"THE ENTREPRENEURIAL INFORMATION ENVIRONMENT OF SMALL AND MIDDLE SIZED ENTERPRISES IN THE CZECH REPUBLIC FOLLOWING THE EU ENTRY"

 First published by Journal of Administrative Sciences (Yönetim Bilimleri Dergisi), Vol. 3, No. 2, 2005. Republished by the JTW with permission of Canakkale Onsekiz Mart University. 2007

n considerations regarding the strategy of the development of the small and middle sized enterprise in the new EU member states, one cannot avoid the contexts connected with the development of information and communication technologies and their significance for the modern economic subject. Their application brings significant changes for the entire society, the organization of many activities and the way of life practically of each individual enterprise. One cannot merely see a primary management factor in the information strategy of small and middle sized enterprises, however, it is not possible to set objectives of the enterprise and methods of the enterprise management either without considering possibilities of modern information systems and technologies and in particular their further possibilities related to the process of internationalization and globalization.       

Significance of SMEs in the EU policies

Small and middle sized entrepreneurs play a key role in the economy in the EU. SMEs are crucial for the total performance of the economy, stimulate productivity and create a potential for the job creations. In the EU and in the new member states, 99% of all enterprises account for the total employment and at the same time, it forms more than a half of the value added.[1]

The revised “Lisbon strategy” presents an enormous importance for the development of the small and middle sized enterprise. Since the document approval, five years have passed. The “strategy” is so called in the half time. In view of that, the European Union has been looking back since the beginning of the year 2004 and it has tried to review the results achieved. Reviewing is not joyful. The pace of the economic growth in the European Union is deeply under the prognosis of 3% of GDP. In the European Union, the unemployment rate is approximately twice as higher as in the USA. In comparison with the USA, it is markedly less invested into science and research here in Europe. There is a significant lack of willpower for indispensable social reforms, which are becoming more and more urgent. The elementary finding, according to which financial resources have to be first created for social achievements and care for the environment, is mostly not respected by the Union politicians.                       

In the conclusion of the spring session of the European Council dealing with the issue of “Implementation the Lisbon agenda”, the heads of nations and governments supported the “New beginning of the Lisbon strategy”. They referred to the need of mobilizing all resources, monitoring synergic effects, renewing the initiative and providing corresponding financing. However, the conclusions contain very few real new political elements, which would make the conclusions of that spring summit different from the previous one. Nor the revised “Lisbon strategy” brings a solution to the problem. The EU Committee for the economic policy came to the conclusion that if the aims were to be met by 2010, the member states have to take great pains than they did now, and in total they have to set nine reform priorities assigning tasks for all old and new member states of the European Union. The following ones belong to them:         

§         A strong support of the growth oriented economies.

§         A solution of the structural problems on the labor market.

§         Further restrictions of the remaining barriers on the inner market of the EU.

§         The restriction of the excessive regulation.

§         The development of the knowledge oriented society. 

§         Stimulating the healthy entrepreneurial climate and creating the environment, in which small and middle sized enterprises thrive.  

§         Securing a long term fiscal sustainability.

§         Deepening and further integrating financial markets and simulating restructuring and consolidating the financial sector in accordance with the “Action plan of financial services“.

§         Strengthening the quality and efficiency of the functioning of the public sector.

The concept of entrepreneurship by individual fields of study often differs, yet, each of these definitions is limiting on its own (legal, economic, psychological etc.).  Simultaneously, we can trace similar features with each definition of entrepreneurship, which are:   

1)       Seizing the initiative,

2)       Organizing and reorganizing social economic mechanisms for the purpose of transferring resources and situations into a practical result,

3)       Taking into account risks of failure,

4)       Goal directed activity,

5)       Creation of the value added,

6)       The sense of entrepreneurship is “entrepreneurship” self, i.e. a cyclical process of its reproduction.

 The concept of entrepreneurship in the SME sector is significantly connected with the development of a new field of study – information management. This field of study defines partly the own information strategy of the sector, and primarily it gives specific practical examples of achieving efficiency in the entrepreneurial activity. The integration of the information strategy into the enterprise strategy of the SME sector within the single EU market creates:              

1)       The ability to achieve the economic activity in some areas in comparison with large enterprises of higher effects. 

2)       The ability to create jobs for IC/IT experts.

3)       Reducing monopoly tendencies and a positive influence on the offer variety by means of electronic communication.

4)       The potential of the high innovative activity.

5)       Motivation towards performance and job satisfaction, a more direct relation between one’s own effort and contributions, the support of self-activity and one’s own responsibility.

6)       Flexibility in the offer of products and services with regard to individual requirements of customers, including sub-deliveries for production finalists.

Entrepreneurial Information Environment in the Sector of Small and Middle Sized Enterprises

The entrepreneurial environment represents one of the essential factors of the economic development. The quality, entrepreneurial favorable environment is one of the fundamental conditions of the growth of the competitive ability of the Czech entrepreneurial subjects on the domestic and foreign market, not only on the single European market, but also on the market of the third countries. The competitive ability of the Czech enterprises is a primary prerequisite for the growth of the competitive ability of the Czech economy as a whole, and it is a precondition for achieving the economic growth.             

The information environment is to be understood as a complex of inner factors affecting the economic position, motivation and behavior of concrete entrepreneurial subjects in relation to the environment of the enterprise and information from those surroundings. The information environment is made up of a wide range of circumstances for obtaining information in the area of legislative, in the area of the institutional infrastructure and in the area of the market functioning. To the significant factors affecting information behavior of entrepreneurial subjects on the market belong measures in the field of the joint commercial EU policy and the development of the general economic boom of the situation and the topical market situation resulting from it. In this broader sense, the information environment intensively affects the entrepreneurial subjects. The adverse information environment can have a negative impact on the development of the number of entrepreneurial subjects, their stability, efficiency and innovative ability. Small and middle sized enterprises are primarily exposed to the impacts of the unfavorable information environment. The more intense impact of the adverse information environment is, to a great extent, connected with their weak points.                        

Participants, who participate to an essential extent in creating the entrepreneurial information environment, are namely state agencies represented by lawmaking bodies and ministries and equal to them bodies of state administrations, institutes and agencies established or supported by the state, courts, bodies of public self-administrations, education institutions of all kinds, research and development places of work, subjects working in the field of finance, banks, insurance companies, capital market institutes, leasing companies, representations of entrepreneurs (chambers, unions, associations, clubs and others) and consulting, intermediary and professional organizations, but also market subjects – real and potential competitors and real and potential cooperation partners. 

The entrepreneurial information environment in the above given concept reflects in fact the objective conditions of entrepreneurship in relation to obtaining information on the environment, but also on one’s own operation and development of the entrepreneurial activity. Retrospectively the entrepreneurial environment influences the information activity. While the information activity expresses the attitudes of the entrepreneurial subject ‘I wan’ and ‘I can’ to obtain information for entrepreneurship, the evaluation of the entrepreneurial environment subsequently affects the decision making of the entrepreneurial subject in the sense of ‘I can’ under the given circumstances) to do business, i.e. to carry out one’s own business plan and to use one’s own capabilities based on the information obtained. From that viewpoint, it is necessary to pay attention to the improvement of the entrepreneurial information environment as a precondition for the development of the entrepreneurial activity, and in this manner also the improving of the total entrepreneurial climate. 

Obstacles in Entrepreneurship, Barriers of the Information-Entrepreneurial Environment in Relation to Smes Following the EU Entry

The need of improving the entrepreneurial information environment is generally recognized. At the same time, the significance of measures taken on all levels of the supreme bodies of the state administration is often emphasized, including measures in the legislative field. Precisely this area is often considered, and in no way illegitimately, as the most significant part, which considerably affects the quality of the entrepreneurial information environment. The respective legislative adjustment has a general validity and usually in the regulated area, as for the formal aspect, affects all entrepreneurial subjects of the given category in the same intense manner. Unlike the programmed support, it does not have then a considerable selective character. Nevertheless, what results from the specifications of the small the middle sized enterprise, is that even global measures affect it with a higher intensity. Time and financial burden resulting from it due to the inadequate or excessive regulation of the approach to information is disproportionably more distinct in a retrospective relation to its working and financial capacities and possibilities in comparison with large, capital strong enterprises.

The continuing obstacles in the development of entrepreneurship, which reflect deficiencies in the quality of the entrepreneurial environment, negatively influence the competitive ability of the Czech entrepreneurial subjects, and in this manner also the competitive power of the Czech economy. Due to the remaining obstacles in the development of entrepreneurship, the potential of the economic growth is not fully utilized in the Czech Republic. As very serious, and from the view of the development of the activities of small and middle sized entrepreneurial subjects exceptionally risky, one ought to consider primarily the obstacles, which occur in the following areas:

·   Legislation affecting general sources of information on entrepreneurship, 

·   Information on the approach to financial resources

·   Technical infrastructure

·   Institutional infrastructure

·   Technical development and innovations

·   Application of human resources with knowledge in IS/IT.

Trends of the Entrepreneurial Information Environment

Following the EU entry, considerable interest in the development of consulting services related to the need of creating the mechanism of one’s own entrepreneurial information environment is taking place in the sector of small end middle sized enterprises. Enterprises, which gradually globalize, strive to increase their own turnover, often by means of information and consulting activities. It follows from the subsequent trends:

1)       Possibilities for establishing and developing intelligent entrepreneurship.

2)       As a consequence of hyper-competition, large enterprises will continue decreasing fixed costs and total running costs. The slimming down of costs and growth of productivity of labor will continue in the primary and secondary sectors. In consequence of the fact that large enterprises will reduce risks too.

3)       Technological innovations will create conditions for the development and commercialization of new products and services.

4)       A great opportunity arises for MSEs, which have a precondition for creating and offering flexible, personified, and locally specific services.

5)       New, that is information technologies, will create conditions, but also needs for “self-employment”. 

6)       The formation and development of the “business service“, i.e. an increase in the offer of services for entrepreneurs and enterprising people.

7)       New market development trends appear too. Customers require an individual approach when satisfying their specific needs. Individual market segments will be still slimmer.

Information Needs of Small and Middle Sized Enterprises After the EU Entry

For creating the model of the entrepreneurial information environment of the sector of small and middle sized enterprises following the EU entry, the processing of the study of information needs of one’s enterprises is necessary. Based on the available materials, I am summing up at this point current pieces of knowledge in the entrepreneurial needs of the sector of SMEs in the Czech Republic (study by STENMARK). These results show that small and middle sized entrepreneurs after the EU entry focus on the following pieces of information:

1)       Basic information on the valid legal EU regulations in the main areas regulating general conditions of entrepreneurship.

2)       Basic information on the valid legal EU regulations specifying specific conditions of entrepreneurship in some areas.

3)       Information on the expected changes of regulations connected with the EU entry regulating specific conditions for entrepreneurship in some areas.

4)       Basic reference information from the field of legal consulting

5)       Basic reference information from the field of tax consulting

6)       Basic reference information from the field of accounting consulting

7)       Basic reference information from the field of economic and organizational consulting

8)       Basic reference information on the regional entrepreneurial infrastructure

9)       Basic information on programs for supporting the entrepreneurship of small and middle sized enterprises in the European Union

10)   Basic information on programs of support provided within the Sector operational program Industry

11)   Basic information on programs of support co-financed from the EU sources (outside the scope of SOP Industry)

12)   Basic information on possibilities of the approach to the results of research and development (within the national support of research and development)

13)   Basic information on possibilities of obtaining information on the development of the Czech Republic and market situation

14)   Basic information on the development of foreign trade and developmental tendencies on foreign markets

15)   Information on possibilities of establishing business contacts by means of the approach to the contact addresses of the potential business partners – EU members

16)   Information on possibilities of establishing business contacts within entrepreneurial missions and similar contact events and mediating participations in these events

17)   Information on exhibitions and similar presentations organized domestically

18)   Information on international exhibitions, fairs, and similar presentations organized abroad

19)   Information on possibilities and conditions of participating in specialized courses and short term seminars, conferences, and similar events oriented on obtaining specific information on the points of issue of the European Union, in particular on regulations regulating conditions of entrepreneurship

20)   Information on retraining courses

21)   Information on courses and trainings in new legislation

Measures and Activities for Achieving the Entrepreneurial Information Environment

Based on the above stated analyses, in support of attaining the quality informative entrepreneurial environment, I recommend defining the following objectives, measures and activities for the SME sector: