Eurada News nº400 - May 2020

The Commission’s SME strategy and the role of RDAs

The EU SME Strategy for a sustainable and digital Europe lists three pillars to focus on and a strategy for governance to comprehensively address the needs of diverse SMEs. EURADA believes that Regional Development Agencies (RDAs) have a role to play in the improvement and implementation of this strategy.

As regional development practitioners, it would be fair to say that Small and Medium Enterprises (SMEs) play a crucial part in the economic development of an area. After all, development agencies also focus on providing support to SMEs. As the Commission points out in its SME strategy, there are around 25 million SMEs in Europe employing over 100 million people and contributing more than half of the EU’s GDP. They are an essential part of the economy not only for these reasons, but also for the value they bring to culture and society. It is therefore vital, as Europe aims to have a sustainable and digital economy, that the diversity and consequently the diverse needs of SMEs are considered and that development agencies are involved in doing this.

One way by which this is done is through the involvement and contribution of EURADA’s members to its position paper regarding the matter. Because EURADA provides recommendations to leverage EU initiatives, enhance the design of policies and increase their impact in regional economic growth, it is important that the voice and opinion of development agencies are reflected in the position paper.

Capacity-building and support for the transition to sustainability and digitalisation was identified as one of the three pillars of the Commission’s SME strategy. A specific key action that must be pointed out is the expansion of Digital Innovation Hubs (DIHs) through networks such as Startup Europe and Enterprise Europe Network (EEN). In EURADA’s position paper, it is reiterated that DIHs must cover all European territory and be accessible at working distance from the companies. A practical example of this is the Knowledge and Technology Transfer Scheme which operates in several counties across Lower Saxony. This has proven to be a successful initiative funded by ERDF. This concept is closely related to DIHs but unfortunately the nearest EEN is located in Hanover, about 150 km away from the region. For this reason, RDAs can play a role in bringing the benefits of the DIHs to all the companies in a territory precisely because of the relationship they have and the support they provide to SMEs.

Not highlighted as a specific pillar but nevertheless an important issue for SMEs is the jobs-skills mismatch or the difficulty of finding highly qualified personnel who meet the specific needs of a business. To address this, the Commission will be updating the Skills Agenda for Europe by launching “Pact for Skills” which involves Vocational Education and Training (VET) specific for SMEs. Development agencies can assist in the implementation of this by cooperating with the VET sector and using their existing knowledge in the processes of entrepreneurial smart specialisation promotion to offer courses which will meet the needs of SMEs.

Meanwhile, when it comes to issues related to complying with market regulations and administrative formalities, it is recognized that SMEs have a more difficult time in accomplishing these tasks because of their limited financial and human resources as well as the varying requirements per Member State. Thus, the Commission seeks to reduce regulatory burden and improve market access for SMEs. In terms of reducing regulatory burden, a way of doing this is of course through continuing with the harmonisation of procedures throughout Member States and the application of electronic bids. On the other hand, improving market access by involving SMEs in public procurement can be a promising opportunity for both SME and the public sector. This is as long as contracting authorities are flexible and provide sufficient information so that SMEs can innovate and plan accordingly.

Naturally, having access to finance is something that SMEs also require yet continue to struggle with given a variety of factors such as lacking collateral or investors, to name a few. Traditional sources of finance would have stringent requirements which SMEs have difficulties meeting. Therefore, diversifying the sources of finance for SMEs allows for better opportunities for SMEs to get funding. The concept of tech due diligence can improve the resources of innovation through the proper assessment of an SME’s market potential and valuation thereby showing all potential risks while assuring investors. EURADA believes that RDAs can play a role in this by mobilising its experts and provide support in an SME’s valuation assessment.

For a strategy to be effective, the cooperation of all parties involved is needed. This means that the EU and Member States must work together in its fulfilment. SME Envoys is an existing network which can facilitate with this. By its mandate, SME envoys are national authorities who are in charge of SME policy and interact with regional authorities and local businesses. Extending this model to the regional level would visualise a specific entity who will advocate for the small businesses of a certain territory. In fact, this situation is already demonstrated by RDAs participating in the Interreg Europe project Scale Up. The project has a consortium of 6 regional partners with EURADA acting as advisory partner. The RDAs aim to improve region-specific ERDF Policy Instruments related to SME growth and development through the transfer and implementation of best practices from one region to another. Although only in its second semester, the project has already had its first study visit to the Lubelskie Voivodeship in Poland. There, project partners learned more about the best practices chosen by partners in Lublin and, together with stakeholders, evaluated whether these best practices can be transferred to their own region to help SMEs grow and develop. The project reiterates the role of RDAs in supporting SMEs as well as the potential of a regional SME envoy through RDAs.

The opinion mentioned in this article is also reflected in EURADA’s position paper regarding the SME strategy. It will be presented to its board of directors, after which it will be widely circulated so as to be accessible for other interested organisations and stakeholders.

More information

Written by Ivana Rae Almora, Intern at EURADA.