Introduction European Enterprise Policy
Entrepreneurship = turning an idea into an action, passion and do what you like to do, and do
it good
= not only about enterprises, but also students are entrepreneurs
Policy = what you do about a problem and how you do it. Setting rules
Supply & demand: price is set by the market:
INVISIBLE HAND (A. Smith): market mechanism when S&D meet.
For example: the policy fixes the minerval (schoolgeld).
- Education = public good
- Waarom niet op privé markt? privatiseren doet de prijs stijgen.
1. 1st question: does the market work?
No? market failure where does it fail? What is the objective? set rules
- It’s about pure economic impact
- The government who was the pilote became the regulator
- For example:
o Safety
o Fixed prices of bread set up by the government between €2 - €2.50
o Fixed prices of books in France
Otherwise, the market doesn’t work
2. 2nd question: can the government make the market
work?
- If we don’t have public television there won’t be any news
- The government has to regulate
3. 3th question: if the government can’t make the market
work, the government should take the market over?
- Planes should be public
- If army was private, the market would fail. Therefore the government does it itself and
the army becomes a public good.
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,Entrepreneurship: a way of life
Chapter 1: enterprise policy: the four objectives
1.1 Rationale and objective of enterprise policy
We need enterprises -> create welfare, economic growth and employment.
Having enterprises is not an objective itself, but a tool to achieve other political and economic
objectives.
Market failure means that we don’t have enough enterprises, jobs, welfare, services…
Mices and gazelles are more important than elephants because M & G has 80% of the job
creations
Many enterprises are not utilising their growth potential a lot of potential in terms of job
creation remains untapped. The basic strategy of enterprises is to survive or to consolidate.
Main threats to survival and development: finding qualified staff and obtaining accurate
financing (<-> innovation and quality is only a strategic element by a minority of enterprises)
Growth
- Rarely a strategic option
- In Belgium: a huge majority under-utilises their growth potential and miss the guts to
grow
Job creation remains untapped
A lot of high potentials don’t create their own business, because of lack of finance or risk-
averse mentality or not seeing opportunities
Delocalisation
Companies who are declared bankrupt
Bankruptcy and delocalisation leads to job destruction: the 4 objectives of enterprise policy:
objectives Policy (beleid)
1. to create more enterprises Start-up policy
2. to release their growth potential Growth enablers policy -> in staat stellen te
gazelles groeien
3. to avoid delocalisation Bankruptcy and second chance policy
goals of an enterprise who are
planned in a certain place but you
have to move because it’s too
expensive
4. to avoid bankruptcies Retention policy (behoud)
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, 1.2 the three phases of enterprise policy
4. 1st: big is beautiful …-1980
- The phenomenon of delocalisation:
moving plants from one country to another for cost reasons (low wages, cheap labour,
a booming market and investment subsidies)
- Retention policy1:
when the elephants no longer create jobs, but remain important in terms of job
maintenance
o This mostly consist of attempts to embed companies in the region by
tightening their links with research centres, universities, incubators and policy
makers
o Subsidies are often inefficient in the long run, though they may postpone the
decisions of big companies to leave by a number of years.
- Determinants and policy recommendations intended to make big companies attractive
at the European level
1. A well developed ICT and life-science strategy as well as an ambitious energy
plan
2. More flexible labour markets to ensure high rotation and access to job
opportunities
3. Improved governance
4. Assured easy access to finance, notably by creating pan-European financial
markets
5. Active promotion of genuine ‘invest in Europe’ campaign
Despite the lobbying of big enterprise federations, the main underpinning of policy is nog
longer ‘big is beautiful’ but ‘think small first’.
5. 2nd phase: small is beautiful 1980-…
- Economic downturn (in EU)
- David Birch (American economist): small firms were creating more jobs than large firms
- SME (KMO) policies and SME task forces would later lead to the creation of a separate
Directorate General devoted to SME policy
- Different measures at regional, national and European levels were set up in order to
assist SMEs -> it became a patchwork quilt in (stikt van) complexity and idiosyncrasy
(eigenaardigheid)-> negative overall conclusion
- Only a few small businesses appeared willing to accept support because
1. The support provider did not understand the owner’s business
2. Accepting external support was often perceived as threatening to personal
autonomy
3. Measures ignored the heterogeneity of small firms or the specific character of
localities
4. The application procedure was considered burdensome, involving a lot of red
tape
- Policies and the infrastructure required to deliver support to SMEs were often
expensive while small business owners themselves appeared resolutely unwilling to
accept their alleged benefits
1 Beleid om de toestand te behouden
3
, - Positive discrimination of SMEs (one of the aims of SMEs) in order to create equal
opportunities for all enterprises had unintentionally led to discrimination occurring
between SMEs themselves.
- 1990: a shift from small business policy to an approach more grounded in global
enterprise
More focus was given to creating a better environment for European enterprises.
Benchmarking and best practices became basic instruments at European level, intended to
influence regional and national policies (-> maatstaven en werkmethodes)
6.
7. 3rd phase: it’s the mindset, stupid!
Positive correlations:
- Between entrepreneurship and growth =0.36
- Between entrepreneurship and employment =0.23
Based on this evidence, SME policy shifted towards a model based on
entrepreneurship
The multiannual SME programmes have become multiannual programmes for enterprises and
entrepreneurship, and they now focus on entrepreneurship and innovation
1.3 Limits of enterprise policy at European level
The best way to understand the E.U.’s role is to start by identifying its limits. In this regard the
following 3 principles of operation are relevant
8. Limit 1: the private sector’s responsibilities
Public involvement should in no way be a substitute for the private sector, nor should it
provoke any kind of cannibalism
If the market fails, government should try to make the market work, based on the underlying
philosophy that ‘it is not because the market fails, that government does better’.
- Only government of Europe should take over if the market fails
9. Limit 2: subsidiarity (=ondergeschiktheid)
Close collaboration with Member States: what can be done in an efficient way at lower
regional level should not be done at European level
- Each policy should be implemented at the lowest level possible if the condition still
be efficient.
- Bv schooldiploma’s moeten op een zo laag mogelijk niveau geregeld worden
(deelstatelijk niveau) maar moeten op alle niveaus in heel de wereld toch gelijk
zijn.
10. Limit 3: council and European Parliament co-decision
needed
Unanimity is the common rule in most of the fields relevant to enterprise policy.
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