Policy context - The entrepreneurship big picture
1. Entrepreneurship in Europe
At European level, there is a long held belief that entrepreneurship and self-employment help to create jobs, develop skills and give unemployed and disadvantaged people an opportunity to fully participate in society and the economy. In this section, we explore how this is reflected in various areas of European policy-making and consider the impact on entrepreneurship in Europe.
As early as 2003, the Commission published a Green Paper on Entrepreneurship in Europe which focused on two main questions:
- Why do so few Europeans set up their own business?
- Why are so few European businesses growing?
Entrepreneurship policy was subsequently anchored in the Lisbon - Strategy which placed the need to boost entrepreneurship at the heart of employment, economic reform and social cohesion measures.
The Europe 2020 strategy went on to recognise entrepreneurship and self-employment as key for achieving smart, sustainable and inclusive growth, and several flagship initiatives address these goals:
- Youth on the move with its emphasis on supporting young entrepreneurs and self-employment through improvements in education and training provision
- Agenda for new skills and jobs which emphasises the need for new approaches to job creation (including start-ups and entrepreneurship) and the supply of skills (including entrepreneurship)
- European Platform against poverty and social exclusion with its emphasis on social innovation
- Innovation Union which seeks to remove the multiple barriers and adverse framework conditions which stop companies from getting ideas to market (including innovation procurement, access to capital, more affordable patents) and to embed creativity, innovation and entrepreneurship into education systems
In general, the European Commission focuses its efforts in this field on supporting business start-ups by unemployed people or people from disadvantaged groups, support for social entrepreneurs and support to self-employed businesses / micro entrepreneurs to improve business sustainability. Through a range of interventions, summarised here, it seeks to increase knowledge about entrepreneurship and self-employment; raise awareness, facilitate mutual learning and build capacity in EU countries and regions; promote voluntary standards and protective measures for entrepreneurship and self-employment and support entrepreneurship financially.
In the 2014-20 programming period for EU funds, one of the central aims of the Commission's proposals for Cohesion Policy is to ensure better value for money by concentrating funding on 11 strategic priorities based on Europe 2020. Three of these priorities target economic competitiveness; four focus on the environment and three deal with jobs, human capital and social inclusion. The last (transversal) priority concerns good governance. The Commission also wants to improve integration between funding streams, simplify procedures and move towards a more results-based approach. Entrepreneurship is considered in at least half of the thematic objectives for 2014 to 2020, and business support to SMEs is a key focus for European Regional Development Fund (ERDF).
Alongside this, the Commission's Action Plan to improve access to finance for SMEs includes the various policies that it is pursuing to make access to finance easier for Europe's 23 million SMEs and to provide a significant contribution to growth. It covers areas such as access to finance, venture capital, loans, taxation reforms, state aid rules, better information for SMEs, business angel initiatives and cross-border investments.
The European Social Business Initiative, introduced in 2011, has three main elements which, together, aim to improve access to funding for social businesses, improve the visibility of social businesses and improve the legal environment in which they operate.
The recent Commission Communication on a Job Rich Recovery includes the promotion and support of self-employment, social enterprise and business start-ups as one of the key targets for job creation. It recognises the fact that businesses face considerable barriers such as a "lack of professional or business skills, mentoring possibilities and difficulties accessing finance" and states that "fostering entrepreneurial mind-sets, greater availability of start-up support services and microfinance as well as schemes converting unemployment benefits into start-up grants play an important role in facilitating self-employment and creating new jobs".
Specific measures in the Communication to boost entrepreneurship include:
- mobilisation of European Social Fund during the 2014 to 2020 period
- better synergy between the worlds of work and education e.g. more structured cooperation between universities and companies creating new curricula promoting entrepreneurship, problem solving and creative thinking
- launching a microfinance and social entrepreneurship stakeholders forum in 2013 to engage local financial intermediaries in promoting entrepreneurial activity in the green economy
- promoting synergies in actions for ICT employment e.g. to further develop the EU initiative on e-leadership (also known as the e-skills initiative) which aims to address the needs of entrepreneurs, managers, ICT practitioners etc.
The Commission's Entrepreneurship Action Plan, published as the ‘blueprint for action to unleash Europe's entrepreneurial potential’ in January 2013 sets out to "revolutionise the culture of entrepreneurship" in Europe. It focuses on a range of areas where action at EU and national level are said to have greatest potential for return on investments. These include:
- Investing in entrepreneurship education, acknowledging results from surveys suggesting that between 15% and 20% of students who participate in a mini-company programme in secondary school will later start their own company (3-5 times higher than for the general population)
- Improving access to finance, particularly for entrepreneurs in the early stages of their business
- Supporting new businesses in the most crucial stages of their lifecycle (acknowledging that about 50% of new businesses fail during their first five years as businesses often lack an appropriate ecosystem to help them to grow).
- Better use of information and communication technology (ICT) can significantly help new businesses to thrive.
- Making the transfer of business ownership easier by reducing regulatory / tax obstacles
- Promoting second chances for ‘honest’ bankrupt entrepreneurs
- Continuing to reduce regulatory requirements for entrepreneurs
- Nurturing a new culture of entrepreneurship - "a radical change of the European culture towards new notions about entrepreneurship is needed, one that publicly celebrates success, brings the contributions of entrepreneurs to European prosperity to the fore and showcases the rewards of an entrepreneurial career".
There is also an emphasis on the entrepreneurial potential of women, older people, migrants and unemployed people.
At the same time, the Commission has proposed a new Programme for the Competitiveness of enterprises and SMEs (COSME) to cover the 2014-2020 period. The objectives are to help SMEs to access finance, create a business friendly environment, encourage an entrepreneurial culture, increase sustainable competitiveness and help small businesses operate outside their home countries and improving their access to markets. COSME will build upon initiatives and actions already undertaken under the Entrepreneurship and Innovation Programme (EIP), such as the Enterprise Europe Network and continue the many successful features of the EIP, while simplifying management of the programme to make it easier for entrepreneurs and small businesses to benefit. The main beneficiaries are likely to be:
- Existing entrepreneurs (small businesses in particular) – easier access to funding for development, consolidation and growth of their business.
- Future entrepreneurs (including young people) – assistance in setting up their own business.
- National, regional and local authorities – tools for effectively reforming policy: reliable, EU wide data and statistics, best practice and financial support to test and scale up sustainable solutions for improving global competitiveness.
The Commission's proposal will be discussed by the European Parliament and the Council. If adopted, it would start on 1 January 2014.
COPIE is a learning network of European Social Fund (ESF) Managing Authorities and Implementing Bodies from across the EU who have come together to explore how best to support disadvantaged people to become successful entrepreneurs. COPIE has developed a range of tools to help meet this goal including diagnosis, action planning and entrepreneurship education tools, a manual on access to finance (aimed at ESF Managing Authorities) and a tool which aims to help regions map their entrepreneurship resources.
But are all of these different initiatives actually making a difference? Are they working? If we compare the EU to the US and China (Analytical report Flash EuroBarometer No 283 – Entrepreneurship, 2009), it seems that entrepreneurial attitudes and activity remain stubbornly low. A survey of over 100,000 people in 50 cities carried out in 2009, for example, found that 71% of Chinese respondents said they preferred self-employment to employment, compared to 45% in the EU. American respondents were more likely to be risk-takers and liked competition (77-82% compared to 55-65% in the EU). The US and China were also seen to be ahead of the EU in all aspects of entrepreneurship education in schools.
There is a sense that this rather fragmented picture of EU entrepreneurship policy still has some way to go in achieving its goals of job creation, skills development and integration of unemployed people in the labour market. Cutting across so many areas of EU policy makes it difficult to create policy coherence and even harder to develop joined up approaches to support for entrepreneurship with potential for real impact. Of course, measuring the impact of entrepreneurship support activity is notoriously difficult - quantitative indicators do not always tell the full story in terms of economic and social impact.
So, what value do interregional projects, such as those funded by INTERREG IVC, add to this somewhat fragmented scene? Do they bring a greater understanding of what actually makes a difference to entrepreneurship activity on the ground in European regions? Many of the project representatives who fed into this capitalisation work cited fragmentation within policies, programmes and organisations as a key barrier to progress. Added to this, there are many different - often uncoordinated - players and actions in the field of entrepreneurship policy.
Subsequent sections of this report highlight some of the good practices identified which tackle these issues and demonstrate their importance to evidence-based policy-making.
2. International perspectives
As early as 2000, the OECD recognised the importance of ‘entrepreneurship and firm generation’ to the modern economy. Since then, it has done a huge amount of work on SMEs and entrepreneurship. Perhaps most relevant to this report is the ‘OECD Scoreboard - Financing SMEs and entrepreneurs’ (2012), which provides a framework to monitor trends in SMEs’ and entrepreneurs’ access to finance – at country and international level – and a tool to support the formulation and evaluation of policies.
Also of importance is the OECD-EU project on self-employment and entrepreneurship, where the OECD LEED Programme (Local Employment and Economic Development) joins forces with the European Commission (DG Employment) to monitor and report on the development and impact of entrepreneurial activity in Europe. It focuses on how public policy can create jobs through self-employment and entrepreneurship and provide better access to the labour market for economically and socially disadvantaged groups. The aim is to support policymakers to design and deliver effective and efficient entrepreneurship support through the provision of robust data and information on entrepreneurship and self-employment activities and on the activities and outputs of public policies, drawing together information from several different sources.
As part of this project, the annual ‘Panorama of Entrepreneurial Activity in Europe’ collects and makes available an evidence base on entrepreneurship and self-activities and policies in European Union countries. It aims to facilitate mutual learning and build capacities of high-level policymakers in the design of good practice policies.
The Global Entrepreneurship Monitor (GEM) is an initiative that explores the role of entrepreneurship in national economic growth, identifying detailed national features and characteristics associated with entrepreneurial activity. It distinguishes between ‘Improvement-Driven Opportunity Entrepreneurial Activity’ and ‘Necessity-Driven Entrepreneurial Activity’. The first is defined as the “percentage of those involved in TEA (Total Early Stage Activity) who (i) claim to be driven by opportunity as opposed to finding no other option for work; and (ii) indicate the main driver for being involved in this opportunity is being independent or increasing their income, rather than just maintaining their income” (GEM 2011). The second is defined as the “percentage of those involved in TEA who are involved in entrepreneurship because they had no other option for work” (GEM 2011).
3. Added value of interregional cooperation for entrepreneurship
The INTERREG IVC programme enables a broad range of organisations operating at regional level to develop a structured and incremental approach to exchanging their experiences of entrepreneurship policy and practice. Interregional exchange of this nature - starting with the identification of practices, and then moving into a sharing phase and finally looking at how different practices might be transferred - helps regional entrepreneurship stakeholders to benchmark their own experiences against those of their peers and to learn from them about what works and what doesn't in different contexts. This learning can then be used to inform policy and practice in individual regions across the EU and thereby adds value at regional level.
Involving multiple stakeholders also helps a region to develop a common ownership of a good practice. When several partners and agencies from one region come together to see a practice live, it enables them to quiz the hosts, to discuss together how it could be adapted in their own region. This means that results that are more embedded, more realistic and more sustainable as they are transferred to the new region. Transferring good practice through interregional exchange is not about finding 'off the shelf' solutions and applying them in your own region. INTERREG IVC exchange enables partners to reflect and adapt practices in a realistic and meaningful way, taking time out of their day-to-day working lives to consider the ‘big picture' and think strategically about how they might do things differently and promote entrepreneurship more effectively.
The role of programmes such as INTERREG IVC in supporting entrepreneurship policy at regional level is also important because involving politicians in interregional exchange creates credibility and a higher degree of political commitment. It also has potential to inform new regional programmes (whether funded through national or EU funds) as INTERREG IVC project partners develop relationships with Managing Authorities to improve the added value of European Regional Development Fund investments in entrepreneurship policy.
In summary, INTERREG IVC creates a space for cross-fertilisation and dialogue between regional level networks and stakeholders on entrepreneurship policy. This is beneficial, accelerates innovation, helps to avoid duplication of effort and repetition of mistakes, and therefore adds value to European investments.