(Dublin, Ireland): Despite the ongoing focus on small and medium-sized enterprises (SMEs) by policymakers and academics little is known of the underlying drivers of successful job creation in SMEs. In an effort to close this knowledge gap, Eurofound carried out comprehensive research looking at SMEs across the EU28. Findings from this research will be presented today in Luxembourg at the SME Assembly 2015 - a gathering of SMEs and policymakers under the Luxembourg EU Presidency, organised by the European Commission.
Small and medium-sized enterprises (SMEs) are the job engine of Europe. In 2014, these 22.3 million companies accounted for 67% of total employment and contributed considerably to job growth, despite employment in the EU being 1.3 percentage points below the 2008 level.
Eurofound’s research and analysis of the main drivers and barriers behind job creation in SMEs across all 28 Member States of the EU shows that job creation is influenced by a combination of factors, both internal and external to the company.
SMEs have a higher potential to create jobs if they are young, operate internationally and are innovative, both in terms of product and process innovation. Other important factors are location in urban areas, being run by skilled managers, having active growth and investment strategies, and having the capacity to flexibly adapt to external changes and to internal growth.
These internal company factors need to be matched by external factors such as a macroeconomic or sector outlook promising a good level of demand, a favourable entrepreneurship image, and effective public administration and support, with company-friendly business and labour regulations and a manageable taxation regime. It is also important that the labour market provides SMEs with a workforce with the required skills and that the SMEs are able to attract these workers, taking into account the competition from large firms in the labour market.
The fact that job creation in SMEs is determined by a combination of factors, external and internal to the company, highlights the importance of comprehensive public support packages and one-stop shops that do not focus on individual issues only, but provide a range of coordinated assistance for the challenges faced by SMEs. At the same time, the support should be tailor-made to the specific requirements of the SMEs with higher job creation potential.
The report concludes that support for job creation in SMEs does not necessarily need to be exclusively provided by governmental actors. Rather, SME organisations that are well placed to assist their target groups could be supported in their efforts to provide suitable services to SMEs.
The full report will be available early in 2016.
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