Small and Medium-Sized Enterprises

 

Wordl Medium-sized enterprises

In context of family businesses often the terms „medium-sized businesses“ or „small and medium-sized enterprises (SME)“ are mentioned. The following definitions show that these terms do not at all describe the same (research) objects.

 

Definitions:

  • SME definition by the European Commission:
    “According to the recommendation of the Commission of 6. May 2003 (Recommendation 2003/361/EG), that replaces since January   1st, 2005 the recommendation (96/280/EG), enterprises with up to 9 employees and an annual turnover of € 2 m or an adequate total annual balance are micro-sized enterprises.
    -49 employees and an annual turnover or annual balance of up to € 10 m are small enterprises
    -249 employees and an annual turnover of up to € 50 m or a total annual balance of at least € 43 m are medium-sized enterprises. Furthermore a general independence of the enterprise is demanded: enterprises that belong with more than 25% to a corporate group do not belong to so defined SMEs.
    The official definition of the EU is available here.

 

  • SME-Definition by IfM Bonn:
    “The term” “wirtschaftlicher Mittestand” (~economic SMEs) is only used in Germany. In other countries we speak of small and medium-sized enterprises – which represents the part of the overall economy that is statistically defined. On this basis the IfM Bonn defines since 01.01.2002 enterprises
    -with up to 9 employees and less than € 1 m turnover als small enterprise
    -with 499 employees and a turnover of less than € 50 m as medium-sized enterprises.
    The official definition of IfM Bonn is available here.

 

Problems of Definition:

The term „medium-sized businesses“ or „small and medium-sized enterprises (SME)“ are according to the WIFU not productive in order to define the entrepreneurial form adequately. This merely describes the size of the enterprise but ignores the central distinctive feature, the family factor of the enterprise. From research results of the past 15 years we can conclude that essential decision-making of the management in family businesses can be explained more by the relation between family and enterprise logics than by advantages and disadvantages that are due to the size of the enterprise. Investment decisions, the treatment of customers, suppliers and employees that is oriented on the ability that grandchildren will succeed in the enterprise are topics that unite all family businesses regardless of which size. Family businesses are to be differentiated rather from publicly owned firms, i.e. entrepreneurial forms that are characterised by anonymous structures of ownership.

Even the Federation of German Industry (BDI) thinks that the above mentioned definitions of SMEs to describe the (German) medium-sized business sector is insufficient. The Federation therefore demands an adjustment of quantitative criteria, the acceptance of qualitative criteria as well as an enlargement of the promotion for SMEs on “Mid Caps” [1]. Possible qualitative criteria to typologise SMEs can be the following criteria according to BDI: economic and legal self-dependence of the enterprise, integration of ownership, control and management as well as a personal management.

 

WIFU Know-how about this topic

 


[1] „‘Mid Caps’ are enterprises of the size 250 to 499 and 500 to 999 employees. The have an immense innovation potential, but are in the so called “Mittelstandsdelle” [~dent of medium-sized businesses] having less R&D funds than SMEs or large scale enterprises and have in general subproportional R&D total expenditures.” (BDI, 2012)