Ποιειν Και Πραττειν - create and do

Discussion Paper on Wealth and Employment Creation in the SME Sector by William A. Adam


In the late seventies, pioneers struggling to introduce the Venture Capital profession in Europe sought the support of the EU to overcome cultural and economic barriers.

The EU sponsored a 3-year pilot project to investigate the problems (EUR.904-1984): from this stemmed the European Venture Capital Association and a variety of support schemes. A follow-on project, Euramtech (European Advanced Manufacturing Technology), investigated the financing problems of a fragmented industry sector under competitive pressure and gave rise to the Eurotec Capital Fund (1990).

Considerable progress has been made during the eighties in catching up with the scale of the US Venture Capital sector in financial terms, as described in a recent report produced by the EU (Com. No. 93528) in November 1993, which also suggests that the problems now are due more to inadequate management and cultural attitudes rather than shortage of finance. Nevertheless financing problems do remain in the high risk, start-up phase and even for well established companies contemplating a significant degree of expansion or restructuring following a period of difficult trading.

The cultural changes that need to be accelerated:

  1. The acceptance of individual failure as an inevitable component of risk taking.
  2. The growing acceptance of wealth and job creators as role models in society. Recognition, rewards and professional standards.
  3. The move towards collaborative team management for the mastery of technology.
  4. Greater decentralization and deregulation to increase individual freedom of action within accepted professional standards of conduct.

Analysis of the problems

Although venture capital investment is mainly thought of in relation to small innovative growth firms, it is evident that success of the process depends essentially on some of these small firms reaching European and global scale. For this to occur a large home market for products and sophisticated capital markets are necessary to underpin their independence.

It was recognized that these new-style companies are culture driven, that is the enterprise is shaped around people and their skills. Many examples could be found in the USA of such firms started up since the last war, Hewlett Packard and Digital being only two of the better known. Relatively few could be found in Europe where, for lack of sophisticated capital markets and new style of management, this type of firm tended to be taken over before reaching maturity.

It was observed that companies with growth potential were too often nipped in the bud by multinationals. Yet, all economies are essentially culture driven and require to be in dynamic balance with a small number of large firms and a large number of small and medium sized firms. Small firms are often not equipped to take up the challenge of rapid technical change in global markets until they reach the critical mass required to maintain a sufficient level of research and technical development: then if still independent they are better able to support the economy in the following ways:

  1. Their high rate of research and technical development provides challenging careers for innovate engineers, scientists and technicians, so reinforcing the role of the universities and technical institutes.
  2. Global scale growth is translated into new jobs and greater stability of employment, particularly during the depression in the home base economy.
  3. Organic growth provides opportunities for budding entrepreneurs as new internal profit centres are created, as well as for business managers, marketing, production and financial experts, that is all those seeking achievement-oriented careers.
  4. Global companies with their famous brand names act as 'flagships' to promote the image of a particular cultural region and can also help strengthen the bargaining power in international diplomacy.
  5. The application of advanced manufacturing technology, essential to survival in high cost economies, requires a large European and global customer base to amortise the high fixed costs.

It is evident that the impact of fast technological change imposes the need for a multi-discipline approach to the development of dynamic regional innovation policies. The strengths and weaknesses of each culture must be taken into account, to foster the capacity for innovation and adaptation to change towards new forms of organisation and institutional co-operation. Generalized policies based on economic factors alone cannot release to the full the energies and 'will to achieve' latent within each of the rich and diverse cultures of the European regions.

There can be no doubt, for example, that smaller and more dependent cultures have been disadvantaged and could be further discriminated against as overall measures are taken to free up the market, unless strategic investment funds are available to anchor these growth firms to the particular economy. There is clearly an opportunity for strategic investment funds to recognise the value-added opportunities of investing for long-term growth while benefiting from more dynamically balanced and culturally driven market economies.

Proposed Action

Set up an informal Steering Committee with the following objectives:

  1. To promote and co-ordinate the activities of Institutions and associations representing individual entrepreneurs and directors of SMEs to encourage each and every company director to make greater efforts to improve his own performance and professional skills.
  2. To develop a creative interface between directors of SMEs and the EU through their own regional or national associations or institutes, either existing or to be established.
  3. To initiate practical proposals to stimulate wealth and job creation in the SME sector, by exchange of information and experience.
  4. To inform on research into cultural exchange and co-operative behaviour.
  5. To enter liaisons with the European Venture Capital Association and the Association of Regional Financial Centres.
  6. Promote independently managed venture funds to channel investment into growth ventures rather than tax havens.


Collaboration with the EU, ref. White Paper on Growth Competitiveness and Employment: principle objective 15 million new jobs by the year 2000.

  1. Large companies are taking on fewer recruits, shedding labour, particularly middle layers of management as IT and other management development tools enable them to sharpen their efficiency and improve profitability to meet the returns demanded by institutional investors.
  2. Public and State owned companies and Administrative units are being discouraged from further development, and encouraged to thin down and, where appropriate, become privatized.
  3. SMEs are the source of improvement of the economic performance of the Community countries. Any plan which assists or accelerates their growth and development must be the main tool to make inroads into Europe's unemployed population (15 SMEs; 17m unemployed).
  4. It is recognised that the characteristics of each culture must be considered to foster the capacity to innovate and adaptation to change, towards new forms of organisation.
  5. More ways must be found to encourage entrepreneurship, director development and personal responsibility for enterprise with ethics, both on the business and financing side and also to strengthen industry / government collaboration to improve the climate for new initiatives.

Authoritative Comments

  1. "If the economy did not invest (sufficiently) in start-ups, the result would be stagnation and decline": Heller Institute for Small Business, USA.
  2. "90% of all failures are due to inadequate direction (management)": US Small Business Administration.


European Company Directors Association

The EU has so far sponsored The European Venture Capital Association, and the Association of Regional Financial Centres. To complement these, a more creative industry / government interface is proposed to represent and involve individual owners, entrepreneurs and directors of many hundreds of thousands of SMEs, though their own local regional and national institutes and associations.


To represent individual directors of SMEs at the EU level and help them to carry out the great responsibilities they have undertaken.


With a general duty to improve the competence of directors.

Individual Membership

From a wide range of business sizes.


  1. The success of the free market economy depends on the success of companies.
  2. The success of companies depends on the leaderships and performance of directors.
  3. The success of companies depends on directors bringing enterprise and integrity into their relationships with all parties associated with the enterprise.
  4. The prosperity of society as a whole depends on the enterprise and integrity of directors.
  5. The success of directors depends on the performance with competence and professionalism acquired through training as well as practical experience.

Policy representation on behalf of individual directors of SMEs

Setting standards in company direction

W.A. Adam

IOD - 2

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