Monitoring and evaluation are critical to effective and coherent SME and entrepreneurship policy, as is stressed in the OECD Council Recommendation on SME and Entrepreneurship Policy. Monitoring shows whether policy implementation is on track in expenditures and activities. Impact evaluation shows whether policy actions are meeting their objectives and their impact and value for money. Despite being a long-standing priority, monitoring and evaluation remain weak in SME and entrepreneurship policy. The OECD Framework for the Evaluation of SME and Entrepreneurship Policies and Programmes 2023 sets out guidance, principles and examples of good practice evaluations. The OECD also helps prepare monitoring and evaluation frameworks for specific countries and organises capacity-building seminars for policy stakeholders. It also runs international peer learning seminars for policymakers and evaluators through the International SME and Entrepreneurship Policy Evaluation Discussion Network. It also offers tailored country-level guidance on monitoring and evaluation through preparation of monitoring and evaluation frameworks and capacity-building seminars for policy stakeholders.
SME indicators, benchmarking and monitoring
To ensure small and medium-sized enterprises (SMEs) reach their full potential to build a more resilient and sustainable future, it is essential for governments to access timely, granular and comparable data and evidence on the performance of their diverse populations of SMEs, on the business conditions affecting their operations and conduct, and on the effective policies that can support them to transform and scale-up.
Key messages
Business statistics shed light on the structure and performance of businesses, providing information on their turnover, employment, profits, and many more operational variables. Business demography indicators such as business births and deaths (among many others) complement this information from the perspective of entrepreneurship and business dynamism. By breaking down these statistics by standard size classes, the structure and performance of SMEs can be compared to those of larger enterprises, including across countries.
A broad range of business conditions can influence how SMEs and entrepreneurs perform, and how they respond to the challenges technological change, globalisation, ageing or climate change raise. A supportive business environment includes clear and simple regulations and quality institutions (e.g. public administration), quality infrastructure (for transport, energy or digital), and a level playing field in dynamic domestic and global markets. How SMEs and entrepreneurs can access strategic resources, such as finance, skills and innovation assets (including data and technology) are also key.
While governments often have common overarching strategies to accelerate SME development and entrepreneurial activities, a large variety of policy approaches is being implemented. Policy mappings identify country policies and institutions in place to improve business conditions for SMEs and entrepreneurs and boost their productivity, innovation and environmental, social and governance performance. The mappings serve to benchmark country approaches, develop typologies and policy indicators, and monitor changes in policy orientations, policy mixes, targeting and instruments. Results can inform national and subnational governments on the policy options available and possible gaps in their own country.
The SME and entrepreneurship policy field is characterised by high data fragmentation. While many useful statistics and data exist, they often rely on different methodologies, priority agendas and management systems, which increases cost, and reduces efficiency and timeliness, in responding to policy needs. In response, the OECD has developed a Data Lake on SMEs and Entrepreneurship, to serve as a “one-stop-shop” platform to access relevant statistics, policy information and tools, and facilitate data sharing and reuse. The Data Lake also aims to raise analytical capacity on related policy issues, with larger volume of data available and a more responsive monitoring system.
Context
SMEs significantly contribute to economic activity
SMEs represent 99% of all businesses, employ two out of three workers, and account for 50% to 60% of value added in the OECD area-, they bear more often the risks of innovation and can respond faster to market changes than larger companies, due to user proximity and shorter lines of decisions. They can thrive in niche and local markets, as well as be competitive and resilient partners in global value chains.
Labour productivity in SMEs lags behind large firms in the business sector
SMEs with the lowest labour productivity levels in 2021 or the latest available year – measured as value added per person employed – were about half as productive as large firms in their country. The largest gaps in labour productivity were observed in Ireland and Korea. The gap in Ireland is mainly due to the presence of multinationals, which benefit from low statutory income tax rates (OECD, Economic Survey of Ireland 2022). In Korea, large firms have considerable market power, higher margins and capacity to invest than SMEs, widening the cross-firm productivity gap (OECD, Economic Survey of Korea 2022).
Smaller firms face more challenges when dealing with uncertainty and complex business conditions
Market conditions are critical to provide the incentives and the playing field for firms to take risks and invest in transformative changes. Innovative firms and smaller firms tend to perceive demand uncertainty and competition pressures more accurately than larger firms. Business surveys conducted at different times and with different frequencies can help monitor business confidence and changes in market perception.
Related policy issues
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Digitalisation offers a range of opportunities for SMEs to improve performance, spur innovation, enhance productivity and compete on a more even footing with larger firms. However, smaller businesses continue to lag in the digital transformation. This is primarily due to low awareness, insufficient internal resources, skill deficiencies, and financial limitations. For all its potential benefits and inherent challenges, SME digitalisation represents a main policy priority for OECD governments.Learn more
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Green entrepreneurship is key to developing and propagating innovative green solutions needed to combat climate change.Learn more
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Following the 2015 Paris Agreement on climate change, governments have made the green transition one of their top policy priorities. With SMEs accounting for a large share of business-sector environmental footprint, it is urgent to involve SMEs and entrepreneurs more closely in this transition. Equally, SMEs and start-ups ae important drivers of the many innovations that can advance sustainable development. OECD work supports governments in the design and implementation of policies that can accelerate the green transition of SMEs and foster green entrepreneurship, including through enhanced energy efficiency and better access to sustainable finance, skills and technologies.Learn more
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SMEs are a major target of public policy, and they are central to the policy agenda of many governments seeking responses to the challenges raised by ongoing megatrends and major transformations. We provide evidence of how business conditions shape SMEs’ ability to do business and grow, and when targeted policy support is needed. This includes supporting governments in developing a conducive business environment ensuring that SMEs can access and make use of a broad range of strategic resources, such as finance, innovation assets and skills.Learn more
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Access to global markets is an important driver of growth and productivity for SMEs and their integration into global value chains a significant source of innovation and knowledge. Well-functioning global markets and a global level playing field are key to SME participation. Policies can help SMEs develop capacity to tap into international markets and supply chains, and strengthen linkages with international business and knowledge networks.Learn more
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Across countries at all levels of development, small and medium-sized enterprises (SMEs) are an important source of economic activity, playing an important role in creating jobs and supporting greater participation of women as entrepreneurs and in the workforce. With fewer resources to meet the costs of engaging in international markets, they tend, however, to be underrepresented in cross-border trade and account for only a small proportion of exports relative to their share of overall activity and employment.Learn more
Get in touch
Antonella LIBERATORE and Gueram SARGSYAN
OECD Statistics and Data Directorate
Email address: SDD.IndServStat@oecd.org
Sandrine KERGROACH
OECD Centre for Entrepreneurship, SMEs, Regions and Cities
Email address: oecd.smee.datalake@oecd.org