The tools to thrive: providing effective support to SME globetrotters

sme-alphabetProviding support to SMEs has been a long-standing policy of the European Union, particularly helping them to establish businesses and succeed overseas.

Jean-Marie Avezou, DG Internal Market, Industry, Entrepreneurship and SMEs, European Commission, says that the majority of EU SMEs tend to stick to their own backyard due to a number of difficulties, such as high export costs and challenging regulatory environments often encountered in third countries. However, there are, he explains, various tools at the disposal of EU SMEs to help them internationalise and thrive.

In a globalised world, SMEs need to be able to face up to increasing competition from developed and emerging economies and to plug into the new market opportunities these countries are providing. International activities reinforce growth, enhance competitiveness and support the long-term sustainability of companies. Moreover, a direct link has been established between internationalisation and increased SME performance.

As demonstrated by the result of an EU study released in 2015,[1] few small businesses in Europe export beyond the EU: 69 per cent of EU SMEs have not engaged in any business activities outside the European Internal Market in the last three years. The main barriers identified by exporting EU SMEs are: burdensome administrative procedures when exporting, high delivery costs, the difficulty of identifying business partners abroad and the high volume of financial investment needed.

Increasing the internationalisation of SMEs and helping them access third markets remains crucial for Europe’s competitiveness, economic growth and innovation. The EU priority is therefore to ensure that enterprises can rely on a business-friendly environment and make the most out of growth markets outside the EU. How is this translated into practice?

The fact is that over the years EU SME policy has paid a great deal of attention to the internationalisation of the more than 21 million small businesses representing the backbone of the European economy and a key source of jobs and growth. Support provided by the EU in this area consists of different actions and programmes: the EU has developed a wide range of support measures to foster SMEs’ internationalisation. Its main aim is certainly not to duplicate what is done at national level by each Member State of the European Union. It is rather to provide clear added value through a European dimension where it makes sense.

For example, almost 22 per cent of the total budget (EUR 2.3 billion) allocated for 2014–2020 to the COSME programme (Competitiveness of Enterprise and SMEs) is going to the priority area of ‘Supporting internationalisation and access to markets’. The COSME programme funds the Enterprise Europe Network, which is the world’s largest support network for SMEs. Present in more than 60 countries, the network helps European businesses to expand internationally by providing them with advice, information on markets and rules or regulations to be complied with and matchmaking opportunities. A total of 4,500 experts in internationalisation and technology transfers are available to accompany SMEs’ various development projects in markets beyond the EU, as well as in the European Internal Market. In countries like China, the network is represented by Business Cooperation Centres (in Chengdu, Changsha and Shanghai) run by local organisations. The aim is to connect Chinese SMEs with European SMEs through matchmaking events or business missions to develop partnerships, business cooperation and trade.

The COSME programme is also financing several targeted actions helping SMEs to internationalise through clusters, international fairs (Business beyond Borders project) or the definition of a new methodology to support and trigger SMEs’ readiness to develop international business in third-country markets.

Another example of practical support for SMEs’ internationalisation is the EU Gateway│Business Avenues mission developed in Asia through the Partnership Instrument. This is an EU initiative helping European companies to establish long-lasting business collaborations in Asia. Selected European companies, including SMEs, get the opportunity to participate in a one-week business mission in any of the three target markets, Korea, South East Asia and China, focused on a specific sector. Companies benefit from a range of business support services, which include coaching, logistical and financial support.

To accompany SMEs in developing their presence abroad, a network of intellectual property rights (IPR) helpdesks is on hand to provide free advice on IPR, which is often mentioned as one of the key concerns of EU SMEs when considering internationalisation. Initially set up in Mainland China, IPR SME helpdesks are now covering broader China (Taiwan, Hong Kong and Macao) as well as Southeast Asian and Latin American countries. They provide jargon-free, first-line and confidential advice on IPR issues, using innovative communication techniques to more effectively reach out to SMEs.

arrow-and-seedlingMore general assistance is also given to intermediary organisations that have developed EU business centres to help European SMEs to enter non-EU markets. These centres have been established in different Asian countries, including China. They provide first line support services including market access assistance, guidance on local business practices and regulatory issues. In the case of the successful EU SME Centre in China, its website is allowing SMEs in Europe to make informed decisions through the use of diagnostic business tools before they enter the Chinese market.

The business environment in third countries is an important factor that can determine if SMEs develop their activities and thrive. Small businesses are indeed more vulnerable to red tape and to difficult or unpredictable regulatory frameworks. The various government-to-government industrial policy or regulatory dialogues set up by the EU, notably with China, contribute directly to the improvement of the business environment. They help to address the issues that SMEs face when they go international. Specific SME policy dialogues exist with relevant administrations of China and the US: they constitute regular fora where best practices in the field of SME policy are exchanged.

All support actions for SMEs’ internationalisation should be seen in the broader framework of the new concept of EU economic diplomacy currently developed within European institutions. Economic diplomacy is about using all available levers to promote EU economic interests abroad. It is not about developing new instruments but rather reinforcing the articulation between all existing ones so that they form together a coordinated, coherent and user-friendly ‘package’ that businesses will be able to fully exploit. This means removing barriers and creating incentives to trade and investment by opening global markets, fostering cooperation on economic governance and regulatory convergence. Improving the coherence and effectiveness of the external action of the EU in the economic field will reinforce the support to EU businesses and SMEs’ internationalisation.

Giving a boost to start-ups in Europe, too

The European Commission recently adopted a Start-up and Scale-up Initiative, which aims to give Europe’s many innovative entrepreneurs every opportunity to become world leading companies. It pulls together all the possibilities that the EU already offers and adds a new focus on venture capital investment, insolvency law and taxation. There is no lack of innovative ideas and entrepreneurial spirit in Europe. But many new firms do not make it beyond the critical first few years, or they try their luck in a third country instead of tapping into the EU’s potential 500 million customer base. The European Commission is determined to change that and help start-ups deliver their full innovation and job creation potential. The Initiative addresses the main obstacles for companies to starting up and scaling up in Europe, which were identified in a recent public consultation.

The Start-up and Scale-up Initiative brings together a range of existing and new actions to create a more coherent framework to allow start-ups to grow and do business across Europe, in particular: improved access to finance, a second chance for entrepreneurs, simpler tax filings and fostering ecosystems where start-ups can connect with potential partners such as investors, business partners, universities and research centres. A set of measures will also be adopted to support the use of IPR by SMEs and take action to support access by start-ups to the European public procurement market.

[1]     Eurobarometer study on Internationalisation of Small and Medium-sized Enterprises