EMCC European Monitoring Centre on Change

Growth opportunities and obstacles for Swedish SMEs

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The fourth in a series of nationwide surveys on the business environment and reality for small and medium sized enterprises (SMEs) was conducted by the Swedish Agency for Economic and Regional Growth and Statistics Sweden in 2011. The survey examined the situation of SMEs, the opportunities for growth and perceived threats to growth. Over 19,000 SME owners gave their views on topics such as growth, competition, regulations, internationalisation and access to finance.


About the survey

Small and medium-sized enterprises (SMEs) have become increasingly important not only for economic growth in Sweden but also for employment. However, an appropriate economic policy is required to allow existing companies to develop and to create opportunities to start new businesses. The collection and compilation of knowledge about the situation and condition of companies is useful for the development of such a policy.

The fourth nationwide survey on the business environment and reality for SMEs by the Swedish Agency for Economic and Regional Growth (Tillväxtverket) and Statistics Sweden took place in 2011. The first three surveys in this series were conducted in 2002, 2005 and 2008. The surveys aim to evaluate the conditions of SMEs and to highlight for public authorities, business owners and interest groups the perceived threats and opportunities for these enterprises. The results form the basis of a series of reports on the Swedish business environment and allow comparisons over time.

The analysis of the results from the 2011 situation and conditions survey (Företagens villkor och verklighet 2011) during autumn 2011 and spring 2012 lead to three reports which discuss growth barriers and growth opportunities, internationalisation and regional development respectively (Swedish Agency for Economic and Regional Growth, 2011a, 2012a, 2012b). This survey data report is based primarily on these three reports.

Survey methodology

The 2011 survey population was classified according to:

  • Legal status: Private companies, trading companies, limited companies (apart from banks and insurance companies) and economic associations were included.
  • Ownership type: Only private companies that were currently Swedish-controlled were included.
  • Turnover: Companies with annual turnover below SEK 200,000 (€ 23,305 as 13 November 2012) were excluded.
  • Number of employees: There were some changes from the previous surveys in this classification. For instance, companies with 50–249 employees (medium-sized companies) were included in this survey but not in the 2002, 2005 or 2008 surveys. This means that the 2011 study included companies from zero up to 249 employees.
  • Sector: Since the last survey was conducted, the Swedish Standard of Industrial Classification has changed to be consistent with the Statistical Classification of Economic Activities in the European Community (NACE) rev 2. Included industries in the 2011 survey were: B mining and quarrying; C manufacturing; D electricity, gas, steam and air conditioning supply; E water supply, sewerage, waste management and remediation activities; F construction; G wholesale and retail trade, repair of motor vehicles and motorcycles; H transportation and storage; I accommodation and food service activities; J information and communication; M professional, scientific and technical activities; N administrative and support service activities; P education; Q human health and social work activities; R arts, entertainment and recreation; and S other service activities. To enable comparisons with earlier surveys the old classification was also part of the dataset.

If one company group contained several enterprises, the one with the most employees was chosen to represent the entire group.

This initial classification gave a possible survey population of 334,340 enterprises. Statistics Sweden estimated that responses from 31,400 companies would be necessary to achieve the desired accuracy while accounting for all the industry variables listed above.

The companies were divided into size classes of 0, 1–4, 5–9, 10–19, 20–49 and 50–249 employees.

The postal survey consisted of 34 questions designed to address areas of interest such as growth, competition, regulations, internationalisation and access to finance. It was also designed to allow analysis of the data based on regional and gender differences in the presence and growth of SMEs in different locations in Sweden. The questions were sent to business owners or business leaders (CEO, managing director or other equivalent title).

Response rate

Replies were received from 18,643 companies, giving a response rate of 60.2% which was lower than previous surveys. The number of companies contacted that did not answer was 12,515 (39.7%). This means that the shortfall was larger than in 2008 when it was approximately 8,000 companies. Larger companies were generally more responsive (Table 1).

Table 1: Survey response rate by company size

Number of employees

Total possible number of companies

Number of companies selected

Response rate

Number

Share (%)

0

156,385

8,385

4,418

52.7

1–4

122,014

8,055

4,882

60.6

5–9

30,241

5,889

3,694

62.7

10–19

15,586

4,403

2,829

64.3

20–49

7,584

3,121

2,009

64.4

50–250

2,530

1,602

1,108

69.2

Total

334,340

31,455

18,940

60.2


Structural data on Swedish SMEs

SMEs constitute 99.9% of enterprises in Sweden. They account for about 60% of total value added and 60% of total employment (Swedish Agency for Economic and Regional Growth, 2011a). This makes SMEs a crucial part of the Swedish economy. Table 2 shows business structure by company size in 2009. The same numbers for companies, number of employees, turnover and value added are presented in percentage terms in Figure 1.

Table 2: Business structure, 2009
 

Total

All SMEs

Micro

Small

Medium

Large

Company size by number of employees

 

0–249

0–9

10–49

50–249

>250

Number of enterprises

927,917

926,973

894,527

27,846

4,600

944

Number of employees

2,441,926

1,550,062

566,948

538,782

444,332

891,864

Net turnover (€ million)

6,224,273

3,706,295

1,322,396

1,183,737

1,200,162

2,517,979

Value added per size class (€ million)

1,759,562

1,061,409

425,687

324,874

310,848

698,154

Source: Swedish Agency for Economic and Regional Growth (2011a)

SMEs with 0–9 employees are very important within the Swedish business structure (Figure 1). They represent the largest share of enterprises and, after large companies, provide the majority of employment, net turnover and value added.

Figure 1: Business structure by number of employees, 2009

se1207019d.tmp00.jpg

Source: Swedish Agency for Economic and Regional Growth (2011a)

Figure 2 shows the value added within different business sectors in 2009. SME production represents over 80% of the value added within ‘forestry, agriculture, fishing’, ‘hotel and restaurant business’, ‘real estate’, ‘law, economic, technology and science services’, ‘education’ and ‘other services’. The only sector where SMEs provide less than 30% of the value added is ‘mining and quarrying’.

Figure 2: Value added per size class by number of employees by sector, 2009 (%)

se1207019d.tmp01.jpg

Note: NACE rev 2 sections A–S excluding K and O

Source: Statistics Sweden


Trends and key findings

The main findings of the 2011 survey as presented in the three thematic reports dealing with opportunities and barriers to growth, internationalisation, and regional development are elaborated below. Other topics studied in the survey include female and immigrant entrepreneurship, public procurement, and companies in the healthcare sector.

Opportunities and barriers to growth

The main finding of the thematic report on opportunities and barriers to growth (Swedish Agency for Economic and Regional Growth, 2011a) was that almost three-quarters of the companies surveyed wished to expand either in terms of turnover or in number of employees. This number has been relatively stable over time, with the percentage of companies wishing to grow being 72–77% in the surveys of 2005, 2008 and 2011.

The 2011 survey found that the larger the company the more willing it was to grow (Figure 3). Only a quarter of companies with no employees wished to grow in terms of turnover and by hiring employees.

Figure 3: Percentage of SMEs wishing to grow

se1207019d.tmp02.jpg

Source: Swedish Agency for Economic and Regional Growth

The survey also highlighted other factors that determine readiness to grow. These were:

  • belonging to the service sector (companies in the accommodation and food service, and wholesale and retail sectors were most willing to grow);
  • degree of cooperation with other companies;
  • franchise and group affiliation;
  • internationalisation;
  • innovativeness – companies that considered themselves innovative had a more positive view on the their future growth;
  • sustainability – companies that sell environmentally friendly products were more willing to grow.

The barriers for growth experienced by the companies participating in the survey also depended on the size of the company (Table 3). For companies with 50–249 employees, the biggest barrier for growth was competition from other companies. For the smallest companies (0–9 employees), lack of time was the biggest hindrance.

Table 3: Factors perceived by SMEs as obstacles to growth (%)
 

Company size

0

1–9

10–49

50–249

Inter-company competition

18.5

22.8

32

41.9

Lacking demand

8.6

8

9.7

13.3

Company’s profitability

13.9

14

13.9

13.4

Access to loans and credits

9.1

11.7

14.2

12.1

Access to equity capital

8.5

9.4

10

5.9

Access to skilled labour

15

24.6

33

12.8

Access to infrastructure

4.2

3.7

5.8

6.6

Capacity of current facilities, equipment and so on

6.1

9

13.1

12.4

Time constraints

29.4

31

26.4

*

Laws and regulations

20.1

23.1

23.7

14.5

Note: The question concerning time constraints was only directed at small companies (0–49 employees).

Source: Swedish Agency for Economic and Regional Growth (2011b)

Access to skilled labour was seen as the greatest obstacle to growth in companies with 10–49 employees (Figure 4). It is notable that a third of companies in this size class considered access to skilled labour a considerable obstacle to growth as unemployment in Sweden is currently relatively high. Laws and regulations were considered a major obstacle by many SMEs, though the proportion that perceived them to be an obstacle had fallen from 30% in 2008 to 22% in 2011.

Figure 4: Percentage of SMEs that consider access to skilled labour a major obstacle to growth

se1207019d.tmp03.jpg

Source: Swedish Agency for Economic and Regional Growth

Based on the survey results, the Swedish Agency for Economic and Regional Growth has identified a number of areas where it and other public authorities and governmental organisations could take action to facilitate growth in SMEs. These include measures that foster:

  • innovation;
  • environmental work in small companies;
  • internationalisation;
  • ensuring access to skilled labour;
  • specific measures directed at companies with 10–49 employees;
  • continued efforts to reduce the regulatory burden;
  • stimulate inter-company collaboration;
  • access to capital – measures directed at certain sectors and groups of entrepreneurs.

Internationalisation of Swedish SMEs

The thematic report on opportunities and obstacles to growth (Swedish Agency for Economic and Regional Growth, 2011a) found that those SMEs that were internationalised are more willing to grow than other SMEs. Around 85% of internationalised SMEs reported they wanted to grow compared with just 70% of other SMEs.

The second thematic report (Swedish Agency for Economic and Regional Growth, 2012a) focused on the internationalised SMEs in the survey and mainly on the forms of internationalisation that exist among SMEs, what opportunities and obstacles to growth they perceive, and what export patterns they have.

Around 25% of Swedish SMEs conduct a business that is internationalised. The survey found that 13% of Swedish SMEs exported goods, 15% imported goods, 1% were a branch of a foreign company and 7% engaged in cross-border inter-company collaboration (Figure 5). The medium-sized companies (that is, those with 50–249 employees) were also asked whether they had established part of their business abroad, with around 19% reporting that some part of their business was located overseas.

Figure 5: Different forms of internationalisation in SMEs (%)

se1207019d.tmp04.jpg

Note: The different forms of internationalisation are not mutually exclusive.

Source: Swedish Agency for Economic and Regional Growth

Among internationalised companies, the ambition to grow was greater the larger the company. Around 80% of medium-sized companies that were internationalised had ambitions to grow, both in terms of turnover and employment. The corresponding share among the smallest companies that were internationalised was only 50%. A higher share of small internationalised companies wanted to grow only by increasing their turnover (that is, without increasing employment) compared with medium-sized companies that were internationalised.

Figure 6: Internationalised SMEs that wanted to grow divided by enterprise size (%)

se1207019d.tmp05.jpg

Source: Swedish Agency for Economic and Regional Growth

Internationalised SMEs perceived various factors as obstacles to growth (except for laws and regulations) to a greater extent than other SMEs (Table 4). Inter-company competition and access to skilled labour were two examples of this.

Table 4: Factors perceived by SMEs as obstacles to growth (%)
  All internationalised companies All other companies

Inter-company competition

25.6

20.3

Lack of demand

11.3

7.5

Company’s profitability

15

13.6

Access to loans and credits

15.1

9.2

Access to equity capital

11.9

8.1

Access to skilled labour

24

19.7

Access to infrastructure

4.4

4

Capacity of current facilities, equipment and so on

8.5

7.7

Time constraints*

33.2

28.9

Laws and regulations

20

22.2

Note: * Refers only to small companies (0–49 employees).

Markets close to Sweden dominated the internationalisation of Swedish SMEs taking part in the survey (Table 5). Of those SMEs that were internationalised, 68% stated that Sweden was the main market for their products. Almost 19% considered the Nordic countries (Denmark, Finland, Iceland, Norway and Sweden) to be their main market and roughly 12% considered their market to be outside the Nordic countries.

Table 5: Main market of internationalised SMEs (%)
Main market 0–49 employees 50–249 employees
Local

22.3

8.3

Regional

14.3

12.1

National

32.1

31

Nordic countries

18.6

22.9

Rest of the world

11.7

25.3

Total

100

100

Source: Swedish Agency for Economic and Regional Growth

Other main findings from the report on internationalised Swedish SMEs are summarised below.

  • One out of five SMEs had business abroad.
  • The share of Swedish exporting SMEs had not changed since the 2005 and 2008 surveys.
  • Internationalised SMEs considered themselves to be more innovative than other SMEs.
  • There were large variations in the internationalisation of SMEs between sectors. The largest share of internationalised companies was found in mining and quarrying, manufacturing, and wholesale and retail. Healthcare, accommodation and food service had the lowest.

Regional context of SMEs in Sweden

All regions report strong willingness to grow

As noted above, the willingness to grow was generally high in most regions but was particularly high in regions classed as ‘very remote rural’ regions. In these regions, around 85% of SMEs wanted to expand.

When considering the regions according to the second revision of EU’s Nomenclature of Territorial Units for Statistics (NUTS 2), there were very slight differences in terms of willingness to grow. However, there were regional differences when it came to how Swedish SMEs wanted to grow – in terms of both employees and turnover or growth by only increased turnover.

SMEs in sparsely populated areas experience greater obstacles

To a great extent, SMEs in different parts of Sweden experience the same obstacles to growth. However, an exception is companies located in very remote rural regions. The survey found that companies located in this type of region experienced greater obstacles to growth than companies in other types of regions. In particular, companies in isolated rural regions considered access to capital and to infrastructure to be greater obstacles to growth than companies in other types of regions.

Table 6: Obstacles to growth perceived by SMEs in different types of region (%)
  City regions Agglo-merated regions near a city Rural regions near a city Remote agglomer-ated regions Remote rural regions Very remote rural regions

Inter-company competition

75.60

74.80

76.50

72.90

75

82.80

Lacking demand

54.20

51.30

54.50

52.40

53.30

59.80

Company’s profitability

58.90

59.10

61.80

59.70

63.90

70.90

Laws and regulations

59.60

60.80

65.50

64.70

65.70

69.60

Access to skilled labour

50.10

56.60

58.40

54

54.20

58.60

Access to loans, credits

38.20

39.90

39.70

35.50

39.90

48.60

Access to equity capital

31.60

32.90

36.20

32.20

37.30

38.60

Access to infrastructure

23.30

26.70

29.20

32.10

34.10

47.50

Source: Swedish Agency for Economic and Regional Growth

More than half of SMEs are innovative

Innovative SMEs can be found in both urban and rural areas. Around 60% of the Swedish SMEs in the survey considered themselves to be innovative in terms of introducing new products, services, production processes, new forms of organisation or leadership, or new methods for sales and marketing. There were no apparent differences between companies located in city regions, agglomerated or rural regions. However, when considering specific NUTS 2 regions, there were some differences with the proportion of companies that are innovative ranging from 49 to 69%.

Inter-company collaboration is declining in all regions

The survey found that, irrespective of whether a company was located in a sparsely populated region or in an agglomerated region near a large city, it was considerably more common to collaborate with other companies in the local business environment than to undertake national or even regional collaboration.

Collaboration is not defined in the survey. Instead respondents were asked whether their company was collaborating with other companies on a regular basis. The survey found cross-border collaborative arrangements were still relatively uncommon. It is widely acknowledged that inter-company collaboration contributes to business development and so it is of concern that the proportion of SMEs engaged in inter-company collaboration has declined in more or less all regions compared with the proportion of collaborating companies in 2002 and 2005.


Commentary

The Swedish survey on the situation and conditions of the country’s SMEs is one of the largest of its kind in Europe with roughly 19,000 SMEs participating and has been carried out three times before in 2002, 2005 and 2008. However, a comparison shows there have been no major changes in the way SMEs perceive their situation and conditions between 2002 and 2011. The proportion of SMEs with a desire to grow has remained steady at 72–77% since 2005. Laws and regulations were considered less of a hindrance to growth in 2011 than in 2008. This change in perception can probably be traced to the efforts of the Swedish government to lessen the administrative burden for SMEs in line with the European Commission’s Small Business Act for Europe.

Based on the results of the survey, the Swedish Agency for Economic and Regional Growth has highlighted four main obstacles to growth that can be fixed through political initiatives and decisions. These are:

  • Simplification of laws and regulations governing SMEs in general as, despite efforts to reduce them, these still represent a major obstacle to growth.
  • Access to finance is not a general obstacle for SMEs though it needs to improve for some groups of business owners and some sectors. Business owners with a foreign background and SMEs in accommodation and food service activities need better access to finance to allow their companies to grow.
  • The lack of skilled labour calls for a better match on the labour market between offered competencies and available jobs.
  • The ‘larger’ small enterprises (that is, those with 10–49 employees) appear to have a strong willingness to grow, although this group put forward the highest proportion of factors representing major obstacles to growth. A conclusion from this is that removing obstacles to growth for this group would create good conditions for growth in general.


References

Swedish Agency for Economic and Regional Growth (2011a), Tillväxtmöjligheter och hinder för svenska små och medelstora företag 2011 [Opportunities and barriers to growth in Swedish small and medium sized enterprises], Info 0359, Tillväxtverket, Stockholm.

Swedish Agency for Economic and Regional Growth (2011b), Företagens villkor och verklighet 2011 [Corporate policy and reality], Info 0329, Tillväxtverket, Stockholm.

Swedish Agency for Economic and Regional Growth (2012a), Internationalisering i svenska små och medelstora företag [Internationalisation in Swedish small and medium sized enterprises], Info 0408, Tillväxtverket, Stockholm.

Swedish Agency for Economic and Regional Growth (2012b), Företagande I Sveriges regioner [Entrepreneurship in Swedish regions], Info 0440, Tillväxtverket, Stockholm.

Jan Persson and Ingrid Broman, Oxford Research

EF/12/81

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