MittelstandsMonitor - Publication of Annual Survey Regarding Business Activities and Structure of Small and Medium-Sized Enterprises

Research

More than 99 % of businesses in Germany are considered to be small or medium-sized. These diverse enterprises ensure economic stability, facilitate structural change and promote innovation, thus making a significant contribution to growth and prosperity.

Despite the fact that small and medium-sized enterprises (SMEs) are rightly acknowledged as playing a significant role in the national economy, it remains impossible to determine their economic situation from nationally held statistics. Until now, there has not been a regularly published, scientifically sound analysis or report addressing the particular situation of SMEs.

Being considered "the" German institutions with SME expertise, the DtA, the IfM Bonn, Creditreform, and ZEW have therefore committed to an initiative of the KfW banking group; together these institutions are aiming to publish an annual report regarding the business activities and structural issues of SMEs - the "MittelstandsMonitor". KfW and DtA are thereby cooperating in the framework of the "Mittelstandsbank" initiative. The central idea behind this initiative is to compare new findings within the small group of experts and then share them with the broader public in a concise, comprehensive form. The exclusive, complementary data collected by each of the partners provide the "MittelstandsMonitor" with a comprehensive, empirical basis.

The "MittelstandsMonitor" frequently addresses estimations regarding the economic situation of SMEs, as well as their founding and liquidation behaviours. Further SME-related key issues will be included in the future.  The first edition of the "MittelstandsMonitor" published today focuses on two topics: "Radical Change in SME Financing", and "Innovation - a Challenge for SMEs".

Here is an overview of the main findings of the MittelstandsMonitor 2003

Chapter 1: The economic situation of small and medium-sized businesses. In view of the overall loss of economic dynamism at both the global and national level, the business activities of SMEs have increasingly slowed in the last three years. In West Germany, businesses have been subject to significant slow-downs, whilst in the new federal states, levels of activity have remained relatively stable, albeit at a rather low level. The participating institutes expect to see further stabilisation in the business activities of SMEs throughout this year.

Chapter 2: Business fluctuation - a source of economic dynamism. New businesses contribute significantly to competitiveness and technological innovation. Since 1999, the number of start-ups has been falling. One significant cause for this is the unfavourable economic environment. Although the balance between the number of newly founded businesses and liquidations has remained positive, it has notably worsened. The stock of enterprises is therefore growing at a much slower rate than in the nineties.  Despite a weakened business activity and the crisis in the closely related Information and Communication Technologies (ICT) sector, the number of high-tech start-ups remains almost as high as in the mid-nineties.

Chapter 3: Radical change in the financing of SMEs. Traditionally, the owners of small and medium-sized businesses in Germany generally have a relatively low equity-capital ratio. Following structural changes in the financial markets and banking sector, however, SMEs are facing extensive changes to their financing structure. These changes will require an increase in the amount of capital held by these businesses. In addition to internal financing, classic bank loans remain the most important financing instrument for SMEs. Modern rating procedures allow appropriate interest rate margins to be set according to the credit risk.  Entrepreneurs should display a greater degree of openness and transparency towards financial institutions. The transformation of financial markets has also necessitated new forms of  funding such as securitisations and global loans complementing the established forms of financing such as low interest rate loans and equity capital financing.

Chapter 4: Innovation - a challenge for SMEs. Compared to innovation activities in other national economies, those in Germany tend to show an above-average concentration in the manufacturing industry. In Germany, a quarter of all investments in research and development are made in automotive manufacture. This imbalance clearly indicates that SMEs must significantly increase their innovation activities. One can only expect to see increased innovation activities, however, if innovation obstacles, which above all effect small businesses, are reduced. Amongst other issues, obstacles include the insufficient opportunity to access external financing, a lack of equity capital, as well as an inadequate ability to absorb and implement external know-how. It is essential that structural policy reduces such obstacles in order to make sure that SMEs are better able to exploit potential opportunities for innovation.

The MittelstandsMonitor 2003 is now available online.

http://www.ifm-bonn.org/

http://www.dta.de

http://www.mittelstandsbank.de

http://www.kfw.de

Contact

Jürgen Egeln, Phone: +49(0)621/1235-176, E-mail: egeln@zew.de