization of



SMEs and Co-operation, The Impact of EU Enlargement on European SMEs, SMEs in Europe 2003 and

Highlights from the 2003 Observatory.

2007 Observatory survey was carried out in 2006/2007 in countries participating in the Multiannual

Program for Enterprise & Entrepreneurship (27 Member States of the EU and Norway, Iceland and

Turkey. For the first time in existence of the Observatory, large-scaled enterprises (employing at least

250 persons) were included in the sample in order to allow an identification of specific performances,

behaviours and problems of SMEs. The survey was carried out under the framework of the Flash

Eurobarometer survey and has a different methodology (interviewing instead of statistical data) than

previous ones. It was primarily enquiring about general characteristics of firms, perceptions on business

constraints, competition and human resources problems and data on internationalization and

innovation. Gallup interviewed 16,339 SMEs (17,283 enterprises in total) altogether.

1.2 SME Performance Review & SBA Fact Sheet

Since 2008 the Observatory of European SMEs has been replaced by the SME Performance Review

(http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm)

which is supposed to represent a comprehensive source of information on the performance of SMEs in

Europe. It uses range of indicators, focused around different areas in the SBA Action Plan. It represents

one of the main tools employed by the European Commission to monitor and assess Member States’

performance in implementing the Small Business Act. The SBA introduces and relies on ten principles:

Entrepreneurship, Second chance, Think small first, Responsive administration, State aid & Public

procurement, Access to finance, Single market, Skills & Innovation, Environment, and

Internationalization. For each of these principles, a series of indicators is developed (See Annex I at the

end of paper)

2 National background of Slovenian Entrepreneurship Observatory

2.1. Evolution from SME policy to entrepreneurship policy

When Slovenia became an independent country it had to develop its own entrepreneurship and SME

policy. Theory indicates that SME policy focuses on existing companies, while entrepreneurship policy

focuses more on entrepreneurs who are in the process of developing new businesses or have early stage

companies. Therefore, the entrepreneurship policy is a broader concept, which–according to Lundstrom

and Stevenson (2002, 2005)—includes measures to stimulate entrepreneurial culture, promote

entrepreneurship, and support nascent and early stage entrepreneurs. According to the framework

proposed by Lundstroem and Stevenson (2002), an overlap between the two policies exists. An overview

of the past and present policies would show a shift from SME policy toward entrepreneurship policy that

was predominant in the first years after Slovenia’s independence, thereby preparing the overview of



covered entrepreneurship policy areas in a particular time period using the six areas proposed by

Lundstroem and Stevenson (2005), as summarized in the Tables 13.2 through 13.4:

• Entrepreneurship promotion;

• Entrepreneurship education;

• The environment for SMEs and start-ups;

• Start-ups and seed capital financing;

• Business support measures for SMEs and start-ups; and

• Target group strategies.

To better understand the development of entrepreneurship policy and supporting institutions in

Slovenia, it is important to understand that not only entrepreneurship policies and institutions had to be

built in Slovenia, but also the state itself. The timeline in Figure 1 depicts three periods, with some

common characteristics highlighted. The first period, between 1991 and 1996, was a period of

establishing all the necessary institutions and subsequently introducing the legislation forming the

national state and a fully-fledged market economy. The second period, between 1997 and 2003, was

heavily characterized by the EU accession process and harmonizing Slovenian legislation with Aquis

communitaire. The third period, after 2004, saw the establishment of a more coherent SMEs and

entrepreneurship policy.

Figure 1: Development of entrepreneurship and SME policy in Slovenia 1991 - 2009



In Table 3 the development of SME and entrepreneurship policy in Slovenia in different periods is

depicted by displaying 6 different policies and the intensity of their implementation.

Table 3: Entrepreneurship policies in the first period (Rebernik, Bradač 2011)

Entrepreneurship policies in the first period

Policies Not covered Partially

covered

Fully

covered

Entrepreneurship promotion x

Entrepreneurship education x

The environment for SMEs and start-ups x

Start-ups and seed capital financing x

Business support measures for SMEs and start-ups x

Target group strategies x

Entrepreneurship policies in the second period


covered

Fully

covered







Entrepreneurship policies in the third period


covered

Fully

covered







2.2 Deficit in evidence based policy-making

At the end of the nineties, there was a big deficit in evidence based policy making, as well as supporting

the development of SMEs on the basis of relevant data. The data were analysed for companies but not

for other economic subjects (e.g. individual entrepreneurs and crafts), because the data was not

harmonized due to different accounting statements and standards. Other deficits that we had

recognized were mainly in three areas:

• Absence of reliable annually updated detailed data on Slovenian SMEs;

• No analysis of (sporadically) available data with data that was available in the area of the

European Union;



• Absence of independent studies that would serve as a basis for creating appropriate measures

for promoting entrepreneurship and small business development in Slovenia in accordance with

the entrepreneurship policy in the European Union.

We estimated that the researches of SMEs in Slovenia at that time were:

• Highly fragmented and unsystematic;

• The data were gathered in a more or less amateur way;

• The gathered data, if they have been available, were not made accessible to potential

researchers and to the public;

• Majority of reports in the field of entrepreneurship and SMEs were usually prepared by

governmental and quasi-governmental institutions and not by the independent research

institutes;

• The rare representations and analysis of SMEs were not published in a form that would be

accessible to the European professional audience.

Considering these deficits and drawbacks, it was hard to expect serious and reliable proposals for

designing elements of economic and policy measures, goals and strategies of development on the basis

of recognizing what’s actually happening in the field of SMEs in Slovenia. It was also difficult to expect

coordinated functioning with the European Union if the collection, handling and analysis of data and the

objectives of potential research in this field was not comparable to studies and analysis that the

European Network for SME Research did and published annually in the European Observatory for SMEs,

which was the basic source of information about the SME sector in the European Union.

These facts were the main reasons to take initiative and go to the Ministry of the Economy, suggesting

that our Institute for Entrepreneurship and Small Business Management could make a possible model

for monitoring entrepreneurship in Slovenia. We argued that such a model would enable reliable

analytic results, and that on the basis of those results we could achieve comparability with data and

analysis in the European Observatory of SMEs.

3 Funding of the Slovenian Entrepreneurship Observatory

From its very beginning, the Slovenian Entrepreneurship Observatory was financed by public money on

the basis of competing and winning the tenders published either by the Ministry of Economy and/or by

the National Research Agency. In all the years, the competition to win the tender was very fierce as the

public research money for this type of research was always very scarce. Even though different

governmental bodies and ministries have used our data and analyses extensively and there has always

been a very satisfactory acceptance and excellent echo in the media, we’ve unfortunately never

succeeded in our attempts to become a part of the budget. Positioning of financing the research in the



state budget would enable us to build a more stable structure for the “production” of Observatories but

this was not the case.

In 1999, the Slovenian Official Gazette published a public tender for research studies and projects in the

field of small business. The tender was issued by the Ministry of Small Business and Tourism and was a

good opportunity for realization of our plans. We applied with the project proposal Conceptualization of

the model of collecting, analysing and incorporating of data on Slovenian SMEs in the European

Observatory for SMEs. The main tasks of the project were focused on immediate applicability of project

results:

• To create a model for sufficient overview of the situation in the area of entrepreneurship and

small business, similar to the one already established in EU members.

• To prepare foundations for annual reports on Slovenian SMEs, in the first step compatible to the

European Observatory of SMEs and in the second step as its integral part.

• Create possibility that we could make proposals of evidence based entrepreneurship policy

measures exploiting the possibilities within the European Network for SME Research.

The main activities of the project that was a starting point for the Slovenian observatory for SMEs were

twofold:

• To explore the commercial and non-commercial sources of information that are already

collecting or processing any data and information in the field of small business in Slovenia.

• To explore the methodology of recording and monitoring the data used by ENSR in the process

of preparing the European Observatory for SMEs and harmonize our methodology to enable us

detailed analysis and comparison of Slovenian SMEs and entrepreneurship with other EU

members.

The results of the one-year project were well accepted by the Ministry and in 2000 we received

financing for another project called Comparison of Slovenian entrepreneurship in the light of European

Observatory for SMEs – The 6th Report. Within this project we created and published the first Slovenian

Entrepreneurship Observatory in which we made the analysis of the Slovenian SMEs adequately

comparable to the one in European Observatory for the first time.

In the following years, the Institute has been creatively combining the following funding mechanisms in

Slovenia provided by the Slovenian Research Agency and (partly) the Ministry of Economy:

• Research programs (http://www.arrs.gov.si/en/progproj/rprog/predstavitev.asp) represent an

area of research, which is relevant and useful for a longer period of time and which is of such

importance for Slovenia that there is a national interest, as defined in the National Research and

Development Programme, for long-term research by the programme group in this area.

Research programmes are carried out by programme groups in public research institutions,



universities, independent education institutions and programme groups organised by public and

private legal entities on the basis of concessions.

• Research projects (http://www.arrs.gov.si/en/progproj/rproj/predstavitev.asp) are of three

types: basic projects covering experimental or theoretical work undertaken primarily to acquire

new knowledge, without any particular application or use in view; applied projects as original

investigation undertaken in order to acquire new knowledge. It is however, directed towards a

specific practical aim or objective; and post-doctoral projects.

• Target research programs (CRP) (http://www.arrs.gov.si/en/progproj/crp/predstavitev.asp)

was established in 2001 for inter-sectorial cooperation in planning and implementing networked

R&D projects for specific areas of public interest. Research within a CRP is problem-oriented and

targeted towards improving Slovenia's competitive capacity, which should form the basis for

successful development and an increase in the standard of living of its inhabitants. It takes into

account the basic guidelines from the Slovenian Economic Development Strategy on the

sustainable development of Slovenia and the interconnection and dependence of economic,

social and environmental dimensions of development.

Mixed sources of funding Slovenian Entrepreneurship over the last decade are displayed in Table 4.

Table 4: Financing of Slovenian Entrepreneurship Observatory in the period 1999 - 2010

Sponsor Period Project name

Ministry of Economy 1999

Conceptualisation the model of collecting, analysing and

incorporating of data on Slovenian SMEs in the European Observatory for SMEs

Ministry of Economy 2000 Comparison of Slovenian entrepreneurship in the light of

European Observatory for SMEs – The 6th Report.

National Research Agency 2001 - 2004 Slovenian Entrepreneurship Observatory (a)

National Research Agency,

Ministry of Economy 2001 - 2004

Slovenian Entrepreneurship Observatory and inclusion in

Global Entrepreneurship Monitor (b)


Ministry of Economy 2003 - 2006

Slovenian Entrepreneurship Observatory and Global

Entrepreneurship Monitor (b)


Ministry of Economy 2004 – 2006 Regional Entrepreneurship Monitor and Social Values (b)

National Research Agency 2004 - 2008 Entrepreneurship for Innovative Society (c)

Chamber of Crafts 2006 Co-financing of GEM Slovenia 2005 and Slovenian

Entrepreneurship Observatory 2005


Ministry of Economy 2006 – 2009

Providing the inclusion of Slovenia in global and European

entrepreneurship monitoring via Global Entrepreneurship

Monitor and Slovenian Entrepreneurship Observatory (b)

National Research Agency 2009 - 2014 Entrepreneurship for Innovative Society (c) (a)

Research project (b)

Target research program (c)

Research program

4 The mission of the Slovenian Entrepreneurship Observatory



4. 1 Mission and objectives

The main mission of the Slovenian Entrepreneurship Observatory has always been:

• To contribute to a better understanding of entrepreneurship specifics in Slovenia;

• To provide accurate information on Slovenian entrepreneurship comparable with information

from the European Observatory of SMEs, and lately with the SBA Fact Sheet;

• To provide evidence on Slovenian entrepreneurship that would be valuable for policy makers;

• To use state-of-the-art knowledge from the entrepreneurship literature and other research that

we are engaged in to suggest policy measures;

• To understand that basically the ultimate beneficiaries are entrepreneurs and SMEs, not policy

makers or researchers.

According to our mission and set objectives, we have selected a limited number of topics to make more

detailed analysis each year (see Table 5). A standard topic each year has always been the topic on SME

demography and performance of Slovenian companies compared to the EU, while the other topics were

selected on the basis of past research results and/or suggestions from different stakeholders (policy

makers, entrepreneurs, media, researchers, etc.)

Table 5: Overview of topics in the Slovenian Entrepreneurship Observatories in period of 2000-2012

Contents of Slovenian Entrepreneurship

Observatories 2000-2012 1

st 2

nd 3

rd 4

th 5

th 6

th 7

th 8

th 9

th

Business demography and performance of

Slovenian companies compared to EU x x x x x x x x x

Administrative burdens x x

Recruitment problems x

Innovativeness of SMEs x x x

Taxes x

Social responsibility x

Banking system and SMEs x

Women entrepreneurship x

Clusters and regional innovation systems x

Environmental responsibility x

Competencies and learning in SMEs x

Growth aspirations x

Family business x x x x x

Succession issues x

Technological modernization and ISO standards

Cooperation between SMEs and large companies x

Internationalization x

Overview of Slovenian publications on SMES x

Personal traits of entrepreneurs x



Absorption capacity of SMEs for innovation and

technology transfer x

Business failures x

Standardisation x

Impact of entries on economic performance x

Impact of prices and efficiency on firm

performance x

Regional analysis of early stage entrepreneurs x

Outsourcing x

Networking of SMEs x

Mapping cultural industries in Slovenia x

Innovativeness in SMEs x

Common market as opportunity for SMEs x

4. 2 A comprehensive model of an insight into Slovenian Entrepreneurship

To get a more comprehensive insight in all the phases of the entrepreneurship, we have joined the

global project Global Entrepreneurship Monitor in 2002 (see www.gemconsortium.org). After joining the

GEM, we conceptualized the entrepreneurship research at our Institute according to the core research

model of the GEM (Reynolds et al. 2005). The model shows that the economic and social development is

achieved not only due to established companies but also because of the churning process in which new

entrepreneurs are emerging and new companies are born, thus contributing to the permanent “creative

destruction”. Our research team investigates both arms of the model, as depicted in Figure 3.



Figure 3: GEM based conceptual model of researching entrepreneurship at the IPMMP

In this way we explore nascent, new and established entrepreneurs and companies and exploits two

major databases:

• The upper arm of the model investigates established companies and is based (a) on data from

the Eurostat and national AJPES, and (b) on data collected with ad hoc interviews tailored to a

particular topic in a given year. The data are harmonized with the SBR and its Fact Sheets.

• The lower part of the model is researching within the GEM project and is based on the Adult

population Survey and interviews with national experts. All GEM data are harmonized by

coordination team within GERA.

In such a model, incorporating two sets of networks and harmonized data, a kind of double international

comparison guarantees that the results and suggested policy implications are in line with the current

entrepreneurship and SME research.

5 Institutional and organizational issues

5 1 Status of the Observatory

Slovenian Entrepreneurship Observatories are being produced and published by the Institute for

Entrepreneurship and Small Business Management at the Faculty of Business and Economics. The

Faculty was established in 1959 and is one of 17 schools within the University of Maribor. Currently,

there are 110 people employed at the FEB, two thirds of which are teaching and research staff. Research



and consulting at the Faculty of Business and Economics is performed at different Institutes which are

organised as units within Faculty.

Institute for Entrepreneurship and Small Business Management is specialized in entrepreneurship and

small business research, teaching and consulting. Its main clients are in the government (Ministry of

Economy, Ministry of Higher Education and Technology, National Research Agency), governmental

agencies, policy making bodies and companies. Institute is partnering with the European Network for

Social and Economic Research, providing national expertise in many projects run by the network. It is

also an active member of the GERA – Global Entrepreneurship Research Association and some other

research networks. All members of the institute are engaged in entrepreneurship education and for two

decades, we’ve successfully run entrepreneurship courses and programs on undergraduate, graduate

and doctoral level. The undergraduate programme in Entrepreneurship established in 1992 was the first

university degree programme in entrepreneurship in Slovenia, with a unique value of incorporating

mentoring companies in the program.

The core team of the Institute consists of 11 people. Beside their teaching assignments, all members of

the Institute are active researchers, the majority of them of the highest rank. They are involved in

different social studies and research projects that include surveys, data collection, interviewing national

experts, data analysis, questionnaires, sampling etc. The most comprehensive longitudinal international

research project currently led by the Institute is Global Entrepreneurship Monitor Slovenia that we

joined in 2002. Since 1999 we annually run the Slovenian Entrepreneurship Observatory which, on the

basis of questionnaire surveys and company data analysis, provides overview of entrepreneurship

activity in Slovenia and suggests policy making actions. Members of the Institute are also involved in the

development of different national policy making and strategic documents. As the Institute is a

constituent part of the university, its core capabilities can be enlarged by inclusion of other members if

such a capability is needed in a particular project.

Bibliography for members of the Institute can be downloaded from the COBISS system

http://cobiss2.izum.si/scripts/cobiss?ukaz=BASE&bno=99999&id=1735376719100457. More details and

some research publications can be downloaded from http://epfip.uni-mb.si.

5 2 Advantages and disadvantages of Observatory status

As it is legally a constituent part of university structure, the Institute is in no way legally connected to

the governmental structure. We find such a status as an advantage whose main benefits can be summed

up in the following:

• independence of research work;

• freedom to provide critical assessments of the entrepreneurship in the country;



• possibility to cooperate with governmental civil servants on the basis of research results,

avoiding possible issues of subordination;

• avoiding the danger that the Observatory could get bureaucratized;

• suggesting policy actions which we consider to be most appropriate in a given year without

regard to political situation, election period, popularity, or similar;

• possibility to be an active player in different academic, professional, entrepreneurship and other

networks either as individuals or as institute, exchanging valuable information important for our

research work.

Nevertheless, there are some drawbacks that must be also considered. We find the main drawbacks of

such an institutional status as ours to be the following:

• permanent struggle to provide funding (see the chapter on funding);

• some data or information important for research are often unavailable or hard to obtain;

• databases must be bought on commercial basis;

• in spite of their availability and relevance, research results are not always considered when

governmental bodies are drafting policy measures.

5 3 Observatory management structure

The management structure of the Observatory is a combination of an ad hoc project structure and a

network style of organizing the research. Within the Institute, there is no full-time employed staff that

works only on the Observatory. In each given year, basically all members of the Institute are engaged in

different research topics that may find their publication in Observatory.

The leadership is provided by the head of the Institute who is at the same time also the academic leader

of the team. The issues and contents of the next cycle Observatory are discussed at regular meetings of

the Institute, where we also decide what will be the main topics that will be researched. When the

topics are selected and chapter authors determined, the authors do the research. There are two co-

editors of Observatory who take care of all procedures typical for any scientific monograph or journal.

For every chapter, the author of the chapter takes full responsibility (and also the academic credit). As

all authors are seasoned researchers, special quality control is usually not needed. Nevertheless, near

the end of the cycle, also due to the academic nature of work, specially assigned reviewers are asked to

do the review.

Speaking in numbers of engaged FTE researchers, we estimate that 3 full time senior researchers and

1/2 of administrative staff can do the job – speaking in terms of research hours only. Speaking in terms

of persons, the necessary skills and knowledge must be provided by more researchers, especially if we

want to cover all 10 areas of the Small Business Act what is our strategic focus. For example, in

Slovenian Entrepreneurship Observatory 2008 which was published under the topic Dynamics of



Slovenian Entrepreneurship, as many as 11 researchers (some of them from other institutes) were

engaged to cooperate on different topics.

Activities, results and target audience

As already mentioned, all members of the Institute are also lecturers alongside being active researchers,

so their work on the Observatory is always connected to their academic activities. Along with publishing

annual or bi-annual Slovenian Entrepreneurship Observatory monographs, we established a book series

under the same name where other publications are also being published (e.g. annual Slovenian GEM

reports, book Ageing as Resource, etc). Observatory results are regularly used in other academic papers

of the team, in the classroom and in providing information for different target audiences.

When the annual Observatory is published, we always convene a well attended media conference and

also send free copies of the book to selected Slovenian public and university libraries, as well as to a

comprehensive list of media. We don’t consider policy makers to be the only beneficiary of our research,

but also students, researchers and general public who would have an interest in the entrepreneurship in

the country. (Even though Observatories, except in two cases, are not published in English, when

finishing this paper the Google returned 1,450 hits on Slovenian Entrepreneurship Observatory and

6,680 hits on Slovenski podjetniški observatorij.)

We are regularly asked by the media to comment on particular issues of their interest or to contribute a

commentary. We are often invited to participate on different conferences, workshops or round tables,

which gives us an opportunity to disseminate our research results and suggest policy-making moves. Our

results are regularly used in policy making documents, nevertheless we still miss a more active interest

of policy makers to cooperate with academia and invite us or other researchers to be engaged in

designing policy measures.

Conclusions

Ten years of working on the Slovenian Entrepreneurship Observatories have taught us the importance of

the quality of primary data, because they also guarantee the quality of analysis and results that are

provided by secondary data and information. Any SME and entrepreneurship analysis should always

include all economic entities on the market, no matter whether they are companies, crafts, individual

entrepreneurs, etc. namely, they all share the same characteristics: they carry out economic activity and

contribute to the economic wellbeing of the country. Therefore, one of the important tasks of policy

makers is to provide consistent and coherent databases on these economic activities, taking into

account the compatibility with international databases and statistical information (Eurostat, OECD,

World Bank, etc.)



National monitoring of entrepreneurship activity must be longitudinal, compatible with international

monitoring and directed towards policy making conclusions. As any longitudinal research, it needs stable

and sufficient financing. Because it is a research work, its independence should always be protected and

defended against any attempts to make it instrumental in any political games. We should keep in mind

that, after all, the ultimate beneficiary should be the entrepreneur and not governmental bodies. To

implement this principle, a clear model of entrepreneurship policy must be created and implemented,

as well as being an integral part of a modern industrial policy.

Literature and links cited in paper:

1. Lundström, A. and L. Stevenson (2001), 'Patterns and Trends in Entrepreneurship/SME Policy and

Practice in Ten Economies', Entrepreneurship policy for the Future Series, vol. 3, Örebro: The Swedish

Foundation for Small Business Research.

2. Lundström, Anders in Stevenson, Lois A. 2005. Entrepreneurship Policy: Theory and Practice Ney

York: Springer Science+Business Media Inc. 3. Rebernik, M. Bradač, B.: From Making the State to Institutionalising Entrepreneurship Policy, In:

Friederike Welter, David Smallbone: Handbook of research on entrepreneurship policies in Central

and Eastern Europe, E. Elgar, Cheltenham , 2011

4. Reynolds et al. (2005): Global Entrepreneurship Monitor: Data Collection Design and

Implementation 1998–2003. Small Business Economics, Volume 24, Number 3, 205-231

5. Links:

• http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-

observatory/index_en.htm

• http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-review/index_en.htm

• http://www.arrs.gov.si/en/progproj/rprog/predstavitev.asp

• http://www.arrs.gov.si/en/progproj/rproj/predstavitev.asp

• http://www.arrs.gov.si/en/progproj/crp/predstavitev.asp

• www.gemconsortium.org

• www.epfip.uni-mb.si



Annex I: Indicators of SME Fact Sheets 2010

I n d i c a t o r s 0. Number of SMEs

I. ENTREPRENEURSHIP

1.1 Desire to become self-employed

1.2 Participation rate in entrepreneurship education

1.3 Entrepreneurship as an opportunity

1.4 Entrepreneurship rate: percentage who have started a business or currently taking steps to start one

1.5 Degree to which the school education helped to develop an entrepreneurial attitude (%)

1.6 Prevalence rate of female entrepreneurial activity

1.7 Persons growing a successful new business receive high status (%)

1.8 Lots of media coverage for new businesses (%)

1.9 Enterprise survival rate

1.10 Enterprise birth rate

1.11 Share of high-growth enterprises (% of total)

1.12 Business ownership rate: Private sector excluding agriculture, hunting, forestry and fishing

1.13 Total Entrepreneurial Activity Index

1.14 Necessity Entrepreneurial Activity Index

1.15 Opportunity Entrepreneurial Activity Index

1.16 ratio Opportunity Entrepreneurail Acticity Index to Necessity Entrepreneurial Index

1.17 Male Total entrepreneurial Activity Index

1.18 Female Total entrepreneurial Activity Index

1.19 Future entrepreneur Index

II. SECOND CHANCE

2.1 Degree of support for allowing for a second chance (% in favour):

2.2 Cost (% of estate) to close a business

2.3 Number of years closing a business

III. THINK SMALL FIRST

3.1 Share of support among SMEs for current regulations:

3.2 Time required to comply with administrative obligations (% of total SME working time):

3.3 Problems with administrative regulations

IV. RESPONSIVE ADMINISTRATION

4.1 Number of days for starting a business

4.2 Costs required to start a business (% of income per capita)

4.3 Difficulty of hiring index (0-100)

4.4 Difficulty of firing index (0-100)

4.5 Cost (% of property value) to register property

4.6 Enforcing contracts - cost (% of claim)

4.7 E-government availability (supply side) - E-government on-line availability

4.8 Social security costs paid by the employer as % of total labour costs:

4.9 Number of procedures for starting a business

4.10 Rigidity of hours index (0-100)

4.11 Rigidity of employment index (0-100)

4.12 Firing cost (weeks of salary)



4.13 Number of procedures for registering property

4.14 Number of days for registering property

4.15. Number of tax payments



V. PUBLIC PROCUREMENT AND STATE AID

5.1 Share of SMEs in terms of value of public procurement contracts:

5.2 Proportion of total State aid devoted to SMEs:

VI. FINANCE

6.1 Venture capital – early stage relative to GDP

6.2 Venture capital – expansion stage relative to GDP

6.3 Extent of guarantees for SMEs (relative to GDP)

6.4 Getting credit: Strength of legal rights index (0-10)

6.5 Getting credit: Depth of credit information index (0-6)

6.6 Difference in interest rate levels between loans up to EUR 1 million and loans over EUR 1 million

6.7 Planned share of EAFRD dedicated to measures 312 ”Support for business creation and development” in 2007-

2013 (% of total allocation):

6.8 Planned share of Structural Funds dedicated to stimulating entrepreneurship and SMEs in 2007-2013 (% of

total allocation):

6.9 Average delay in payments (% share of average contract days):

6.10 Share of lost payments (% of total)

6.11 Share of SMEs experiencing problems with access to finance:

6.12 Public registry coverage (% of adults)

6.13 Private registry coverage (% of adults)

6.14 Effective payment period (in days)

VII. SINGLE MARKET

7.1 Average transposition delay in months for overdue directives – in months

7.2 Single market directives - % transposed or notified

7.3 Number of 2 years overdue directives

7.4 Share of intra-EU exporting SMEs to all SMEs (in terms of number of enterprises):

7.5 Share of trade with the EU-27; share of import from EU in total imports (%)

VIII. SKILLS AND INNOVATION

8.1 Percentage of enterprises having purchased on-line over the last calendar year (SMEs: between 10-250

employees)

8.2 Percentage of enterprises having received orders on-line over the last calendar year (SMEs: between 10-250

employees)

8.3 SMEs innovating in-house, as a percentage of the total number of SMEs (10-250 employees)

8.4 Enterprises introduced organisational and/or marketing innovation, as a percentage of the total number of

SMEs (10-250 employees)

8.5 Innovative SMEs co-operating with others, as a percentage of the total number of SMEs (10-250 employees)

8.6 SMEs with innovation activities SMEs with innovation activities (10-250 employees)

8.7 Share of SMEs that have new products or income from new products:

8.8 Share of SMEs’ turnover from new or significantly improved products and services:

8.9 Share of SME staff that have tertiary education:

8.12 Average hours spent in CVT courses per employee:

8.13 Participation rate in any learning activities in micro enterprises:

8.14 Training small and medium-sized enterprises as % of all small and medium-sized enterprises (10-250

employees):

8.15 SMEs using e-learning applications for training and education of employees (10-250 employees)

8.16 Average cost of CVT courses as % of total labour cost SMEs (10-250 employees)

8.17 Innovation expenditure as % of turnover (10-250 employees)



IX. ENVIRONMENT

9.1 % Share of SMEs having comprehensive systems for energy efficiency

9.2 % Share of SMEs applying simple measures to save energy:

9.3 Average expenditure on environmental protection:

X. INTERNATIONALISATION

10.1 Share of turnover from export (% of total)

10.2 Share of SMEs gaining any income from subsidiaries and/or joint ventures abroad (%):

10.3 Percent of input purchased abroad:

10.4 Number of days required to export:

10.5 Number of days required to import:

10.6 Share of SMEs exporting outside the EU-27 to all SMEs (in terms of number of enterprises):

10.10 SME enterprise had any own imports in 2006-2008

10.11 SME enterprise had any direct exports in 2006-2008

10.12 SME enterprise invested abroad in 2006-2008

1

The Observatory of European SMEs

Rob van der Horst

Panteia/EIM Business & Policy Research

European Network for Social and Economic Research ENSR

Background of EIM Business & Policy Research

EIM in The Netherlands was founded in 1930 by the Ministry of Economic Affairs

and the (organized) business sector. EIM is the Dutch abbreviation of Economic Insti-

tute for Small and Medium-sized Enterprises. The reasons to found EIM were directly

linked to the economic recession of the thirties when many small businesses struggled

to survive. The government (and the organized business sector) wanted to have at

their disposal independent data about SMEs to develop their policies to support them.

From the start EIM has been an independent foundation. Until ca 1995 EIM was fi-

nanced by the Ministry of Economic Affairs and two chambers representing SMEs in

the retail and craft sectors (compulsory membership). Around 1990 EIM started work-

ing also on a commercial basis.

Until EIM became a company (about 10 years ago) the Board of Governors was com-

posed of representatives of employers associations, trade unions, Netherlands Statis-

tics, and the academic world. The Ministry of Economic Affairs was only represented

in the Board by an observer, thus stipulating the independent status of EIM.

Objective/Mission of EIM

For many years the objective of EIM has been to provide the government (national,

regional, local), the organised business sector, advisors and researchers with inde-

pendent information (qualitative and quantitative) about structure and development of

SMEs in The Netherlands. All research financed by public sources has been made

public, in the past through reports and brochures, nowadays also through EIM’s web-

site.

In the meantime EIM has become a research company and its focus has become

broader than just SMEs. Most research on SMEs and entrepreneurship contracted out

by the government is put out to tender: in such cases EIM is one of the bidders in

competition with other research companies.

Part of the national research on SMEs and entrepreneurship is not put out to tender:

EIM has a 4-years contract with the Ministry of Economic Affairs to carry out re-

search on SMEs and entrepreneurship for about € 2.1 million a year. The data, papers

and reports are published (also in English) on: http://www.ondernemerschap.nl

A couple of years ago EIM took over two other research companies: Research voor

Beleid (social research) and NEA (transport and logistics research). In the meantime

2

these three companies have merged and have continued their operations under the

name of Panteia, which is now with more than 200 employees the largest policy re-

search organisation in The Netherlands.

EIM and the Observatory of European SMEs

Around 1990 the European Commission ‘discovered’ small and medium-sized enter-

prises as important players in the economic field. Many large businesses were well

represented in Brussels and had at their disposal data and other information to support

their lobby activities. There were hardly any data about small businesses in interna-

tional perspective. Small business representative organisations did not have the finan-

cial means to conduct research.

EIM took the initiative to discuss the issue with the predecessor of DG XXIII (which

is the predecessor of DG Enterprise and Industry): the SME Task Force of the Com-

mission. EIM suggested preparing an annual report about the state of affairs of SMEs

in Europe, like the annual SME reports in the USA, Japan and The Netherlands.

The reactions of the SME Task Force were rather positive. Therefore by the end of

1991 EIM took the initiative to establish a European network of SME research organi-

sations in order to be able to carry out international comparative SME research. In

each of the (then) 12 Member States an organisation was selected that would be able

to collect data and other information, do interviews, analyse the data and draft reports.

Important selection criteria were:

• Independent from the government;

• Good reputation of SME research;

• Having a certain size to conduct several studies at the same time;

• Good knowledge of and access to data sources;

• Working country-wide.

So, when in the summer of 1992 DG XXIII published their invitation to tender for the

first SME Observatory, EIM had just established the European Network for SME

Research ENSR. It had been composed of foundations for SME research (e.g. in

Germany, Netherlands), university institutes (e.g. in UK, Belgium, Italy), research

companies (e.g. in Spain), and research departments of Chambers (e.g. Luxembourg).

Although the ENSR was established as a body to carry out the EU SME Observatory,

its general aim was to conduct all kind of SME research, on a commercial basis, for a

variety of clients. ENSR has never been a legal entity (although serious attempts have

been made to establish an EEIG), so each project has a main contractor (one of the

ENSR member organisations) whereas other ENSR members act as subcontractors.

By the end of 1992 EIM won the tender issued by DG XXIII for the first Observatory

of European SMEs. EIM and its subcontractors in the ENSR won all contracts for the

next Observatories. The last (8th

) Observatory was published in 2004.

The European Network

As mentioned above the European Network for SME Research ENSR was initially

established to carry out the EU SME Observatory, but soon the members discovered

that the Network had a large potential to carry out other SME related research for na-

tional and international clients. The Observatory project had learned the ENSR mem-

3

bers how to work together in the international field, how to manage large international

projects, how to stick to deadlines, how to work with limited budgets and how to

(sometimes) deal with clients who wanted to influence the outcomes of the research.

In 2004 the Network changed its name into European Network for Social and Eco-

nomic Research ENSR to demonstrate that ENSR is broader than just an SME re-

search network. Since its foundation in 1991 ENSR has carried out more than 170

studies at a total turnover of € 40.3 million. Average turnover per project is € 233,000

euro. The turnover per project varies between € 7,000 and € 1.9 million. Total turn-

over of the 8 Observatory contracts was € 13 million. Average number of ENSR

members participating in an ENSR project is 9, varying between 2 and 32.

The network consists of members in all 27 EU Member States, together with members

in Norway, Iceland, Switzerland (covering also Liechtenstein), Turkey and Croatia.

So, the ENSR covers 33 countries. Through associated organisations the ENSR is also

able to cover other Candidate Countries, the Neighbourhood Policy Countries, the

BRICS-countries, Korea, Japan and the USA.

University graduates form the main work force of each member. In total more than

600 highly qualified researchers specialised in applied economic and social research

are brought together in the Network. Professors, holding a chair in SME economics or

in business economics, are linked to some of the member-institutes. Examples: Prof.

Robert Blackburn (UK), Prof. David Smallbone (UK), Prof. David Storey (UK), Prof.

Roy Thurik (Netherlands), Prof. Miroslav Rebernik (Slovenia), Prof. Slavica Singer

(Croatia), Prof. Jarna Heinonen (Finland), Prof. Bogdan Piasecki (Poland), Prof.

Thierry Volery (Switzerland), Prof. Hanns Pichler (Austria), Prof. Giuliano Mussati

(Italy), Prof. Antti Paasio (Finland), and Prof. Hans-Jobst Pleitner (Switzerland).

The overall competence of the Network is strengthened by the specialisation of each

member. The Network has a broad spectrum of qualitative and quantitative research

consisting of macro oriented, meso and sector studies, as well as micro economic and

small business management research.

Each member has international experience in carrying out economic and social re-

search. Many members have a wide network of international relations and have car-

ried out research in many Member States, Eastern European countries and countries in

the developing world.

Each member operates countrywide. Some members have regional offices, but these

are co-ordinated by the national headquarters, where the national and international

research is carried out. All members are independent and follow a scientific approach.

Since 2004 the Network has had an office in Brussels.

Every three years the directors of the ENSR member organisations come together for

the General Meeting. The GM has to approve the financial accounts of the last three

years, approve the next three years plan and the budget. The GM also appoints a new

Executive Committee (5 people, one of them being the Executive Director) and de-

cides which member organisation will host the ENSR secretariat for the next three

years.

All member organisations pay an annual fee to cover the costs of the Secretariat, the

website, the Brussels’ office and the meetings of the Executive Committee.

4

The Observatory of European SMEs

One of the major conditions for the development into a competitive and dynamic

knowledge-based economy is availability of information for the major stakeholders:

policy-makers, researchers, economists and business including SMEs. Detailed infor-

mation about the SMEs is indispensable for policy makers, at both national and Euro-

pean level. This information must be up-to-date, comparable between the individual

Member States and available on a continuous basis. The Observatory of European

SMEs was established to meet precisely this need. Over the years – as was stated in

the Commission's own Communications, the reports of the European Parliament and

those of the Economic and Social Committee - the Observatory reports have devel-

oped into an important source of information on the European economy.

The First Annual Report of the Observatory was published in May 1993 and the Sec-

ond Annual Report was published in April 1994. Both these reports dealt with SMEs

in the then twelve Member States of the European Union. The Third Report was pub-

lished in March 1995 and included information on SMEs in the twelve existing mem-

bers plus the three new Member States (Austria, Finland and Sweden) and Norway.

The Fourth Report was published in July 1996 and included information on SMEs in

all the countries of the European Economic Area, plus Switzerland. The participation

of Switzerland in this and next Observatories was financed by the Swiss government.

The Fifth Annual Report was submitted to the EC in November 1997. Similar to the

Fourth Annual Report it included information on SMEs in all the countries of the

European Economic Area, plus Switzerland.

Each time the European Union was enlarged, more countries were covered by the Ob-

servatory. Apart from that the EEA countries (Norway, Iceland and Liechtenstein)

were covered. In most Observatory reports several comparisons are made with SMEs

in the USA and Japan.

Till 2000 each Observatory report counted 400-500 pages. They have been published

in English, French and German. From 2002 onwards, the Observatory was published

as a series of reports, each dealing with a specific subject, selected by the European

Commission.

The last (8th

) Observatory reports were published in 2004.

Annual Report on European SMEs

Since 2008 each year an Annual Report on European SMEs is published by DG En-

terprise in the frame of the SME Performance Review. The reports provide an over-

view of the size, structure and importance of SMEs to the European economy and

their contribution to growth and jobs, as emphasised in the Small Business Act and

Europe 2020 strategy. Comparisons with important partner countries outside the EU

and with the large enterprise sector are included. The studies are available at:

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/performance-

review/index_en.htm

EIM and ENSR were involved in the preparation of the 2008 and 2009 reports.

Content of the Observatory reports

5

The reports of the Observatory provide an overview of the current situation in the

SME sector in Europe through statistics on the number of enterprises, on total em-

ployment and on production by size of enterprise. In addition, the Observatory reports

cover a range of thematic issues.

The basic idea of the Observatory project is to collect – through the Network – as

much quantitative and qualitative national and European data about the subjects dealt

with in the reports. Sources of information may be: statistical bureaus, ministries,

chambers of commerce, universities, trade associations, banks, support organisations,

etc.

In the first Observatory projects the results were mainly based on existing national

and international research, compared and analysed through desk research, economet-

ric modelling and forecasting, and in-depth-interviews. Over the years it appeared that

many national data are not comparable between countries. Apart from the Eurostat

SME database there are only a few sources (e.g. GEM, OECD) with comparable data.

Therefore it was decided to do each year a large telephonic survey among SMEs in all

countries, all sectors, covering three size classes of enterprises. Such surveys in all

countries and all languages (with a response of about 8,000) are very costly, but at

least one has a database with internationally comparable data.

A major source of information was the database ‘Enterprises in Europe’ published by

Eurostat, the statistical office of the European Union. It comprises a.o. the following

harmonised data by size class of enterprises, industry and country: number of enter-

prises, employment, turnover, labour costs and value added. As the data are published

with a considerable delay, each year EIM produced an estimate of actual data, with

the help of an econometric model of the European economy, by size class of enter-

prises.

In the Annex on overview is presented of all subjects dealt with in the SME Observa-

tory reports, 1992-2004.

For more information on the Observatory of European SMEs, see:

http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-

observatory/index_en.htm

Management of the Observatory

Although EIM was the main contractor in all Observatory projects, and thus responsi-

ble towards the client (i.e. the Commission) it has always tried to decentralize as

much work as possible to the other ENSR member organisations. In a typical Obser-

vatory project there would be:

- A project director (from EIM)

- A Steering Committee composed of five senior researchers from different ENSR

member organisations taking all major decisions in the project.

- Chapter coordinators responsible for the outline, data collection, analysis and

drafting of a specific chapter. Such a coordinator had to apply for this ‘job’ and

based on CVs the Steering Committee would appoint him/her.

- A specialised senior researcher responsible for the survey (contacts with survey

bureau, sample, progress, weighing, and analysis).

- A team of senior researchers responsible for drawing conclusions and formulating

policy recommendations.

6

- An external Reference Board composed of representatives of European employers

associations (both of large businesses and SMEs), trade unions, mutuals, coopera-

tives, crafts, European Parliament, OECD, and academics. This Board was invited

to comment on the chapter outlines and on the draft chapters.

After the completion of each Observatory report an assessment was carried out to

measure the quality of the services. All ENSR members that had participated were

asked to assess the Chapter Coordinators and the Steering Committee. The Chapter

Coordinators were asked to assess the input of all members to their chapters. Each

year the best researcher received a price.

The budgets received from the Commission were the only financial source of the Ob-

servatory projects. The research organisations were not supposed to bring in other

money.

Especially in the first years large numbers of reports have been printed and distributed

among policymakers in Brussels and the Member States. Limited numbers of reports

have been sold by EIM at cost price.

In two years a CD ROM was produced (by another consultant) containing all informa-

tion collected by the Observatory, all chapters (in 3 languages) and an interactive da-

tabase of the survey.

The project team has made numerous speeches about the findings of the Observatory

in many different countries around the world. Observatory researchers have been in-

volved in setting up similar projects in the Russian Federation, Romania, the Slovak

Republic, Hungary, Egypt, South Africa and Argentina.

Several European Observatory reports have been translated into Russian, Chinese and

Japanese.

Brussels, 22 October 2012

7

Annex

Subjects dealt with in SME Observatory reports, 1992-2004

Subject

1st

Repo

rt

2nd

Rep

ort

3rd

Rep

ort

4th

Repo

rt

5th

Repo

rt

6th

Repo

rt

7th

Pro

ject

8th

Pro

ject

Performance of SMEs X X X X X X X X

Business environment X X X X X X

Enterprise policies X X X X X X

Impact Internal Market X X X X X X

Business dynamics, entrepreneurship X X X X X X

Labour market and employment X X X X X X

Capital and finance X X X X X X X

(High) technology and innovation X X X X X X X

Regional aspects, clusters X X X X X

Interdependency of large and small X X

Education and training X ●

Infrastructures X X X

Legal aspects X

Management in SMEs X

Transmission of SMEs X

Co-operation between SMEs X X

External information and advice X

Failures and bankruptcies X

Export and internationalisation ● X X X X

Craft trades ● X X X

Administrative burden ● X X

Producer services ●

Women in SMEs ●

Co-operatives, mutuals, associations ● X X

Tourism ●

Environment and CSR ● X

New services ●

8

Subject

1st

Repo

rt

2nd

Rep

ort

3rd

Rep

ort

4th

Repo

rt

5th

Repo

rt

6th

Repo

rt

7th

Pro

ject

8th

Pro

ject

Community programmes X

E-commerce X

Functioning of markets X

Taxation X

Competence of SMEs X

Enlargement of the EU and SMEs X

● In-depth thematic study

SME Observatories and the Small Business Environment Research/SMME Research General/Journal … ·...

Documents

Transcript of SME Observatories and the Small Business Environment Research/SMME Research General/Journal … ·...