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Entrepreneurship Policy for the Future Volume 1 of the Entrepreneurship for the Future Series Table of Contents Preface and acknowledgements........................................................................................... ix Once upon a time ­ the point of departure.....................................................................................................ix Chapter 1.................................................................................................................... 15 Formulating the problem....................................................................................................................................15 The problem of definitions................................................................................................................................ 17 Perspectives on SME definitions.......................................................................................................................22 The unimportance of SME definitions.............................................................................................................22 The importance of defining SMEs....................................................................................................................23 The problem of evaluation................................................................................................................................. 24 Chapter 2.................................................................................................................... 27 The study -- objectives and approach................................................................................. 27 Project purpose and objectives..........................................................................................................................27 Approach to the project......................................................................................................................................27 Selection of countries........................................................................................................... 28 Research questions and methodology.................................................................................. 30 Analysis................................................................................................................................ 32 Selection of best practices.................................................................................................................................. 33 Chapter 3.................................................................................................................... 37 A discussion of SME versus entrepreneurship policy.......................................................... 37 SME policy........................................................................................................................................................... 37 The shift towards entrepreneurship policy...................................................................................................... 38 Differentiating small business policy from entrepreneurship policy ­ a comparison of features............40 Features of SME policy.......................................................................................................................................41 Features of entrepreneurship policy..................................................................................................................42 Articulating a model for entrepreneurship policy........................................................................................... 44 Chapter 4.................................................................................................................... 51 Institutions, entrepreneurship and economic performance.................................................. 51 Introduction.......................................................................................................................... 51 Classical views on entrepreneurship..............................................................................................................53 Disappearance and revival..................................................................................................................................54 A closer look at the data..................................................................................................................................... 55 Goal of this paper................................................................................................................................................57 Framework............................................................................................................................ 57 Definitions and a double dichotomy................................................................................................................ 58 Framework and the role of culture and institutions....................................................................................... 59 Determinants........................................................................................................................................................61 An eclectic theory of entrepreneurship............................................................................................................ 61 Demand side.........................................................................................................................................................62 Supply side............................................................................................................................................................ 63 Risk-reward profiles.............................................................................................................................................63 Role of institutions.............................................................................................................................................. 64 Role of culture......................................................................................................................................................65 Some final remarks.............................................................................................................................................. 67 Consequences.......................................................................................................................................................68 Linking the level of business ownership and economic growth...................................................................68 Linking entrepreneurship and economic performance.................................................................................. 70 Sorhe lessons from European economic history............................................................................................ 72 Contemporary empirical studies........................................................................................................................ 76 Synthesis and policy implications...................................................................................................................... 78 Introduction.......................................................................................................................... 15 References............................................................................................................................. 81 Chapter 5........................................................................................... 89 The European Union and the policy in favour of small and medium sized enterprises....... 89 1. Introduction.................................................................................................................................................... 89 2. The definition of SME...................................................................................................................................90 3. Evolution of the European.Community SME policy............................................................................... 91 3.5 Integrated programme................................................................................................................................. 96 4. The organisation............................................................................................................................................. 97 5. Measures taken under the Multiannual Programmes................................................................................ 98 Joint European Ventures for SMEs; JEV..................................................................................................... 100 Business co-operation...................................................................................................................................... 101 Target Groups................................................................................................................................................... 103 European Observatory Study......................................................................................................................... 104 Conclusion........................................................................................................................... 104 Chapter 6..........................................................................................107 Fostering entrepreneurship in Europe................................................................................. 107 Introduction......................................................................................................................................................... 107 I What is entrepreneurship.............................................................................................................................. 108 What influences entrepreneurship................................................................................................................. 109 Cultural factors.................................................................................................................................................. 109 Geographic factors........................................................................................................................................... 110 Social factors..................................................................................................................................................... 111 Economic factors............................................................................................................................................. 111 II Why foster entrepreneurship?.................................................................................................................... 112 BI Barriers and bottlenecks to entrepreneurship............................................................................................ 113 Know-how......................................................................................................................................................... 113 Finance............................................................................................................................................................... 114 Administrative burdens....................................................................................................................................116 Social security.................................................................................................................................................... 117 N How to foster entrepreneurship ­ examples from Europe................................................................... 117 Finance............................................................................................................................................................... 119 Social acceptance.............................................................................................................................................. 120 Education........................................................................................................................................................... 121 Incubators.......................................................................................................................................................... 123 Social security.................................................................................................................................................... 124 Administrative burdens....................................................................................................................................124 Family Support.................................................................................................................................................. 126 Training.............................................................................................................................................................. 126 Conclusions....................................................................................................................................................... 127 References.......................................................................................................................................................... 128 Chapter 7..........................................................................................131 The Importance of Entrepreneurship Policy.................................................... 131 The Parameters of Entrepreneurship Policy................................................................................................ 132 A changing policy mix..................................................................................................................................... 135 An increasing Focus on the 'Entrepreneurial Economy'............................................................................ 135 'Entrepreneurship policy in practice' based on ten cases............................................................................136 A look at entrepreneurship policy objectives and measures...................................................................... 138 Measuring performance ­ trends, indicators and outcomes...................................................................... 144 Chapter 8...... ...................................................................................149 On the Road to Entrepreneurship Policy........................................................................... 149 Structures........................................................................................................................... 150 Reduction of administrative, legislative and regulatory and tax burden........................... 153 Overview of what governments are doing and why.................................................................................... 154 A. Taxation........................................................................................................................................................ 155 B. Administrative burden................................................................................................................................ 156 C. Simplified repotting to government authorities...................................................................................... 156 D. Regulatory burden.......................................................................................................................................156 E. Legislative reform........................................................................................................................................ 156 F. Labour market reform.................................................................................................................................156 Approaches in the taxation area......................................................................................... 157 Approaches to reduction of administrative, regulatory and legislative burden....................................... 158 Labour market issues....................................................................................................................................... 159 Summary............................................................................................................................ 160 Small business support initiatives...................................................................................... 165 Service providers.............................................................................................................................................. 165 Range of support services.................................................................................................. 168 Identification of target groups........................................................................................................................ 173 Why are they doing it?..................................................................................................................................... 175 Observations and lessons learned.................................................................................................................. 177 Access to financing: seed capital and start-up loans......................................................... 181 Summary and trends.......................................................................................................... 185 The increasing importance of networks........................................................................................................ 187 Conclusions........................................................................................................................ 190 Chapter 9........................................................................................................................ 193 Entrepreneurship policy in the area of motivation and skills............................................ 193 Promotion of entrepreneurship......................................................................................................................193 Why they are doing it - entrepreneurship promotion objectives...............................................................196 What are they doing ­ approaches to entrepreneurship promotion......................................................... 196 Summary............................................................................................................................ 200 Entrepreneurship education............................................................................................... 203 Integrating entrepreneurship in the education system................................................................................ 203 Why are they doing it?..................................................................................................................................... 206 Approaches ­ K - 12........................................................................................................................................ 207 Critical success factors in entrepreneurship education............................................................................... 210 Post-secondary levels....................................................................................................................................... 212 Summary............................................................................................................................ 214 Chapter 10...................................................................................................................... 217 From 'On The Road To Entrepreneurship Policy' To Reaching The Destination................................ 217 The need for knowledge.................................................................................................................................. 217 The policy/research gap.................................................................................................................................. 219 Governments and the entrepreneurship research agenda.......................................................................... 221 Summary assessment........................................................................................................................................222 Closing postion................................................................................................................................................. 223 Checklist of signs that entrepreneurship is important and taken seriously:... 225 Describing different contexts and testing some hypothesis.......................................................................229 Some Comments on how to measure Skill, Motivation and Opportunity for entrepreneurs.............. 233 Annex 1: Economic Indicators - Ten Case Comparisons Annex 2: Examples of performance indicators in use for entrepreneurship and start-up support measures