Nurturing small and medium sized enterprises in Europe

Abstract

Tourism is one of the world’s major industries responsible for economic growth, foreign exchange earnings, employment opportunities and regional balances in individual countries and across regions. This industry generates over 5% of the European Union (EU) gross domestic product and has strong linkages with other economic sectors. In fact, tourism triggers infrastructural developments that are related to the industry such as airports, seaports, parks, roads and rails. Within the EU alone, the tourism sector consists of about 1.8 million businesses. Most of these tourism businesses are small and medium sized enterprises (SMEs) that employ 5.2% of the total European workforce that translates to approximately 9.7 million jobs, with a significant proportion of young people (EU, 2010). This chapter considers relevant academic literature that differentiates SMEs from their larger counterparts. It maintains that small businesses are often constrained by their size and limited resources. Arguably, the accessibility to finance is one of the most critical factors for the SMEs’ inception and growth. These entities are often viewed by financial institutions as relatively risky when compared to enterprises from other industries. Therefore, this chapter contends that tourism SMEs may easily find themselves in an ‘equity gap’ where it may prove very difficult to raise capital for further investment. Consequently, national governments and other regulatory stakeholders are increasingly stepping in to support micro and small enterprises in many contexts. In this light, the European Union (EU) has reaffirmed its commitment for SMEs. As a matter of fact, the EU has drafted the ‘Small Business Act’ in 2008 and refined it again in 2011. The EU’s commitment is quite evident from their frequent calls for research and training schemes in the subject areas of “SMEs” and “tourism”; where grants are frequently issued under ‘Marie Curie’ and ‘Cordis FP7’ programmes. Therefore, this chapter identifies specific policies and initiatives that are aimed at fostering a climate for job creation and competitiveness for SMEs in Europe. By the end of the chapter you should be able to:

• Define small and medium sized enterprises in the European Union context; • Distinguish the differences between small and medium sized enterprises and large firms; • Learn about the European Union measures that are currently supporting the financing needs of small and medium sized enterprises; • Be knowledgeable of crowd-funding as an alternative form of financing.