Entrepreneurship in Europe

The Commission in February 2004 published an Action Plan on Entrepreneurship, which focuses on actions in five policy areas: entrepreneurial mindsets, incentives for entrepreneurs, competitiveness & growth, access to finance and cutting red tape.

Background

The Commission defines "Entrepreneurship" as 'the mind set and process [needed] to create and develop economic activity by blending risk-taking, creativity and/or innovation with sound management, within a new or an existing organisation'.

Small (less than 50 employees) and medium-sized (less than 250) enterprises are considered the backbone of the European economy, providing jobs for millions of European citizens and are the basis for economic innovation. However, conditions for SMEs and start-up companies are not as favourable in the EU as they are in the US and entrepreneurial initiative and risk-taking are less developed. A 2002 Eurobarometer survey found that EU citizens are less inclined to become entrepreneurs, and more risk-averse than their American counterparts. Once a new company has been created, it also tends to grow at a slower rate than in the US. Moreover, conditions for start-up companies vary widely across Europe.

The EU recognised this problem and made entrepreneurship one of the main objectives of the Lisbon agenda in 2000. Responding to this, the Commission launched a series of initiatives aimed at fostering support for small businesses in the EU. In January 2003, it adopted a  Green Paper on Entrepreneurship in Europe to stimulate the debate amongst policy makers, businesses, representative organisations and experts on how entrepreneurship can be better promoted in Europe. This paper set out to find answers to two fundamental issues: 'How to produce more entrepreneurs' and 'How to get more firms to grow'. 

Issues

Following the Green Paper consultation process, the Commission on 11 February published its ' Action Plan: The European agenda for Entrepreneurship'. The Action Plan is designed to provide a strategic framework for boosting entrepreneurship, complementing ongoing work, especially under the 2000 Multiannual Programme for Enterprises and Entrepreneurship. 

The Action Plan aims to encourage more people to start businesses and to help entrepreneurs thrive. The Commission has emphasised that a joint effort from Member States, professional organisations and local authorities is needed to achieve this target, promoting a 'co-ordinated approach'.

To enhance the situation of entrepreneurship in the EU, the Commission proposes actions in five strategic policy areas:

1. Entrepreneurial mindsets: The Commission seeks to promote awareness of the entrepreneurial spirit by presenting best practise models and fostering entrepreneurial attitudes and skills among young people.

2. Better incentives for entrepreneurs: This does not only concern the possibility to register a business quickly and cheaply, but also the need for a fairer balance between risk and reward. The Commission plans to tackle the negative effects of business failures, facilitate the transfer of companies and amend social security systems for entrepreneurs.

3. Growth and competitiveness: The Commission sets out to promote access to support and management training for entrepreneurs from all backgrounds, especially women and ethnic minorities. Moreover, the Commission will encourage cross-border trading and support networks and strategic partnerships between entrepreneurs.

4. Access to finance: The Commission's aim is to create more equity and stronger balance sheets through improving the availability of venture capital, business angel finance and investments by private individuals. Existing financial instruments will be used and there will be an effort to lower capital taxes.

5. Regulatory and administrative framework: Administrative barriers and regulatory burdens need to be reduced and simplified in areas such as taxation, employment and environment. The Commission will concentrate on implementing the measures of its European Governance programme (2002) through better law-making, impact assessments and stakeholder consultation.

At its Spring Summit meeting in March 2004, the European Council adopted conclusions on 'Stimulating Entrepreneurship', recognising that entrepreneurship is a major driver of innovation, competitiveness, employment and growth and that encouraging and training more people to become entrepreneurs are key requirements for the achievement of the Lisbon objectives. Commission and Member States were called upon to boost the entrepreneurial mindset through education and training, improve the regulatory environment, facilitate access to finance and strengthen the dialogue between entrepreneurs and policy makers. 

On 29 July 2004, the Commission has published details of the key actions of the Entrepreneurship Action Plan, describing the 38 planned sub-actions, objectives and the impact the activities are expected to have. The paper also sets out the role of the various actors involved (Commission, national and regional authorities and business support organisations), as well as best practice examples.

Positions

The European Parliament on 23 October 2003 adopted an own initiative report calling upon Member States 

  • to make more intensive use of positive examples from other Member States for their own programmes to promote entrepreneurship;
  • to speed up the implementation of the European Charter for Small Enterprises, adopted by the European Council in June 2000 in Feira;
  • to make greater efforts in the areas of education policy, rules and regulations, cost and time involved in establishing new businesses, provision of risk capital and start-up finance, innovation and technology transfer and tax relief.

UNICE supports the Commission's Action Plan, maintaining that more favourable framework conditions are a must to foster Europe's entrepreneurial spirit. UNICE considers that a series of measures are necessary to achieve this: integrating entrepreneurship education into school curricula, reducing the overall tax burdens for companies, improving access to finance and ridding Europe's entrepreneurs of administrative hurdles. UNICE has called for the Spring Summit on 25-26 March 2004 to make entrepreneurship one of its top priorities.

UEAPME, the European association of crafts and SMEs, backs the actions and objectives presented in the Action Plan. However, the association urges the Commission to imple ment some key action, such as 'reducing the complexity of employment regulations for micro-enterprises' (which is foreseen for 2006), faster than planned. UEAPME argues that burdensome and complex employment regulations still constitute one of the biggest obstacles preventing small and micro-enterprises from hiring new labour in Europe.

EUROCHAMBRES, the Association of European Chambers of Commerce and Industry, has welcomed the Action Plan, but has said that it could have gone further to bring new impetus to the Lisbon process. In particular, the association has criticised the lack of clear targets and a detailed timetable for implementation. Moreover, EUROCHAMBRES has called for concrete actions in areas such as education, the promotion of female entrepreneurs and supporting cross-border activities of SMEs.

Timeline

  • 19-20 March 2000: Feira EU summit endorses European Charter of Small Enterprises.  
  • 9 Nov 2005:  Commission presents 'Think Small First', its new SME policy.  
  • 25 July 2008: Commission Communication on Small Business Act (SBA). 
  • 11-12 Dec 2008: EU summit approves SBA. 
  • 20 Jan 2009: European Parliament's legal affairs committee approves European Private Company Statute.
  • Before June 2009: Parliament expected to give SBA the green light.

Further Reading

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