SME and entrepreneurship policy in the Slovak Republic

Foreword
Acknowledgements
Abbreviations and acronyms
Basic statistics of the Slovak Republic
Executive summary
	Key findings
		Enterprise scale up and innovation should be key policy priorities
		Regulatory constraints and high labour taxation are affecting SME growth and hiring
		Stronger leadership and co-ordination of SME and entrepreneurship policy are needed
		SMEs lag on digitalisation
		Policy for entrepreneurship should be inclusive across regions and populations
1.  SME and entrepreneurship policy in the Slovak Republic – overall assessment and recommendations
	SME and entrepreneurship performance in the Slovak Republic
		The Slovak economy has a relatively large share of micro firms
		The Slovak economy has very high business dynamism
		SME productivity is low and stagnant or falling
		Relatively few small firms export or innovate
		Entrepreneurship rates are high
		Policy recommendations
	The business environment for SMEs and entrepreneurship
		Macro-economic conditions have been favourable but COVID-19 is having a severe impact on SMEs
		Regulatory reforms need to be continued
		The innovation system does not favour SME innovation
		SME development is hindered by skills shortages
		Some transport and digital infrastructure gaps need to be addressed
		Relatively high social security payments may hinder small firm growth
		Equity finance and alternatives to debt finance are limited
		The spillovers from trade and foreign direct investment openness are currently limited
		Policy recommendations
			Regulatory environment
			Innovation and R&D
			Education/skills
			Taxation
			SME access to finance
			Trade and foreign direct investment
	Strategic framework and delivery arrangements for SME and entrepreneurship policy
		There is no overarching SME and entrepreneurship policy document
		SME and entrepreneurship policy lacks a lead unit, a cross-government co-ordination mechanism and an SME advisory council
		A policy portfolio examination would help assess the mix of spending
		Use of business identification number information could support evaluation
		A connecting hub would strengthen the policy delivery system
		Policy recommendations
	SME and entrepreneurship programmes
		A business diagnostic tool and client management approach would strengthen business development services
		SME innovation support should include actions to strengthen university-SME links
		Internationalisation programmes are at a basic level
		Entrepreneurship training and skills programmes lack a co-ordinated approach
		New sector skills councils and changes to the dual training system are strengthening SME skills
		Access to finance programmes are now supporting a wider range of instruments
		The Office for Public Procurement promotes SME participation
		There is scope for more dedicated entrepreneurship programmes for women and youth
		Policy recommendations
			Business development services
			Innovation support
			Internationalisation programmes
			Entrepreneurship training programmes
			SME workforce skills development programmes
			Access to finance programmes
			Public procurement programmes
			Entrepreneurship programmes for under-represented social groups
	The local dimension of SME and entrepreneurship policy
		Stronger SMEs and entrepreneurship are needed to drive transition in regions lagging economically
		Gaps in finance, advice and support infrastructure need to be addressed
		Regional universities can play a greater role in supporting SMEs and entrepreneurship
		Cluster organisations can be anchors for regional entrepreneurial ecosystem development
		SME and entrepreneurship development should be integrated into effective regional smart specialisation strategies
		Policy recommendations
			Strengthen business support across the regions
			Strengthen cluster organisations
			Strengthen the role of universities as regional entrepreneurial ecosystem anchors
			Involve local actors in regional entrepreneurial ecosystem development strategies
	SME digitalisation
		SMEs face challenges in digitalisation
		Digital skills and other digitalisation framework conditions need to be strengthened
		Business advice and financial support for SME digitalisation should be reinforced
		Digitalisation actions could be better co-ordinated across government and with non-government actors
		Digital Innovation Hubs are not yet fully on-stream
		Policy recommendations
	Inclusive entrepreneurship – the Roma community
		The Roma population experiences high labour market exclusion
		Self-employment and business creation rates are also low
		There are only scattered public interventions for promotion of entrepreneurship by Roma people
		Social enterprises play a significant role in Roma labour market attachment
		NGOs are also providing support that can be built on
		A network of Roma entrepreneurship support organisations could be established
		Policy recommendations
			Labour market attachment through social enterprises
			Business creation and self-employment by Roma people
	References
2.  Performance of SME and entrepreneurship characteristics in Slovak Republic
	Business structure in the Slovak Republic
		The Slovak small business economy is weighted to very small enterprises
		Most SME growth is in service sectors
		SMEs account for the great majority of business employment
		SME employment is greatest in sectors with low productivity and greate exposure to the COVID-19 crisis
		SME productivity is relatively low
		Many early entrepreneurs have no recruitment plans
		Entrepreneurship and small business activity is weaker in the eastern regions
	Business dynamics
		Business birth rates are among the highest in the OECD
		The churn rate has declined since 2013, but remains high, especially in financial and insurance activities
		Start-ups comprise one-third of Slovak enterprises, but rarely live beyond 5 years
		Many businesses are facing the challenge of business transfer, especially family-owned businesses
	Productivity of SMEs in the Slovak Republic
		The productivity of SMEs is low and has been in decline among the smallest firms
		Wages in SMEs continue to lag behind wages in large firms
	High growth enterprises, internationalisation and SME innovation in the Slovak Republic
		The Slovak Republic has one of the highest shares of high-growth enterprises in industry
		Slovak SMEs under-perform in exports going beyond the EU market
			Exporting is highly concentrated in a few firms
		SME innovation levels are relatively low
			Young firms in the Slovak Republic tend to be less innovative than their counterparts in other OECD countries
			SME workforces have relatively few employees with tertiary education
			Slovak SMEs lag on innovation spending
	Entrepreneurship culture and performance in the Slovak Republic
		Entrepreneurship rates are high, but Slovaks perceive fewer entrepreneurial opportunities
		Gender gaps in self-employment are large and female entrepreneurship has declined
		Youth and seniors are active in entrepreneurship
	Spatial variations in SME and entrepreneurship activity
	Conclusions and policy recommendations
	References
3.  The business environment for SMEs and entrepreneurship in the Slovak Republic
	Macro-economic conditions
		Pre-COVID-19 macroeconomic conditions were favourable to SME growth
		COVID-19 represented a big shock to the Slovak economy
	The regulatory environment
		Frequent regulation changes increase the administrative burden on smaller firms
		Gold-plating increases administrative burden
		Improvements can be made in administrative procedures to start a business
		Insolvency procedures are costly in terms of time and money, disincentivising second chance entrepreneurship
	The innovation system
		Weak academic research performance and academic-business cooperation holds back innovation
		Innovation and R&D policies are fragmented and are not well implemented
	Educational attainment and skills
		Slovak pupils score below the OECD average in science and reading
		The Slovak Republic has a low share of the workforce with a university education
		Many sectors face significant skill shortages, especially in ICT and electronics
		Graduates in the Slovak Republic are less likely to find job in the field of their studies
		Compared to other OECD countries, adults are less likely to participate in education
		Entrepreneurship education receives only marginal attention in the educational system
		Attracting Slovak migrants living abroad could bring back skills and support entrepreneurial activities
	Infrastructure
		Transport infrastructure investment is unevenly distributed across the territory
		Broadband connectivity among SMEs is low, and few small firms use a fast connection
	Taxation affecting SMEs
		Corporate taxation is low and a lower rate regime has been introduced for the smallest firms
		The tax structure relies heavily on social security taxation, possibly discouraging firms from hiring
		Tax incentives for employment are focused on marginalised workers
		Tax credits for innovative investments doubled between 2018-20, likely making R&D support more appealing to small enterprises
		There is potential for a tax break for equity investments in small firms
	SME access to finance
		There is a strong reliance on straight debt
		Raising financial literacy among entrepreneurs can improve their ability to obtain funding
	Trade and foreign direct investment
		Business environment conditions are supportive of Slovak SME exports
		Success in attracting FDI fails to translate into productivity spillovers for SMEs
	Conclusions and policy recommendations
	References
4.  The Strategic Framework and Delivery Arrangements for SME and Entrepreneurship Policy in the Slovak Republic
	The SME and entrepreneurship policy framework
		The SME Support Law provides a basic legal framework for SME policy
		The EU Operational Programme on Research and Innovation has guided much of the SME and entrepreneurship support
		SME policy priorities in the OP R&I are well-formulated but lack the comprehensiveness of a national SME strategy
		A national SME and entrepreneurship policy strategy would provide an integrated vision across government and add clarity to policy priorities and directions
		Co-ordination of SME and entrepreneurship policies across central government ministries and agencies
			A number of ministries and agencies are involved
			The Ministry of Economy is the lead ministry, but does not have an SME and Entrepreneurship Policy Unit in its organisational structure
		Establishing an interministerial SME and entrepreneurship policy co-ordination platform would enhance policy coherence
		Consultation and dialogue with SME and entrepreneur stakeholders
			The Slovak Republic has a well-established practice of stakeholder consultations on legislative proposals and national policy and strategy documents
			Improvements could be made to strengthen consultation input from small businesses
		The SME and entrepreneurship policy mix and portfolio
			The Ministry of Economy is the largest supporter of state aid to SMEs
			Micro-enterprises comprise the majority of recipients of de minimis aid
			The allocation of funding to policy intervention categories – a missing component of the policy mix analysis
		Policy portfolio analysis
	Monitoring and evaluation
	Policy delivery arrangements for national SME and entrepreneurship support programmes
		The delivery of SME and entrepreneurship financing measures is concentrated in a small number of key public entities
		A myriad of pubic entities deliver business advisory support
		SME access to support programmes could be improved
			Enhance awareness of the National Business Centre to increase the level of take-up by entrepreneurs and SMEs
			Greater co-operation between policy delivery actors can be built through a support ecosystem approach
			Delivery of support to enhance digitalisation skills and capacity appears to be underdeveloped
			Actions are needed to address the low-take up SME support programmes
			An integrated and comprehensive online portal for SME and entrepreneurship support can be an important tool
	Conclusions and policy recommendations
	References
	Notes
5.  SME and entrepreneurship programmes in the Slovak Republic
	Business development services
	Innovation programmes
	Internationalisation programmes for SMEs
	Entrepreneurship training programmes
	SME workforce skills development programmes
	SME access to finance
		Eximbanka
		The Slovak Guarantee and Development Bank
			The Slovak Investment Holding (SIH)
			The Central Europe Fund of Funds
		The Slovak Business Agency
	Public procurement for SMEs
	Entrepreneurship programmes for under-represented social groups
		Female entrepreneurship
			Enhancing the cross-sector emergence of new Women Business Angels across the EU
			Woman Entrepreneurs of Slovakia
			Regulatory changes
		Programmes for the unemployed
			Grants for starting in self-employment for the unemployed
		Youth entrepreneurship
			University incubators
	Conclusions and policy recommendations
	References
	Notes
6.  The local dimension of SME and entrepreneurship policy in the Slovak Republic
	Spatial variations in SME and entrepreneurship development conditions
		Regional inequality
		Regional competitiveness
		Regional entrepreneurial ecosystem quality
		Regulations and the capability to ‘do business’
		Regional unevenness and foreign direct investment
		The emergence of business clusters
		Universities and entrepreneurial ecosystems
	The local tailoring and co-ordination of SME and entrepreneurship policies
	Conclusions and policy recommendations
	References
7.  SME digitalisation initiatives in the Slovak Republic
	SME digitalisation – Why does it matter and what are the policy options?
		Digitalisation, productivity and growth performance are closely linked
		SMEs lag behind large enterprises
		Key challenges faced by SMEs
		SME digitalisation represents a growing concern for policy makers
		Policy makers should favour a combination of broad-based policies and narrowly targeted interventions
	The state of SME digitalisation in the Slovak Republic
		The labour market in the Slovak Republic is especially vulnerable
		SMEs in the Slovak Republic spend less on ICT and digitalisation than their counterparts in other European countries
		The digital preparedness is relatively poor among businesses in the Slovak Republic
		The access to communications infrastructures, services and data is below average
		Digital skills among the workforce in the Slovak Republic are slightly below the EU average
		The government is taking steps to digitalise its operations, but further progress would be welcome
	Policy developments in the Slovak Republic
		The Strategy of the Digital Transformation of Slovakia 2030
		The Action Plan for the Digital Transformation of Slovakia 2019-22
		The national Action Plan for Smart Industry
		The National Coalition for Digital Skills and Occupations of the Slovak Republic
		The IT Fitness Test
	Conclusions and policy recommendations
		1. Improve collaboration with non-government bodies
		2. Establish centres of excellence/digital hubs across the country, embedded within the smart specialisation strategy.
		3. Create a coordination mechanism to design and implement policy responses related to SME digitalisation
		4. Develop an online diagnostic tool for SME digitalisation in the Slovak Republic
		5. Pilot a financial support programme specific for relatively risky or advanced SME digitalisation projects
		6. Expand business development services (training, mentoring, coaching) both to SMEs in their early stages of digitalisation and to a select number of disruptive innovators
		7. Increase opportunities to acquire digital skills through on-the-job training and life-long learning activities
	References
8.  Inclusive Entrepreneurship – Focus on the Roma Community
	Socio-economic conditions of the Roma
		History
		Population characteristics
		Social challenges
		Labour market outcomes
		Business creation and self-employment
	Constraints on Roma entrepreneurial activity
		Discrimination in the market
		Low skills levels
		Lack of labour market experience
		Low levels of capital and no access to finance
		Welfare trap
	Current approaches to supporting Roma entrepreneurship
		Government support
		Municipalities
		Non-Governmental Organisations
		Social enterprises
		International programmes
	Conclusions and policy recommendations
	References