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Broadening horizons for Europe’s SMEs

Globalisation is both an opportunity and a threat for Europe’s SMEs, whose capacity to operate on an international level will determine their long-term competitiveness. Yet, the vast majority of European SMEs continue to limit their operations to their own country. A recent EU report seeks to identify the factors which impede, or support, the internationalisation of SMEs in Europe.

(09.07.08). Increasingly, companies are being called upon to broaden their horizons and compete on an international basis. ‘Internationalisation’ has been proven to be one of the key drivers of competitiveness and growth and, indeed, a full 63% of European Union citizens are in favour of globalisation (Flash Eurobarometer 151b). However, European SMEs have difficulties embracing this global trend and the opportunities it offers. According to a report from the European Observatory of SMEs, only 8% of SMEs in the EU export, only 12% of the inputs of an average SME are purchased abroad, and only 5% of companies obtain income from foreign business partnerships.

Concerned about the low level of internationalisation of European SMEs, the European Commission launched a BEST project, at the end of 2006, on ‘Supporting the internationalisation of SMEs’. An expert group, including high-level representatives from across the EU and associate countries, was set up to examine national and regional policies to promote more international trade by SMEs, both within the EU and outside it.

“The aim was to analyse the factors which facilitate or hinder internationalisation, to identify existing policies that encourage or support SMEs in going in this direction, and provide policy recommendations for the future,” notes the project officer from the European Commission’s Entrepreneurship Unit, Inigo Urresti.

Identifying good policy and good practice

The ‘Internationalisation of SMEs’ expert group met four times between November 2006 and December 2007 and produced two final documents, which should make a significant contribution to the definition of policies and programmes aimed at increasing the international orientation of European SMEs.

A ‘Final Report of the Expert Group on Supporting the internationalisation of SMEs’ was published in early 2008, and a good practice brochure presenting a collection of 27 national programmes, identified as providing examples of good practice in support to the internationalisation of SMEs, was distributed for the first time at the conference of the European Charter for Small Enterprises in Bled, Slovenia, in June 2008.

The final report is based on the recommendations of the experts and supported by statistical data and studies. It provides a good overview of the current situation across the EU with regard to the internationalisation of SMEs and offers an insight into the barriers that exist and how they may be overcome.

The importance of public support

“One clear message to emerge from the report, is the vital importance of public policy support,” says Urresti. “The existence of public support programmes makes a major difference. Many SMEs would not even consider going international if it were not for support received from public agencies. This makes public support not only helpful, but absolutely necessary.”

The report also identifies the need for better communication and greater clarity in the provision of support services. “There are too many different support agencies and networks, and better coordination is needed,” says Urresti. The main reported reasons for failure to move outside the national market are a lack of financial resources, and, most of all, a lack of the skills and/or people required to tackle internationalisation. “There is a need for more international entrepreneurs. In the long term this should be fostered through the national education systems,” says Urresti. “Education systems need to create entrepreneurs with the necessary language skills, international outlook and understanding of business in an international context.”

Looking to the future

The expert report recommends better coordination of policies and programmes to support internationalisation, as well as greater involvement of SMEs themselves in defining policy. It also stresses the importance of raising awareness among SMEs of the importance of extending their vision beyond national boundaries. It suggests that, whilst the national level is probably the best for the development and coordination of policies, for maximum impact they should be implemented at regional/local level. It also recommends support to networks, promotion of life-long training, and an emphasis on internationalisation rather than simply exports.

The next step for the project will be the completion of an in-depth study to identify the state of play with regard to internationalisation in European SMEs. “This should provide a clear overview of the extent of the problem, with an analysis by sector, type of activity, size of the enterprise, and so on,” says Urresti. The study is now under way and should be completed by the end of 2009.

Entrepreneurship Unit:
Directorate-General for Enterprise and Industry