SMEs in Europe 2003

Entrepreneurship and SMEs have emerged as the engine of economic and social development throughout the world. The role of entrepreneurship has changed dramatically and fundamentally, so that it is now seen as a requisite ingredient generating employment, economic growth and international competitiveness in the global economy. The purpose of this report is first to explain why the role of SMEs is crucial for international competitiveness and a strong economic performance in Europe, and then to document the role that SMEs play in Europe. Entrepreneurship and SMEs are related but certainly not identical concepts. Entrepreneurs, for example, are the main drivers of the firm creation process where young and small firms play a role. On the other hand, the entrepreneurial energy of a country, region or industry is often described using phenomena such as firm creation and turbulence (Carree and Thurik, 2003). The impact that SMEs have on economic performance in Europe is explained in Chapter 2. A careful measurement of the structure and role of SMEs is required to understand the different roles that SMEs play and how these roles are evolving throughout Europe. In particular, a measurement of SME activity in Europe provides (in Section 3.1) what the (static) role of SMEs is in Europe, how the role of SMEs varies across specific countries and how it is benchmarked against the other major areas in the world. How the economic role of SMEs has been changing over time is presented in Section 3.2. The way in which the measurement of the structure and role of SMEs is set up hinges on two views: first it attempts to illustrate the theory-based results surveyed in Chapter 2. Second, it is in line with the measurements given in earlier versions of the SME Observatory reports 'SMEs in Europe'. A report about SMEs in Europe would however not be complete if no attention is paid to the current economic setting. The European economy is recovering from an economic downturn. Very little information is available about the roles of SMEs in the business cycle and in particular how do SMEs respond to economic adversity. This issue is dealt with in Chapter 4. Finally a Synthesis is presented in Chapter 5.

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