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European Commission benchmarking initiatives
European Commission benchmarking initiatives
Since the mid-1990s, the European Commission has undertaken a number of benchmarking initiatives in response to calls from industry and the member states of the European Union.
Further impetus was given to these initiatives in the Conclusions of the European Council held in Lisbon in March 2000. This proposed the adoption of the open co-ordination method, which relies on the member states themselves to take actions, learning from shared experiences and good practices. The Lisbon Conclusions also proposed the application of benchmarking across a wide range of policy areas.
Benchmarking in the Enterprise Directorate-General
In the area of enterprise policy, the objective of benchmarking is to provide an effective tool for improving the competitiveness of companies. It seeks to promote better implementation of measures in key areas of the business environment and in critical functions within the business.
Best practice benchmarking
Implementation of this initiative has involved the implementation of benchmarking at three levels:
framework conditions benchmarking seeks to strengthen the external environment in which the company operates;
enterprise benchmarking addresses key functions in the internal environment of the company; and
sectoral benchmarking addresses elements of both the internal and external environment in the context of the competitive challenges faced by a particular industry.
Implementation of benchmarking at each of the three levels presents significantly different challenges. At the level of framework conditions benchmarking, the challenge is to implement successfully a novel approach. While there is some experience with the application of benchmarking of framework conditions at national level, the Commission initiative is the first which seeks to implement it simultaneously at the level of the European Union and that of a number of member states.
At the level of enterprise benchmarking, the challenge is to promote wide take-up of benchmarking techniques by companies and particularly among SMEs, which have not previously used benchmarking extensively.
At the level of sectoral benchmarking, the aim is to work jointly with industry, which has the sector-specific expertise required to implement projects, in order to ensure that the particular requirements of individual industries are addressed.
A score-board has been developed in co-operation with the member states to benchmark performance across the EU on key indicators relating to enterprise policy. The score-board consists of approximately 25 indicators measuring performance in relation to policies supporting innovation, entrepreneurship and market access.
Methodology/scope. This score-board is one of several other processes of developing indicators in relation with EU policies going on at the present time. In choosing and interpreting the indicators the present score-board tried to take the point of view of the enterprises; its first objective is to make comparable the context in which they operate. It is a diagnostic tool at the service of enterprise policy to identify issues –problem areas, best practices, targets – in a concrete and immediate way, through cross-country comparison.
The first run of the score-board compared member states in the Community as a whole, vis-à-vis its main partners, the USA and Japan. The structure of the score-board is as follows:
The entrepreneurship theme is decomposed into three main directions:
entrepreneurial dynamism (with indicators from business demography, bankruptcy law and availability of MBAs);
regulatory constraints in starting new businesses (with indicators on registration costs and delays and complementary analysis from other sources); and
capital markets/financing conditions (with indicators relating to Business Angels and Venture Capital activity, and to new markets).
The Keeping Dynamic theme deals with the framework conditions and performance related to innovation, technology and progress towards the knowledge-based economy, under two subheadings:
the innovative capacity dimension (with indicators relating to new graduates in science and engineering, R&D efforts, innovative SMEs, patents, high technology exports); and
the progress towards the knowledge-based economy, measured with indicators on installed computer power, Internet penetration, cellular phone penetration, the importance of ICT markets and training opportunities.
Finally, the market access theme is approached through indicators on imports, public procurement and quality certification as well as the results from a survey of SMEs' perception with respect to major constraints they face in their development plans.
Key conclusions and recommendations. The first run of the score-board leads to the following principal conclusions: at operational level, the need to improve, as a priority, the data related to entrepreneurial activity and to investigate further the relationships between business demography parameters, framework conditions and economic activity. The factors influencing risk taking and attitudes to failure should be further explored as well. In the same area, the comparison of practice with respect to regulatory requirements on start-ups (registration on new companies) made it clear that in some member states there is scope for administrative simplification and streamlining.
The main conclusion from the capital markets part is that risk capital in Europe is now growing fast. Performance varies considerably from one member state to another. In comparison with the USA, European risk capital markets and institutions seem under-developed and far from catching up, in spite of some positive findings. The Business Angels Networks are an example of an institution that has yet to take off. In sum, there is scope for improvement in this area. More focused benchmarking should try to identify best practices with respect to the conditions made to risk capital.
The data from the innovation segments of the score-board (innovative capacity and knowledge-based economy) show with consistency that the USA is generally ahead of the EU (exception: mobile telephony). At the same time, there exist member states that systematically do as well as the USA, if not better: Sweden and Finland. Ireland also has very good results in the high-tech area. These countries over-perform in these areas, even when GDP levels are taken into account. They seem as if they had pioneered into new grounds, while the other countries seem to perform in conformity with their stage of economic development (as proxied by GDP levels).
Identifying best practice in this very complex area remains a priority for the policies having a direct or indirect bearing on it. Finally, among the "input" indicators of the score-board (regulatory environment for start-ups, capital markets development, public R&D), investments in human capital do seem to matter. In a future run of the score-board, human resources indicators will also be examined together rather than integrated in each of the various segments that compose the score-board.