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Introduction[]
This document contains a revised and updated policy brief for the business creation theme of EQUAL. This policy brief is part of a series of four on inclusive entrepreneurship:
- culture and conditions
- integrated business support
- appropriate business finance
- consolidation and growth
In general the main content and messages in the original brief[1] remain valid today. The original brief was highly appreciated by practitioners and policy makers at different levels. So where there was no need to update the material it has been left the same.
However, in order to be useful during the next round of the Structural Funds it has been necessary to make the following adjustments:
- To update the sections referring to the EU policy context to ensure that the latest initiatives are taken into account;
- To update some of the evidence referring to the solutions tested by EQUAL projects;
- To slightly reorganise some of the sections so as to make them consistent with the categories used in the "tool for inclusive entrepreneurship" developed by the Community of Practice on Inclusive Entrepreneurship (CoPIE).
On the basis of an analysis of good practice during the two rounds of EQUAL the tool clusters the solutions tested into four main categories concerning inclusive entrepreneurship – culture and conditions, integrated business support, appropriate business finance and consolidation and growth. These categories could be used in the next round of the Structural Funds to analyse the strengths and weaknesses of business support strategies at different levels and for helping the transfer of good practice.
In order to make the policy brief compatible with this methodology it has been necessary to change the title of the brief and include more information on how to create the most favourable conditions for inclusive entrepreneurship.
This document has been prepared by experts (October 2007) and their opinions do not in any way engage the Commission.
Encouraging entrepreneurship among the disadvantaged[]
EQUAL helps to change the mindsets and improve the conditions which allow under-represented groups to start a business.
People only turn to business advisors and banks when they are at least thinking about becoming an entrepreneur. However, the experience of EQUAL and many similar initiatives, is that the problem for many disadvantaged groups and areas starts far earlier on than this. For various reasons they may not even consider entrepreneurship as an option at all.
Entrepreneurship appears particularly difficult when communities have depended for a long time on traditional agricultural, industrial or public sector activities. Some EU Member States report that start-up rates are 10 times lower in their worst performing areas than in their best. Similarly, certain groups may have little tradition of entrepreneurship and few positive role models to base their judgement on. The administrative cost and the risk of losing out in terms of taxes, benefits and other income can also act as a real disincentive. Approximately half as many women as men set up a business, and the proportion of self-employed young people and ethnic minorities is lower than that for the population as a whole.
On the other hand, certain ethnic groups have an extremely strong tradition of entrepreneurship. Similarly, the millions of Europeans who survive through some form of informal activity are practicing small scale entrepreneurship every day. In France around 40% of the 300,000 businesses created each year are set up by unemployed people. They show that successful entrepreneurship does not depend primarily on formal education, class, gender or racial stereotypes.
In this context, strategies for improving business support and access to finance can only affect the tip of the entrepreneurial iceberg. Unless enough people want to become entrepreneurs in the first place, the banks and advisors will find themselves competing for a relatively small proportion of the potential field. So the long term challenge is to develop strategies for both changing the "mindsets" and some of the objective conditions which are necessary for opening up entrepreneurship in the formal economy to a far wider public.
EU Pledges long-term commitment to developing small business[]
The first priority of the recent EU Communication, promoted by DG Enterprise, on the role of policies for SME's in implementing the Lisbon Strategy[2] is "promoting entrepreneurship and skills". It states that "the EU is not fully exploiting its entrepreneurial potential and is not producing enough start-ups". It mentions a series of factors which tip the balance in favour of being employed rather than self employed. These include basic conditions like the "imbalance between risk and reward, weak social security coverage" and the "time and costs involved in setting up a new company". It also refers to the "need to foster entrepreneurial mindsets" by increasing the appreciation of entrepreneurs in society and to "the increasingly important role of entrepreneurship education".
The Communication brings together several previous strands of EU Enterprise Policy such as the European Charter for Small Enterprises [2] and the Entrepreneurship Action Plan [3] and places them under the umbrella of the Lisbon "Open Method of Coordination". This means that progress can be charted in each Member State's implementation report of its National (Lisbon) Reform Programmes. The Commission's main instruments for directly promoting its priorities are DG Enterprise's new €3.6 billion Competitiveness and Innovation Framework Programme (CIP) and the Structural Funds which spent a total of €21 billion euros on support to SME's in the period from 2000-2006. When it comes to policies for creating the culture and conditions for entrepreneurship, three main strands of EU work stand out in terms of the solutions being tested by EQUAL projects.
Firstly there is the work to simplify procedures, speed up and reduce the costs of company start-ups. The conclusions of the 2006 Spring European Council state that Member States should ensure that that the time required to create a business should be "within one week anywhere in the EU by the end of 2007" Start-up fees should be as low as possible and there should be one stop shop arrangements. Micro and craft enterprises should not be over burdened with red tape and policy makers should take account of their needs.
Secondly, there has been an important push to "foster entrepreneurial mindsets through school education" [5]. This has resulted in a Communication from the Commission[6] and an important conference in 2006 which gave rise to the "Oslo Agenda for Entrepreneurship Education in Europe". Key recommendations include developing a coherent framework for policy development, introducing entrepreneurship education into the official curricula, training and motivating teachers, promoting business games and learning by doing, building two way links between entrepreneurs and schools, and taking a far broader approach to entrepreneurial skills throughout the educational system.
Finally, DG Enterprise has launched a series of activities to create positive role models and improve the image of entrepreneurship. They have recently launched the Enterprise and Industry Awards which attracted entries from over four hundred projects, many of which are especially active in the areas of entrepreneurial culture and conditions. They have also promoted research, the exchange of good practice and networking among young, female and ethnic minority entrepreneurs as well as social enterprises.
Building bridges between local communities and new business[]
EQUAL Partnerships have been able to explore a range of solutions to the obstacles faced by under represented group. Key elements of success have come from:
Research on the barriers facing under-represented groups in order to design "bridges" into self employment[]
One of the first steps of EQUAL and similar projects in the field of entrepreneurial culture has been to try to improve the two way information gap that often exists between business support systems and potential entrepreneurs from disadvantaged groups and areas. This involves both obtaining first-hand knowledge of the real obstacles these groups face and also building trust and providing more reliable information to them.
Providers of business support services participating in EQUAL[7] have undertaken extensive research to acquire better intelligence about the barriers, the specific business support needs, profiles and opportunities of disadvantaged groups, areas and sectors (i.e. the social economy). The results of this research have been directly used:
- To provide guides on routes out of benefit dependency into entrepreneurship that try to overcome the major hurdles faced by disadvantaged people and by all those in the submerged economy when trying to move from social security benefits into self-employment. On the basis of international comparisons, a series of policy recommendations for improvements to benefit systems and proposals that should be taken into account when providing business advice have been formulated in some countries.
- To increase the quality of business support strategy and procedures in national and regional programmes by adapting them to the needs of under-represented groups (for example, specific targets and monitoring arrangements which take into account the needs of specific groups, contracts specifying when, how and how much specialist outreach services intervene, when they hand over to mainstream support services, and quality guidelines for specific services, such as women-friendly "business incubators").
- To train both specialist and mainstream business advisors to into account the differences between potential entrepreneurs.
- To allocate more resources to business support programmes and schemes, targeting under-represented groups (up to 30% of the budget for entrepreneurship).
Business start-ups[8] have been shown to increase by up to 20% per annum in regions where the above approaches have been undertaken.
Support for teachers and trainers to build entrepreneurial attitudes and skills[]
Another group of EQUAL partnerships has been at the forefront of initiatives in entrepreneurship education (Valnalon[9], Garapen[10], ENE[11]) focussing particularly on the needs of under-represented groups like women and people living in rural areas. Some have developed particularly imaginative methods for "learning by doing" like, for example, turning the whole class room into a cooperative which trades internationally with other class-room cooperatives of students from different European countries[12] These EQUAL partnerships has also developed support tools for teachers, influenced the mainstream curriculum and had an effect on training[13]
A common strand running through this work is the need to go beyond narrow definitions of entrepreneurship as a set of technical skills such as book-keeping and marketing which are only useful to private businesses. Many projects see it as a much broader set of attitudes and competences such as team-working, decision making, risking taking, innovating and so on which can be applied to all walks of life. They argue that these qualities are essential for entering the "knowledge economy" and that those that don't go on to become professional business people can apply their entrepreneurial skills as employees within private companies, in the public sector, the social economy and the community.
Linked to this approach is the need to integrate entrepreneurship training into all stages of the educational system.
Building entrepreneurial capacity in deprived communities[]
In addition to work on welfare bridges and the educational system, EQUAL projects have been especially active in a third entry point for improving the culture and conditions for entrepreneurship – namely the community. The projects that take this direction such as KCidade[14] and Norte de Cordoba[15] show that entrepreneurial ability does not depend on educational qualifications, social status or race. Even the most deprived urban and rural communities can become "business incubators" - but this means designing long term integrated itineraries which build individual and collective empowerment and link broader social issues to economic activity. EQUAL projects stress the importance of starting with small activities that spring directly from peoples concerns and using these to create positive examples and role models which are the seed for entrepreneurship. Building trust through family and social networks is vital - as is the use of ICT.
Promoting positive role models of entrepreneurship in the media[]
EQUAL partnerships have tested effective ways to promote positive role models of entrepreneurship by:
- Disseminating promotional leaflets, posters and by organising publicity campaigns in the media. All promotional images show people who are confident, energetic and fashionable[16].
- Organising contests and competitions for entrepreneurship among particular groups to reinforce the idea that the businesses are far from marginal.
- Pooling resources with various actors to make a wider impact and achieve larger scale initiatives, such as TV series.
Policy recommendations[]
The good practices tested under EQUAL reinforce the policy orientations and priorities at EU level by addressing the business needs and potential of under-represented groups. The projects point to the importance of policies to change the culture and conditions for entrepreneurship as a prerequisite for all subsequent steps to improve business support and finance. This requires:
- More research, monitoring and demographic profiling of the barriers and needs of potential entrepreneurs.
- Pan-European analysis and benchmarking of various national and regional strategies that build "bridges" out of benefit dependency and the submerged economy (such as schemes which allow potential entrepreneurs to test trade while still receiving benefit).
- Further cooperation and exchange of models to extend entrepreneurship education within schools. There is scope for involving large numbers of students in imaginative transnational programmes in this area. Schools (and training establishments) must become central players in inclusive entrepreneurship strategies. Adjusted curricula and support for teachers can ensure that entrepreneurship education also addresses the needs of groups that face disadvantages in the labour market.
- Exchange of best practice in the field of integrated strategies for mobilising the entrepreneurial potential of deprived urban and rural communities.
- Increasing the visibility of successful projects and communicating positive role models.
It is important to ensure that the lessons learnt in these fields are reflected in the National Reform Programmes of the Lisbon Process and in the strategies funded through the next round of the Structural Funds. This requires better co-ordinating between relevant government departments responsible for social and economic policies at all levels, between agencies responsible for business support and regional actors like business organisations.
References[]
[1] etg2-hardtoreach_en.cfm
[2] Implementing the Community Lisbon Programme. Modern SME Policy for Growth and Employment. COM (2005) 551 Final. Brussels 10.11.2005 com_2005_en.pdf
[5] Entrepreneurship Action Plan. Key Action Sheets. Key Action 1. [4]
[6] Implementing the Community Lisbon Programme. Fostering Entrepreneurial Mindsets through education and learning. COM(2006) 33 final [5]
[7] tcaView.jsp?id=736 and etg2-suc-exzept.pdf
[8] entrep-cyfenter_en.cfm
[9] entrep-06-es-valnalon_en.cfm
[10] entrep-red-accent_en.cfm
[11] cip=PT&national=2001-055
[12] See footnote 8
[13] entrep-cyfenter_en.cfm
[14] entrep-07-kcidade_en.cfm
[15] etg2-suc6-cordoba.pdf
[16] See footnote 15 on Norte de Cordoba also Verbund Enterprise etg2-suc-verbundentrep.pdf