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10 Enterprise policy

Building on the Commission's existing policies for SMEs, innovation and industrial competitiveness, enterprise policy has recently undergone a process of refocusing and reformulation in response to the challenges posed by the knowledge-based economy and the need to adapt to global economic developments.

The starting-point for this new policy was set by the Lisbon Economic Council in March, 2000, which fixed the goal for the EU 'to become the most competitive and dynamic knowledge-driven economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion' and identified enterprise and entrepreneurship as key to achieving this.

Enterprise policy in the Union is founded on three main aims,1 each of which gives rise to a set of specific measures as described below:

  • encouraging entrepreneurial activity: the measures under this head, which are especially important for lagging regions, are aimed, in particular, at improving the access of SMEs to finance, in cooperation with the European Investment Bank and the European Investment Fund. They also focus on developing a range of business support services, creating a regulatory and administrative environment favourable to enterprise development, offering entrepreneurial advice and encouraging the development of skills and motivation, which accordingly increase the attractiveness of regions to investors. These elements have been developed under the Multiannual Programme for Enterprise and Entrepreneurship (2001-2005); 2

  • creating an environment which is supportive to innovation and change: measures under this head seek, in particular, to encourage the exchange of good practice between countries, regions and enterprises across the Union. They also help to remove obstacles to innovation and growth, provide support to innovation projects and promote the development of the service sector. They are being implemented through the recently adopted Communication 'Innovation in a knowledge-based economy' and the First Action Plan for Innovation in Europe; 3

  • to ensure that businesses have access to markets: measures under this head are being pursued through continued efforts to consolidate the Internal Market, ensuring access to global markets, the dissemination of voluntary standards and the promotion of e-commerce and new distribution networks. The reduction in the problems created by distance will, of course, be of particular importance to firms in peripheral regions.

The new enterprise policy has no specific spatial dimension but, nevertheless, addresses some of the most relevant obstacles to cohesion and regional development. Many of the new enterprises policy priorities have parallels in the regional policies implemented through the Structural Funds. In this respect, it can work in parallel with regional policy to create synergy to advance economic and social cohesion. In particular, it is aimed at removing the whole range of barriers to market entry, which are often particularly prevalent in lagging regions. In the short-term, at least, it is expected that their removal will release latent enterprise potential and so help to reduce regional disparities. In addition, the establishment of an enterprise and innovation 'scoreboard' will accelerate the diffusion of business best practice between both Member States and regions. While the precise impact of the new enterprise policy on economic and social cohesion (and, in particular, its effect on the development of the lagging regions) is difficult to quantify, it can potentially play a significant role in reducing regional disparities.

In addition, the wide range of measures which are planned can have a positive effect on the ability of firms in lagging regions to compete in the global market place:

  • measures such as benchmarking, peer reviews and joint action with Member States will enable policy makers and businesses across the EU to identify best practices and, in turn, to implement them. Programmes for encouraging the dissemination of innovation and best practice are likely to benefit lagging regions, in particular, and together with the development of business centres and technology parks, help them to exploit the opportunities offered in the new economy;

  • policies designed specifically for SMEs, which are important for employment creation and regional development, to help them compete on a more equal footing with larger firms; the establishment of information and advice centres, such as the EuroInfo Centres (EICs) and the European Business and Innovation Centres, to offer support to enterprises across the EU. The EICs, by virtue of their close association with local businesses, their understanding of the local institutional environment and their links throughout the Union, play an important role in building relationships between firms in different regions and help them solve practical problems. In addition, the Europartenariat programme encourages SMEs in lagging regions to form business links with companies elsewhere, so enabling them to import technological and business know-how.

Many of the new enterprise policies have parallels in the regional policies implemented through the Structural Funds, and a core chapter of the Guidelines for Structural Funds programmes4 was devoted to establishing priorities for enterprise support similar to the new enterprise policy.


Enterprise policy is particularly focused on SMEs, which are an important part of the European economy. SMEs are the predominant type of firm in the EU and they are particularly important in lagging regions, where the small family business is prevalent, particularly in traditional sectors. The first multiannual programme for SMEs was therefore aimed at the development of SMEs in assisted regions.

In 1998, SMEs accounted for 99.8% of the 19.4 million non-primary sector private enterprises in the EU. Their average turnover was around EUR 500,000. In the two years, 1996 to 1998, the total number of SMEs in the EU is estimated to have increased by 4% and the number of people employed by 2% (from 73.2 million to 74.6 million), the same as in the economy as a whole.

Access to finance

Initiatives have also been undertaken to improve the availability of finance to SMEs through risk capital funds, the SME guarantee facility and small business loans for ICT projects. Most of these are implemented through the European Investment Funds. Since 1998, Spain, for example, has received 15% of the total amount allocated under the SME guarantee facility, which has gone to 672 firms. Other programmes, like the Joint European Venture (JEV), have also helped create new businesses in lagging regions, particularly in areas of new technology, almost 20% of the projects financed under the programme being implemented in Spain, Portugal and Greece.

Policy on tourism

Europe is the main tourist destination in the world. In a number of regions, particularly assisted ones in the south and in mountainous areas, tourism is a major source of employment and has a substantial effect on economic development. It is also an activity dominated by SMEs, some 6.5% of the total turnover of firms of this size being generated in this sector.

In the EU as a whole, it accounts for 5.5% of GDP and 6% of jobs. In many parts of the EU, the figures are much higher. In Spain, for example, tourism accounts for 10.5% of GDP and 9.5% of employment.

Tourism is likely to be a major source of job creation over the coming years, particularly in lagging and peripheral regions, and measures to support the sector could have an important effect on the development of these. According to the report of a High Level Group on Tourism and Employment set up by the Commission, there is an opportunity for creating around 3 million new jobs in tourism in the EU over the next decade, but certain conditions have to be met to realise this.

(see Box: Regional aspects of Innovation Policy)

  1. Commission of the European Communities (2000) Towards Enterprise Europe. Work Programme for Enterprise Policy 2000-2005. Enterprise DG. SEC (2000) 771.
  2. Commission of the European Communities (2000) Challenges for enterprise policy in the knowledge-driven economy. Proposal for a Council decision on a Multiannual Programme for Enterprise and Entrepreneurship (2001-2005). COM (2000) 256. Office for Official Publications of the European Communities: Luxembourg
  3. COM (2000) 567 of 20 September 2000
  4. The Structural Funds and their co-ordination with the Cohesion Fund: Guidelines for programmes in the period 2000-2006 - COM (1999) 344 of 1 July 1999

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