LECTURE 4

Industrial policy, entrepreneurship and SMEs.

Protection of competition

1. Industrial policy of the EU

2. Entrepreneurship and SMEs
3. EEN and EURES
4. Protection of competition
 The EU industry

• Europe has always been the home of

industry. For centuries, it has been a
pioneer in industrial innovation and
has helped improve the way people
around the world produce, consume
and do business.

• Industry is the backbone of the

European economy

• Europe needs an industrial policy

based on competition, open markets,
world-leading research and
technologies and a strong single
market without barriers and red tape.

2
 Industry is central to Europe’s future progress and prosperity

• It makes up more than 20% of the EU’s

economy and employs around 35 million
people, with many millions more jobs
linked to it at home and abroad

• It accounts for 80%

of goods exports and is a key reason
behind the EU’s position as top global
provider and destination
for foreign direct investment

• Small and medium sized

businesses (SMEs) account for over 99%
of all European firms – the vast majority
of which are family run companies – and
are the economic and social backbone of
the EU
3
 Industrial policy of the EU

• Competitiveness is at the heart of the

• The main objective of the European Union
industrial policy is to secure the
competitiveness of the Union's industry.
Commission’s agenda and, as we stand on the
brink of a new industrial revolution, the EU is
committed to supporting the digital and green
transformation of EU industry.

• Industrial policy is closely linked to other

key EU policy sectors: trade, the Single
Market, research, development and
innovation (R&D&I), employment, energy
issues and environmental protection.

4
 Industry challenges

• Industry is the engine of innovation,

productivity growth and exports. It provides
quality jobs to Europeans.

• However, the European industrial structure

is undergoing deep transformation driven by
digital and other new technologies, and new
business models

• A modernisation effort is required to ensure

that the European industry stays competitive
in global markets: to embrace technological
change; integrate products and services;
develop technologies that use less energy,
reduce waste and avoid pollution; and invest
in a workforce with the right skills.

5
To which of these trends is the EU industry connected?

6
A New Industrial Strategy for Europe (1)

• In March 2020, the Commission

presented a new strategy to help
Europe's industry lead the twin
transitions towards climate
neutrality and digital
leadership.
• The strategy aims to drive Europe's
competitiveness and its strategic
autonomy at a time of moving
geopolitical plates and increasing
global competition.
 A New Industrial Strategy for Europe (2)

• Europe’s industry has a global competitive advantage on high value-

added products and services. Europe needs an industry that becomes
greener and more digital while remaining competitive on the global
stage.
• Thanks to a strong innovation capacity, it is also a world leader in
green technology patents and other high tech sectors
• Тhе single market empowers European companies of all sizes to
innovate, scale-up and employ more people.
• European industry is already undergoing a significant
transformation. There is a pronounced shift from products to
services and from exclusive to shared ownership of products and
services. The pressure on natural resources is already leading to a
more circular approach to manufacturing. Thanks to disruptive
technologies like 3D printing, Europe also needs to make the most
of localisation as an opportunity to bring more manufacturing back
to the EU in some sectors.

Meanwhile -> the EU has to continue to lead by example complying

with the highest social, labour and environmental standards
8
 A New Industrial Strategy for Europe – Goals

• A deeper and more digital single market

• Upholding a global level playing field
• Supporting industry towards climate neutrality
• Building a more circular economy
• Embedding a spirit of industrial innovation
• Skilling and reskilling
• Investing and financing the transition

Source: A New Industrial Strategy

for Europe
https://eur-lex.europa.eu/legal-
content/EN/TXT/HTML/?uri=CELE
X:52020DC0102&from=EN
9
 What does the European Commission do?

The European Commission is taking action to maintain European industry’s global competitiveness,
reach climate-neutrality by 2050, and make Europe fit for the digital age, through:

• supporting the transformation of EU energy-intensive industries to enable a climate-neutral,

circular economy by 2050
• empowering citizens by providing skills for industry
• promoting advanced technologies
• supporting innovation through policies and programs
• taking action on intellectual property so companies can better manage and benefit from their non-
tangible assets
• developing clusters and pooling European, national and regional resources to aid the revitalisation
of regions
• providing platforms for discussion and dialogue, such as the annual EU Industry Days

10
 Small and medium-sized enterprises (SMEs)

• the backbone of the European economy

• represent 99% of all businesses in the EU

• Within the EU they account 67 % of all jobs in the private sector, as

much as 85 % of all newly created jobs and some 59 % of the value
added by the economy

• defined in the EU recommendation 2003/361

• The main factors determining whether an enterprise is an SME are

staff headcount and either turnover or balance sheet total

11
Why the backbone of the European economy?

12
SME definition

13
 SME strategy (1)

• Building capacity and supporting SMEs in their transition to

sustainability (Achieving a climate-neutral, resource-efficient, and agile
digital economy) – through The over 600 members of the Enterprise
Europe Network (EEN) and 240 Digital Innovation Hubs (DIH), in each
region of Europe.

• Reducing regulatory burden and improving market access

• Improves access to financing

14
 SME strategy (2)
• Small Business Act (SBA) - an overarching framework for the EU policy on small and
medium-sized enterprises (SMEs). Its aim was to provide an SME policy framework to
improve competitiveness and promote entrepreneurship. Rather than being a legislative
Act, it contains provisions applying to small firms, directed at governments and
institutions to "think small first" when establishing policy and law.

• The ‘Think Small First’ principle is meant to be a guiding principle for all policy- and
law-making activities. It requires policymakers to take SMEs’ interests into account at
the early stages of the policymaking process. The principle also calls for newly
designed legislation, and for administrative rules and procedures to be made simple and
easy to apply.

• More than 300 policy measures have been adopted/implemented under the ‘Think
Small First’ principle since 2011. Regulatory impact assessments (RIAs) are in place in
almost every EU Member State, and SME stakeholders are generally consulted on new
legislative proposals. ‘Think Small First’ principle is applied to both legislation and
administrative procedures affecting SMEs

• The most commonly adopted/implemented measures across the EU-28 have been
measures to: 1) develop the research, development and innovation (RD&I) skills of
SMEs; 2) set up public financing programs; 3) promote an entrepreneurial mind-set.
15
 Task for next time -> Check:

1. Open the report: 2019 SBA Fact Sheet & Scoreboard - European
Commission
2. Check how the SMEs have been performing in 2019
3. Check how the SBA has been performing in 2019

16
 What help can SMEs get?

• Support under many EU business-support programmes targeted

specifically at SMEs: research funding, competitiveness and
innovation funding and similar national support programmes that
could otherwise be banned as unfair government support

• Fewer requirements or reduced fees for EU administrative compliance

The European Commission aims to promote

entrepreneurship and improve the business
environment for SMEs, to allow them to realise
their full potential in today’s global economy

17
 COSME financial instruments

• The programme for the Competitiveness of Enterprises and Small and Medium-
sized Enterprises (COSME) is improving access to finance for SMEs through two
financial instruments that have been available since August 2014.
• Financial instruments that facilitate access to loans and equity finance for
SMEs
• COSME financial instruments are complemented by resources from the
European Fund for Strategic Investments (EFSI).

The Loan Guarantee Facility (LGF)
guarantees and counter-guarantees for financial
intermediaries (e.g. guarantee organisations, banks,
leasing companies) to help them provide more loan
and lease finance to SMEs.
The Equity Facility for Growth (EFG)
investments in risk-capital funds that provide
venture capital and mezzanine finance to
expansion and growth-stage SMEs, in particular
those operating across borders.

18
19
COSME is a programme implementing the Small Business Act (SBA)
which reflects the Commission’s political will to recognise the central
role of SMEs in the EU economy
COSME is the EU programme for the Competitiveness of Enterprises
and SMEs, running from 2014 to 2020, with a budget of €2.3billion.
COSME will support SMEs in the following areas:

◦ Facilitating access to finance

◦ Supporting internationalisation and access to markets
◦ Creating an environment favourable to competitiveness
◦ Encouraging an entrepreneurial culture

20
21
22
The COSME program as of 31.03.2020

23
24
 Why should the European SMEs internationalize?

• Being internationally active correlates strongly with higher

turnover growth

• SMEs that are internationally active generally report higher

employment growth

• The relationship between internationalization and innovation

is strong

• Internationally active SMEs, therefore, are more competitive

than their domestic counterparts. They benefit from access to
know-how and technology, increased efficiency and economies
of scale and increased competence by entering difficult
markets and exploiting the advantages of cutting-edge
technology. Given increased market integration, SMEs can
play an important role in global value chains.
25
 Drivers of SME internationalization

The main features of the current

wave of globalization are:

• an unprecedented lowering of
trade barriers worldwide;

• vastly improved logistics and

communications systems
available to all companies;

• the information technology

revolution which has opened
the way for greater technology
and knowledge exchanges and
the advent of new types of
economic transactions such as
e-commerce.

26
 The main barriers to internationalization
reported by SMEs are:
• not enough working capital to
finance exports;
• the difficulty of identifying
foreign business opportunities;
• not enough information to
locate/analyse markets;
• inability to contact potential
overseas customers;
• the difficulty of obtaining reliable
foreign representation;
• lack of managerial time to deal
with internationalisation;
• not enough and/or untrained staff.
External barriers in the business
environment:
• lack of capital;
• lack of adequate public support;
• lack of adequate information;
• the cost of or difficulties with
paperwork needed for transport;
• other laws and regulations in the
foreign country;
• tariffs or other trade barriers in the
foreign market;
• cultural differences (including
business culture).
27
 Non-financial support to European SMEs
Of the available non-financial support
services, the six mainly used by SMEs and
therefore worth concentrating on are:
• information on rules and regulations;
• information on market opportunities;
• exhibiting in international trade fairs;
• identifying potential foreign business
partners;
• business cooperation and networking;
• ‘matchmaking’ events.
Support networks tend to be
managed by the government
(e.g. commercial offices
abroad) or big business
associations. They play a key
role in supporting any type of
internationalization as they
provide access to information
that is directly usable by the
SME.
28
 Enterprise Europe Network (EEN)

• The world’s largest support network • Member organisations include:

for SMEs with international
technology poles, innovation support
ambitions
organisations, universities and
research institutes, regional
• Active in more than 60 countries development organisations, chambers
worldwide. It brings together 3,000 of commerce and industry
experts from more than 600 member
organisations – all renowned for their
excellence in business support

29
Advice for international growth

• Enterprise Europe Network experts provide the businesses with the

advice it needs to grow and expand into international markets.

• You can get free access to a range of advisory services such as:
✓ how to export your products or services to new markets
✓ how to get CE marking for your products
✓ the best way to finance your plans for growth
✓ how to protect your intellectual property assets in another country.
 Support for business
innovation International partnerships

• EEN helps businesses bring

innovative ideas to commercial
success on international markets.
• Innovation support services are open
to all kinds of businesses. Network
experts are there to assess which
services are best suited to the specific
development phase of the respective
business.
• Innovation awareness
• At an entry level, Network services
include:
• information on innovation-related
policies, legislation and support
programmes
• links with local innovation
stakeholders;
• information about access to local
sources of funding.
• EEN can help your business find the right
international partners to grow and expand
abroad.
• The Network has the reach and expertise to
find the right partner(s) to:
✓manufacture or distribute your products
✓access new markets
✓find the technology you need to drive
innovation in your business
✓cooperate in research and development
projects
 EURES Network

• EURES (European Employment Services) is a cooperation network formed

by public employment services

• The objective of the EURES network is to facilitate the free movement of

workers within the European Economic Area (the EU members states plus
Norway, Liechtenstein and Iceland) and Switzerland.

• EURES targets both job-seekers interested in moving to another country to

work or to study, and employers wishing to recruit from abroad.
• EURES offers a network of advisers that can give information, help and assistance to jobseekers and
employers

• EURES advisers are trained specialists who provide the three basic EURES services of information,
guidance and placement, to both jobseekers and employers interested in the European job market.

• There are more than 850 EURES advisers across Europe. Their contact details and addresses can be
found on the page "Search for EURES advisers" in the section "EURES" of the portal.

• EURES is a free service to both jobseekers and employers, subject to the conditions set out by
individual EURES members.
33
34
The European Commission supports entrepreneurship through:

• Improving the entrepreneurial capacity of European citizens and

organizations by fostering entrepreneurial learning and the
entrepreneurial mindset as promoted by the European
Entrepreneurship Competence Framework (EntreComp)

• Creating an environment where entrepreneurs can flourish and

grow: supporting start-ups, transfers of business, insolvency and
second chance

• Supporting specific groups whose entrepreneurial potential has not

been fully tapped yet, such as women and young people
through entrepreneurial learning and Erasmus for Young
Entrepreneurs

Check here: https://ec.europa.eu/growth/smes/supporting-

entrepreneurship_en
35
36
37
 A task for next time:

1. Check the requirements for the Erasmus for Young Entrepreneurs

Program

2. Is the program popular (how many people have taken part in it, in
which countries and sectors?)

38
 Competition rules in the EU
• Free competition is a key element of an open market
economy. It stimulates economic performance and offers
consumers a broader choice of better-quality products and
services and at more competitive prices.
• European Union competition policy ensures that
competition is not distorted in the internal market by
ensuring that similar rules apply to all companies operating
within in it.
• Title VII, chapter 1 of the Treaty on the Functioning of the
European Union lays down the basis for Community rules
on competition.
• State aid is prohibited under the Treaty, although
exceptions exist because such aid may be justified by, for
example, services of general economic interest.
• If you infringe the EU's competition rules,
you could end up being fined as much
as 10% of your annual worldwide
turnover. In some EU countries individual
managers of offending firms may face serious
penalties, including prison.
• EU competition rules apply directly in all EU
countries - the courts in your country will
uphold them. These rules apply not only to
businesses but to all organisations engaged in
economic activity (such as trade associations,
industry groupings, etc).
• The European Commission monitors
and investigates anti-competition
practices, mergers and state aid to
ensure a level playing field for EU
businesses, while guaranteeing choice
and fair pricing for consumers.
39
 Examples of anti-competition practices
Illegal contacts and agreements
These agreements are known as cartels. They are
forbidden because they restrict competition.
They can take many forms, and need not be
officially approved by the companies involved.
The most common examples of these practices
are:
✓Price fixing
✓Market sharing
✓Agreement on customer allocation
✓Agreement on production limitation
✓Distribution agreements between suppliers
and re-sellers where, for example, the price
charged to customers is imposed by the
supplier
Abuse of a dominant position
If your company has a large market
share, it holds a dominant position
and must take particular care not to:
✓ charge unreasonably high
prices which would exploit
customers
✓ charge unrealistically low
prices which may drive
competitors out of the market
✓ discriminate between customers
✓ force certain trading
conditions on your business
partners
40
Violation of competition and European Commission’s reaction (1)

41
 Violation of competition and European Commission’s reaction (2)

FIND MORE EXAMPLES HERE: https://op.europa.eu/en/publication-detail/-/publication/b11a5d15-c5ca-11e7-9b01-

42
01aa75ed71a1