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20 sme in estonia

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The State of Small and Medium-Sized Enterprises in Estonia on the Way to Accession David Smallbone Centre for Enterprise and Economic Development Research,  Middlesex University Business School, The Burroughs, Hendon NW4 4BT, London, UK, e-mail: [email protected] Urve Venesaar  Estonian Institute of Economics at T allinn Technical University, 7 Estonia Avenue, Tallinn 10143, Estonia,  fax: 372-6889951, e-mail : [email protected] Abstract Crucial issues in the political and economic transformation in Estonia, as in other transition countries, are the creation of the private sector, the development of entrepreneurship and the creation of small and medium sized enterprises (SMEs). Emphasis in this process should be placed on the creation of a favourable environment in which enterprises can develop in order that the transformation of society towards a market economy can take place. In Estonia, the development of the SME sector was based on a liberal policy and facilitated initially by economic reforms including privatisation. The first steps in the development of SME support network were only made in the mid-1990s, and its influence is still rather modest. However, now that the positive effects of the initial factors that stimulated an increase in new private enterprises have diminished, the role of public policy in promoting SME development is gaining in importance. Integration into EU is an additional influence through the implementation of the acquis communautaire. In this context, it is important to identify where market failure limits the activity of small enterprises, in order to specify policy objectives with respect to SME development, identify target groups, and define appropriate strategies for the elimination or reduction of constraints on the ability of the SME sector to achieve its potential contribution. This chapter considers the contribution of SMEs to economic development in Estonia, changes in external environment for enterprise development over time, and the main threats and opportunities for SMEs in connection with EU accession. Whilst SMEs have

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