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The Single European Act of 1993 has legally created a union of western European countries, allowing free movement of goods, services, capital, and labor. One of the major aims of this union is to develop the economic potential of Europe so it can compete as a world power with the USA and Pacific Basin countries. The small- and medium-sized enterprise (SME) sector is considered crucial to European competitive development. It employs the majority of the European labor force and commands two thirds of sales volume in the non-primary sector. Most of the expansion of employment in Europe over the last decade has been in very small firms. The sector's importance is reflected in a consistent long-term European SME policy, with the major emphasis on creating a favorable competitive business environment.
Overview and Recent Developments of the Sector
By 1993, there were 17 million enterprises in the private and non-primary sector of the European Union (EU), of which 99.9 percent were SMEs (ENSI 1994). Of these, 93.3 percent were micro firms, 6.2 percent were small, and 0.5 percent were medium size. Only 0.1 percent of the 17 million were defined as large firms. The European Commission uses an employee definition for different-size firms. Firms with 0-9 employees are defined as micro, 10-99 are small, 100-499 are medium-size, and 500 and over are defined as large. By and large, the wealthier European countries have greater-than-average sized SMEs, probably reflecting their ability to exploit economies of scale in their larger markets. However, in general the EU businesses tend to be a lot smaller that those of the USA, for example.
The Mediterranean countries (Italy, Spain, Greece, Portugal, and southern France) have a greater preponderance of smaller firms than the generally wealthier northern European countries. The further north one goes in Europe, the larger average firm size tends to become. Denmark, Germany, France, and Britain, for example have an average enterprise size over double that of Portugal, Spain, Italy, and Greece. The Scandinavian countries, shortly to enter the EU, have the largest enterprises of all.
The number of enterprises throughout the EU increased at an average of 1.8 percent per annum between 1988-1993. Since large and medium size firms have decreased in number, this increase is entirely accounted for...