The White Charter of Romanian SMEs in 2016 FOREWORD

Transcription

1 The White Charter of Romanian SMEs in 2016 FOREWORD The White Charter of the SMEs from România 2016, the XIV-th edition, remain the reference publication of the National Council of SMEs from România, a radiograph of the national environment, publication which highlights the quantitative and qualitative situation, trends, business perception and is a basis for policy proposals on future directions of support and development of the Romanian business environment. The Romanian economic environment is in a period of changes a new system of taxing the microenterprises (1-3 income tax), a reduced rate of VAT (20), a rate of 9 Foodstuffs, respectively the tourism, a tax rate of dividends of 5, but also increased taxes on nonresidential buildings. The results of the analysis made in White Charter presents an entrepreneurial environment characterized by pessimism about the economic environment development (13.78 of companies consider that the evolution of the Romanian business environment will be favorable to SMEs), of difficulties in overcoming the problems of bureaucracy (61.41 of SMEs consider that the bureaucracy is the main problem in business development) and the lack of interest in accessing European funding programs (81.66 between entrepreneurs intend not to access structural funds in the next period). All these results come in a difficult European context, unprecedented in the recent history of the European Union, the recent social changes in Europe (exit of Great Britain from UE) constituting elements of challenges that Romanian society must find adequate answers. Business people are affected first, but they are the ones who must act, the welfare of the entire society depending on their welfare. The public policies should adapt with higher speed and based on the analysis made in the White Paper, are needed a swift actions to restore confidence and economic stability. The National Council of SMEs from România proposes a series of strategic measures which have at their center a bureaucratization accelerated, access to adequate funding (mainly European funds), access to markets and internationalization, but also public administration reform, the need for reactive and concerned administrations being, in equal measure, overriding importance for the smooth running of the Romanian economy. 3

2 The National Council of SMEs from România Council has proposed to become until 2020, the most powerful employers' organization in South East Europe, a strong organization being defined by the substance of public policy that supports, by the number and quality of its members, but also by the influence that it has in shaping an economic environment balanced, fair and competitive. On behalf of our organization, I thank to each Romanian entrepreneur that works honestly for his family, for the community, for our country. Bucharest, June, 2016 FLORIN NICOLAE JIANU President National Council of SMEs from România 4

3 The White Charter of Romanian SMEs in 2016 PREFACE The present edition of the White Charter of SMEs in Romania incorporates the fourteenth annual research report conducted by The National Council of Small and Medium Sized Private Enterprises in Romania. The paper incorporates as usual the most comprehensive, extensive and detailed evaluation, analysis and projections related to SME sector, which has contributor to the generation of jobs and GDP in Romania. A first specification that is required is that the devising and development of the White Charter of SMEs in Romania in 2016, in addition to the specific problems of SMEs and the economic and socialnational situation, were considered the provisions of the Programme of the Government of technocrats approved by Romania's Parliament for 2016, of the the strategy EU 2020, the financing program EU , of the Small Business Act, the main EU strategic documents which mark major developments in Europe and SMEs in Romania. As in 2015, the current research report is limited to only analyze SMEs on interviewing in the spring of 2016, of entrepreneurs and managers of SMEs giving up the analysis based on balances due to failure to obtain them in time useful, from the Ministry of Finance. The Edition from 2016 of White Paper on SMEs contains the main categories of analysis: a) Evaluation and examination analysis of the situation of Romanian SMEs for 2016 at national, regional, sectoral and county level b) Analysis of the SMEs and other enterprises from Romania, with a focus on the following performances: overall commercial financial innovating social c) The essential analysis of the SMEs issue, each chapter ending with a selection of main findings 5

4 d) The formulation in the end of paper of a set of strategic and tactical priorities and ways in order to eliminate the main difficulties that the SMEs in Romania are facing, to reduce the impact of contextual threats and capitalize at a high level the national and international economic opportunities. The elements included in the final chapter reflects the CNIPMMR strategy for the period , which were adopted at the National Convention at Sinaia in April The value, the actuality and the usefulness volume can be summarized in the following major facets: the presentation the latest economic and social developments, as they are perceived by entrepreneurs in Romania in 2016; the pointing out of the main issues faced by SMEs in the spring of 2016; the essentialized characterization of Romanian entrepreneurs as they present themselves after the economic crisis, in the 2016; pointing some major constructive and functional features on management, commercial, financial, innovation, human, of SMEs in Romania, globally and on certain typologies (dimensional, sectoral, territorial, legal, a.s.o.); the making available of a set strategic and tactical ways for the recovery of SME sector. The five categories of analysis, as were recently introduced and/or significantly developed, confer a plus of utility and added value to the fourteen edition of the paper. The elements mentioned entitle us to state that the present paper The White Charter of Romanian SMEs 2016, accomplished by the National Council of Small and Medium - Sized Private Enterprises in Romania (CNIPMMR) represents, as in previous years, the most comprehensive study of Romanian SMEs, based on information regarding particularly the situation of the enterprises from that year. The paper provides essential elements that are necessary for the knowledge and valorizing of the high economic and social potential of SMEs, in order to speed up the overcoming of the current difficulties. The target groups, whom it is dedicated research report incorporated the White Paper of SMEs in 2016, are: the entrepreneurs and SMEs managers, who may use the multiple information on the entrepreneurial environment and the 6

5 The White Charter of Romanian SMEs in 2016 good managerial practices, in order to increase the functionality and performances of the companies where they work; the central and local administration bodies, with attributions in the economic field; the SMEs organizations, the other national, branch and local employers organizations and trade unions; the political leaders at national and local level, interested in the achievement of a business environment favorable to the economic agents; the national, regional and county level media, approaching economical - social issues; the international organizations and bodies concerned of the status and evolution of Romanian business environment and of the evolution of SMEs performances. We hereby give special thanks to the authors of the paper, teachers from the Academy of Economic Studies and experts within CNIPMMR Prof. Ph. Dr. Ciprian Nicolescu, Ştefan Corcodel, Daniel Urîtu and Alina Truică. The last, in addition to the contribution as author, conducted the complex operational coordination of the volume. In the research of volume of development have used the valuable results of analysis performed by the President, Florin Jianu and the members of Permanent Council of CNIPMMR and the specialists Ana Bontea and Victor Lavric within CNIPMMR, whom we thank in this way. A notable contribution to the accomplishment of the paper had: the Projects Department within CNIPMMR, coordinated by Mirabela Lavinia Borcos and Oana Mihaela Bara, the Employers Organization of Young Entrepreneurs (PTIR), the Accounting Department, by Dumitrita Voinescu and Mrs. Georgiana Stoian, who ensured the achievement of the electronic processing of information obtained from questionnaires. Unfortunately, in developing paper we faced some situations in which entrepreneurs have not answered all the questions and certain areas representing the country was uneven. Finally our thanks also go to the Faculty of Management at ASE, Mr. Dean Prof. Dr. Ion Popa for granted substantial support in the process of gathering information from entrepreneurs and the 20 students of the Faculty of Management, Year II and III within the 7

6 Academy of Economic Studies in Bucharest, who have actually conducted the interviewing of the 1096 entrepreneurs in all counties of the country (see annex). Without their contribution and that of the interviewed entrepreneurs, as well as without the support of the members of the Permanent Council of CNIPMMR the paper, which is essential for the development of SMEs, could not have been possible. Naturally it is necessary to mention the involvement of the main partner CECCAR and of the following partners: - FRC - BCR - ANEVAR - EXIMBANK - ALPHA BANK - SODEXO - CORAL IMPEX who provided a significant part of the financial resources needed to achieve this complex paper, which represents an indispensable material for all those who decide and act in the SMEs sector and in it s entrepreneurial environment. Bucharest, June, 2016 Prof. PH.D. OVIDIU NICOLESCU Honorary President National Council of Small and Medium -sized Private Enterprise in Romania 8

7 The White Charter of Romanian SMEs in 2016 CONTENTS Foreword... 3 Preface... 5 Contents Chapter 1 STRUCTURE OF THE SMEs SAMPLE Main findings Chapter 2 MAIN CHARACTERISTICS OF ROMANIAN ENTREPRENEURS Main findings Chapter 3 BUSINESS ENVIRONMENT Entrepreneurs assessments regarding the overall evolution of Romanian economic environment Business opportunities Difficulties in SMEs activity The main contextual evolutions with negative influence on SMEs activity 47 Main findings Chapter 4 THE IMPACT OF COMPLEX ECONOMIC DEVELOPMENT, NATIONAL AND INTERNATIONAL ON SMES The dinamics of SMEs activities between October 2011 and March The psychological impact of the recession on entrepreneurs Assessments on economic developments in Romania in Perceptions of entrepreneurs on the government's ability to contribute to solving complex economic and social issues post crisis Main findings Chapter 5 LEVEL AND DYNAMICS OF SMES PERFORMANCE Overall SMEs performances in 2015 compared to Overall performances of enterprises in 2016 compared to Size of the SMEs financial obligations not paid on term Evolution of SMEs business indicators in 2015, as compared to Main findings Chapter 6- ROMANIA S INTEGRATION INTO THE EUROPEAN UNION AND THE ABSORPTION OF STRUCTURAL FUNDS Entrepreneurs perceptions regarding the implications of Romania s adherence to the European Union upon the economy and SMEs SMEs level of information on new regulations introduced upon Romania s adherence to the European Union The positive impact of Romania s adherence to the European Union, on SMEs 135 9

8 activity SMEs intentions to access structural funds in SMEs status in terms of accessing structural funds Main obstacles faced by SMEs in accessing structural funds Main findings Chapter 7 - SMES STRATEGIES, POLICIES AND COMPETITIVE ADVANTAGES Drawing up of plans, policies and strategies within SMEs Small and medium sized enterprises objectives SMEs competitive advantages Activities that are mainly approached within SMEs SMEs managerial priorities The use of consulting services Awareness of the notions of knowledge based economy and knowledge based entreprises by Romanian entrepreneurs Key success factors within SMEs Main findings Chapter 8- SMES FINANCING Methods for financing SMEs business Main elements in selecting a bank by SMEs SMEs financing needs Main findings Chapter 9 HUMAN RESOURCES, TRAINING, WAGES WITHIN SMEs The evolution of the hiring process within SMEs Employee appreciation criteria within small and medium-sized enterprises The evolution of average salaries within SMEs in 2015 compared to The intensity of human resources training The percentage of employees that have benefited from training The percentage of highly trained employees within the total number of personnel in small and medium-sized enterprises, The frequency of experienced employees within small and mediumsized enterprises Main findings Chapter 10 THE MARKET, CLIENTS AND SMEs RELATIONSHIPS WITH THE BENEFICIARIES / SUPPLIERS The SMEs market The SMEs clients The evolution of the SMEs relationships with clients and

9 The White Charter of Romanian SMEs in 2016 suppliers Causes of contract cancelation with suppliers and customers Main findings Chapter 11 INNOVATION WITHIN SMEs Innovation activities Innovation investment The renewal of products and services The main methodes of innovation in SMEs Main findings CHARACTERISTICS OF SME INFORMATIZATION The use of IT within small and medium-sized enterprisess Internet/Intranet use within SMEs Main findings RECOMMENDATIONS CONCERNING THE DEVELOPMENT OF SMEs SECTOR IN ROMANIA Major priorities for business environment in Recommendations on the development of SMEs sector Bibliography Appendix List with the students from the Management Faculty ASE Bucharest who interviewed the entrepreneurs

10 Chapter 1 THE DIMENSION AND STRUCTURE OF THE SAMPLE OF SMEs The analysis was conducted by questioning a sample of 1096 companies micro, small and medium sized from all fields of business activity, age categories and development regions, sample considered representative for the objectives of the study and for the situation of Romanian SMEs sector. Taking into account the age of SMEs (picture no. 1.1), most of the enterprises which made up the object of the investigation have the age over 5 years (26.81), being followed by the companies whose existence is bellow 5 years (26.26), the companies between 5-10 years (25.75) and those companies with 10 to 15 years old (21.66). 26,81 21,66 26,26 25,27 Below 5 years 5-10 years years Over 15 years Picture no 1.1 The structure of the sample according to the age of the companies The distribution of small and medium sized enterprises by Romanian development regions is the following: Bucharest-Ilfov 34.93, the Southern Region 17.69, the South Eastern Region 13.36, the South Western Region 10.38, the Central Region 9.30, the North Western Region 6.95, North Eastern Region 6.23 and the Western Region See picture no ,38 1,17 13,36 17,69 6,95 34,93 9,30 6,23 Bucharest-Ilfov Centre Noth East North West South South East South West Picture no. 1.2 The structure of the sample by development regions 12

11 The White Charter of Romanian SMEs in 2016 Given the dimension of the companies, as shown in picture no. 1.3, microenterprises represent of the total of SMEs investigated, small companies accounted and medium sized ones hold a percentage of ,77 6,02 82,21 Microenterprises Small enterprises Medium sized enterprises Picture no. 1.3 The structure of the sample by the size of the SMEs In terms of the legal organization form of the SMEs, of the enterprises are limited liability companies, of the companies have other forms of legal organization, while 3.79 of them are joint stock companies. See picture no ,79 10,92 85,29 Limited liability companies Joint stock companies Other forms of legal organisation Picture no. 1.4 The structure of the sample according to the legal form of the SMEs If we classify the companies by fields of activity, the sample of SMEs shows the following structure: of companies act in trade 13

12 field, of the companies act in the services field, are industrial companies, 8.21 of the economic units conduct their business activity in construction field, 3.97 operate in transportations field and 2.80 act in tourism. Many of the companies cover several fields of activity, because they focus on identifying and capitalizing business opportunities, that represent a basic feature of SMEs both in Romania as in other countries. We mention that for each enterprise was considered the NACE code of the main activity area. The graphical representation of the distribution of enterprises by fields of activity is displayed in picture no ,70 3,97 2,80 34,03 Trade Construction Industry Services 22,29 8,21 Transportations Tourism Picture no. 1.5 The structure of the sample by the activity fields Because among the objectives of the investigation is the identification of some core elements on which the businesses become operational, of positive and negative aspects of the work of SMEs, of perceptions of entrepreneurs / managers on the economic environment, of vulnerabilities of the activities and so on, the investigation was not designed in proportional variant, which involves copying in the sample of the proportions of typologies from the reference population. Thus, for example, if there have been used the method of proportionate shares would have been selected and sampled about 90 of microenterprises, of which about 40 act in the services sector. Such an investigation structure would have had a low degree of relevance, because the behavior of micro-enterprises that operate in services is relatively similar in terms of management, investment and human resources and, instead, there would have been reduced information from NACE activity areas, in which operate fewer companies. For this reason it was preferred the option of survey stratified - optimal type, 14

13 The White Charter of Romanian SMEs in 2016 by which was reduced within the sample the weight of homogeneous layers (for example the enterprises which have as activity object services) and in exchange was increased the share of heterogeneous layers (for example was supplemented in compensation the layer of companies with industrial activity). This construction method of the sample ensures a better quality of the information and a superior level of knowledge of the realities investigated. The elements presented above highlight the main features of the investigated sample and it s representativeness for the SMEs sector in Romania. 15

14 MAIN FINDINGS The sample, by it s dimensions micro, small and medium sized enterprises - is significant for Romania. The distribution by age group is balanced, the lowest proportion of companies being owned by companies that have between 10 and 15 years old (21.66) and the highest share of businesses investigated are being recorded among older organizations 15 years (26.81).The sample includes SMEs of all the 8 Romanian development regions, the highest percentage being held by the ones from the Bucharest- Ilfov (34.93). Microenterprises hold within the sample lower weights than within the Romanian economy, in order to enable the analysis of a higher number of subjects of the small and medium sized SMEs. Limited liability companies represent the highest majority of SMEs in the sample (85.29). The number of SMEs in trade, services, industry, construction, transportation and tourism fields makes up representative samples for each field of activity. The study was designed under the form of a stratified optimum polling, providing a better quality of information and a higher level of knowledge of the realities investigated. The sample of SMEs investigated is representative for Romania, as size and structure, ensuring adequate informational support for expressing thoroughly grounded findings and conclusions. 16

15 The White Charter of Romanian SMEs in 2016 Chapter 2 MAIN CHARACTERISTICS OF ROMANIAN ENTREPRENEURS The entrepreneurs represent the engine of any market economy, being the main creators of economic substance and promoters of change. Due to their major contribution to the economic and social development, the knowledge of the main characteristics of the entrepreneurs from our country 1 has a special significance. Although the investigated sample is representative for Romania 1096 entrepreneurs, from the eight development regions, of all SMEs categories, a.s.o. we mention that the elements resulted from the investigation should not be generalized, but considered as indicative. According to our study, Romanian entrepreneurs present the following characteristics: According to the groups of age, the highest percentages are held by entrepreneurs between 45 to 60 years (37.49) and those between 35 to 45 years (33.79) and at the opposite end there are the people under 25 years (1.04). Also, the average age of entrepreneurs is: years at the sample level, years for male entrepreneurs and years for female entrepreneurs. The age structure is in favor of the development of the SMEs sector, since approximately 56 of entrepreneurs are less than 45 years old, thus having ahead at least two decades of entrepreneurial activity. In this context, we also mention the high weight (21.34) of young entrepreneurs, aged between 25 and 35 years. Details in picture no Over the years, various specialists have attempted to make up a profile of the Romanian entrepreneur, that changes each year (for instance: the number of young people rises, there is an increase of the percentage of people with high education, the percentage of male entrepreneurs reduces, a.s.o.). 17

16 6,34 1,04 21,34 Up to 25 years 37, years years years 33,79 Over 60 years Picture no. 2.1 Entrepreneurs structure according to the age Taking into account the professional background, it can be noticed that people with economic background hold a weight of of the total, bringing forward the number of engineers, jurists, technicians, qualified workers, professors, IT specialists etc. 4,93 1,37 3,10 3,56 17,34 46,53 0,91 22,35 Others professions Economist IT specialist Engineer Jurist Qualified worker Professor Technician Picture no. 2.2 Entrepreneurs structure according to the professional background The classification of the entrepreneurs according to the sex (picture no. 2.3) shows the predominance of male entrepreneurs (69.71). The structure on sex is more balanced in comparison to the situation in the European Union, according to which about a quarter of all european entrepreneurs are women. Given that in Romania the female represent about 51 of the population, such a configuration 18

17 The White Charter of Romanian SMEs in 2016 signifies a higher degree of capitalization of their potential compared to countries in European Union and North America. 30,29 69,71 Women Man Picture no. 2.3 The structure based on sex of entrepreneurs Taking into account the marital status, as it can be noticed as well in picture no. 2.4, it can be seen the predominance of married entrepreneurs (82.94). 17,06 Married Unmarried 82,94 Picture no. 2.4 Entrepreneurs structure according to marital status Regarding the entrepreneurs number of children, it can be seen that more than 1/3 of the businessmen have one child and of the individuals have two children. We point out the high percentage of those having no child (30.53), situation that may be explained by the considerable weight of young entrepreneurs. See picture no

18 2,83 0,73 31,08 34,83 30,53 No children 1 children 2 children 3 children More than 3 children Picture no. 2.5 The structure of entrepreneurs by the number of children The correlative approach of information on marital status and number of children gives us a picture of a more intense expression of the entrepreneurial spirit at married people and at those having children. The percentages of these two categories of people are higher among entrepreneurs than the entire active population of Romania. The situation is normal, as married people with children present, in terms of the degree of involvement in economic and social life, of assuming responsibilities and of the intensity of work efforts, higher parameters than the rest of the population. From the perspective of the studies completed, most entrepreneurs have superior education (63.96) and 5.93 graduated a Master Degree, 3.38 attended various post/graduate studies, and 0.82 have a PhD. Please find information in pictures no. 2.6 and no This situation indicates a high degree of intellectualization of entrepreneurs, which is a favorable premise for enhancing the performances of SMEs in the future period and for the transition to knowledge based economy. 63,96 0,87 35,17 Elementary Medium (highschool) Universitary and post graduate Picture no. 2.6 The structure of entrepreneurs according to education 20

19 The White Charter of Romanian SMEs in ,82 3,38 5,93 Ph. D. studies Other post graduate studies Picture no. 2.7 Master The frequency of entrepreneurs with post graduate studies Entrepreneurs classification according to the attended training programs points out that 2.10 of them trained in Romania and 1.19 attended training programs abroad, highlighting the poor availability of Romanian businessmen for getting perfection through training in different activity fields. 2,10 1,19 Training in Romania Training abroad Picture no. 2.8 The structure of entrepreneurs based on attended training programs From the perspective of the seniority in labor as entrepreneur it can be seen that the highest percentages are held by individuals having under 5 years and between 10 to 15 years of seniority in labor as entrepreneurs (21.85) and the lowest weight is held by those entrepreneurs with 15 to 20 years of seniority in labor At the sample s level the average seniority in labor as entrepreneur is of years. Please find the information in picture no

20 18, years 10,15 29, years years years 21,85 19,29 Over 20 years Picture no. 2.9 The structure of entrepreneurs according to seniority in labor as entrepreneur The analysis of the entrepreneurs according to the number of associates / shareholders reveals that over 3/4 of SMEs have the unic owners of their businesses, in of the companies are 2 to 5 associates and in 1.47 of companies are more than five associates, which indicates reduced associative spirit of entrepreneurs in Romania. See picture no ,35 22,18 1,47 Unic owner 2 to 5 associates Over 5 associates Picture no The structure of entrepreneurs according to the number of associates / shareholders Regarding the number of hours dedicated to business by entrepreneurs, it can be seen that over 1/5 of respondents allocate 60 hours/week and of them are involved in the company for at least 8 hours a day, a situation that shows the high degree of involvement of Romanian entrepreneurs in developing entrepreneurial activity. 22

21 The White Charter of Romanian SMEs in ,91 7,16 9,68 9, hours hours 40 hours 26,91 34, hours 60 hours Picture no The structure of entrepreneurs according to the number of hours dedicated to business per week Regarding the involvement of family members in the business activity, the investigation reveals that of businessmen do not collaborate with family members in order to carry out business, a situation which show that over half of Romanian entrepreneurs try to avoid overlapping familial relationships with entrepreneurial, often generating conflict situations. 62,50 37,50 Appeals to family members Do not appeal to family members Picture no The entrepreneurs situation who involve family members in the company's activity From the information presented we can outline a sketch of Romanian entrepreneur - mature person, with economic and tehnical training, male, married, with children, graduate university institution, with an average age of years as entrepreneur, with high level studies, unic shareholder, who allocates, daily, more than 8 hours to the business and who not involves family members in the company's activity. 23

22 MAIN FINDINGS The highest percentages are owned by entrepreneurs aged between 45 and 60 years (37.49) and those aged between 35 and 45 years (33.79) and the opposite is people who are under 25 years (1.04). The average age of entrepreneurs is years of entrepreneurs have economical background and of businessmen are professional engineers. Over 2/3 of respondents are men of entrepreneurs investigated are married. Approximately 70 of entrepreneurs have children. Relatively good level of training of Romanian entrepreneurs (63.96 have higher education) can help the development private companies of entrepreneurs have average education, and 0.87 have elementary education of entrepreneurs attended training sessions in Romania and 1.19 completed their training abroad. The average seniority in labor as an entrepreneur at the sample level is years. Over 3/4 of the entrepreneurs are unic owners of their business. In of SMEs are 2 to 5 partners/shareholders and in 1.47 of companies are more than 5 co-owners. Approximately 1/5 of entrepreneurs allocates to the business at least 60 hours per week of entrepreneurs allocates to the firm minim 8 hours every day of entrepreneurs not involve family members in the company's activity. The Romanian s entrepreneur profile is the following: mature 24

23 The White Charter of Romanian SMEs in 2016 person, with economic and tehnical training, male, married, with children, with higher education, with an average age of years as entrepreneur, unic shareholder, who dedicate daily more than 8 hours to the business and who not involves the family members in the company's activity. Chapter 3 25

24 BUSINESS ENVIRONMENT 3.1. Entrepreneurs assessments regarding the overall evolution of Romanian economic environment The overall situation of the Romanian economic environment in the current period (picture no. 3.1) was assessed as neutral in of the enterprises, embarrassing to the development in of the SMEs and favorable to business in of companies. Examining by comparison these considerations with those from the previous year (in 2015 the business environment was assessed as being neutral in of the enterprises, unfavorable in of the units and favorable in of the economic agents), it is found that have not been significant changes in the perceptions of entrepreneurs/managers from SMEs regarding the business environment where they conduct their business activity. 33,58 18,16 48,27 Favorable to business Neutral Embarasing to business development Picture no. 3.1 The overall entrepreneurs assessment of the current economic environment If we compare the opinions on the current state of the business environment with the observations regarding the environment throughout 2016 and 2017, it can be seen a slight decrease in the frequency of evaluations favorable and a slight increase of the number of respondents anticipate that the environment will be neutral. Details may be found in pictures no. 3.2 and no

25 The White Charter of Romanian SMEs in ,04 13,78 51,19 Favorable to business Neutral Embarasing to business development Picture no. 3.2 Entrepreneurs estimation of the evolution of the economic environment in ,57 14,51 52,92 Favorable to business Neutral Embarasing to business development Picture no. 3.3 Entrepreneurs estimation of the evolution of the economic environment in 2017 The examination of enterprises on development regions highlights the following significant aspects: - SMEs in which it is considered that the environment is / will be neutral to doing business are higher in the North West, if we consider the current situation and the year 2017 (62.34 and 66.23) and North East if we consider the evolution over the course of 2016 (57.58); - the percentages of companies where is estimated that the economic environment throughout 2016 and the 2017 will be 27

26 favorable are higher in the Central region (22.33 and 23.30); - the highest proportions of SMEs where is considered that the current status of the economic environment and the evolution until the end of the year 2016 is / will be embarrassing to the running of entrepreneurial activities are met in the South-West Region (70,00, 62,00, respectively 52,00); - South West region register the highest frequency, and the Central region register the lowest proportion of organizations where the opinion that the current environment is embarrassing business development. See tables no. 3.1, 3.2 and 3.3. Table no. 3.1 The differentiation of entrepreneurs assessment of the current economic environment according to development regions No. 1. Overall situation of the current economic environment Favorable to business North- East South - East SMEs grouped by development regions: South South - West West North - West Centre Bucharest- Ilfov Neutral Embarrassin g to business development

27 The White Charter of Romanian SMEs in 2016 Table no. 3.2 The differentiation of entrepreneurs assessment of the evolution of the economic environment in 2016 by to development regions No. Overall situation of the current economic environment North- East South - East South SMEs grouped by development regions: South - West West North Centre Bucharest- - West Ilfov 1. Favorable to business Neutral Embarrassing to business development Table no. 3.3 The differentiation of entrepreneurs assessment of the evolution of the economic environment in 2017 by to development regions No. Overall situation of the current economic environment North- East South - East SMEs grouped by development regions: South South - West West North - West Centre Bucharest- Ilfov 1. Favorable to business Neutral Embarrassing to business development

28 Taking into account the size of the SMEs (tables 3.4., 3.5 and 3.6) we see that: - micro enterprises register most often the negative perceptions and least often positive perceptions both in terms of the current state and future evolution of the business during 2016 and 2017; - small enterprises register the highest percentages of entities that are considered/is estimated that the economic environment is / will be present for business development and for the full year 2016; - medium sized companies register higher proportions of SMEs where is considered that the environment of business of 2016 and 2017 will be neutral. Table no. 3.4 The differentiation of the assessment of the current business environment by the size of the companies No. Overall situation of the current economic environment Micro enterprises Companies size Small enterprises Medium sized enterprises Favorable to business Neutral Embarrassing to business development

29 The White Charter of Romanian SMEs in 2016 Table no.3.5 The differentiation of the assessment of the evolution of the business environment in 2016 by the size of the companies No. Future status of the economic environment Micro enterprises Companies size Small enterprises Medium sized enterprises Favorable to business Neutral Embarrassing to business development Table no. 3.6 The differentiation of the assessment of the evolution of the business environment in 2017 by the size of the companies No. Future status of the economic environment Micro enterprises Companies size Small enterprises Medium sized enterprises Favorable to business Neutral Embarrassing to business development The distribution of the opinions within enterprises by fields of activity underlines the following differentiations, higher than the average of the sample, both in terms of the current environment assessments and in terms of the estimations for the future periods of time: 31

30 Industry Constructions Trade Transportation Tourism Services - the tourism SMEs register superior percentages of economic units where was appreciated that the current economic environment during the 2016 and from 2017 is favorable/ is not favorable to develop business (33.33, 20, respectively 23.33); - the entities from transportation sector register the higher proportions in which it is estimated that the current economic environment and the year 2017 not have impact/will have impact from the business (41.86, respectively 48.84); - the companies from industry have the highest percentage of SMEs where was considered the business environment will be neutral to the economic development (56.02) and the lowest proportion where was considered the business environment will be unfavorable to develop business (27.39). See tables no.3.7., 3.8 şi 3.9. Table no.3.7 The differentiation of the assessment of the current business environment by the fields of activity Future status SMEs by fields of activity No. of the economic environment 1. Favorable to business Neutral Embarrassing to business development

31 Industry Constructions Trade Transportation Tourism Services Industry Constructions Trade Transportation Tourism Services The White Charter of Romanian SMEs in 2016 Tabelul 3.8 The differentiation of the assessment of the evolution of business environment in 2016 by the fields of activity No. Future status of the economic environment SMEs by fields of activity 1. Favorable to business Neutral Embarrassin g to business development Table no. 3.9 The differentiation of the assessment in 2016 of business environment by the fields of activity No. Future status of the economic environment SMEs by fields of activity 1. Favorable to business Neutral

32 3. Embarrassin g to business development Business opportunities The analysis of the main business opportunities of SMEs for 2016 (picture no. 3.4). points out that the assimilation of new products was the most frequently indicated (in of the companies), followed by the increase of the demand on the internal market (49.36), the entering on new markets (49.18), the accomplishment of a business partnership (46.81), the use of new technologies (38.41), obtaining a grant (13.87) and the increase of exports (13.78). It should be noted that of SMEs have been reported and other economic opportunities. See picture no Assimilation of new products Increase of the demand on the internal market Entering on new markets Accomplishment of a business partnership Use of new tehnologies 52,19 49,63 49,18 46,81 38,41 Getting a grant Increase of exports 13,87 13,78 Others 3,28 0,00 10,00 20,00 30,00 40,00 50,00 60,00 Picture no. 3.4 The frequency of business opportunities accessible to Romanian SMEs in 2016 If we consider the intensity of expression of these business opportunities (on a scale from 1 to 3). the first position is occupied by the increase of the demand on the internal market with an average 34

33 The White Charter of Romanian SMEs in 2016 of 1.84, followed by the increase of exports (1.74), the assimilation of new products (1.67), the accomplishment of a business partnership (1.57), the use of new technologies (1.45), obtaining a grant (1.36), the entering on new markets (1.32). The full picture of the intensity of expression of business opportunities encountered this year by the Romanian entrepreneurs is represented graphically in picture no Increase of the demand on the internal market Increase of exports Assimilation of new products Accomplishment of a business partnership Use of new tehnologies Getting a grant Entering on new markets 1,84 1,74 1,67 1,57 1,45 1,36 1,32 0 0,5 1 1,5 2 Picture no. 3.5 The intensity of business opportunities within SMEs The distribution of SMEs by development regions points out a series of differentiations compared to the overall situation of the sample: - the assimilation of new products is seen in higher proportions to the companies from South Western Region (60.06) and in lower percentages to the entities from West Region (30.77); - the increase of the demands on the internal market is seen in in higher proportions to the companies from North-East Region (69.70) and in lower percentages to the entities from North-West Region (35.06); - the entering on new markets and the accomplishment of a business partnership are seen more often in North-West Region; 35

34 - the use of new technologies (52.25) is seen in higher percentages in the South-West Region (52.25). Details may be found in table no Table no The frequency of business opportunities by development regions Business SMEs grouped by development regions: No. Opportunities for 2016 North - East South - East South South - West West North - West Centr e Buchares t - Ilfov 1. The assimilation of new products Increase of the demands on the internal market Entering on new markets The accomplishme nt of a business partnership The use of new technologies Obtaining a grant Increase of exports The classification of SMEs by their size (table no. 3.11) mainly points out the following significant aspects: 36

35 The White Charter of Romanian SMEs in the assimilation of new products is indicated as business opportunity in a frequency inversely proportional to the size of SMEs; - the increase of the demand on the internal market, accomplishment of a business partnership, use a new technologies and getting a grant are reported more frequently among small businesses; - medium sized companies have the highest rates of economic agents who made reference to entering on new markets (68.18) and increase exports (33.33). Table no.3.11 The differentiation of business opportunities by classes of size of SMEs Companies size No. Business Opportunities for 2016 Micro enterprises Small enterprises Medium sized enterprises 1. The assimilation of new products Increase of the demands on the internal market Entering on new markets The accomplishment of a business partnership The use of new technologies Obtaining a grant Increase of exports If we enclose enterprises by fields of activity it can be seen some significant differences compared to the overall average of the sample (table no. 3.12): 37

36 Industry Constructions Trade Transportations Tourism Services - the assimilation of new products was notified more often by the companies from trade field (60.04) and more rarerly by the companies from transportations field (37.21); - the increase of demands on the internal market, the SMEs by the tourism field have the highest percentage (57.26) and the companies from services field register the smallest proportion (40.95); - in terms of the use of new technologies, and the increase of exports are more frequently indicated by the enterprises from the transportations field; - the companies from services have reported less the increase of demands on the internal market (67.03) and more rarely the obtaining a grant (9.89) and the increase of exports (8.78). Table no The differentiation of the business opportunities of SMEs by activity fields Business SMEs by fields of activity No. opportunities for The assimilation of new products Increase of the demands on the internal market Entering on new markets The accomplishment of a business partnership The use of new technologies Obtaining a grant

37 The White Charter of Romanian SMEs in Increase of exports Difficulties in SMEs` activity The entrepreneurs / managers investigated indicated that at present they are dealing with the following difficulties: bureaucracy (61.41), excessive taxation (54.47), corruption (45.16), excessive controls (44.98), unfair competition (40.33), the dropping of the internal demand (36.31), personnel employment, training and maintaining (26.37), the increase of the level of wage related expenses (25.54), inflation (21.90), the competition of the imported products (19.71), delays in cashing the equivalent value of the invoices from private companies (19.62), poor quality of infrastructure (18.16), high costs of credits (15.24), relative instability of the national currency (13.14), difficult access to credits (12.50), the non payment of invoices by state institutions (11.41), the decrease of the export demand (10.04), obtaining consultancy and training necessary for the company (8.58) and the knowledge and adoption of the community acquis (4.65). The full picture of difficulties encountered by SMEs in 2016 is graphically represented in picture no.3.6. Bureaucracy Excessive taxation Corruption Excessive controls Unfair competition Dropping of the internal demand Personnel employment, training and maintaining Increase of the level of wage Inflation Competition of the imported products Delays in cashing the invoices from private companies Poor quality of infrastructure Difficult access to credits Relative instability of the national currency High costs of credits Non-payment of invoices by state institutions Decrease of export demand Obtaining consultancy and training necessary for SMEs Knowledge and adoptation of the community acquis Others 61,41 54,74 45,16 44,98 40,33 36,31 26,37 24,54 21,90 19,71 19,62 18,16 15,24 13,14 12,50 11,41 10,04 8,58 4,65 0,27 39

38 Picture no. 3.6 The frequency of major difficulties faced by SMEs Regarding the intensity of manifestation of these difficulties it can be seen that, on a scale from 1 to 5, the first position is occupied by the dropping of the internal demand with an average of 2.59, followed by the competition of imported products (2.32), the decrease of the export demand (2.07), the high costs of credits (1.88), non payment of invoices by the state institutions (1.79), corruption (1.78), unfair competition (1.78), the inflation (1.77), the delays in cashing the invoices from private companies (1.70), excessive taxation (1.69)., bureaucracy (1.68), difficult access to credits (1.66), excessive controls (1.54), the knowledge and adoption of the community acquis (1.54), obtaining consultancy and training, as necessary for the company (1.53), personnel employment, training and maintaining (1.52), the relative instability of the national currency (1.45), the poor quality of infrastructure (1.43) and the increase of the level of wage related expenses (1.40). See picture no

39 The White Charter of Romanian SMEs in 2016 Dropping of the internal demand Competition of the imported products Decrease of export demand High costs of credits Non-payment of invoices by state institutions Corruption Unfair competition Inflation Delays in cashing the invoices from private companies Excessive taxation Bureaucracy Difficult access to credits Excessive controls Knowledge and adoptation of the community acquis Obtaining consultancy and training necessary for SMEs Personnel employment, training and maintaining Realtive instability of the national currency Poor quality of infrastructure Increase of the level of wage 2,59 2,32 2,07 1,88 1,79 1,78 1,78 1,77 1,7 1,69 1,68 1,66 1,54 1,54 1,53 1,52 1,45 1,43 1,4 Picture no. 3.7 The intensity of difficulties faced by SMEs According to the regional membership of SMEs, it can be noticed that: - the percentage of organizations for which the bureaucracy, competition of imported products, the relative instability of the national currency, non payment of invoices by the state institutions and obtaining consultancy and training, as necessary for the company are higher in the Center Region (74.07); - personnel employment, training and maintaining, the increase of the level of wage related expenses, the delays in cashing the invoices from private companies, the relative instability of the national currency and the relative instability of the national currency (23.42) are most frequently within the companies from the West Region; 41

40 - in the North-East Region we find the most organizations which complain the problem of the unfair competition (48.48), dropping of the internal demand (56.06). Additional information are summarized in the table no Table no The differentiation of difficulties faced by SMEs by development regions No. Difficulties in the current activity of the company North - East South - East South SMEs grouped by development regions: South West West North West Centre Bucharest -Ilfov 1. Bureaucracy Excessive taxation Corruption Excessive controls Unfair competition Dropping of the internal demand Personnel employment, training and maintaining Increase of the level of wage Inflation Competition of the imported products Delays in cashing the invoices from private companies

41 The White Charter of Romanian SMEs in Poor quality of infrastructure Difficult access to credits Relative instability of the national currency High costs of credits Non-payment of invoices by state institutions Decrease of export demand Obtaining consultancy and training necessary for SMEs Knowledge and adoptation of the community acquis The analysis of difficulties by the size of the companies (table no. 3.14) points out the following aspects: - the bureaucracy, the taxation, the excessive controls, obtaining consultancy and training, as necessary for the company, the knowledge and adoption of the community acquis are perceived as difficulties in frequency conversely proportionally to the size of the enterprises; - the high percentages of the organizations who feel the personnel employment, the high costs of credits, difficult access to credits, non payment of invoices by the state institutions and training and maintaining, decrease of export demand increases with the size of SMEs; - the corruption, unfair competition, the inflation, the delays in cashing the invoices from private companies and the poor quality of infrastructure have impact the small enterprises 43

42 Table no The differentiation of the difficulties by the size of SMEs No. Difficulties in the current activity of the company Micro enterprises Companies size Small enterprises Medium sized enterprises 1. Bureaucracy 62,71 60,47 45,45 2. Excessive taxation 57,60 44,96 34,85 3. Corruption 44,73 49,61 42,42 4. Excessive controls 48,83 27,91 25,76 5. Unfair competition 39,84 44,19 39,39 6. Dropping of the internal demand 36,51 34,88 36,36 7. Personnel employment, training and maintaining 24,97 26,36 45,45 8. Increase of the level of wage 23,31 25,58 39,39 9. Inflation 21,53 25,58 19, Competition of the imported products 19,53 17,05 27, Delays in cashing the invoices from private companies 17,98 31,01 19, Poor quality of infrastructure 16,87 26,36 19, Difficult access to credits 14,87 15,50 19, Relative instability of the national currency 12,87 11,63 19, High costs of credits 11,10 16,28 24, Non-payment of invoices by state institutions 10,32 16,28 16, Decrease of export demand 9,77 7,75 18, Obtaining consultancy and training necessary for SMEs Knowledge and adoptation of the community acquis 9,10 7,75 3,03 4,99 3,10 3,03 44

43 Industry Constructions Trade Tourism Transportation Services The White Charter of Romanian SMEs in 2016 The classification of the most frequent difficulties by the economic fields where SMEs conduct their business, points out the following aspects (table no. 3.15): - the companies that activate in the services field have higher percentages signaled for the problems generated by the bureaucracy (64.76) and the excessive taxation (60.95); - the corruption and the excessive controls are indicated most often among economic agents in the trade field; - the unfair competition, dropping of the internal demand, the increase of the level of wage, the delays in cashing the invoices from private companies, the high costs of credits and non payment of invoices by the state institutions are manifested in higher percentages within organizations that activate in the constructions field; - the personnel employment, training and maintaining, the poor quality of infrastructure, obtaining consultancy and training, as necessary for the company, the knowledge and adoption of the community acquis are recorded in higher percentages at the units from tourism field; - the inflation, the relative instability of the national currency, difficult access to credits and decrease of export demand are reclaimed more often within firms in the transport sector. Table no The differentiation of difficulties of SMEs by the fields of activity SMEs by fields of activity No. Difficulties in the current activity of the company 1. Bureaucracy Excessive taxation Corruption Excessive controls

44 5. Unfair competition Dropping of the internal demand Personnel employment, training and maintaining Increase of the level of wage Inflation Competition of the imported products Delays in cashing the invoices from private companies Poor quality of infrastructure Difficult access to credits Relative instability of the national currency High costs of credits Non-payment of invoices by state institutions Decrease of export demand Obtaining consultancy and training necessary for SMEs Knowledge and adoptation of the

45 The White Charter of Romanian SMEs in 2016 community acquis 3.4. The main contextual evolutions with negative influence on SMEs` activity Of the contextual evolutions considered to have a negative influence on the activity and performances of SMEs this year, the most frequently indicated were the evolution of the legal framework (45.80), corruption (29.20), the global economic crisis (26.64), the excessive bureaucracy (26.64), Romanian banks policies as far as companies are concerned (26.64) and the insufficient capacity of the Government, the Parliament, a.s.o. to counteract the effects of this crisis (23.81). This situation is explained by the unforeseen economic developments generated by the international crisis, the instability / inconsistency of laws, in conjunction with the existence in a small measure of a legislation that stimulate in a real way and substantially the activities of SMEs and non-adopting a consistent program against recession. The other ones that follow are the political changes within the state management (17.34), the insufficient predictability of the environment for enterprises (14.60), the climate and social tensions (14.32), the inter-ethnic tensions (4.84), the IMF and World Bank policy Romania (4.56) and the conflicts and social tensions ethnic and military in the areas close to Romania (1.09). See picture no

46 Legal framework development 45,80 Corruption Global economic crisis 29,20 26,64 Excessive bureaucracy 26,64 Romanian banks`policies concerning firms Insufficient capacity of the Government, the Parliamnet a.s.o. to counteract the effect of this Political changes within the state management Insufficient predictability of the economic envirnoment Social climate and tensions 24,82 23,81 17,34 14,60 14,32 Inter-ethinc tensions 4,84 IMF and Work Bank policy Romania Conflicts and social, ethnic and military tensions in the areas close to Romania Others 1,09 0,09 4,56 Picture no. 3.8 The frequency of the main contextual evolutions with a negative influence on the activity of the SMEs If we take into account the contextual evolutions with negative influence on the activity of SMEs by development regions, we mainly find the following aspects (table no. 3.16): - the evolution of the legal framework is felt higher percentage of companies in the North West (77.92) and lowest in the West by economic units (23.08); - companies from the West Region register the highest percentages of SMEs where are pointed out the corruption (52.85), the excessive bureaucracy (46.15), the insufficient predictability of the environment for enterprises 48

47 The White Charter of Romanian SMEs in 2016 (38.46), the political changes within the state management (38.46) and the insufficient capacity of the Government, the Parliament, a.s.o. to counteract the effects of this crisis (23.08); - the economic agents from the Center Region are affected in a higher proportion by the Romanian banks policies as far as companies are concerned (43.69), and in a smaller proportion by the excessive bureaucracy (24.27) and by the insufficient predictability of the environment for enterprises (9.71); - in the South-West Region was more often pointed out the problems caused by the climate and social tensions (29.73) and the conflicts and social tensions ethnic and military in the areas close to Romania (2.70). Tabel no The differentiation of the perceptions of the negative influences of contextual evolutions on the regional membership of SMEs No. Events that have a negative impact on the companies activity and performances North East South East SMEs grouped by development regions South South West West North West Centre Bucharest- Ilfov 1. Legal framework development 2. Corruption 3. Excessive bureaucracy 4. Global economic crisis Romanian banks` 5. policies concerning firms Insufficient capacity of the Government. 6. the Parliament a.s.o. to counteract the effect of this crisis Political changes 7. within the state management Insufficient predictability of the 8. economic environment 9. Social climate and tensions Interethnic tensions

48 11. IMF and Work Bank policy Romania Conflicts and social. ethnic and military 12. tensions in the areas close to Romania The analysis of SMEs by the size categories (table no. 3.17) points out the following significant aspects: - the legal framework development is often registers in micro enterprises (47.17) and rarely in small enterprises (37.21); - the bureaucracy, the insufficient capacity of the Government, the Parliament, a.s.o. to counteract the effects of this crisis, the social climate affects negatively the activity of companies, with a frequency directly proportional to their size and the percentage of entities impacted by policy banks increases with the size organizations; - small businesses feel more often the adverse effects caused by the corruption (39.53), by the global economic crisis (28.68), by the Romanian banks` policies concerning firms (28.68), by political changes within the state management (20.93), by the IMF and World Bank policy towards Romania (10.85) and by conflicts and social, ethnic and military tensions in the areas close to Romania (1.55). Table no The differentiation of the perception of the negative influences of contextual evolutions grouped according to the size of the SMEs Events that will have a negative Companies size No. impact on the companies activity and performances Micro enterprises Small enterprises Medium sized enterprises 1. Legal framework development Corruption Excessive bureaucracy

49 The White Charter of Romanian SMEs in Global economic crisis Romanian banks` policies concerning firms Insufficient capacity of the Government. the Parliament a.s.o. to counteract the effect of this crisis Political changes within the state management Insufficient predictability of the economic environment Social climate and tensions Interethnic tensions IMF and Work Bank policy Romania Conflicts and social. ethnic and military tensions in the areas close to Romania The analysis of the contextual factors with a negative impact on SMEs according to the fields of activity shows the following significant aspects: - the legal framework development, the insufficient capacity of the Government, the Parliament, a.s.o. to counteract the effects of this crisis, the social climate affects more frequently the tourism companies; - the corruption, the bureaucracy, the insufficient predictability of the economic environment, the conflicts and social. ethnic and military tensions in the areas close to Romania are indicated in higher proportions in the transportation companies; - the global economic crisis and the interethnic tensions are recorded more frequently within services companies; - the political changes within the state management, the IMF and Work Bank policy Romania are registered in higher percentages within industry SMEs. Additional information is presented in table no

50 Industry Construction Trade Transportation Tourism Services Table no The differentiation of the perception of the negative influences of contextual evolutions on SMEs grouped according to the field of activity Events that will have a negative SMEs by fields of activity No. impact on the companies activity and performances 1. Legal framework development Corruption Excessive bureaucracy Global economic crisis Romanian banks` policies concerning firms Insufficient capacity of the Government. the Parliament a.s.o. to counteract the effect of this crisis Political changes within the state management Insufficient predictability of the economic environment Social climate and tensions Interethnic tensions IMF and Work Bank policy Romania

51 The White Charter of Romanian SMEs in Conflicts and social. ethnic and military tensions in the areas close to Romania

52 MAIN FINDINGS The evolution of the Romanian economic environment at present is assessed as neutral in of the SMEs, embarrassing to the development by of companies and favorable to business by of enterprises. Small and medium sized enterprises where is assessed that the current economic environment is embarrassing to business, registers higher percentages at the level of companies from the South West Region (44.14) and the companies from transportation field (41.86). In of the enterprises it is assessed that the evolution of the Romanian economic environment until the end of 2016 will be favorable to SMEs. The highest percentages of SMEs where is registered that the economic environment from 2016 will be favorable to the development are among the companies from the Central Region (22.33), small companies (24.81) and the companies from the tourism sector (20). The main business opportunities of SMEs during 2016 are the assimilation of new products (in of the companies), the increase of the demand on the internal market (49.36), the entering on new markets (49.18), the accomplishment of a business partnership (46.81), obtaining a grant (13.87) and the increase of exports (13.78). The difficulties faced more often by small and medium sized are: the bureaucracy (61.41), the excessive taxation (54.74), the corruption (45.16). The contextual elements with negative influence on the activities and performances of SMEs that are most frequently met in Romania are the evolution of the legal framework (45.80), the corruption (29.20), global economic crisis (26.64). 54

53 The White Charter of Romanian SMEs in 2016 Chapter 4 THE IMPACT OF COMPLEX ECONOMIC DEVELOPMENT, NATIONAL AND INTERNATIONAL ON SMEs 4.1. The Dinamics of SMEs activities between October 2011 and March 2016 The world economic recession has generated multiple negative effects in Romania. A large part of specialists considers that many countries will continue to have negative economic evolutions, despite registering increases in their GDP. In this context, showing the impact of the internal/international economic recession upon the activity of Romanian SMEs is very significant. Due to the fact that the entrepreneurs within bankrupt companies could not be contacted (their companies were closed or they were not available for information), we hereby present two categories of results of our survey: - a first category related to the evolution between October 2011 and March 2016 of the activities within the questioned SMEs (Figure 4.1)): the investigation shows that 66,79 of companies activate within the same parameters, 19,43 of enterprises have decreased their activity and 13,78 of organizations have had an ascending evolution; - a second category of results regarding the estimations of entrepreneurs in respect to the evolution of SMEs with a very well known activity (suppliers, customers, friends companies etc.), between October 2011 and March 2016; the survey shows that 36,32 of enterprises have diminished their business, 32,77 of companies register the same parameters, 19,93 of the entities have become bankrupt or are in a bankruptcy situation and 10,98 of economic units have increased their activity. See Figure 4.2. Even though the information provided by entrepreneurs regarding other companies might be influenced by the subjectivity of their perception towards the state of other organizations, we consider the presented situation as being relevant in order to form a comprising view of the SMEs evolution between October 2011 and March We can conclude that a considerable part of the Romanian small and medium-sized enterprises has been confronted with big problems, due 55

54 to the pronounced economic decline. As is the case in other countries in the world and the EU, they had trouble facing the economic recession, situation explained mainly by the fact that SMEs are, generally, more vulnerable to contextual turbulence than large enterprises. 13,78 19,43 SMEs operating at the same capacity 66,79 SMEs that have amplified the activity SMEs which have reduced the activity Figure 4.1 Dinamics of the inquired smes activity, between october 2011 and march SMEs went bankrupt / in bankrupt situation SMEs have reduced the activity SMEs operating at the same parameters SMEs that have amplified the the activity Figure 4.2 Dinamics of the SMEs activity, whose business is very well known by entrepreneurs, between october 2011 and march 2016 We will further present the situation within the 1096 mentioning the fact that, among them, there are no companies that have ceased their activity due to bankruptcy. Considering the age of the companies (table 4.1), we conclude that the enterprises which are under 5 years, record higher percentages of entities operating at the same parameters (70,34), enterprises of 5 to 10 years register higher percentages among entities who have reduced their activity (22,58), and employers of years, record a higher proportion of the companies which have amplified their businesses (15,61). 56

55 The White Charter of Romanian SMEs in 2016 Table 4.1 The dinamics of SMEs activity between October 2011 and March 2016, as per their age No. Dinamics of SMEs Activity between October 2011 and March 2016 Under 5 years SMES age years years Over 15 years SMEs diminishing their activity SMEs activating at the same parameters SMEs increasing their activity A classification of companies as per their territorial distribution shows the following significant aspects: - SMEs in the North-Western Region register a higher percentage of companies who maintained their affairs at the same level (74,03); - the Western Region holds the highest amount of enterprises with a descending evolution (30,77), but records the lowest percentage of enterprises that have stagnated (61,54) and have developed (7,69) - economic units in the South-East stand out through a higher percentage of entities who have grown their businesses (21,23); Table 4.2 The dinamics of the inquired SMEs activity between October 2011 and March 2016, as per development region they belong No. Dinamics of SMEs activity between October 2011 and March 2016 North- East South- East South SMEs as per development region South- West West North- West Centre Bucharest- Ilfov 1. SMEs with reduced activity 2. SMEs maintaining the

56 3. level SMEs with increased activity The analysis of SMEs as per size classes shows that the percentages of ascending evolution companies are increased along with the dimension of the organization, the amounts of enterprises in decline registering an inversely proportional frequency to the size of enterprises, and same business level being mostly indicated by small entities (69,77) an rerely by medium units (62,12). This situation is explained by the fact that, generally, the size of the economic agent has been shown to diminish its vulnerability to the unfavourable contextual evolution. Details in Table 4.3. Table 4.3 The differentiation of investigated companies activity between October 2011 and March 2016, as per SMEs size No. Dinamics of SMEs Activity between October 2011 and March 2016 Micro-enterprises SMEs size Small enterprises Medium enterprises 1. SMEs with reduced activity 2. SMEs maintaining the level 3. SMEs with increased activity When refering to the companies form of legal organization (Table 4.4), we observe the following: - LLCs have the highest proportion of enterprises working in the same parameters (68,48) and the lowest share of SMEs which have amplified the businesses13,42). - JSCs has the highest proportion of companies that have developed (16,67) and the lowest percentage of units that have had a downward trend (16,67); 58

57 The White Charter of Romanian SMEs in the economic operators with other legal forms they reported more frequently the decrease of activities (30,58) and more rarely maintenance of business at the same level (53,72). Table 4.4 The dinamics of the inquired SMEs activity between October 2011 and March 2016,, as per form of legal organization No. Dinamics of SMEs Activity between October 2011 and March SMEs with reduced activity 2. SMEs maintaining the level 3. SMEs with increased activity SMEs as per form of legal organization JSC LLC Other form of legal organization The classification of economic agents as per their field of activity indicates the following main elements: - enterprises in the services sector recorded the highest proportion of companies operating at the same parameters (70,48); - SMEs in the trade sector recorded a higher percentage of companies that have reduced their business (24,20) and a lower share of entities that were maintained at the same levell (62,23); - the tourism operators have the largest percentage of organizations that have developed their businesses (26,67) and the lowest frequency of the entities that have had a descending evolution (10). See table

58 Table 4.5 The dinamics of SMEs activity between October 2011 and March 2016, as per field of activity Dinamics of SMEs Activity Nr. between October 2011 and crt. March SMEs with reduced activity 2. SMEs maintaining the level 3. SMEs with increased activity SMEs as per field of activity Industry Construction Commerce Transport Tourism Services 17,01 16,48 24,20 18,60 10,00 17,46 67,22 70,33 62,23 72,09 63,33 70,48 15,77 13,19 13,56 9,30 26,67 12, The psychological impact of the current economic situation on entrepreneurs Although Romania s GDP has increased during last year and the National Prognosis Comission anticipates an increase in Romanian economy in 2015, our country and some of the EU s states are still facing a number of micro, mezzo and macro-economic problems, and a large part of the experts consider that the eurozone will still encounter difficulties in the next years. The unfavourable national and international economic evolutions over the last years, the uncertainties regarding the present economic situation and the unpredictability of future evolution have and still are psychologically impacting a considerable number of businessmen. Considering these aspects, it is important that we develop a perspective regarding the degree to which Romanian entrepreneurs/managers have been emotionally influenced by the current economic situation. The investigation has shown the following: - 38,48 of respondants within SMEs are little to very little threatened by the world and macro-economic context; - 32,97 of entrepreneurs are pretty affected by the current economic situation; - 11,02 of business men are influenced by the economic evolution at a high level; - 10,47 of respondants are very much influenced by the economic conjecture; 60

59 The White Charter of Romanian SMEs in ,07 of entrepreneurs are not at all influenced by the current economic conditions. See Figure ,48 7,07 10,47 11,02 Very big High Fairly high 32,97 Low / very low No impact Figure 4.3 The psychological impact of the current economic situation on entrepreneurs Regarding the companies as per their year of establishment shows the following: - companies of under 5 years register a superior percentage of organizations in which the economic situation is impacting the entrepreneurs at a pretty high level and low / very low by the entrepreneurs (35,52, respectively 41,38) and lower percentages of respondents affected in large and very large extent (6,55 și 9,31); - Enterprises with aged 5 to 10 years recorded higher percentages of entities in which entrepreneurs are very bad influence by the macroeconomic environment / world economic (11,23) and not at all influenced (7,97); - SMEs over 15 years old have a higher percentage in terms of businesses owners who feel threatened in broad measure of economic trends manifested nationally / internationally (17,36) and record low frequencies of persons pretty much influenced (30,90), little or verz little (34,72) and not affected bz de current economic situation (5,90). More information is presented in Table

60 Table 4.6 The psychological impact of the current economic situation on entrepreneurs, as per SMEs age SMEs age No. The psychological impact of the current economic situation upon entrepreneurs Under 5 years 5-10 years years Over 15 years Very high High Pretty high Low or very low No impact Upon an examination of the companies as per territorial distribution (Table 4.7), we observe the following: - Organizations in the Western region recorded higher percentages of people who are impacted pretty much (69,23) and are not psychologically affected by the current economic situation and do not mention any entrepreneur to be greatly affected by the macroeconomic conjuncture (15,38); - SMEs in Bucharest Ilfov recorded the highest percentage (15.71) and South East entities hold the lowest share (4.38) of decision makers who feel the economic developments at a very high level; - companies from the central region have the largest proportion of respondents who feel threatened little or very little of the current state of the economy (53.40) and the lowest percentage of decision makers who are influenced rather than economic context (25.24); 62

61 The White Charter of Romanian SMEs in 2016 Table 4.7 The psychological impact of the current economic situation on entrepreneurs, as per SMEs territorial distribution No. The psychological impact of the current economic situation upon entrepreneurs North- East South- East South SMEs as per development region South- West West North- West Centre Bucharest- Ilfov Very high High Pretty high Low or very low No impact The classification of enterprises as per size shows mainly that: - the frequency with which entrepreneurs are largely affected by the current economic situation is directly proportional with the size of the entities and the share of respondents heavily influenced by current economic conditions, decreases with the size of businesses; - small businesses registered the highest percentage of decision makers pretty much affected by the macroeconomic conjuncture / (39.06) and lower weights of the companies in which the businessmens perceive little or very little this context (35.59) and are not affected by the economic context (5.47); - the medium siye companies recorded a higher frequency of people who are not psychologically affected by current economic developments (7.58). See table

62 Table 4.8 The psychological impact of the current economic situation on entrepreneurs, as per SMEs size No. The psychological impact of the current economic situation upon entrepreneurs Microenterprises SMEs size Small enterprises Medium enterprises 1. Very high 2. High 3. Pretty high 4. Low or very low 5. No impact Regarding the SMEs form of legal organization (Table 4.9), we observe the following significant aspects: - JSCs register superior percentages of businessmen that have felt the contextual evolution to a very high (38,89) and not influenced emotionally of economic situation of the moment (11,11); - LLCs hold a larger percentage of respondants that have been pretty affected (11,16) and little or very little (39,81) by the current economic conditions; - companies with other forms of legal organization stand out through a higher percentage of decision-makers that have been amply affected by the existing economic situation (19,83). 64

63 The White Charter of Romanian SMEs in 2016 Table 4.9 The psychological impact of the current economic situation on entrepreneurs, as per SMEs form of legal organization No. The psychological impact of the current economic situation upon entrepreneurs SMEs as per form of legal organization JSC LLC Other form of legal organization 1. Very high 2. High 3. Pretty high 4. Low or very low 5. No impact An investigation of the organizations based on their field of activity mainly reveals that : - companies from the tourism sector recorded higher percentages of respondents who are in low impact / small extent (53.33) and not impact (16.67) by the macro world economic developments (9,43); - Transport companies have higher proportions units in which businessmen are largely affected by current economic conditions (16,28); - Entities operating in the trade sector is characterized by a higher frequency decision makers who feel very much the current situation (14,10) and records a lower percentage of people who are influenced extensively by the economic context (8,51), Details in Table

64 Table 4.10 The psychological influence of the current economic situation on entrepreneurs, as per SMEs field of activity No. 1. The psychological impact of the current economic situation upon entrepreneurs Very high SMEs as per field of activity Industry Construction Commerce Transport Tourism Services High Pretty high Low or very low No impact An analysis of the emotional perception of the current economic situation as per SMEs performance in 2015 compared to 2014 (table 4.11), the following aspects stand out: - companies with much better results register higher percentage (18,52), and those with much poorer results hold lower percentages (3,13) of decision-makers which are not psychologically influenced by the current conditions; - companies with much weaker achievements has the highest frequency of businessmen who feel threatened in a large proportion of the macroeconomic developments (53,13); - organizations with identical performance hold a higher percentage of respondents who are mostly affected (13,69) and fairly high and in fairly high measure by the current economic situation (37,96); 66

65 The White Charter of Romanian SMEs in 2016 Table 4.11 The differentiation of the psychological impact of the current economic situation on entrepreneurs, as per performance in 2015 compared to 2014 No The psychological impact of the current economic situation upon entrepreneurs Very high High Pretty high Low or very low No impact SMEs performance in 2015 compared to 2014 Much better Better Identical Poorer Much poorer Considering the correlation between the psychological impact of the present economic situation and the level of education of decision-makers in SMEs (Table 4.12), we observe the following: - persons with secondary education have the highest percentage of respondents unaffected (7.73) and little affected or in a very little extent by the current economic conjuncture (39.78); - entrepreneurs with elementary education have the highest proportion of decision makers greatly influenced by the current economic conjuncture (22.22), a lot (22.22) and pretty much (55.56). 67

66 Table 4.12 The psychological impact of the current economic situation on entrepreneurs, as per their level of education No. The psychological impact of the current economic situation upon entrepreneurs 1. Very high 2. High 3. Pretty high 4. Low or very low 5. No impact Entrepreneurs level of education Elementary Medium high Assessments of the evolution of the economic situation in Romania, in 2016 Considering the answers given by the decision-makers within SMEs about Romania s economic situation in 2016 (figure 4.4), the results of the investigation show the following: of entrepreneurs/managers estimate the current year to be the same as the previous; of respondants indicate a descending trend; of the inquired subjects register a positive evolution. We observe the fact that decision-makers in small and mediumsized enterprises do not agree with specialists that estimate that 2016 will be a year of economical growth for Romania. 68

67 The White Charter of Romanian SMEs in ,47 32,97 11,02 Better The same Worse Figure 4.4 Entrepreneurs estimations regarding the romanian economic situation in 2016 The classification of companies as per their age (Table 4.13) underlines the following : - companies with a recorded age of years have an increased frequency makers who believe that the economy will stagnate (60.43); - companies established in the last five years recorded the highest percentage of people who anticipate a negative trend (42.56); - enterprises with aged between 5 to 10 years have the highest proportion of respondents who believe that the economic situation will improve (9.06) Table 4.13 The differentiation of the entrepreneurs estimations regarding Romania s economic situation in 2016 as per SMEs age SMEs age No Romania s economic situation in 2016 Under 5 years 5-10 years years Over 15 years Better Same Worse

68 Classification of SMEs by development regions to which they belong highlights the following: - enterprises in the the North West region recorded the highest percentage of decision makers which anticipates a downward trend (53,33), as well as the lowest share of people which estimates that the economic situation will remain unchanged (44,00) and will be better (2,67); - North East respondents most frequently appreciates that the Romanian economy will stagnate in 2016 (70,77) and will be better (12,31). More information is listed in Table 4.14 The entrepreneurs estimations regarding Romania s economic situation in 2016,as per SMEs development regions to which they belong No. Romania s economic situation in 2016 North- East South- East South SMEs as per development region South- West West North- West Centre Buchares t-ilfov Better Same Worse 12,31 8,90 8,33 5,45 7,69 2,67 8,74 4,71 70,77 69,18 48,44 67,27 61,54 44,00 58,25 50,00 16,92 21,92 43,23 27,27 30,77 53,33 33,01 45,29 Upon analysis of the SMEs size (Table 4.15), we observe the following: - the percentage of entrepreneurs who believe that 2016 will be the same grow at the same time with the amplification of the size of organizations and the share of people who expected a downward trend evolves inversely proportional to the size of the companies; - small firms recorded the highest percentage of decision makers who estimates that the economic situation will evolve positively (68,05). 70

69 The White Charter of Romanian SMEs in 2016 Table 4.15 The differentiation of the entrepreneurs estimations regarding Romania s economic situation in 2015, as per SMEs size No. Romania s economic situation in 2016 Micro enterprises SMEs size Small enterprises Medium enterprises 1. Better 2. Same 3. Worse A classification of economic agents as per their form of legal organization shows that JSCs hold a high percentage of people that foresee a positive evolution of Romania s economy in 2016 (6,89), LLCs indicate a higher frequency of respondants estimating a stand-still (69,44), and companies with a different form of legal organization register a high amount of entrepreneurs that indicate a descending trend for the current year (47,11). See Table Table 4.16 The entrepreneurs estimations regarding Romania s economic situation in 2016, as per the SMEs form of legal organization No. Romania s economic situation in Better 2. Same 3. Worse SMEs as per form of legal organization JSC LLC Other form of legal organization

70 Industry Construction Commerce Transport Tourism Services An analysis of the organizations as per fields of activity (Table 4.17), reveals the following: - SMEs in Transport hold higher percentages of respondants considering 2016 as a better year (13,79) și la fel (68,97), precum as well as a lower percentage of decision-makers foreseeing an involution (17,24); - entrepreneurs from trade anticipated into higher frequency that the economic situation will deteriorate (41,13). - Table 4.17 The differentiation of the entrepreneurs estimations regarding Romania s economic situation in 2016, as per SMEs field of activity SMEs as per field of activity Romania s economic No. situation in Better Same Worse Considering the companies as per their performance in 2015, compared to 2014 (Table 4.18), We note that entrepreneurs with superior results more frequently appreciate that the trend will be positive (18,52), stakeholders from the companies with identical outputs believes in a higher proportion that the economic situation will be unchanged (63,67), and the companies with much weaker achievements have a higher share of people who expect a downtrend (79,69). 72

71 The White Charter of Romanian SMEs in 2016 Table 4.18 The differentiation of the entrepreneurs estimations regarding Romania s economic situation in 2015, as per SMEs performance in 2015 compared to 2014 No. Romania s economic situation in 2016 Much better Performanţele economice 2015/2014 Better Identical Poorer Much poorer Better Same Worse The differentiation of the analysis as per entrepreneurs level of education (Table 4.19), indicates the fact that the highly educated respondents estimate more frequently a stand-still in the economic situation (57,53) and will be better (7,46), and decision-makers with elementary education estimate a descending trend in 2016 (66,67). Table 4.19 The estimations regarding Romania s economic situation in 2016, as per entrepreneurs levels of education No. 1. Better 2. Same 3. Worse Romania s economic situation in 2016 Entrepreneurs level of education Elementary Medium High

72 4.4. Perceptions of entrepreneurs on the government's ability to contribute to solving complex economic and social issues post crisis During and after an economic recession, each country s government must play a major role in order to counter the negative effects and invigorate/grow the economy, by adopting a series of ferm measures based on internal and external economic realities Investigation of perceptions of entrepreneurs about the current government's ability to contribute to solving economic and social problems in our country after the economic crisis of the previous years (figure 4.5) revealed the following: - 41,89 of respondents believe that the executive has little possibility to facilitate overcoming the negative aspects of post crisis; - 33 the company considers that the state body which exercises executive power has a medium potential to counteract the consequences of the recession; - 22,46 of entrepreneurs believe that the government lacks the required capabilities to act against the negative consequences of the economic decline; - only 2,66 of those investigated said that the central organ of state administration possess a high capacity to combat economic and social repercussions subsequent crisis. We observe a very low percentage of entrepreneurs that trust the executive body s potential to counteract the negative consequences brought on by the recession, a situation that can be explained by an insufficient coherence of the measures implemented until now, by the budget deficit problems with which Romania and some of the EU states have been confrunted and by the fact that many of the world s economically developed countries have not found solutions to counteract the effects of the world recession. 74

73 The White Charter of Romanian SMEs in ,46 2,66 33,00 High capacity Medium capacity 41,89 Figura 4.5 Low capacity No capacity The entrepreneurs perceptions regarding the Government s ability to counteract the recession s consequences When examining the entrepreneurs perceptions as per SMEs age (Table 4.20), we mainly observe that: - frequency of respondents who opines that central authority has no capacity to combat the effects of the recession is broader in organizations aged years (24,19) and lower among firms over 15 years old (21,11); - SMEs established into the last 5 years have a higher percentage of decision makers who believe that the potential of the government to counter the impact of the crisis is high (3,10); - companies with over 15 years old recorded higher proportions of policy makers who believe that the government has a reduced force to cope with economic and social consequences of the decline from previous years (43.60). Table 4.20 The entrepreneurs perceptions regarding the Government s ability to counteract the recession s consequences, as per SMEs age No The government s ability to counteract the recession s consequences High Medium Low Under 5 years SMEs age 5-10 years years Over 15 years

74 4. No ability The classification of perceptions as per SMEs development region shows the following significant aspects: - organizations in the North East have a higher proportion of firms that considered that the central organ of state administration has a reduced potential to solve economic and social problems post-crisis (57,58); - businesses that consider the government has an average capacity to counter the economic crisis are more frequent in the West (69,23) and less frequent in the North East (25,76); - if we consider the decision makers who believe that the state body which exercises executive power possesses high capabilities to bring their contribution to overcoming the consequences of the recession, South East are recorded most individuals (6,85) and in West and Central regions are recorded null respondents quota. More information in Table Table 4.21 The differentiation of the entrepreneurs perceptions regarding the Government s ability to counteract the recession s consequences, as per SMEs territorial distribution No. 1. Ability of government to help solve economic and social problems post crisis High North- East South- East South SMEs as per development region South- West West North- West Centre Bucharest- Ilfov , 3, 4, Medium Low No ability

75 The White Charter of Romanian SMEs in 2016 The classification of organizations as per size (Table 4.22) shows the following aspects: - the percentage of SMEs in which the executive is perceived as having the power to resolve post-crisis is amplified with the reduction of the company; - frequencies of entrepreneurs which estimates that the government has reduced / average capacity to combat the consequences of the economic decline, increases in direct proportion with the dimensions of organizations; - medium companies recorded a higher weight and smaller businesses recorded a smaller proportion of respondents who believe that central authority has the potential to overcome the negative repercussions of the economic downturn. Table 4.22 Perceptions of entrepreneurs on the potential of the government to contribute to solving economic and social problems post crisis No. Potential of the government to contribute to solving economic and social problems post crisis 1. High Micro-enterprises SMEs size Small enterprises Medium enterprises Medium 3. Low 4. No ability Regarding the SMEs form of legal organization, we mainly observe that: - JSC hold the largest percentage and the operators with other legal forms record low proportions, in terms of respondents who believe that the state body which exercises executive power has reduced capacity (58,33) and high capacity to counteract the effects of postcrisis(5,56); 77

76 - Entities with other juridical legal form, register the lowest percentages of operators who believe that central authority has low potential (36,36) and higher (0,83) to contribute to overcoming the negative consequences of economic setbacks; - LLCs shows a higher percentage of SMEs that estimate the government has high capability of combating the consequences of the economic decline (33,30). Details in Table Table 4.23 The differentiation of entrepreneurs perceptions about the ability of government to contribute to solving economic and social problems post crisis No. The government s ability to contribute to solving economic and social problems post crisis SMEs as per form of legal organization JSC LLC Other form of legal organization 1. High 2. Medium 3. Low 4. No ability Differentiating the analysis depending on the activity of economic entities, we find the following important aspects: - Travel firms have higher proportions of enterprises in which consider that the Government has medium potential (50) and low (46,67) to counteract the effects of economic regress; - transport companies recorded the highest share, and tourism organizations recorded zero percentage by SMEs who believe that the government has average capability to cope with the adverse effects of the crisis; - also entrepreneurs from the field of transport frequently opines that central authority has average capacity 78

77 Industry Construction Commerce Transport Tourism Services The White Charter of Romanian SMEs in 2016 (27,91) and low capacity (39,53) for solving problems post-crisis. See Table Table 4.24 Assessments of entrepreneurs on the potential of of the government to contribute to solving economic and social problems post crisis SMEs as per field of activity No. The government s ability to contribute to solving economic and social problems post crisis High Medium Low No ability

78 MAIN FINDINGS Between October marche 2016, 66,79 of the questioned SMEs activate within the same parameters, of economic units have decreased their volume of activity and of enterprises have had an ascending evolution (the entrepreneurs within bankrupt companies could not be contacted due to either their companies being closed or a lack of availability to provide information). Considering the perceptions of entrepreneurs regarding development of SMEs whose activity is known very well (suppliers, customers, business friends, etc.), the investigation shows that between October March 2016, of entities have reduced their business, 32,77 of organizations have maintained the same level, of companies have gone bankrupt or are in a bankruptcy situation, and of enterprises have increased their business. The frequency of entities that have reduced their activity is higher among: firms of 5-10 years old (22.58), SMEs in the West (30.77), microenterprises (21.53), economic operators with other legal form of organization (30.58) and companies in the trade sector (24.20). The proportion of organizations operating at the same parameter is higher among: entities that have less than 5 years old (70.34), economic units in North West (74.23)also small companies (69.77) LLCs (68.48) and services companies (70.48). SMEs that have boosted their activity record higher percentages among: companies of years old (15.61), businesses in the South East (21.23) medium companies (28.79), S.A. (16.67) and organizations from tourism (26.67). Given the psychological impact of the current economic situation in our country on decision makers of the SMEs, it is found that of investigated persons feel threatened in a small proportion or very small by macroeconomic and global context, of entrepreneurs / managers are very much affected by the economic situation of the moment, 11,02 of businessmen feel economic developments at a high level, of respondents are 80

79 The White Charter of Romanian SMEs in 2016 influenced heavily by the economic conjuncture, and 7.07 of those investigated are not impacted by current economic conditions. The proportion of entrepreneurs who are affected to a large extent by the current economic conditions from Romania are higher among companies that have 5-10 years old (11.23), companies from Bucharest-Ilfov (15.71) microenterprises (11.73), operators of other legal form of organization (19.83), companies operating in trade sector (14.10), SMEs with much weaker performences in 2015 than in 2014 (53, 13) and people with elementary education (22.22). Taking into account the opinions of those working in small and medium enterprises on the economic situation into 2016, the survey results show that of entrepreneurs estimate that the economy will stagnate, of decision makers believe that trend will be Descendant and 6.72 of those investigated believes that evolution is positive of respondents believe that the government has little possibility to facilitate overcoming the negative aspects into post crisis period, in 33 of firms is estimated that the state body which exercises executive power has medium potential to counteract the consequences of the downturn, of entrepreneurs believe that the government has the required capabilities to act against the negative consequences of economic decline and only 2.66 of those questioned declared that the central body of the state administration have a high capacity of combating economic and social repercussions subsequent recession. The frequency of entrepreneurs who opines that the government has high potential to counter the economic crisis are higher in organizations established into the last 5 years (3.10), companies in the Southeast (6.85), medium-sized companies (4.55 ), joint stock companies (5.56) and companies in the transport sector (6.98). 81

80 Chapter 5 LEVEL AND DYNAMICS OF SMES PERFORMANCE 5.1. Overall SMEs performances in 2015 compared to 2014 In regards of the overall performances of enterprises in 2015, as compared to 2014, one finds that the results have been much better in 2.46 of the companies, better in of the enterprises, identical in of economic agents, slightly poorer in of economic units and net inferior in 5.84 of the organizations. This fact highlights a relative stability of Romanian SMEs performances. More information in the following picture. 19,98 5, ,26 Much better Better Identical Slightly poorer 50,46 Much poorer Picture no. 5.1 SMEs structure, subject to economic performance dynamics in 2015, as compared to 2014 Classifying economic agents by their age, one can see the fact that enterprises with an age of 5 to 10 years have registered the largest proportions of enterprises that have had much better results in 2015, compared to 2014 (3.58), but also among those with slightly poorer performances (20.43). In the meanwhile, this same category has registered the highest percentage of enterprises to register much poorer results in 2015, compared to 2014 (7.17). Enterprises with an age smaller than 5 years have registered the highest proportion of firms that have had identical results in 2015 compared to 2014 (53.79). More details in table

81 The White Charter of Romanian SMEs in 2016 Table 5.1 SMEs performance in 2015 as compared to 2014, by age of SMEs SMEs performances Age of SMEs No. in 2015 as compared to 2014 Under 5 years 5-10 years years Over 15 years Much better Better Identical Slightly poorer Much poorer In terms of the regional location of SMEs, we can highlight the following deviations, taking into account the sample average (table 5.2): - economic units with net superior performances register the highest percentage in the North-East region (6.06) while in the following regions we cannot find a company that performed much better than last year: West and North- West; - SMEs with better results register a higher percentage in the Western Region (46.15) and the lowest in the North-West region (6.49); - Enterprises with identical performances are more frequent in the South-West (63.06) and rarer in the West region (38.46); - In terms of those enterprises having a slightly poorer performance, the North-West region holds the highest percentage (38.96), and the lowest percentage is found in the Western region (7.69); - Enterprises with net inferior results are more often met within SMEs from Bucharest and Ilfov (11.43) and more seldom in the Center region (0.00). - An overall analysis highlights the fact that the region that had the most positive evolution in 2015, compared to 2014, 83

82 North-East South-East South South-West West North-West Center Bucharest - Ilfov is the South-East region of Romania. Meanwhile, the North- West region has had the greatest downfall in the same period of time. Table 5.2 SMEs performance differentiation in 2015 as compared to 2014, by development regions No. SMEs performances in 2015 as compared to 2014 SMEs by development regions Much better Better Identical Slightly poorer Much poorer The classification of companies by classes of size (table 5.3) points out the fact that the percentage of SMEs having much better results is higher in the medium enterprises category (4.55). Microenterprises have higher percentages of enterprises that have had identical results (52.28), slightly poorer results (22.09) and much poorer results (6.44). Thus, on an average basis, microenterprises have had the most significant downfall of performance. 84

83 The White Charter of Romanian SMEs in 2016 Table 5.3 Differentiation of performances in 2015 as compared to 2014, as per SMEs sizes SMEs Size No. SMEs Performances in 2015 as compared to 2014 Micro Small Medium 1. Much better 2. Better 3. Identical 4. Slightly poorer 5. Much poorer Examining SMEs based on their legal form of organization highlights the fact that joint-stock companies have obtained much better performances (2.78) and better performances (36.11) in the highest frequencies, while also having the biggest percentage of enterprises that have had much poorer results (8.33). Limited liability companies have had the largest proportion of enterprises that registered identical results in 2015, compared to 2014 (51.44), while also having the smallest proportion of the ones that had much worse results in that period of time (5.75). Entities with other forms of organization are associated with the highest proportion of enterprises that have had poorer results over the period of analysis (24.79). More details can be found in table 5.4. Table 5.4 Evolution of performance in by the form of legal organization of SMEs SMEs performances SMEs by their legal form of organization No. in 2015 as compared to 2014 Joint-Stock Company Limited Liability Company Other forms of organization 1. Much better

84 Industry Construction Trade Transportati on Tourism Services Better Identical Slightly poorer Much poorer Comparing the economic performances, subject to the field of activity of SMEs (table 5.5), one can find the following important issues: - Companies from the transportation sector do not have any representatives among the companies that have had much better results in 2015, compared to 2014; - Companies from the tourism sector have registered the highest percentage of enterprises with better results (43.33), followed by the ones from the transport sector (27.91) and the ones from the industrial sector (26.56); - Enterprises from the trade sector can be characterized by the biggest percentage of companies that have had identical results in 2015, compared to 2014 (53.72), followed by the ones from the services sector (52.38); - The biggest percentage of economic agents that have had poorer results is found among the constructions sector (25.27); - Entities from the transport sector have the highest proportion of companies with much poorer results (11.63), followed by the ones from the trade sector (7.45). A thorough analysis highlights the fact that the field of activity with the most significant positive evolution in 2015, compared to 2014, is tourism. On the other side, the one with the worst evolution is the trade sector. Table 5.5 SMEs performances between 2015 and 2014, as per field of activity No. SMEs performances in 2015 as compared to 2014 SMEs per fields of activity 1. Much better

85 The White Charter of Romanian SMEs in Better Identical Slightly poorer Much poorer Analyzing small and medium-sized enterprises based on the studies of the entrepreneurs, one can observe the fact that enterprises managed by persons with superior (university) studies have registered much better results in a higher frequency than in the case of those managed by persons with elementary or medium-level studies (3.63). This category has also registered the highest frequency in terms of the SMEs that have had better results (22.81). Enterprises managed by persons with medium-level studies have registered the highest percentage of companies with much poorer results (7.42). More details on this subject can be found within the following table (table 5.6). Table 5.6 Evolution of performance in 2015 compared to 2014 by the level of studies of the entrepreneur No SMEs performances in 2015 as compared to 2014 Much better Better Identical Slightly poorer Much poorer Level of entrepreneur studies Elementary Medium Superior Taking into account the gender of the entrepreneur (table 5.7), we highlight the fact that companies managed by women have higher percentages among the ones that have registered much better results (3.01), but also among the ones with poorer results (23.49). Complementary to this, companies managed by men have registered higher percentages among companies with 87

86 better results (21.86), identical results (51.57) and much poorer results (5.89). Table 5.7 Evolution of performance in 2015 compared to 2014 by the gender of the entrepreneur No SMEs performances in 2015 as compared to 2014 Much better Better Identical Slightly poorer Much poorer Gender of entrepreneur Female Male Overall performances of enterprises in 2016 compared to 2015 In terms of the economic performances of SMEs envisioned for 2016, in comparison with 2015, we find that sample of enterprises foresees much better results in only 1.55 of the organizations, better in of the organizations, identical in of enterprises, poorer in 6.02 of the companies and much poorer in 5.29 of firms. See picture ,02 5,29 1,55 22,35 Much better Better Identical Slightly poorer 64,79 Much poorer Picture no

87 The White Charter of Romanian SMEs in 2016 SMEs structure by performance dynamics in 2016, as compared to 2015 Taking into account the previsions within SMEs based on age groups (table 5.8), one can observe the fact that proportions of enterprises with net superior results were higher among the years group (2.11), percentages of enterprises in which the results are estimated to be identical are higher among the 0-5 years group of age (67.59), while significantly poorer results are anticipated to be met within enterprises that have 10 to 15 years of age (6.75). Table 5.8 SMEs performance in 2016 as compared to 2015, by age of SMEs SMEs performances Age of SMEs No. in 2016 as compared to 2015 Under 5 years 5-10 years years Over 15 years Much better Better Identical Slightly poorer Much poorer The distribution of SMEs, as per development regions of Romania (table 5.9) points out the following important aspects: - The proportion of the companies in which net superior results are expected is higher in the South-West region (2.70) and lowest in the North-West and in the West (0.00); - Companies with better performances are also more common in the North-East region (42.42) and less common in the North-West region (10.39); - Regarding the economic units which will remain at the same level as in 2015, the highest percentage is recorded in the 89

88 North-East South-East South South-West West North-West Center Bucharest- Ilfov North-West region (81.82) and lowest in the North-East region (48.48); - In terms of companies with slightly poorer performances, the South-East region holds the highest percentage (10.96), and West region registers a null proportion; - In the Bucharest-Ilfov region we find the highest number of companies with much poorer results (10.13) and the lowest percentage of enterprises with net inferior performances is found in the West region (0.00). Table 5.9 Companies performances by development regions in 2016, as compared to 2015 No. SMEs performances in 2016 as compared to 2015 SMEs by development regions Much better Better Identical Slightly poorer Much poorer Analyzing the organizations by size reveals the fact that small enterprises have the highest percentage of entities that predict much better results in 2016, compared to the previous year (2.33), while microenterprises are associated with the high proportion of companies that estimate similar results in 2016, as compared to 2015 (67.37). Medium-sized enterprises are remarked by the highest proportion of entities with better results (43.94), but also with a null proportion among the ones that estimate much worse results in 2016, compared to More details can be found in table

89 The White Charter of Romanian SMEs in 2016 Table 5.10 Companies performances in 2016, as compared to 2015, by size classes No. SMEs performances in 2016 as compared to Much better 2. Better 3. Identical 4. Slightly poorer 5. Much poorer SMEs size Micro Small Medium Examining firms by their legal form of organization, we can see that joint-stock companies have the biggest share among companies with better estimated results (47.22). Limited liability companies are remarked among the category of enterprises with much better estimated results in 2016, compared to 2015 (1.70). More details can be found in table Table 5.11 Evolution of performance in by the form of legal organization of SMEs SMEs performances SMEs by their legal form of organization No. in 2016 as compared to 2015 Joint-Stock Company Limited Liability Company Other forms of organization Much better Better Identical Slightly poorer Much poorer

90 The analysis of SMEs results, in terms of the field in which they activate, points out that following highlights: - The organizations in which much better results are expected register a superior percentage among trade firms (2.13) and a null proportion in transportation and tourism; - In terms of the companies with better performances, the highest percentage is held by the SMEs from the tourism sector (43.33) and the lowest rate is found among economic agents operating in the trade field (15.69); - Considering the companies with estimations of identical performances, the trade sector holds the highest percentage (66.76), and the enterprises from the transport field register the lowest percentage (51.16); - SMEs where slightly poorer achievements are estimated are more frequent in the trade sector (7.98) and more seldom among the companies activating in the tourism sector (3.33); - Taking into account the prefiguration of much poorer performances, the economic units in the transportation sector register a higher percentage (11.63), while the entities from the tourism sector stand out through a null share. A general analysis of the research sample highlights the fact that enterprises in the tourism sector are associated with the most significant positive evolution, while the ones involved in trade are the most pessimistic from this perspective. This trend continues the one highlighted in the previous analysis. More information about this issue is presented in table Table 5.12 Companies performances in 2016, as compared to 2015, by fields of activity No. 1. SMEs performances in 2016 as compared to 2015 Much better Industry Constructio n SMEs per fields of activity Trade Transportatio n Tourism Services Better Identical Slightly poorer

91 The White Charter of Romanian SMEs in Much poorer Upon analyzing companies, as per the performances achieved in 2015, as compared to 2014 and observing their estimated evolution in 2016, as compared to 2015 (table 5.13), the following aspects are revealed: - Enterprises in which much better results estimated in 2016, compared to 2015, are more frequent among those organizations which have also had a significant increase in performance in 2015, compared to 2014 (37.04); - The economic agents that foresee better performances in 2016, compared to 2015, register higher percentages among SMEs that have also achieved much better (29.63) and better (62.23) performances last year; - The proportion of entities that estimate similar results in 2016, compared to 2015, is higher among enterprises that have registered similar evolutions in 2015, compared to 2014 (83.54); - The percentage of companies where slightly poorer performances are estimated is higher among those companies having registered poorer performances in 2015, as compared to 2014 (16.89) and, very interestingly, among those with much better results (14.81); - SMEs where net inferior performances are expected in 2016, compared to 2015, are more frequent among those companies having also had a much poorer year in 2014 (70.31). Overall, although a number of significant changes have taken place within the macro-economic environment, approximately the same dynamics of performances are found in the SME sector, due to the fact that the current results of companies are usually conditioned by the achievements from the previous periods of time. 93

92 Table 5.13 Correlation between companies performances in 2016/2015 and in 2015/2014 No. Category of SMEs Much better results in 2015, as compared Better results in 2015, as compared Identical results in 2015, as compared Poorer results in 2015, as compared Much poorer results in 2015, as compared to 2014 to 2014 to 2014 to 2014 to Companies with estimation of much better results in 2016, as compared to 2015 Companies with estimation of better results in 2016, as compared to 2015 Companies with estimation of identical results in 2016, as compared to Companies with estimation of poorer results in 2016, as compared to Companies with estimation of much poorer results in 2016, as compared to Classifying firms based on the studies of the entrepreneur highlights the fact companies run by persons with superior forms of studies estimate much better results in a higher proportion (2.11), while firms coordinated by persons with elementary studies estimate in a higher proportion identical performances (88.89). More details in table

93 The White Charter of Romanian SMEs in 2016 Table 5.14 Evolution of performance in 2016 compared to 2015 by the level of studies of the entrepreneur No SMEs performances in 2016 as compared to 2015 Much better Better Identical Slightly poorer Much poorer Level of entrepreneur studies Elementary Medium Superior Classifying SMEs based on the gender of the entrepreneur (table 5.15) highlights the fact that firms administrated by women have higher percentages among companies with much better estimated results (2.11) and similar results (65.96). No. Table 5.15 Evolution of performance in 2016 compared to 2015 by the gender of the entrepreneur SMEs performances in 2016 as compared to 2015 Gender of entrepreneur Female Male Much better Better Identical Slightly poorer Much poorer

94 5.3. Size of the SMEs financial obligations not paid on term For the purpose of obtaining a perspective on the dynamics of financial obligations and receivables of SMEs, the evolutions registered in 2015, in comparison with 2014 and as they were estimated in 2016, the following indicators were analyzed: the size of bank credits, debts to suppliers, customers debts to the company and the size of the Social Insurance, the size of the VAT, taxes, etc. which have not been paid by the company (pictures 5.3 and 5.4). The results of the study mainly point out the following aspects: - The relatively high percentage of SMEs in which similar sizes in terms of bank credits in 2015/2014 and in 2016/2015 were found reveals a stability in terms of the loaned resources needed for carrying out firm activities; - The percentage of companies where an increase of the debts to suppliers and of the customers debts to the company in 2015/2014 was registered and estimated for the following year are stable or growing, and the frequency of the increase of the receivables is higher than the percentage of the debts. Thus, on average, financial blockages are seemingly avoided; - In relation with the previous periods of time, very high percentages of SMEs who recorded or will register in 2015/2014 and in 2016/2015 identical sizes of unpaid taxes, social insurance, VAT, etc. were registered within this research. 96

95 8,21 8,85 1,19 13,14 9,40 1,64 6,57 13,05 2,01 8,03 10,04 2,37 79,47 73,45 76,55 77,10 1,82 9,67 8,85 2,83 2,28 12,96 9,85 1,82 1,09 5,93 14,51 2,19 2,10 6,66 8,58 2,92 76,82 73,08 76,28 79,74 The White Charter of Romanian SMEs in The size of the bank loans The size of debts to the suppliers The size of the receivables from clients CAS, VAT, unpaid taxes size Significant decrease Slight decrease Slight increase Significant increase Remained the same Picture no. 5.3 Evolution of SMEs financial obligations and receivables structure in 2015 as compared to ,28 The size of the bank loans The size of debts to the suppliers The size of the receivables from clients CAS, VAT, unpaid taxes size Significant decrease Slight decrease Remained the same Slight increase Significant increase Picture no. 5.4 Evolution of SMEs financial obligations and receivables structure in 2016 as compared to

96 Classifying small and medium-sized enterprises by their age, we reached the following results and conclusions: The evolution in 2015, compared to 2014, of financial obligations and receivables (table 5.16): - SMEs with less than 5 years of age have registered higher proportions of enterprises in which a constant evolution of credits (81.03), a significant increase in debts towards suppliers (2.41) and of unpaid taxes (3.79) were registered; - Enterprises with an age situated between 5 and 10 years are remarked by the highest percentage of enterprises that encountered significant increases in bank loans (3.94); - Enterprises with an age between 10 and 15 years are associated with a higher percentage among companies that met a constant evolution of their unpaid taxes (82.28); - Enterprises that are over 15 years old have registered a larger proportion among entities that have had a significant decrease in the volume of CAS, VAT and other unpaid taxes (3.45), but also among enterprises with significant increases in receivables (2.76). Estimated evolution in 2016/2015 of the indicators (table 5.17): - SMEs with an age of under 5 years are remarked with the highest percentage of enterprises that have estimated a significant increase in debts associated to CAS, VAT and taxes (3.45); - Also within the group of SMEs that have under 5 years of age we can highlight the fact that they registered the biggest proportions of enterprises that estimated that they will not encounter positive or negative evolutions of all four indicators; - Within the group of companies that have between 10 and 15 years of age we encounter the most reduced proportions of economic agents in which a significant increase of bank debts (0.00) and of receivables (0.84) were met; 98

97 15 ye years 5-10 years Under 5 years The White Charter of Romanian SMEs in Enterprises with an age of over 15 years are associated with higher proportions among the companies that estimate a significant increase in receivables (3.45). Table 5.16 Dynamics of SMEs financial obligations and receivables in 2015 as compared to 2014, subject to SMEs age Evolution of indicators N o Financial obligations and receivables Significant dropping Small extent dropping Approxima tely the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits

98 10-15 years 5-10 years Under 5 years Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Table 5.17 Dynamics of SMEs financial obligations and receivables in 2016 as compared to 2015, subject to SMEs age Evolution of indicators N o Financial obligations and receivables Significant dropping Small extent dropping Approximat ely the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers

99 Over 15 years The White Charter of Romanian SMEs in 2016 Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes The studying of the evolutions of the indicators, subject to the SMEs size, points out a series of relevant aspects. Taking into consideration the period between 2015 and 2014, at the level of the sample under analysis, the following elements have been identified: - Micro-enterprises have superior percentages of SMEs in which the size of the bank loans remained the same (79.91), the debts to suppliers remained the same (75.36), the debts of the customers to the company held the same level (79.91) and the volume of unpaid tax liabilities has had a constant evolution (81.35); - Small companies have shown with an increasing frequency, a significant increase in bank loans (9.30), a significant dropping of debts to suppliers (3.10) and a grand increase in terms of the size of the unpaid Social Insurance, VAT and taxes (3.10); - Medium-sized enterprises register higher percentages of organizations that recorded the following: the significant increase in debts towards suppliers (6.06) and the significant increase of the receivables from clients (12.12). Details in table

100 Small Micro Regarding the period of 2016/2015, SMEs predictions show the following specific facts: - Micro-enterprises have higher proportions of SME where the records show the same level in some analyzed indicators, respectively debts to banks (81.35) and size of debts in terms of taxes (79.80); - Small companies require a high frequency of organizations that predict a significant decrease in supplier debt (4.65) and a small increase in receivables (24.03); - Medium enterprises are characterized by high numbers of companies which anticipate a significant increase in terms of all of the analyzed indicators. In addition to this, these entities highlight themselves with a significant decrease in the volume of bank loans (3.03). More information in table Table 5.18 Dynamics of SMEs financial obligations and receivables in 2015 as compared to 2014, subject to SMEs size Evolution of indicators N o Financial obligations and receivables Significant dropping Small extent dropping Approximat ely the same Small extent increase Significan t increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts

101 Small Micro Medium The White Charter of Romanian SMEs in 2016 to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Table 5.19 Dynamics of SMEs financial obligations and receivables in 2016 as compared to 2015, subject to SMEs size Evolution of indicators N o Financial obligation and receivables Significant dropping Small extent dropping Approximat ely the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS,

102 Medium VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes The distribution of enterprises by their legal form of organization, highlights the following significant aspects. In terms of the 2015/2014 evolution of the indicators (table 5.20), our study has shown the following specific elements: - Joint-stock companies have registered higher percentages of SMEs in which a significant downfall of all of the analyzed indicators was registered the size of banks loans, the size of debts towards suppliers, the size of receivables, the amount of taxes. In contract, we must highlight the fact that this category of SMEs has also registered the highest percentage of enterprises that encountered significant increases of bank loans (5.56); - Limited liability companies have had higher percentages of the enterprises in which a significant increase of state fiscal obligations has been registered (3.19); - Companies with other forms of legal organization have indicated in a larger proportion the constant evolution of bank loans (89.26), of supplier debt (79.34), of receivables from clients (83.47) and of unpaid fiscal obligations (86.78). If we refer to the estimated evolution from 2016, as compared to 2015, in terms of financial obligations and receivables (table 5.21), SMEs predictions show the following specific aspects: - Joint-stock companies have higher percentages of small and medium-sized enterprises in which the significant increase of bank loans (2.78) and of receivables from clients (2.78) have been envisioned. In contrast, these 104

103 fo r Limited liability Joint stock The White Charter of Romanian SMEs in 2016 enterprises are associated with a null proportion among enterprises that estimate a significant increase of debts towards suppliers and of fiscal obligations; - Limited liability companies have registered higher proportions of entities in which a significant drop of bank loans is estimated (2.45); - Enterprises organized in other legal forms are characterized by higher percentages among the organizations that estimate a stagnation in terms of getting bank loans (90.91), of debts towards suppliers (81.82), of receivables (82.64) and of unpaid fiscal obligations (VAT, etc.) (88.43). Thus, the trend highlighted in the 2015/2014 interval is maintained. Table 5.20 Dynamics of SMEs financial obligations and receivables in 2015 as compared to 2014, subject to SMEs form of legal organization N o Financial obligation and receivables Significant dropping Small extent dropping Evolution of indicators Approximate ly the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits

104 form Limited liability Joint stock Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Table 5.21 Dynamics of SMEs financial obligations and receivables in 2016 as compared to 2015, subject to SMEs form of legal organization Evolution of indicators N o Financial obligation and receivables Significant dropping Small extent dropping Approxima tely the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers

105 The White Charter of Romanian SMEs in 2016 Size of customers debts to the company Size of unpaid CAS, VAT, taxes The distribution of enterprises by field of activity in which they operate, highlights the following significant aspects. In terms of the 2015/2014 evolution of the indicators (table 5.22), our study has shown the following specific elements: - SMEs from the industrial field have pointed out higher frequencies of entities indicating a significant increase in bank loans (4.98), but also a stagnation of unpaid tax liabilities (CAS, VAT, taxes) (79.25); - Companies from the construction sector recorded higher percentages of organizations that have registered a constant evolution of unpaid taxes (81.32); - Enterprises activating in the field of trade stand out through a superior percentage of SMEs to register a constant evolution of the receivables from their clients (80.85); - Enterprises from the transportation field have null percentages of SMEs that have experienced significant increases in the debts to suppliers, the debts of clients and in bank loans; - The tourism operators have higher proportions of enterprises that registered a significant decrease in the size of bank loans (10.00); - Entities from the service sector are highlighted by a higher proportion among enterprises with a constant evolution of unpaid fiscal obligations (80.00) and of bank debt (80.32). If we refer to the estimated evolution from 2016, as compared to 2015, in terms of financial obligations and receivables (table 5.23), SMEs predictions show the following specific aspects: 107

106 Construction Industry - The highest percentage of economic units to predict a significant decrease in unpaid taxes was registered among the companies in the industry sector (4.15); - SMEs in the construction sector indicate more often an accelerated increase of receivables from clients (5.49); - Enterprises activating in the transportation field register null percentages in terms of significant increases in all indicators; - Entities from the tourism sector estimate, with higher frequencies, a significant downfall of unpaid fiscal obligations (10.00), but also of debts towards banks (10.00); - Companies from the service sector are associated with higher percentages of enterprises with a constant evolution of the debts towards banks (80.00). Table 5.22 Dynamics of SMEs financial obligations and receivables in 2015 in comparison with 2014, as per fields of activity Evolution of indicators No. Financial obligations and receivables Significant dropping Small extent dropping Approximate ly the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company

107 Services Tourism Transportation Trade The White Charter of Romanian SMEs in 2016 Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes

108 Trade Construction Industry Table 5.23 Dynamics of SMEs financial obligations and receivables in 2016 as compared to 2015, as per fields of activity Evolution of indicators No. Financial obligations and receivables Significant dropping Small extent dropping Approximat ely the same Small extent increase Significant increase Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes

109 Services Tourism Transportation The White Charter of Romanian SMEs in 2016 Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Size of bank credits Size of debts to suppliers Size of customers debts to the company Size of unpaid CAS, VAT, taxes Evolution of SMEs business indicators in 2015, as compared to 2014 In order to create a comprehensive view of SMEs activity, the evolution in 2015, compared to 2014, of the following indicators was analyzed: physical volume of sales, number of employees, inventory of goods, number of customers, volume of orders, export volume and amount of profit. The analysis of these indicators evolution at the sample level (picture no. 5.5) indicates the following: 111

110 - The physical volume of sales has kept the same level in of the economic units, has dropped in of the SMEs, has registered slight increases in of enterprises, has significantly dropped in 5.12 of the cases and has significantly increased in 7.12 of the entities; - The number of employees has remained the same in of the studied organizations, has moderately decreased in of companies, has slightly increased in of companies, has significantly dropped in 4.84 of enterprises and has significantly increased in 1.52 of SMEs; - Regarding the inventory of goods, of the enterprises have held the same level, in of the companies, slight decreases have been registered, in of the cases moderate increases have been indicated, in 4.95 of entities there have been significant decreases and in 1.84 of the economic agents, significant increases of goods have been registered; - The volume of orders has registered the following dynamics: in of the SMEs the same level has been recorded, in of the companies, there has been a slight decrease in this indicator, in of organizations it has moderately increased, in 5.66 of companies a significant decrease of orders was recorded, and in 4.22 of economic units a significant increase has been indicated; - By analyzing the number of customers, one can observe that of the entities have met a stagnation, of the companies have registered a slight decrease, of the SMEs have slightly increased their numbers of customers, 5.71 of the organizations have registered a significant decrease, while 3.81 have recorded significant increases; - The export volume has held approximately the same level in of the companies, has slightly decreased in of the enterprises, has slightly increased in of organizations, has significantly decreased in of companies and has significantly increased in 2.90 of SMEs; - The evolution of the amount of profit tends to align to the evolution of the above-mentioned indicators, registering percentages of SMEs holding approximately the same level (52.79), slightly decreasing (15.80), significantly decreasing (6.34), slightly increasing (21.29) and significantly increasing (3.78). 112

111 7,12 14,80 5,12 1,52 1,84 4,22 3,81 2,90 3,78 14,34 10,83 4,84 24,10 16,41 14,85 4,95 22,17 15,55 5,66 14,86 5,71 23,43 15,14 10,69 11,80 21,29 15,80 6,34 48,86 52,40 52,19 68,47 61,94 59,47 52,79 The White Charter of Romanian SMEs in Significant increase Slight increase About the same Slight decrease Significant decrease Picture no. 5.5 Evolution of SMEs indicators in 2015, as compared to 2014 Next, the evolution in 2015 as compared to 2014 of each indicator will be presented, as per labor age of enterprises, development region distribution, size of SMEs, form of legal organization and fields of activity. Regarding the physical volume of sales, mainly the highest percentages of companies to register substantial increases are indicated in SMEs with an age between 5 and 10 years (8.18), enterprises in the Western Region (30.77), small enterprises (17.07), joint stock companies (8.57) and companies in the sector of tourism (14.29). More information in table

112 form of orga Size Development region Labor experience Table 5.24 Evolution of the physical volume of sales in 2015, as compared to 2014 Evolution of the physical volume of sales No Category of companies Significant increase Slight increase Approximat ely the same Slight decrease Significant decrease 0 5 years years years Over 15 years North East South East South South West West North West Center Bucharest Ilfov Micro Small Medium stock companies nizatjoint

113 Development region Labor experience Field of activity The White Charter of Romanian SMEs in 2016 Limited liability companies Other forms of legal organization Industry Construction Trade Transportation Tourism Services The number of employees has significantly increased in organizations with an experience in labor of 10 to 15 years (2.58), in economic units in the South-East Region (4.20), in medium-sized enterprises (4.55), in limited liability companies (1.66) and in SMEs operating in the industry field (2.55). More information in table Table 5.25 Evolution of number of employees in 2015, as compared to 2014 N o Category of companies Significant increase Evolution of number of employees Slight increase Approximat ely the same Slight decrease Significant decrease 0 5 years years years Over 15 years North East South East South

114 Field of activity Legal form of organization Size South West West North West Center Bucharest Ilfov Micro Small Medium Joint stock companies Limited liability companies Other forms of legal organization Industry Construction Trade Transportation Tourism Services The highest percentages of companies to have significantly increased their goods inventories were registered among organizations with 10 to 15 years of labor experience (2.68), SMEs in the South-East Region (5.88), small enterprises (4.24), limited liability companies (2.03) and units activating in the field of industry (3.03). More information in table

115 Legal form of organization Size Development region Labor experience The White Charter of Romanian SMEs in 2016 Table 5.26 Evolution of goods inventories in 2015, as compared to 2014 Evolution of goods inventory N o Category of companies Significant increase Slight increase Approximat ely the same Slight Significant decrease decrease 0 5 years years years Over 15 years North East South East South South West West North West Center Bucharest Ilfov Micro Small Medium Joint stock companies Limited liability companies

116 Development region Labor experience Field of activity Other forms of legal organization Industry Construction Trade Transportation Tourism Services Regarding the volume of orders, one can observe that the highest percentages of SMEs to register significant increases of the indicator have been indicated among companies with 10 to 15 years of labor experience (5.80), economic agents in the Western Region (15.38), small enterprises (9.02), limited liability companies (4.48) and entities activating in the field of tourism (6.90). Details in table Table 5.27 Evolution of orders volume in 2015, as compared to 2014 N o Category of companies Significant increase Evolution of orders volume Slight increase Approximat ely the same Slight decrease Significant decrease 0 5 years years years Over 15 years North East South East South

117 Field of activity Legal form of organization Size The White Charter of Romanian SMEs in 2016 South West West North West Center Bucharest Ilfov Micro Small Medium Joint stock companies Limited liability companies Other forms of legal organization Industry Construction Trade Transportation Tourism Services The most frequent significant increases in the number of customers were registered in SMEs with 5 to 10 years of labor experience (5.17), entities in the West region (15.38), small enterprises (7.20), companies with other forms of organization (4.20) and enterprises operating in the field of tourism (8.00). More details in table

118 Legal form of organization Size Development region Labor experience Table 5.28 Evolution of number of customers in 2015, as compared to 2014 Evolution of number of customers No Category of companies Significant increase Slight increase Approximat ely the same Slight decrease Significant decrease 0 5 years years years Over 15 years North East South East South South West West North West Center Bucharest Ilfov Micro Small Medium Joint stock companies Limited liability companies

119 Development region Labor experience Field of activity The White Charter of Romanian SMEs in 2016 Other forms of legal organization Industry Construction Trade Transportation Tourism Services The export volume has registered the most frequent significant increases among enterprises with 5 to 10 years of labor experience (5.10), SMEs in the South-Eastern Region (5.88), medium-sized enterprises (6.25), economic agents organized as a limited liability company (3.03) and companies conducting their activity in industry (4.90). See table Table 5.29 Evolution of export volume in 2015, as compared to 2014 Evolution of export volume N o Category of companies Significant increase Slight increase Approximat ely the same Slight decrease Significant decrease 0 5 years years years Over 15 years North East South East South

120 Field of activity Legal form of organization Size South West West North West Center Bucharest Ilfov Micro Small Medium Joint stock companies Limited liability companies Other forms of legal organization Industry Construction Trade Transportation Tourism Services Upon analyzing the size of the amount of profit, we find that the highest percentages of small and medium sized enterprises to have considerably increased their amount of profit are among the economic units with 5 to 10 years of labor experience (4.78), the entities in the West Region (16.67), small enterprises (9.76), companies with other forms of organization (4.20) and SMEs operating in tourism (6.90).More information in table

121 of organ Size Development region Labor experience The White Charter of Romanian SMEs in 2016 Table 5.30 Evolution of the size of the profit amount in 2015, as compared to 2014 N o Category of companies Significant increase Evolution of the profit amount size Slight increase Approximat ely the same Slight decrease Significant decrease 0 5 years years years Over 15 years North East South East South South West West North West Center Bucharest Ilfov Micro Small Medium stock companies izatiojoint

122 Field of activity Limited liability companies Other forms of legal organization Industry Construction Trade Transportation Tourism Services

123 The White Charter of Romanian SMEs in 2016 MAIN FINDINGS Comparing the year 2015 with 2014, one finds that the registered performances have been: much better in 2.46 of the companies, better in of the companies, identical in of SMEs, poorer in of the enterprises and net inferior in 5.84 of the organizations. Regarding the estimated economic performances of SMEs in 2016 as compared with 2015, identical results have been foreseen in of the organizations, better in of the economic units, poorer in 6.02 of enterprises, net inferior in 5.29 of the companies and much better in only 1.55 of firms. Estimated increases in the sizes of bank loans have been estimated for of SMEs in 2015/2014 and for of firms in 2016/2015. The percentages of enterprises to register or expect increases of debts to suppliers are in 2015 compared to 2014 and in 2016 compared to Customers debts to the company have increased in of SMEs in 2015/2014 and will increase in of firms in 2016, compared to The size of unpaid taxes, social insurance, VAT, etc. has increased in of the companies in 2015/2014 and will increase in of SMEs in 2016/2015. The physical volume of sales has increased in of SMEs. The number of employees has increased in of the enterprises. Inventories of goods recorded an advance in of the companies. The volume of orders increased in of companies. The number of clients was amplified in of the organizations. The volume of exports has increased in the case of of SMEs. 125

124 Chapter 6 ROMANIA S INTEGRATION INTO THE EUROPEAN UNION AND THE ABSORPTION OF STRUCTURAL FUNDS 6.1. Entrepreneurs perceptions regarding the implications of Romania s adherence to the European Union upon the economy and SMEs Regarding the implications of Romania s adherence to the European Union, the results of our study show that in of the SMEs, one deems that the European integration stands for a major opportunity for the carried-out activities, of the entrepreneurs consider the adherence as being without significant influence, while in 6.27 of the companies it is perceived as a major threat. See picture ,04 50,69 6,27 Without significant influence A major opportunity A major threat Picture no. 6.1 Structure of the perception regarding the effects of Romania s EU integration upon SMEs Taking into account the perception upon the effects of the EU integration by the age of the SMEs, one can observe the following: the percentage of firms in which this action is regarded as a major 126

125 The White Charter of Romanian SMEs in 2016 opportunity is higher among enterprises with an age between 10 and 15 years (55.32). SMEs with an age between 5 and 10 years are associated with a higher proportion among which the integration is seen as one with no significant influence (49.09). Companies older than 15 years have the highest proportion among enterprises that consider the integration to be a major threat (6.92). More details can be found in table 6.1. Table 6.1 Differentiation of perceptions regarding the effects of Romania s EU integration, by SMEs age No Adherence to the EU is considered: No significant impact A major threat A major opportunity Age of SMEs Under 5 years 5-10 years years Over 15 years The analysis of SMEs opinions, as per development regions (table 6.2), points out that: - The frequency of companies where the EU adherence is perceived as a major opportunity is higher within the South- West Region (76.58) and lower in the Centre Region (35.29); - SMEs where one believes that the European integration represents a major threat are the most numerous in the West Region (15.38) and the least in the South-West Region (2.70); - Enterprises where one believes that the adherence shall and does not have significant impact on the carried out activities register the highest percentage in the North-West Region (55.26) and the lowest percentage in the Western Region (15.38). 127

126 Table 6.2 Differentiation of perceptions regarding the effects of Romania s EU integration, by SMEs development regions No. Adherence to the EU is considered: North - East SMEs as per development regions South South North Bucharest - East South West Centre - West - West - Ilfov 1. No significant impact A major threat A major opportunity Regarding the size of enterprises (table 6.2), one notices that the EU adherence is deemed as a major opportunity in the highest percentage among the medium-sized companies (71.21) and in the lowest percentage in micro-enterprises (47.81). Micro-sized enterprises also hold the highest percentage of SMEs where the European integration is perceived as a major threat for the carried out activities (6.51). Table 6.3 Differentiation of perceptions regarding the effects of Romania s adherence to the EU, by SME size classes No. Adherence to the EU is considered: Companies size Micro Small Medium 1. No significant impact A major threat A major opportunity

127 Industry Constructions Trade Transportation Tourism Services The White Charter of Romanian SMEs in 2016 Subject to the economic fields where the SMEs conduct their business activity, the following aspects were revealed: - Companies where the Romanian integration into the EU is considered a major opportunity for the carrying out of the business activities, register the highest percentage in tourism (70.00) and transport (62.79) fields and the lowest percentage in constructions (45.04); - SMEs where the European integration is thought of as having no significant impact on the carried out activities hold the highest percentage in the trade field (49.60) and the lowest percentage in the tourism field (26.67); - In terms of the perception of Romania s adherence to the EU as a major threat, the highest percentage is held by the SMEs within the industry sector (10.59) and the transportation field (9.30). See more information in table 6.4. Table 6.4 Differentiation of SMEs perceptions regarding the effects of Romania s adherence to the EU, as per fields of activity SMEs as per fields of activity No. Adherence to the EU is considered: 1. No significant impact A major threat A major opportunity

128 Carrying out an analysis based on the performances of SMEs in 2015, compared to 2014 (table 6.5) highlights the fact that the adhesion to the European Union is better viewed among enterprises with superior performances (65.22) and net superior (62.96), due to the fact that these firms have a higher adaptability. In contrast, high percentages of enterprises with worse results (62.04) and much worse results (65.63) have stated that the adherence to the European Union does not present any influence on their current and future activity. Table 6.5 Differentiation of SMEs perceptions regarding the effects of Romania s adherence to the EU, as per their performance in 2015, compared to 2014 No. Adherence to the EU is considered: Performance of the firm in 2015, compared to 2014 Much better Better Identical Poorer Much poorer 1. No significant impact A major threat A major opportunity SMEs level of information on new regulations introduced upon Romania s adherence to the European Union Regarding Romania s adherence to the European Union, a number of hundreds of normative acts have come into force and regarding the fact that a big part of the latter acts regulate the obligations falling under entrepreneurs duty, it s highly important that the level of information within Romanian SMEs be known, as related to those regulations introduced subsequent to the adherence to the EU. The results of our study have shown that in of SMEs, the degree of information on the new regulations is average (partial information) and only in of the companies there is an appropriate information level (full information). This indicates a real 130

129 The White Charter of Romanian SMEs in 2016 improvement in comparison to the analysis from prior years and the fact that the enforcement of the legislation transcribing the community laws and regulations is not creating as much difficulties as in the past periods. More details in picture no ,50 11,29 Fully informed No information 57,54 12,67 Not interested Partially informed Picture no. 6.2 SMEs level of information on the newly introduced regulations, upon Romania s adherence to the EU Taking into account the age of enterprises (table 6.6), one can observe the fact that enterprises with an age of over 15 years are associated with the highest proportions of firms in which the new regulations are fully known (19.93). Enterprises with an age between 5 and 10 years registered the highest percentage of enterprises in which stakeholders do not have any information on this matter (13.04). Companies with less than 5 years of experience have the highest percentage among enterprises that are not interested in this domain (14.69). Table 6.6 Differentiation of the level of information on the newly introduced regulations, upon Romania s adherence to the EU, by SMEs age Age of SMEs No. Level of information Under 5 years 5-10 years years Over 15 years Fully informed I have no information I m not interested Partially informed

130 Regarding the classification of SMEs as per development regions, one notices the higher percentage of organizations with a high level of information within the South-Western region (20.91), the high percentage of companies where information is partial in the North-West region (76.32), the higher percentage of companies where there is no information whatsoever in the West region (30.77). Details in table 6.7. Table 6.7 Differentiation of the level of information on the newly introduced regulations, upon Romania s adherence to the EU, by SMEs development regions SMEs grouped by development regions No. Level of information North - East South - East South South - West West North - West Bucharest Centre - Ilfov 1. Fully informed I have no information I m not interested Partially informed The classification of companies as per size classes (see table 6.8) points out that: the extent to which the entrepreneurs/decisional factors within SMEs are fully or partially informed on the new regulations grows along with the enterprises size, thus proving a direct link between these two indicators. Also, microenterprises are associated with the highest percentage of firms in which there is no interest on this matter (14.66). 132

131 The White Charter of Romanian SMEs in 2016 Table 6.8 Differentiation of the SMEs level of information on the newly introduced regulations, upon Romania s adherence to the EU, by size classes No. Level of information Companies size Micro Small Medium Fully informed I have no information I m not interested Partially informed Analyzing the companies per fields of business activity indicates the following aspects: the enterprises activating in the tourism field hold the highest percentage of companies where the level of information regarding the new regulations is very high (24.14). These companies, interestingly, register the highest percentage of enterprises with no information (17.24), a high polarization being thus highlighted. The organizations activating in transports indicate superior percentages of units with an average level of information (67.44) and the largest percentage of enterprises with no interest whatsoever for these regulations is registered in the field of trade (16.35). More information is presented in table

132 Industry Construction Trade Transportation Tourism Services Table 6.9 Differentiation of the SMEs level of information on the newly introduced regulations, upon Romania s adherence to the EU, by fields of activity SMEs per fields of activity No. Level of information 1. Fully informed I have no information I m not interested Partially informed Analyzing the level of information on the new legal regulations based on the performance of SMEs in 2015, compared to 2014 (table 6.10) one can observe that in SMEs with much better results, the level of information is the highest, one quarter of them considering themselves to be fully informed. We would like to mention the fact that the biggest percentage of firms that are not interested in the new regulations is associated with entities that have had much worse results (46.03). Thus, we can highlight a reverse correlation between the level of information and past performances. 134

133 The White Charter of Romanian SMEs in 2016 Table 6.10 Differentiation of the SMEs level of information on the newly introduced regulations, upon Romania s adherence to the EU, by prior performance No. Level of information Performance of the firm in 2015, compared to 2014 Much better Better Identical Poorer Much poorer Fully informed I have no information I m not interested Partially informed The positive impact of Romania s adherence to the European Union, on SMEs activity In addition to the inherent difficulties of the process of alignment to European standards, Romania s adherence to the EU has a positive influence on the activity of a considerable number of SMEs. The results of our study show the fact that the factors triggered by the European integration which have the broadest positive impact on SMEs sector in our country are: better access to markets (registered by of companies), improved legislation and regulations (38.50), the existence of potentially better and/or cheaper suppliers (35.95), easier access to new technologies (21.72), the access to structural funds (15.88), improved cooperation towards innovation (11.95), and fairer public purchase procedures (6.02). Details in picture

134 Better access to markets Improved legislation and regulations Cheaper and/or better potential suppliers Better access to new technologies Access to structural funds Better cooperation to innovation More accurate procurement procedures Other factors 21,72 15,88 11,95 6,02 2,55 38,50 35,95 45, Picture no. 6.3 Structure of the positive effects of EU adherence on Romanian SMEs If we examine the positive effects of the adherence to the European Union based on the age of SMEs (table 6.11), one can observe that higher percentages are associated to enterprises younger than 5 years, if we take into account the better access to the markets (52.41) and the better legislative process (42.76). Another conclusion is the fact that enterprises older than 15 years see the existence of cheaper/better suppliers as a positive effect of the adherence to the EU (40.69). Table 6.11 Differentiation of positive effects of EU adherence on Romanian SMEs, by age of SMEs Age of SMEs No. Positive effects of EU adherence Under 5 years 5-10 years years Over 15 years Better access to markets Improved legislation and regulations

135 The White Charter of Romanian SMEs in Potentially cheaper and/or better suppliers 4. Access to structural funds Better cooperation towards innovation Better access to new technologies Fairer public purchase procedures Other issues Classifying the companies as per development regions, one can notice higher percentages than the sample average, as registered by: SMEs from the North-West region, regarding the better access to markets (63.64) and better regulations (72.73), companies from the South region, regarding the existence of potentially better and/or cheaper suppliers (52.31). More details in table Table 6.12 Differentiation of positive effects of EU adherence on Romanian SMEs, by development region SMEs grouped by development regions No. Positive effects of EU adherence North - East South - East South South - West West North - West Bucharest Centre - Ilfov Better access to markets Improved legislation and regulations Potentially cheaper and/or better suppliers Access to structural funds Better cooperation

136 towards innovation 6. Better access to new technologies Fairer public purchase procedures Other issues The study of SMEs, as per classes of size (see table 6.13) reveals the following: the percentage of firms indicating better access to markets is higher among medium-sized enterprises (54.55); the percentage of firms indicating improved legislation and regulations is higher among micro-enterprises (39.40); the percentage of enterprises that have highlighted the potentially cheaper and/or better suppliers a positive effect of the EU adherence is higher among medium-sized enterprises (43.94). Furthermore, the access to structural funds has been highlighted more frequently by small enterprises (25.58), while the better access to new technologies is more common amongst medium-sized companies (37.88). Table 6.13 Differentiation of positive effects of EU adherence on SMEs, as per size classes No. Positive effects of EU adherence Companies size Micro Small Medium 1. Better access to markets Improved legislation and regulations Potentially cheaper and/or better suppliers Access to structural funds Better cooperation towards innovation Better access to new technologies

137 Industry Constructions Trade Transportation Tourism Services The White Charter of Romanian SMEs in Fairer public purchase procedures Other issues Regarding the factors that had a positive impact, subject to the field of activity of the analyzed companies, we find that the highest percentages are registered among the following categories: organizations from the transport field, in terms of a better access to markets (55.81); SMEs from the same field, if we refer to improved legislation and regulations (53.49); entities from the industry sector if we refer to the potentially cheaper and/or better suppliers (40.66); entities from the industry sector, if we consider the better access to structural funds (19.09) and the better access to new technologies available (26.56). More details on this matter can be found in table Table 6.14 Differentiation of positive effects of EU adherence, as per SMEs fields of activity SMEs by fields of activity No. Positive effects of EU adherence 1. Better access to markets Improved legislation and regulations Potentially cheaper and/or better suppliers Access to structural funds Better cooperation towards innovation Better access to new technologies

138 7. Fairer public purchase procedures Other issues SMEs intentions to access structural funds in 2016 Structural funds are financial instruments, by which the European Union acts in view of eliminating the economic and social disparities between regions, for the purpose of achieving a social and economic cohesion. These funds will be allocated to various projects through development programs that contain specific development guidelines and eligibility conditions in order to receive such funding. Given the fact Romania shall benefit in following years of a series of such structural funds in the amount of around 30 billion Euros from the EU (through multiple programs), it is highly important to know the status of Romanian SMEs, in terms of accessing these forms of financing. The polling conducted among Romanian entrepreneur s or SME manager s points out that only of the latter intend to access structural funds in See picture no ,34 Yes No 81,66 Picture no. 6.4 SMEs status in terms of accessing structural funds By the age of SMEs, one can the observe the following important aspects: entities with an age of 10 to 15 years have the highest proportion among companies that intend to access structural funds in the near future (21.94). Companies with an age of 5 to 10 years have higher percentages among organizations that do not wish to use this type of financing in 2016 (83.51). More details in picture

139 The White Charter of Romanian SMEs in 2016 Over 15 years years 5-10 years Under 5 years 16,55 21,94 16,49 18,97 83,45 78,06 83,51 81,03 Yes No Picture no. 6.5 Entrepreneurs /managers intention to access structural funds,as per SMEs age The analysis of the situation of SMEs by development regions (picture 6.6) mainly shows that: Companies from the North-East region hold the highest percentage of enterprises that intend to access the EU funds (33.33), followed by organizations in the West region (30.77); The North-Western region registers the highest share of SMEs with no interest towards structural funds (93.51). Also, the SMEs in the Bucharest-Ilfov region hold a diminished interest in accessing the structural funds, in a percentage of 15.58, situation which can be explained by the existence of powerful competition in all activity fields and by the fact that the funds for this region are reduced in size. Bucharest-Ilfov 15,58 Center 26,21 North West 6,49 West 30,77 South West 19,82 South 16,92 South East 19,18 North East 33,33 Yes 84,42 73,79 93,51 69,23 80,18 83,08 80,82 66,67 No Picture no. 6.6 Entrepreneurs /managers intention to access structural funds, as per SMEs development regions 141

140 The classification of SMEs, as per classes of size points out the fact that the percentage of companies intending to access such European funds is higher among medium-sized enterprises (30.30). More information in picture no Microenterprises Small enterprises Medium enterprises 16,65 24,03 30,30 83,35 75,97 69,70 Yes No Picture no. 6.7 Entrepreneurs / managers intention to access structural funds as per SMEs classes of size Regarding the intentions to access such structural funds, subject to the field of activity, one finds a bigger interest among those companies from the tourism sector (36.67), followed by the ones activating in the industry field (24.90). More details in picture no Services Tourism Transports Trade Construnctions Indutry 15,24 36,67 20,93 17,02 9,89 24,90 84,76 63,33 79,07 82,98 90,11 75,10 Yes No Picture no. 6.8 Entrepreneurs /managers intention to access structural funds by fields of activity 142

141 The White Charter of Romanian SMEs in 2016 Highlighting the analysis based on the overall performance of SMEs in 2015, compared to 2014, one can see the fact that there is a direct link between performances and the interest of accessing funds, a fact proved by the following results: - The percentage of companies in which there is intention to access structural funds is higher among companies with much better results in 2015, compared to 2014 (33.33); - SMEs with much poorer results in 2015, compared to 2014, have the highest proportion among companies that do not wish to access such funds in the following period (85.94). Supplementary information can be found in picture 6.9. Much better Better Identical Poorer Much poorer 33,33 22,75 17,00 16,44 14,06 66,67 77,25 83,00 83,56 85,94 Da Nu Picture no. 6.9 Entrepreneurs /managers intention to access structural funds by performance in 2015, compared to

142 6.5. SMEs status in terms of accessing structural funds The polling conducted among Romanian SMEs entrepreneurs/managers points out the fact that 0.18 of the companies have got the approval for their project, as submitted, while 0.36 have submitted their projects and 1.09 are in the stage of project elaboration. A significant percentage of the companies are in an information-related stage, and 2.92 have contacted a consulting company, an employers organization, etc. We must note the fact that almost 80 of the SMEs are not at all interested in accessing structural funds or have not replied to this question. See picture no for more details on this issue. 2,92 0,36 0,18 16,42 1,09 I contacted a consulting firm, an employer's association to help me I submitted the project I received approval for the submitted project I am gathering information about the issue I am in the planning stage of the project 79,01 No answer / Not interested Picture no Status of SMEs, in terms of accessing structural funds Taking into account the age of SMEs, the following issues can be observed: enterprises with an age of 10 to 15 years have higher percentages of SMEs that have come in contact with a consultancy agent in order to receive technical help (5.49), but also among the ones that have submitted their project (0.42). Companies that are older than 15 years are associated with higher proportions among the entitites that have received their project approval (0.34) and among the ones that are in the elaboration phase of their project (2.07). More details on this matter can be found in table

143 The White Charter of Romanian SMEs in 2016 Table 6.15 Differentiation of the SMEs situation relating to the accessing of structural funds, as per SMEs age No. Funds accessing stage Under 5 years Age of SMEs 5-10 years years Over 15 years 1. I have contacted a consulting company, an employers organization etc., in order to get help I have submitted the project I ve got the approval for the project I have submitted I m getting information about the funds I m in the stage of project elaboration No reply / not interested The classification of SMEs, as per classes of size, points out the following aspects: - The proportions of firms that have received approval for the project submitted, have submitted projects and are in the research phase on structural funds is higher among microenterprises (0.11); - Medium-sized enterprises hold the highest rates of economic units that were in contact with consulting firms or employers unions in order to receive specialized help on this issue (4.55). More information in table

144 Table 6.16 Differentiation of the SMEs situation relating to the accessing of structural funds, as per SMEs size No. 1. Funds accessing stage I have contacted a consulting company, an employers organization etc., in order to get help Companies size Micro Small Medium I have submitted the project I ve got the approval for the project I have submitted I m getting information about the funds I m in the stage of project elaboration No reply / not interested Analyzing the SMEs stage regarding the accessing of structural funds as per the field in which they activate, we register among the SMEs involved in industry a higher percentage of firms that have contacted consultancy firms (6.22). The only type of firms that has submitted a project and are still in evaluation is also associated with the industry field (1.66). The largest percentage of firms having received approval for the submitted project is in the tourism sector (3.33). The biggest proportion of firms in the information phase operate in the field of transport (27.91). More details in table

145 Industry Construction Trade Transportation Tourism Services The White Charter of Romanian SMEs in 2016 Table 6.17 Differentiation of the SMEs situation relating to the accessing of structural funds, as per fields of activity SMEs as per fields of activity N o. Funds accessing stage 1. I have contacted a consulting company, an employers organization etc., in order to get help I have submitted the project I ve got the approval for the project I have submitted I m getting information about the funds I m in the stage of project elaboration No reply / not interested Highlighting the analysis based on the general results from 2015, compared to 2014, one can observe the following results: - SMEs with much better results in the analyzed period of time have higher proportions of the firms that are gathering information on these funds (29.63) and have contacted a consultancy firm, an employer s association, etc. for assistance (7.41), but also among that are in the project elaboration phase (3.70); - Economic agents with better results have registered higher percentages among the firms that have submitted a project 147

146 (0.86) and that have received approval for their project (0.43); - Enterprises with poorer results have the highest proportion among the companies that are not interested in this domain (83.11). Supplementary information can be found in table Table 6.18 Differentiation of the SMEs situation relating to the accessing of structural funds, as per performance in 2015, compared to 2014 Performance in 2015, compared to 2014 No. Funds accessing stage Much better Better Identical Poorer Much poorer 1. I have contacted a consulting company, an employers organization etc., in order to get help I have submitted the project I ve got the approval for the project I have submitted I m getting information about the funds I m in the stage of project elaboration No reply / not interested

147 The White Charter of Romanian SMEs in Main obstacles faced by SMEs in accessing structural funds Given the low degree of absorption of such structural funds in Romania on the 31 st of May 2016 by means of the present study, the main obstacles, as encountered by SMEs in their efforts to get non-reimbursable finance were identified and ranked. The most significant two such obstacles, as pointed out by the respondent entrepreneurs, are: excessive bureaucracy and the unstable character of regulations and documentation (77.46) and insufficient information regarding the available funds (44.25). The following obstacles have also been highlighted: insufficient own funds in order to insure co-financing (38.23); non-permissive eligibility criteria (non-eligible NACE Codes, the obligation to generate profit, etc.) 36.77; high cost of credits and insufficient guarantees to cover cofinancing (34.40); lack of trust in consultancy companies (17.06); poor managerial (technical) capacity of implementation (11.41). More details in figure no Excessive bureaucracy and the unstable character of regulations and documentation 77,46 Insufficient information on available funds Insufficient equity financing Non-permisive eligibility criteria (non-eligible NACE codes, the obligation to obtain profit, etc.) High cost of credits and insufficient guarantees to cover co-financing 44,25 38,23 36,77 34,40 Lack of trust in consulting companies Poor managerial (technical) capacity of implementation Another response 1,09 17,06 11,41 Picture no. 6.9 Main obstacles encountered by SMEs in accessing structural funds 149

148 Analyzing the options of respondents based on the age of SMEs, one can observe the fact that excessive bureaucracy and the instability of regulations and documents are more of an obstacle for firms with an age between 5 and 10 years (78.85). Insufficient information about available funds have been more frequently selected by the enterprises younger than 5 years (46.21). These enterprises have also had the highest proportion among the entities that highlighted the lack of financial resources for sustaining co-financing as a major obstacle (40.69). Supplementary details are presented in table Table 6.19 Differentiation of obstacles in accessing structural funds, as per SMEs age No. Obstacles in accessing structural funds Under 5 years Age of SMEs 5-10 years years Over 15 years 1. Excessive bureaucracy and the instability of regulations and documentation 2. Insufficient information regarding the available funds 3. Insufficient own funds in order to insure co-financing Non-permissive eligibility criteria (noneligible NACE Codes, obligation of profit generating etc.) High cost of credits and insufficient guarantees in order to cover co-financing Lack of trust in consultancy companies Poor managerial (technical) capacity of implementation Another answer

149 North-East South-East South South-West West North-West Center Bucharest- Ilfov The White Charter of Romanian SMEs in 2016 The classification of firms as per development regions shows higher than the average percentages registered by the SMEs in the North-West region, as far as excessive bureaucracy, regulation and documentation instability are concerned (87.01). The firms from the North-West region have also mainly identified the insufficient information about available funds as an obstacle towards accessing non-reimbursable financing (63.64). The firms from the Western region have identified the insufficient own funds in order to cover for the insurance of co-financing (46.15) as a major obstacle. The nonpermissive eligibility criteria (46.97) are an obstacle for the companies in the North-East region. Finally, the high cost of credits and insufficient guarantees to cover co-financing (40.78) represent a problem for the companies in the Bucharest-Ilfov region. More details in table Table 6.20 Differentiation of obstacles in accessing structural funds, as per SMEs development regions SMEs as per development regions No. Obstacles in accessing structural funds 1. Excessive bureaucracy and the instability of regulations and documentation Insufficient information regarding the available funds Insufficient own funds in order to insure co-financing Non-permissive eligibility criteria (non-eligible NACE Codes, obligation of profit generating etc.)

150 5. High cost of credits and insufficient guarantees in order to cover co-financing Lack of trust in consultancy companies Poor managerial (technical) capacity of implementation Another answer The classification of SMEs as per classes of size (see table 6.21) points out the following: microenterprises register in a superior ratio the excessive bureaucracy and the instability of regulations and documentation (78.25) as a main obstacle; microenterprises mostly also indicate the insufficient information about the funds (45.62); small enterprises indicated the funds needed to cover co-financing (39.53); small enterprises also indicated the high cost of credits and insufficient guarantees in order to cover for co-financing (34.88). 152

151 The White Charter of Romanian SMEs in 2016 Table 6.21 Differentiation of obstacles in accessing structural funds, as per SMEs classes of size N o. Obstacles in accessing structural funds SMEs size Micro Small Medium 1. Excessive bureaucracy and the instability of regulations and documentation Insufficient information regarding the available funds Insufficient own funds in order to insure co-financing Non-permissive eligibility criteria (noneligible NACE Codes, obligation of profit generating etc.) High cost of credits and insufficient guarantees in order to cover cofinancing 6. Lack of trust in consultancy companies 7. Poor managerial (technical) capacity of implementation 8. Another answer Regarding the obstacles in accessing structural funds, as per the companies fields of activity, we note that: firms operating in the trade field are the most affected by excessive bureaucracy and the instability of regulation and documentation (81.91); companies from the tourism sector are associated with the lack of information (56.67); firms in the constructions branch are affected by insufficient financial resources needed for co-financing (43.96); tourism companies are affected by high cost of credits and insufficient guarantees in order to cover co-financing (50.00). 153

152 Industry Construction Trade Transportation Tourism Services Table 6.22 Obstacles in accessing structural funds, as per SMEs fields of activity SMEs as per fields of activity No. Obstacles in accessing structural funds 1. Excessive bureaucracy and the instability of regulations and documentation Insufficient information regarding the available funds Insufficient own funds in order to insure co-financing Non-permissive eligibility criteria (non-eligible NACE Codes, obligation of profit generating etc.) High cost of credits and insufficient guarantees in order to cover co-financing Lack of trust in consultancy companies Poor managerial (technical) capacity of implementation Another answer

153 The White Charter of Romanian SMEs in 2016 MAIN FINDINGS Romania s integration into the European Union is perceived as a major opportunity in of SMEs, of entrepreneurs believe that the adherence has no significant impact whatsoever, and in only 6.27 of the companies, this adherence is seen as a major threat. SMEs believing that the EU adherence stands for a major opportunity for the carried out activities register a higher percentage among those companies with years of experience in labor (55.32), among companies from the South- Western Region (76.58), medium-sized SMEs (71.21), organizations from the tourism sector (70,00) and among companies with better performances in 2015/2014 (65,22). In of SMEs, the degree of information regarding the newly occurred regulations, is average (partial information) and in of the companies there is an appropriate information level (full information), which points out the fact that the enforcement of the legislation transcribing the community acquis is creating less and less difficulties for the business environment. The companies with a high degree of information, are more frequent at the level of those enterprises with over 15 years of experience (19.93), companies from the South-West region (20.91), medium-sized SMEs (27.27), companies from tourism (24.14) and companies with better performances in 2015, as compared to 2014 (25.00). The better access to markets (indicated as such by of the companies), improved legislation and regulations (38.50), the existence of potentially better and/or cheaper suppliers (35.95), the better access to new technologies (21.72), the access to structural funds (15.88), improved cooperation towards innovation (11.95) and fairer public acquisition procedures (6.02) are the main positive effects upon the SMEs brought by the Romanian adherence to the EU. Only of the entrepreneurs intend to access structural funds in the following period of time. Only 0.18 of the companies have received approval for their submitted projects, while 0.36 have submitted a project and 155

154 1.09 are in the project elaboration stage. A significant percentage of the enterprises are in the information stage and 2.92 of the companies have contacted a consultancy firm. The percentage of enterprises which intend to access structural funds is higher among SMEs with 10 to 15 years of experience (21.94), companies activating in the North-East region (33.33), medium-sized enterprises (30.30), economical agents from the tourism sector (36.67) and among units with much better performances (33.33). The most significant two obstacles, as pointed out by the respondent entrepreneurs are: excessive bureaucracy and the unstable character of the regulations and documentation (77.46) and the insufficient information regarding the available funds (44.25). The following obstacles were also identified: insufficient own funds in order to insure co-financing (38.23); non-permissive eligibility criteria (non-eligible NACE Codes, the obligation to generate profit etc.) 36.77; the high cost of credits and insufficient guarantees to cover co-financing (34.40); lack of trust in consultancy companies (17.06); poor managerial (technical) capacity of implementation (11.41). 156

155 The White Charter of Romanian SMEs in 2016 Chapter 7 SMES STRATEGIES, POLICIES AND COMPETITIVE ADVANTAGES 7.1. Drawing up of plans, policies and strategies within SMEs The competitiveness of the SMEs sector in Romania is strictly conditional upon the enterprises capacity to substantiate, develop and implement strategies, policies and plans. Essentially, the development of the provisional dimension in SMEs is a prerequisite for increasing organizational performance that is part of the complex process of enriching the entrepreneurial dimension with managerial systems, methods and techniques. Our study results show that in of the total of companies investigated are performed annual plans and policies, in of SMEs are elaborate 3 5 years strategies, and in of the enterprises are not implemented plans activities (picture no. 7.1). Annual plans and politicies No planning activities 35,67 36,75 49,40 58, years strategies (plans) 13,85 5, Picture no. 7.1 SMEs structure, subject to performed predicting activities The analysis of companies, subject to regional membership (table 7.1) has led to the following conclusions: - SMEs which have indicated that not elaborates planning activities have the high percentages within the companies from South West Region (58.49) and more reduced within North East Region (27.69); 157

156 - the companies which releases the annual plans and policies are more frequently in North West Region (63.64), and more rarely within the South East Region (30.14); - the organizations that have punctuated the development of strategies / plans 3-5 years recorded the highest value among companies in the West Region (23.08) and lowest among those in the South West (2.83). Table 7.1 Differentiation of SMEs predicting activities by development regions SMEs grouped by the development regions No. Companies that develop: North East South East South South West West North West Centre Bucharest -Ilfov 1. No planning activities Annual plans and policies years strategies (plans) The depth analysis regarding the differentiating activities of elaboration of plans / policies and strategies, depending on the size of SMEs (Table. 7.3) highlights the following issues: - the SMEs which had mentioned that not elaborates plans have the highest rate among micro enterprises (38.88) and the lowest share of entrepreneurs in medium-sized enterprises (20.00); - the enterprises which had mentioned that releases annual plans and policies registers the highest share in the mediumsized companies (58.46) and lowest weight from Small (46.88); - the organizations which elaborates the 3-5 years strategies presents high percentages within small enterprises (22.66) and lower percentages within micro enterprises (12.02). 158

157 The White Charter of Romanian SMEs in 2016 Table 7.2 Differentiation of the performed predicting activities by size classes No. Companies that develop: Microenterprises The size of the companies Small enterprises Medium sized enterprises 1. No planning activities Annual plans and policies 3-5 years strategies (plans) If we are to group small and medium sized enterprises, subject to the fields the latter activate in, the following aspects stand out (table 7.3): - the enterprises that use annual plans and policies are more frequent in the tourism sector (65.12) and less frequently in those from industry field (42.80); - the SMEs that develop 3-5 years strategies register the highest percentage among the companies from services sector (13.14); - The companies that do not appeal to planning activities are more frequent among the enterprises from the trade sector (41.78) and less within tourism sector (25.58 ). Table 7.3 Differentiation of the performed predicting activities by fields of activity No. Companies that develop: SMEs by fields of activity Industry Constructions Trade Transportation Tourism Services 1. No planning activities

158 2. 3. Annual plans and policies 3-5 year strategies (plans) Small and medium sized enterprises objectives In terms of Romanian SMEs objectives for the following two years, our study results show that in a large number of companies one has set as such an objective, the maintaining of the business activities within the existing size limits (44.86), while in of enterprises, the major purpose is represented by the moderate expansion of the business activity. Follows in descending order the fast expansion of the business activity (6.60), the closing down the business (3.68), the reducing the size of the business activity (2.26) and the selling the business (1.98). These facts are hereby graphically displayed in picture no ,60 2,26 40,62 3,68 1,98 Maintaining the size of the business activities 44,86 Moderate expansion of the business activity Fast expansion of the business activity Reducing the business size Closing down the business Selling the business Picture no. 7.2 Structure of SMEs objectives for the following two years The classification of companies, as per classes of size (table 7.4) points out the following aspects: 160

159 The White Charter of Romanian SMEs in micro-enterprises register the largest share of business entrepreneurs who mentioned closing down the business (4.48) and the reducing the size of the business (2.64) and the lowest share in terms of entrepreneurs who have opted for rapid business expansion (6.08); - small enterprises register the highest frequency among entities who mentioned the fast expansion of the business activity (10.32), maintaining the business (52.38) and the selling the business (3.17); - medium sized companies present the highest values of entrepreneurs who have opted for moderate expansion of business (51.56) Table 7.4 Differentiation of SMEs objectives by size classes The size of the companies No. Objectives Microentreprises Small entreprises Medium entreprises Moderate expansion of the business activity Fast expansion of the business activity 3. Closing down the business Maintaining the size of the business activity Reducing the size of the business activity 6. Selling the business SMEs competitive advantages The main competitive advantages of the SMEs are: the pricequality ratio (57.48), the quality of the products/services (42,25), the low price of the products/services (25.91), the company s reputation (24.45), the quality of the employees (20.44), the after-sales services (11.22), the distribution of channels (9.03), the quality of the management (8.49), the relations with the political and economic environment (6.11) and the innovative capacity (3.28). See picture no

160 Price-quality ratio 57,48 65,24 Quality of the products/services 34,58 42,25 Low price of the products/services Company`s reputation Quality of the employees After-sales services Distribution channels Quality of the management Relations with the political and economic environment Innovative capacity Others 25,91 24,45 16,44 20,44 20,07 11,22 3,93 9,03 5,67 7,05 8,49 6,11 1,82 3,28 4,22 0,73 0,29 41, Picture no. 7.3 SMEs main competitive advantages The grouping of companies, subject to the latter s regional membership (table 7.5), points out the following differences: - companies from the North - East Region are distinguished by higher frequencies among the after-sales services (19.7); - organizations from the South - East Region record larger shares of enterprises having mentioned the price-quality ratio (71.23) and the distribution channels (17.21); - the companies from the Bucharest-Ilfov Region are characterized by high percentages of entities which mentioned the low price of the products/services (47.84) 162

161 The White Charter of Romanian SMEs in 2016 and lower percentages within entities which mentioned the quality of the employees (30.39). Table 7.5 Differentiation of SMEs competitive advantages by development regions No. Competitive advantage North East SMEs grouped by the development regions South East South South West West North West Centre Bucharest -Ilfov 1. Price-quality ratio Quality of the products/services 3. Low price of the products/services 4. Quality of the employees 5. Company`s reputation 6. Quality of the management 7. Distribution channels 8. Innovative capacity After-sales services Relations with the political and 10. economic environment Examining the competitive advantages of SMEs according to their size reveals that there is a positive correlation between the size of SMEs and the frequency with which they indicate the quality of the products/services, the company s reputation, the quality of the management, the distribution of channels and the innovative capacity and a negative correlation regarding the low price of the products/services. 163

162 Table 7.6 Differentiation of SMEs competitive advantages by size classes The size of the companies No. Competitive advantage Microenterprises Small enterprises Medium enterprises Price-quality ratio Quality of the products/services 3. Low price of the products/services 4. Quality of the employees Company`s reputation Quality of the management Distribution channels Innovative capacity After-sales services Relations with the political and economic environment 7.4. Activities that are mainly approached within SMEs In 2016, SMEs will focus their managerial approach upon the following directions: the relation with distributors and customers (44.53), the implementation of new products/services (33.39), the relation with suppliers (30.02), the elaboration of strategies and policies (19.53), reducing costs (14.05), the implementation of new technological processes (12.23), the satisfying the staff requirements (11.41), the staff training (7.21), delivery and logistics methods (7.12), the acquisition and use of information and knowledge (5.57), the company s capitalization (4.74), satisfying reducing the number of employees (3.19) and the restructuring the decision making process (1.92). As we see, the first two managerial approaches are referring to the networking aspects of a business, thus emphasizing its entrepreneurial character. See picture no

163 The White Charter of Romanian SMEs in 2016 Relation with distribuitors and customers Implementation of new products/services Cutting costs Elaboration of strategies and policies Relation with suppliers Implementation of new technological processes Satisfying the staff requirements Staff training Delivery and logistics methods Acquisitions and use of information and knowledge Company capitalization Reducing the numbers of employees Restructuring the decisions making process 33,39 32,36 30,02 27,05 19,53 18,91 14,05 28,22 12,23 7,13 11,41 7,93 7,21 5,38 7,12 6,18 5,57 5,45 4,74 0,87 3,19 1,38 1,92 2,47 44,53 46, Picture no. 7.4 Frequency of SMEs focusing on key - activities By studying the priority of activities within SMEs, as per the development regions the latter belong to (see table 7.7), we mainly notice the following aspects: - North East Region involves the largest share of SMEs indicating methods of delivery and logistics (13.64); - the enterprises from the South East Region record higher percentages of those entities that mention as implementation of new technological processes (23.29) and the reducing the numbers of employees (5.48); - SMEs in South Region register the highest value of entrepreneurs who mentions the implementation of new products/services (41.54); 165

164 - South West Region registers the highest percentages of firms which indicated the reducing the numbers of employees (20.72); - the West Region registers the highest weights by entrepreneurs who indicates the elaboration of strategies and policies (38.46), the satisfying the staff requirements (30.77), the acquisitions and use of information and knowledge (23.08), the staff training (30.77), the restructuring the decisions making process (15.3) and the company capitalization (11,11); - the companies from the Center Region record the larger shares of the enterprises that are interested in the relation with suppliers (45.63). Table 7.7 Frequency of activities approach by development regions No. 1. Managerial approach Relation with distributors and customers North East South East SMEs grouped by the development regions South South West West North West Centre Bucharest -Ilfov Implementation of new products/services 3. Relation with suppliers Cutting costs Elaboration of strategies and policies 6. Satisfying the staff requirements Implementation of new 7. technological processes 8. Delivery and logistics methods Acquisitions and use 9. of information and knowledge 10. Staff training 11. Restructuring the decisions making process 12. Reducing the numbers of employees 13. Company capitalization

165 The White Charter of Romanian SMEs in 2016 Whereas the managerial approaches within SMEs by size classes, one mainly notices the following aspects (table 7.8): - micro-enterprises imply the larger shares of SMEs indicating the relation with distributors and customers (46.61), the implementation of new products/services (35.96), the relation with suppliers (30.52), the acquisitions and use of information and knowledge (6.22) and the company capitalization (4.99), as well as lower weights regarding the cutting costs (13.10), the elaboration of strategies and policies (8.55), the implementation of new technological processes (11.10), the satisfying the staff requirements (7,70), the delivery and logistics methods (6.22) and the restructuring the decisions making process (1.66); - small companies are distinguished by higher frequencies among those enterprises that the delivery and logistics methods (12.40), the staff training (13.95) and the reducing the numbers of employees (3.88), as well as lower percentages regarding the implementation of new products/services (17.05) and the company s capitalization (3.10); - medium-sized enterprises record the greater percentages of entities indicating the reducing costs (21.21), the elaboration of strategies and policies (27.27), the satisfying the staff requirements (27.27), the implementation of new technological processes (18.18) and the restructuring the decisions making process (4.55). Table 7.8 Frequency of activities approach by size classes The size of the companies No. Managerial approach Microenterprises Small enterprises Medium enterprises Relation with distributors and customers Implementation of new products/services Relation with suppliers Cutting costs Elaboration of strategies and policies Satisfying the staff requirements

166 7. Implementation of new technological processes Delivery and logistics methods Acquisitions and use of information and knowledge Staff training Restructuring the decisions making process Reducing the numbers of employees Company capitalization Companies analysis, as per the latter s fields of activity, points out the following aspects, as per the information within table 7.9.: - industrial sector involves larger shares of enterprises having mentioned delivery and logistics methods (7.88) and the acquisition and use of information and knowledge (7.88); - companies from the constructions sector are distinguished by larger frequencies among the enterprises targeting the cutting costs (20.88), the satisfying the staff requirements (18.68) and restructuring the decisions making process (3.30); - enterprises from the tourism register lower percentages regarding the relation with distributors and customers (50), the implementation of new products/services (37.50), the relation with suppliers (37.23); - SMEs from the tourism sector register larger shares among the entities having mentioned that their managerial approach will target the elaboration of strategies and policies (26.67), the implementation of new products/services (20) and the staff training (13.33); - enterprises from the transportation field record the larger percentage of the organizations focusing on the reducing the numbers of employees; - SMEs from trade field suppose the high percentages of organizations focusing on the company s capitalization (8.57). Table 7.9 Frequency of activities approach, subject to fields of activity No Managerial approach Relation with distributors and customers Implementation of new products/services SMEs by fields of activity Industry Constructions Trade Transportation Tourism Services Relation with suppliers

167 The White Charter of Romanian SMEs in Cutting costs Elaboration of strategies and policies Satisfying the staff requirements Implementation of new technological processes Delivery and logistics methods Acquisitions and use of information and knowledge Staff training Restructuring the decisions making process Reducing the numbers of employees Company capitalization SMEs managerial priorities Companies performances are to a large extent conditional upon the priorities, the latter s entrepreneurs and managers focus on. According to our study results (see picture no. 7.5), the most frequent managerial priorities, as registered within Romanian SMEs, are: the amplifying the marketing activities (43.34), the purchase of the technology (20.44), the diversifying production (15.42), the constructions of buildings (14.23), the intensive training of the employees (13.87), the replacement of the equipment (11.50), the computerization of the activities (9.76), the managerial restructuring and modernization (9.22), the introduction of modern quality management system (6.75) and the fighting and limiting pollution (5.75). 169

168 Amplifying the marketing activities Diversifying production Purchase of the tehnology Intensive training of the employees Constructions of of buildings Replacement of the equipment Computerization of the activities Managerial restructuring and modernization Fighting and limiting polution Introduction of modern quality management system Others 15,42 20,44 13,87 14,23 11,50 9,76 9,22 5,75 6,75 0,64 43,34 Picture no. 7.5 SMEs managerial priorities As one may very well also notice in table 7.10, the impact of companies size on activities development actions is significant and reveals the following aspects: - there is a positive correlation between the size of the enterprises and the share of the companies indicating the replacement of the equipment, the purchase of the technology, the managerial restructuring and modernization, the introduction of modern quality management system, the fighting and limiting pollution and the computerization of the activities; - micro enterprises suppose the highest percentage of SMESs which indicate the amplifying the marketing activities (45.06); - small enterprises have the highest frequently within firms which targets constructions of buildings (19.38); - medium sized enterprises record highest percentages in the entities which indicates the replacement of the equipment (19.70), the purchase of the technology (28.79), the diversifying production (22.73), the managerial restructuring and modernization (13.64), the introduction of modern quality 170

169 The White Charter of Romanian SMEs in 2016 management system (16.67), the fighting and limiting pollution (16.67), the computerization of the activities (19.70) and the intensive training of the employees (21.21). Table 7.10 Correlation between SMEs size and development priorities intensity No. Managerial priorities The size of the companies Microenterprises Small enterprises Medium enterprises 1. Replacement of the equipment Constructions of buildings Purchase of the technology Diversifying production Amplifying the marketing activities Managerial restructuring and modernization Introduction of modern quality management system Fighting and limiting pollution Computerization of the activities Intensive training of the employees 7.6. The use of consulting services Because the development and consolidation of the SMEs sector in terms of competitiveness is an insurmountable necessity in the context of the caching up process that Romania is involved in at European level. Therefore, a key role lies upon the consulting services that could contribute decisively to the improvement and growth both the organizational and sector performances. Our results reveal the fact that only of SMEs have used the services of an external consultant during 2015 (picture no. 7.6), thus suggesting the existence of some explicit or tacit difficulties obstructing the development of stable and profitable relationships between the business environment and the specialized suppliers of know-how (management, accounting, marketing etc.). 171

170 10, Smes that have used external consultants 89,51 Smes that not have used external consultants ,21 Smes that have used external consultants 94,79 Smes that not have used external consultants Picture no. 7.6 Frequency of using consulting services within SMEs In terms of the SMEs regional membership (table no. 7.11), one may notice that the companies from the West Region have used consulting services in larger manner (38.46), while the enterprises from the South Region have called upon these services with a lower frequency (3.08). 172

171 North East South East South South West West North West Centre Bucharest -Ilfov The White Charter of Romanian SMEs in 2016 Table no Intensity of using consultancy within SMEs by development regions SMEs grouped by the development regions No. Use of consulting services SMEs that have used external consultants SMEs that not have used external consultants The study of companies in terms of size classes (table 7.12) points out that there is a positive relationship between the size of the SMEs and the propensity to use consulting services. Table 7.12 Intensity of using consultancy by size classes No. Use of consulting services SMEs that have used external 1. consultants SMEs that not have used 2. external consultants The size of the companies Medium Microenterprises Small enterprises enterprises The classification of SMEs, subject to the fields of activity (table 7.13) points out the fact that the largest shares of companies using consulting services are in the transportation field (16.67) and industry field (14.11), while the lowest are registered in the tourism sector (4.65). 173

172 Industry Constructions Trade Transportation Tourism Services Table 7.13 Intensity of using consultancy by fields of activity SMEs by fields of activity No. Use of consulting services SMEs that have used external consultants SMEs that not have used external consultants Awareness of the notions of knowledge based economy and knowledge based entreprises by Romanian entrepreneurs Given that our society is moving rapidly towards the knowledge based economy, it is highly important that we build an understanding regarding the extent in which the Romanian entrepreneurs are familiarized with these concepts. Our results have shown the fact that only in of the companies the notions of knowledge - based organization and economy are known. Compared to last year this indicator has decreased by 0.85 p.p. See picture no ,56 21, Know the concepts of the knowledge-based economy and organizatiom Do not know the concepts of the knowledge-based economy and organization 174

173 North East South East South South West West North West Centre Bucharest -Ilfov The White Charter of Romanian SMEs in ,71 22, Know the concepts of the knowledge-based economy and organizatiom Do not know the concepts of the knowledge-based economy and organization Picture no. 7.7 Frequency of knowledge of the knowledge based economy and organization within SMEs In terms of the SMEs regional membership (table no. 7.14), one may notice that the companies from the West Region are familiarized with the concepts of knowledge-based economy and organization in larger extent (38.46), while the enterprises from the North-West Region are characterized by a lower frequency (10.39). Table no The understanding of the knowledge-based economy and organization concepts by development regions The understand ing of the SMEs grouped by development regions No. knowledgebased economy and organizatio n concepts 1. Know the concepts Do not know the concepts

174 By distributing the companies, as per fields of activity, we find that the information level regarding the notions of knowledge-based economy and company is higher in those companies from the transportation sector (26.67) and lower in those SMEs from the trade field (16.28). See table Table 7.15 The understanding of the knowledge-based economy and organization concepts, subject to the fields of activity No. The understanding of the knowledge-based economy and organization concepts Industry Construction SMEs by fields of activity Trade TransportationTourism Services 1. Know the concepts Do not know the concepts Key success factors within SMEs The assessment of SMEs, regarding the main key success factors of their businesses, reveals that the first three places are taken by the following elements: the market opportunities (53.65), the business relations and the business partners (43.16), the qualified and skilled employees (34.85), the motivated and loyal employees (16.33) and the support services for managing the load degree of the employees (14.05). See picture no

175 The White Charter of Romanian SMEs in 2016 Market opportunities Business relations and business partners Qualified and skilled employees 53,65 50,76 43,16 40,29 34,85 29,31 Motivated and loyal employees Support services for managing the load degree of the employees 16,33 15,20 14,05 5, Picture no. 7.8 Key success factors within SMEs The structure of SMEs by development regions, points out the following essential aspects: - SMEs from the West Region register the highest percentages by the organization which indicate the qualified and skilled employees (46.15) and the motivated and loyal employees (38.46); - companies from the North West Region imply lower frequencies indicated by the market opportunities (62.43) and the support services for managing the load degree of the employees (24.68); - the enterprises in the Central region are characterized by high frequencies among organizations aimed at business relations and business partners (65.05). Further information may be found in table no

176 Industry Constructions Trade Transportation Tourism Services North East South East South South West West North West Centre Bucharest -Ilfov Table 7.16 Key success factors by development regions SMEs grouped by development regions No. Key success factors 1. Market opportunities Business 2. relations and business partners Qualified and 3. skilled employees Motivated and 4. loyal employees Support services for managing the 5. load degree of the employees ,23 5,41 2,94 4,00 5,56 13,56 8,65 3,46 Table 7.17 Key success factors by SMEs fields of activity SMEs by fields of activity No. Key success factors 1. Market opportunities Business relations and business partners Qualified and skilled employees Motivated and loyal employees Support services for managing the load degree of the employees In terms of companies distribution, as per fields of activity (table 7.17), we hereby mention the following essential aspects: 178

177 The White Charter of Romanian SMEs in SMEs that define key success factor in the opportunities offered by the market for the products / services have achieved higher rates for trade organizations (63.56); - firms that appreciate the business relationship and / or business partners as critical to organizational performance, are found more frequently among construction entities (62.64); - entities qualified and skilled employees scored higher percentages recorded among SMEs working in tourism (53.33); - economic agents that consider particularly important cultivating and maintaining motivated and loyal employees recorded higher frequencies where tourism industry (19.92); - SME support services management believes the burden on employees as key success factor, have higher rates for transportation organizations (27.91). 179

178 MAIN FINDINGS In of the total of companies under investigation, such annual plans and policies are carried out, in of SMEs, one elaborates 3-5 year strategies, and in of the enterprises, one conducts no such planning activities whatsoever. SMEs objectives for the following two years target primarily the maintaining of the business activities within the existing size limit (44.86), the moderate expansion of the business activity (40.62), a fast expansion of the business activity (6.60), closing down the business (3.68), reducing the business size (2.26) and selling it (1.98). The main competitive advantages of the SMEs are: the pricequality ratio (57.48), the quality of the products/services (34.58), the low price of the products/services (25.91), the company s reputation (24.45). SMEs will focus their managerial approach upon the following directions: the relation with distributors and customers (44.53), the implementation of new products/services (33.39), the relation with suppliers (30.02), the elaboration of strategies and policies (19.53), reducing costs (14.05), the implementation of new technological processes (12.23). Only in of the companies the notions of knowledge - based organization and economy are known. The managerial priorities within the Romanian SMEs sector are: the most frequent managerial priorities, as registered within Romanian SMEs, are: the amplifying the marketing activities (43.34), the purchase of the technology (20.44), the diversifying production (15.42). Only of SMEs have used the services of an external consultant during 2015, thus suggesting the existence of some explicit or tacit difficulties obstructing the development of stable. SMEs consider key success factors: the market opportunities (53.65), the business relations and the business partners (43.16), the qualified and skilled employees (34.85), the motivated and loyal employees (16.33) and the support services for managing the load degree of the employees (14.05). 180

179 The White Charter of Romanian SMEs in 2016 Chapter 8 SMES FINANCING 8.1. Methods for financing SMEs business Whereas the finance methods for economic activities that SMEs entrepreneurs/managers called upon in the last year, our study results show the following aspects: of the companies have used self finance, of the companies have got bank credits, of SMEs have used a suppliers credit, 7.95 of the enterprises have used the leasing and 2.83 have used customer s credits. At the same time we also notice the fact that 2.46 have used the guaranteeing under the National Credit Guarantee Fund for SMEs; the companies under investigation have used to a smaller extent other forms of finance, such as non reimbursable funds, non-payment of the invoices, loans from specialized institutions, the emission of shares, factoring, etc. See picture no Self finance Bank Credits Supplier's credit Leasing Customer's credit Guaranteeing under the National Credit Guarentee Other Non reimbursable funds Non-payment of the invoices Loans from specialized institutions Emission of share Factoring 7,95 2,83 2,46 2,37 2,10 2,01 1,73 1,64 0,73 22,63 21,26 71, Picture no. 8.1 Methods for financing SMEs business 181

180 By grouping SMEs, as per the latter s size (see table 8.1), we notice that: - micro-enterprises mainly use self - finance (76.47) and supplier s credit (21.75) and less bank credits (18.76), leasing (4.00) and non reimbursable credits (1.66); - medium sized enterprises call more frequently upon bank credits (53.03), leasing (33.33), non reimbursable funds (6.06), customer s credits (4.55); - the guaranteeing from the National Credit Guarantee Fund for SMEs is mainly present in the case of small companies (4.65). Table 8.1 Differentiation of SMEs financing methods by size classes No. Financing Methods Micro Companies Size Small Medium 1. Self - finance Bank credits Supplier s credit Leasing Non - reimbursable funds Loans from specialized financial institutions Customer s credit Non - payment of invoices Other Guaranteeing under FNGCIMM 11. Emission of shares on the capital market Factoring

181 Industry Constructions Trade Transportation Tourism Services The White Charter of Romanian SMEs in 2016 The studying of SMEs, as per fields of activity (table 8.2.): - companies from trade mainly use self-finance (74.73) and less frequent non-reimbursable funds (1.06) and loans from specialized financial institutions (0.53); - enterprises from the tourism field register the highest percentage of companies having used bank credits (36.67), non reimbursable funds (3.33) and loans form specialized institutions (6.67); - companies from the constructions field use more frequently leasing (14.29); - enterprises from the transportation sector call more frequently upon supplier s credit (32.56) and customer s credit (6.98). Table 8.2 Differentiation of SMEs financing methods by fields of activity SMEs by fields of activity No. Financing Methods Self - finance Bank credits Supplier s credit Leasing Non - reimbursable funds Loans from specialized financial institutions , Customer s credit Non - payment of invoices Other Guaranteeing under FNGCIMM 11. Emission of shares on the capital market

182 12. Factoring Main elements in selecting a bank by SMEs According to our study results, the SMEs decisional factors believe that the main elements in choosing a bank on long term are (picture no. 8.2): the speed of services and operations/low bureaucracy (as indicated by of the companies), flexibility of financing options / availability for financing business (33.85), wide range of services (24.27), available online banking (12/32) and extended availability in terms of subsidiaries network and interaction with employees (8.30). The speed of services and operations/low bureaucracy Flexibility of financing options / availability for financing business Wide range of services 24,27 33,85 43,43 Available online banking Extended availability in terms of subsidiaries network and interaction with employees Other 8,30 7,66 12,32 Picture no. 8.2 The elements in choosing a bank on long term Taking into account the impact of the companies size on the decision of choosing a bank on long term (see table 8.3), one finds that: of micro companies choose a bank on long term based on the speed of services and operations/low bureaucracy; - most of small (37.98) and medium size companies (51.52) choose a bank based on the flexibility of financing options/ the availability for financing business. 184

183 Industry Constructions Trade Transportation Tourism Services The White Charter of Romanian SMEs in 2016 Table 8.3 The elements in choosing a bank on long term by SMEs size No. The elements in choosing a bank on long term SMEs size Micro Small Medium 1. The speed of services and operations / low bureaucracy 2. Flexibility of financing options / availability for financing business 3. Wide range of services Extended availability in terms of subsidiaries network and interaction of employees Available online banking Other Whereas the elements in choosing a bank on long term, subject to the fields SMEs activate in, we mainly find that (table 8.4): - most of companies that activate in transportation field (46.51) choose a bank on long term based on the speed of services and operations/low bureaucracy and flexibility of financing options/availability for financing business; - the firms that pay more attention to wide range of services in choosing a bank on long term activate in tourism (40); - available online banking is an element that is more important for the firms from transportation field (18.60). Table 8.4 The elements in choosing a bank on long term by fields of activity SMEs by field of activity No. Bank 185

184 1. The speed of services and operations / low bureaucracy Flexibility of financing options / availability for financing business Wide range of services Extended availability in terms of subsidiaries network and interaction of employees Available online banking Other SMEs financing needs It appears that the main financing needs of SMEs are: finance inventories and working capital (35.95), development of new products, services or accessing new markets (29.74), real estate investment, in equipment or technology (28.10) and employees training (13.78). Further details in picture no Finance inventories and working capital Development of new products, services or accesing new markets Real estate investment, in equipment or technology 28,10 35,95 29,74 Employees training 13,78 Other 13,41 Refinancing of other financial obligations 9,67 Figura 8.3 SMEs financing needs 186

185 The White Charter of Romanian SMEs in 2016 Analyzing SMEs by size (table 8.5), we find that there is a positive correlation between the firms size and the rate of SMEs that indicate as financing needs real estate investment, in equipment or technology and employees training. Finance inventories and working capital recorded higher percentages among small businesses (37.21) and the development of new products, services or access markets among medium-sized enterprises (33.33). Table 8.5 Main financing needs by size classes of SMEs No. Financing needs Micro Companies size Small Medium 1. Real estate investment, in equipment or technology 2. Finance inventories and working capital Development of new products, services or accessing new markets Employees training Refinancing other financial obligations 6. Other Taking into account the field of activity, we highlight the following: - SMEs that indicated real estate investment, in equipment or technology, have greater rate in tourism organizations (46.67); - firms that aimed for financing inventories and working capital, are found more frequently among commercial entities (40.96); - organizations that need financing for developing products, services or accessing markets are more common in trade sector (31.91); Additional information is contained in the table below. 187

186 Industry Constructions Trade Transportation Tourism Services Table 8.6 Main financing needs by fields of activity SMEs by field of activity No. Financing needs 1. Real estate investment, in equipment or technology 2. Finance inventories and working capital Development of new products, services or accessing new markets Employees training Refinancing other financial obligations 6. Other

187 The White Charter of Romanian SMEs in 2016 MAIN FINDINGS Approximately of SMEs under questioning finance their economic activities out of own sources of the enterprises call upon bank credits in order to finance the latter s activities of the enterprises have used a supplier s credit of the enterprises have used the leasing have used loans from specialized institutions and 2.10 of the enterprises have used non - reimbursable funds as their source of finance. The services and trade fields depend to a high extent on selffinance. while bank credit is more frequently used in the tourism sector. Entrepreneurs believe the main factors in choosing a bank on long term are: the speed of services and operations / low bureaucracy (43.43), flexibility of financing options (33.85) and the wide range of services (24.27). The main financing needs of SMEs are: finance inventories and working capital (35.95), development of new products, services or accessing new markets (29.74) and real estate investment, in equipment or technology (28.10). 189

188 Chapter 9 HUMAN RESOURCES, WAGES AND TRAINING IN SMEs 9.1. The evolution of the hiring process within SMEs The results of the investigation show that the small and medium-sized enterprise sector in Romania continues to bring its contribution to the creation of new work places within the economy. In report to the sample, 1.87 people were hired into the company and 1.28 people have left the organization, thus revealing an average plus of 0.59 people per SME. Most companies (92.39) have hired less than 5 people, 4.13 of enterprises have integrated into the workfield between 5 and 10 people, 2.02 of economic agents have registered new employees, while 1.47 of the entities have had an increase in personnel of more than 20 people. See Figure ,13 2,02 1,47 92,39 Less than 5 persons Figure 9.1 The situation of new employees within SMEs in 2015, as compared to 2014 Aproaching the SMEs as per age (Table 9.1) shows that the average number of new employees is higher within organizations older than 15 years (3.47), lower within companies established in the last 5 years (0.09), and the average plus in personnel number registers the highest level within the economic units with more than 15 years of age (1.43). We observe that the two indicators are directly proportional with the age of the enterprises persons persons More than 20 persons

189 The White Charter of Romanian SMEs in 2016 Table 9.1 The evolution of hiring and average personnel variation within SMEs as per the age of enterprises SMEs age Nr. Indicator 0-5 yrs 5-10 yrs yrs Over 15 yrs 1. Average number of new employees Average personnel variation When analyzing the economic agents as per development regions (Table 9.2), we observe that enterprises in the West Region register the highest average number of new employees (6.15), the organizations in the North-West Region indicate the smallest number of newly employed people (0.93), as well as a negative average personnel variation (-0.34). Table 9.2 The evolution of hiring and average personnel variation within SMEs as per development regions Nr. Indicator North- East South- East SMEs as per development region South South- West West North- West Centre Bucharest- Ilfov Average number of new employees Average personnel variation As per the size of companies, we observe that the average number of new employees increases proportionally to the size of SMEs, and the average plus in personnel is higher within medium-sized (4.33) and lower within micro-enterprises (0.23). See Figures 9.2 and

190 Medium enterprises 16,15 Small enterprises 2,97 Micro enterprises 0,66 Medium enterprises Small enterprises Micro enterprises Figure 9.2 Differentiation of the average number of new employees as per size of the SMEs Medium enterprises 4,33 Small enterprises 1,16 Micro enterprises 0,23 Figure 9.3 Differentiation of the average personnel variation as per SMEs size Regarding the form of legal organization of economic agents, we observe that the average number of new employees is higher within joint stock companies (9.69), lower within entities with a different form of legal organization (0.68), while the average plus in the number of new employees is higher within limited liability companies (0.68) and lower in other types of SMEs (0.05). Details in Table

191 The White Charter of Romanian SMEs in 2016 Table 9.3 The evolution of hiring and the average personnel variation within SMEs as per form of legal organization Nr. 1. Indicator SMEs as per form of legal organization JSC LLC Other form of legal organization Average number of new employees Average personnel variation The investigation of SMEs as per fields of activity (Table 9.4) shows the fact that companies in the field of Transport take the first place regarding the average number of new employees (3.91), companies in Commerce register lower levels of newly employed people (0.89) and of the average plus in the number of employees (0.29). Table 9.4 The evolution of hiring and the average personnel variation within SMEs as per their field of activity Nr. Indicator SMEs as per field of activity Industry Construction Commerce Transport Tourism Services 1. Average number of new employees Average personnel variation Employee appreciation criteria within small and medium-sized enterprises Considering the elements that the decision-makers appreciate as being the most important regarding their employees, the investigation s results show the fact that most of the enterprises value 193

192 experience (58.49), specialized skills and knowledge (50.91), competency in the field of activity (49.73), loyalty towards the company (36.77), responsibility (35.40) and the degree of implication towards the organization (35.13). Other criteria are: conscienstiousness (34.31), the ability to withstand effort (30.47), team-working skills (28.38), education (23.18), intelligence (22.45), civilized behavior (17.52), foreign languages (12.32), recommendations (12.14) and IT skills (6.84). See Figure 9.4. Experience Specialized knowledge and skills Competence in the field of activity Sense of responsibility The consciousness The intelligence The level of involvement in company Exercise capacity Loyalty to the company School level Teamwork skills Civilized behavior Recommendations Foreign languages spoken Computer skills Others 35,40 34,31 22,45 35,13 30,47 36,77 23,18 28,38 17,52 12,14 12,32 6,84 0,27 58,49 50,91 49,73 Figure 9.4 The frequency of employee appreciation criteria within SMEs Regarding the intensity with which these criteria are manifested (on a scale of 1 to 5), we observe that the most relevant within SMEs are: experience (2.86), specialized skills and knowledge (2.22), recommendations (2.04) and education (2.00). Next are intelligence (1.94), responsibility (1.86), foreign languages (1.74), competency in the field of activity (1.62), conscientious-ness (1.62), the degree of implication within the organization (1.59), IT skills (1.44), team-working skills (1.43), the ability to withstand effort (1.41), loyalty towards the company (1.27) and civilized behavior (1.21). See the graphic representation in Figure

193 The White Charter of Romanian SMEs in 2016 Experience Specialized knowledge and skills Competence in the field of activity Sense of responsibility The consciousness The intelligence The level of involvement in company Exercise capacity Loyalty to the company School level Teamwork skills Civilized behavior Recommendations Foreign languages spoken Computer skills Others 2,86 2,22 1,62 1,86 1,62 1,94 1,59 1,41 1,27 2,00 1,43 1,21 2,04 1,74 1,44 1,18 Figure 9.5 Intensity of employee appreciation criteria manifestation within SMEs The classification of SMEs as per size groups reveals the following aspects: - organizations with the age of 10 to 15 years value more frequently experience (64.56), specialized skills/knowledge (56.96), education (27.43) and IT skills (8.02); - conscientiousness and civilized behavior are more often valued within companies of 5 to 10 years of age; - enterprises with an age of less than 5 years indicate higher numbers of economic units where loyalty towards the company (41.72), responsibility (36.55), the ability to withstand effort (36.55), intelligence (24.48) and foreign languages (13.45) are held at a higher value. - entities older than 15 years register the highest percentage of SMEs where competency in the field of activity (50.34), the degree of implication towards the company (37.24), team-working skills (33.45) and recommendations (12.41) are more appreciated. 195

194 More information in Table 9.5. Table 9.5 Differentiation of employee appreciation criteria as per SMEs age Nr. Elements that entrepreneurs consider as most important with respect to their employees Under 5 yrs SMEs age Yrs Yrs Over 15 yrs 1. Experience Knowledge and skills Competency in the field of activity Loyalty towards the company Responsibility The degree of implication towards the organization Conscientiousness Ability to withstand effort Team-working skills Education Intelligence Civilized behavior Foreign languages Recommendations IT skills The classification of employee appreciation criteria as per SMEs development regions reveals the following significant elements: - companies in the South Region register the highest percentage (76.41) and companies in the North-Western Region indicate the lowest percentage (35.06) regarding the emphasis on employee experience; - knowledge and skills are more often appreciated within 196

195 North-East South-East South South-West West North-West Centre Bucharest- Ilfov The White Charter of Romanian SMEs in 2016 organizations in the North-Eastern Region (78.79) and less within SMEs in the South-West (35.14); - economic agents in the North-Western Region more frequently take into account loyalty toward the company (57.14), conscientiousness (51.95) and the ability to withstand effort (53.25); - the degree of implication within the organization, teamworking skills and foreign languages are indicated in higher percentages within the units in the Western Region; - the Southern Region stands out through high percentages of companies that emphasize competency in the field of activity (62.56) and employee education (39.49). Table 9.6 Differentiation of employee appreciation criteria as per SMEs development regions Nr.. Elements that entrepreneurs consider as most important with respect to their employees SMEs as per development regions 1. Experience Knowledge and skills Competency in the field of activity Loyalty towards the company Responsibility The degree of implication towards the organization Conscientiousness

196 8. Ability to withstand effort Team-working skills Education Intelligence Civilized behavior Foreign languages Recommendations IT skills As per the size of SMEs (Table 9.7), we mainly observe that: - experience, competency in the field of activity, responsibility, the degree of implication within the organization and team-working skills are indicated with a frequency directly proportional to the companies sizes, while loyalty towards the company and the ability to withstand effort are more important, as the SMEs size decreases; - conscientiousness, education and recommendations are indicated more often by micro-enterprises; - smaller organizations register higher percentages of entities which emphasize intelligence, civilized behavior, foreign languages and IT skills. Table 9.7 Differentiation of employee appreciation criteria as per SMEs size Nr. Elements that entrepreneurs consider as most important with respect to their employees Size of SMEs Microenterprises enterprises size Small Medium- enterprises 1. Experience

197 The White Charter of Romanian SMEs in Knowledge and skills Competency in the field of activity Loyalty towards the company Responsibility The degree of implication towards the organization Conscientiousness Ability to withstand effort Team-working skills Education Intelligence Civilized behavior Foreign languages Recommendations IT skills When analysing the economic agents as per form of legal organization, the following aspects are most important: - SMEs with another form of legal organization register higher percentages where respondants appreciate experience (71.70), specialized skills and knowledge (70.25), competency in the field of activity (59.50), loyalty toward the company (38.84), education (38.84) and IT skills (18.18); - LLCs indicate higher numbers of economic units that emphasize responsibility (36.32), conscientiousness (35.68), the ability to withstand effort (32.69), intelligence (23.22), recommendations (12.99) and IT skills (7.56); - JSCs hold the highest percentage of entities where the degree of implication toward the organization (38.89) and foreign languages (13.89) are highly appreciated. See the information in Table

198 Table 9.8 Differentiation of employee appreciation criteria as per SMEs form of legal organization Nr. crt. Elements that entrepreneurs consider as most important with respect to their employees SMEs as per form of legal organization JSC LLC Other form of legal organizatio n 1. Experience Knowledge and skills Competency in the field of activity Loyalty towards the company Responsibility The degree of implication towards the organization Conscientiousness Ability to withstand effort Team-working skills Education Intelligence Civilized behavior Foreign languages Recommendations IT skills

199 Industry Construction Commerce Transport Tourism Services The White Charter of Romanian SMEs in 2016 An investigation of SMEs as per their field of activity (Table 9.9) shows the following significant aspects: - economic agents in the field of Industry indicate higher percentages of enterprises that appreciate experience (68.88) and specialized skills/knowledge (54.36); - companies in Construction more frequently emphasize competency in the field of activity (54.95), responsibility (37.36), conscien-tiousness (40.66), the ability to withstand effort (46.15) and team-working skills (29.67); - SMEs in Tourism register higher percentages of respondants that appreciate loyalty towards the company (46.67), education (33.33), intelligence (36.67), foreign languages (30) and IT skills (16.67); - the degree of implication towards the company and civilized behavior are more appreciated by units in the field of transport. Table 9.9 Differentiation of employee appreciation criteria as per SMEs field of activity Nr. Elements that entrepreneurs consider as most important with respect to their employees SMEs as per field of activity 1. Experience Knowledge and skills Competency in the field of activity Loyalty towards the company Responsibility

200 6. The degree of implication towards the organization Conscientiousness Ability to withstand effort Team-working skills Education Intelligence Civilized behavior Foreign languages Recommendations IT skills The evolution of average salaries within SMEs in 2015 compared to 2014 The analysis of the evolution of the average salary within SMEs in 2015 as compared to 2014 reveals the following: in of companies, salaries have stagnated, in of enterprises the remuneration level has increased with 0 to 5, in 7.97 of units employee income has increased with 5 to 10, in 2.93 of companies the average salary has decreased with 0 to 5, in 1.92 of economic agents there have been wage increases of 10 to 15, while 1.92 of them have indicated wage decreases of 5 to 10, in 1.10 of SMEs the employee income has increased with over 15, in 0.73 of enterprises remuneration has decreased with over 15 and in 0.18 of entities wages have decreased with 10 to 15. See Figure

201 The White Charter of Romanian SMEs in ,37 0,73 0,18 1,92 1,92 1,92 7,97 0,73 70,85 Remained the same Increased over 15 Increased by 5-10 Increased by Increased by 0-5 Decreased over 15 Decreased by 5-10 Decreased by Decreased by 0-5 Figure 9.6 SMEs structure regarding the evolution of average wages in 2015/2014 Considering the organization as per their age, we observe that: - SMEs established in the last 5 years register a higher percentage of economic units where the salaries in 2015 have stagnated, as compared to 2014 (76.47); - companies of 10 to 15 years of age indicate higher percentages of units where wages have registered increases of 10 to 15 (3.40), 5 to 10 (10.64), 0 to 5 (14.89) and decreases of 5 to 10 (3.40); - economic agents older than 15 years hold the higher percentages of companies that have increased remuneration with over 15 (2.41) and have decreased it with 10 to 15 (0.69) - companies with an age between 5 and 10 years have more often registered 0 to 5 decreases of wages (3.97) and 15 decreases (1.44). See the information in Table

202 Table 9.10 Nr. 1. Report between the enterprises age and the evolution of the average salary Average wage evolution Increase of over 15 SMEs age 0-5 yrs 5-10 yrs yrs Over 15 yrs Increase of Increase of 5-10 Increase of 0-5 Stagnation Decrease of 0-5 Decrease of 5-10 Decrease of Decrease of over Regarding the SMEs as per development regions (Table 9.11), we observe the following aspects: - companies with the same wage level are registered in the highest percentage among SMEs in the South-Western Region (83.78) and the lowest percentage among units in the Western Region (46.15); - the Western Region indicates the highest percentage of companies with wage increases of over 15 (7.69) and of 10 to 15 (5.56), as well as decreases of 0 to 5 (15.38) and of 10 to 15 (7.69); - organizations in the Southern Region have more often indicated increases of 5 to 10 (12.31) and of 0 to 5 (17.44); - the Bucharest-Ilfov area registers the highest percentage of companies that have decreased the wage level with more than 15 (1.57). 204

203 The White Charter of Romanian SMEs in 2016 Table 9.11 Nr. Evolution of SMEs salaries as per development regions Average wage evolution North- East South- East South SMEs as per development regions South- West West North- West Centre Bucharest- Ilfov 1. Increase of over Increase of Increase of Increase of Stagnation Decrease of Decrease of Decrease of Decrease of over The classification of units as per their size (Table 9.12) shows the following: - salary increases of over 15 and of 5 to 10, as well as decreases of 0 to 5 are indicated more frequently directly proportional to the SMEs sizes; - stagnation of wages and decreases of 10 to 15 and of over 15 are registered in higher percentages along with the decrease in the companies sizes; - small enterprises register higher percentages of economic agents where the employee average income has increased with 10 to 15 (4.65) and has decreased with 5 to 10 (2.33). 205

204 Table 9.12 Evolution of the average wage as per SMEs size Nr Average wage evolution Increase of over 15 Increase of Increase of 5-10 Increase of 0-5 Stagnation Decrease of 0-5 Decrease of 5-10 Decrease of Decrease of over 15 Micro-enterprises SMEs size Small enterprises Medium-sized enterprises Regarding the form of legal organization of economic agents, we observe that: - LLCs register the highest percentages of companies where the employees income has stagnated (72.27) and has increased with over 15 (1.28), as well as the most enterprises indicating decreases of 0 to 5 (3) and of 0 to 15 (0.21); - JSCs hold higher percentages of enterprises registering wage increases of 10 to 15 (2.78) and of 5 to 10 (19.44), as well as decreases of 5 to 10 (5.56); - percentages of 0 are registered among entities with different form of legal organization and among JSCs, regarding increases and decreases of 10 to 15 and of over 15. More information is presented in Table

205 The White Charter of Romanian SMEs in 2016 Table 9.13 Evolution of the average wage as per SMEs form of legal organization Nr. Average wage evolution JSC SMEs as per form of legal organization LLC Other form of legal organization 1. Increase of over Increase of Increase of Increase of Stagnation Decrease of Decrease of Decrease of Decrease of over The investigation of the wages dynamics as per SMEs fields of activity (Table 9.14) shows the following: - regarding the SMEs where the average wage has stagnated, companies in the field of Construction hold a higher percentage (86.67), while enterprises in Industry indicate a lower percentage (62.24); - raises of 10 to 15 and of over 15, as well as decreases of 10 to 15 are registered more frequently within the companies in Transport; - economic agents in the field of Commerce indicate the highest percentage of increases of 0 to 5 (15.73) and operators in Tourism indicate higher percentages of increases with 5 to 10 and decreases of the average salary with 0 to 5 (6.67); - regarding the increases and decreases of 5 to 10, 10 to 15 and over 15, we observe several fields of activity indicating

206 Industry Construction Commerce Transport Tourism Services Table 9.14 Evolution of the average wage as per SMEs field of activity SMEs as per field of activity Nr. Average wage evolution 1. Increase of over Increase of Increase of Increase of Stagnation Decrease of Decrease of Decrease of Decrease of over The intensity of human resources training The analysis of SMEs as per the average number of working days per employee, dedicated to training in the previous year (Figure 9.7) shows the following essential aspects: of organizations have not been involved in human resources training; of companies have dedicated 1 to 5 days of training for personnel; of enterprises have dedicated 6 to 10 days; of organizations have allocated more than 10 days of training per employee. We observe the fact that one third of SMEs have considered training the employees, which is a higher percentage than in the previous years. This fact indicates the higher efforts of Romanian 208

207 The White Charter of Romanian SMEs in 2016 entrepreneurs and managers for employee training, given its importance, even though the majority of companies have gone through a rather difficult period in the years subsequent to the economic recession. 66,54 None 22,82 8,52 2, days 6-10 days Over 10 days None 1-15 days 6-10 days Over 10 days Figure 9.7 Structure of SMEs as per average number of working days per employee dedicated to training The companies classification as per their age reveals the following: - enterprises with an age of over 15 years register the highest frequencies of economic units dedicating 1 to 5 days (26.55), 6 to 10 days (13.10) and over 10 days (3.10) to training; - more recently established organizations indicate higher percentages of SMEs that have allocated no days (75.43) and lowest percentages of 1 to 5 days (18.69) and 6 to 10 days (4.15) [allocated] to employee training. More information is included in Table

208 Table 9.15 Average number of working days allocated per employee for training as per SMEs age Nr Average number of working days for training in SMEs None 1-5 days 6-10 days Over 10 days SMEs age Under 5 years 5-10 yrs yrs Over 15 yrs An investigation of companies as per development regions shows the following (Table 9.16): - the frequency of organizations where no training was implemented is higher in the North-Western Region (77.63) and lower in the Western Region (23.08); - SMEs where 1 to 5 days were allocated for employee training register a higher percentage among entities in the Western Region (61.54) and a lower percentage in the South-Western Region (16.22); - enterprises dedicating 6 to 10 days to training activities indicate the highest percentage in the South-West (24.32) and the lowest percentage in Bucharest (4.46); - economic units dedicating over 10 days to the training of human resources are more frequent in the Western Region (7.69) and less in the South (0.51). 210

209 The White Charter of Romanian SMEs in 2016 Table 9.16 Average number of working days allocated per employee for training as per SMEs development regions Nr Average number of working days for training in SMEs None 1-5 days 6-10 days Over 10 days North- East South- East South SMEs as per development region South- West West North- West Centre Bucharest- Ilfov Regarding the SMEs size (Table 9.17), we observe that the percentage of entrepreneurs that do not invest in training increases with the decrease in enterprise size, while frequencies with which companies allocate 1 to 5, 6 to 10 and over 10 days increase proportionally with their sizes. This situation clearly reveals the considerable impact of economic agents upon employee training programms. Table 9.17 Average number of working days allocated per employee for training as per SMEs size Nr Average number of working days for training in SMEs None 1-5 days 6-10 days Over 10 days Micro-enterprises SMEs size Small enterprises Medium-size enterprises

210 As per SMEs form of legal organization (Table 9.18), we observe that: - JSCs hold the highest percentages of enterprises where 1 to 5 days (33.33), 6 to 10 days (13.89) and over 10 days (2.78) were allocated for training; - entities with a different form of legal organization register a higher percentage among SMEs that have not invested in employee training (86.78) and lower percentages of economic operators allocating an average of 1 to 5 (8.26), 6 to 10 (4.13) and over 10 days (0.83) for the training of human resources. Table 9.18 Average number of working days allocated per employee for training as per SMEs form of legal organization Nr Average number of working days for training in SMEs None 1-5 days 6-10 days Over 10 days SMEs as per form of legal organization JSC LLC Other form of legal organization The classification of organizations as per fields of activity shows the following: - SMEs in the field of Tourism register higher percentages of economic agents that have allocated 1 to 5 days (36.67), 6 to 10 days (13.33) and over 10 days (6.67) to employee training and a lower percentage of companies that have not been involved in this process (43.33); - companies in Commerce hold a higher percentage of enterprises that have dedicated no days to training (73.07) and lower percentages of organizations dedicating 1 to 5 days (18.67) and over 10 days (0.80) to the improvement of human resources; 212

211 The White Charter of Romanian SMEs in entities in the field of Construction indicate a lower frequency of companies that have trained personnel for 6 to 10 days (6.67). See more information in Table Table 9.19 Average number of working days allocated per employee for training as per SMEs field of activity Nr. 1. Average number of working days for training in SMEs None SMEs as per field of activity Industry Construction Commerce Transport Tourism Services days 6-10 days Over 10 days An investigation of companies as per their performance in 2015, compared to 2014 shows that the economic units with much better results register a higher percentage of organizations where training was allocated 6 to 10 days (18.52) and more than 10 days (7.41), entities with better results indicate a higher frequency among the enterprises having dedicated 1 to 5 days to employee training (33.62), and companies with much poorer performance hold the highes percentage of SMEs that have not been implicated in employee training (89.06). Table 9.20 Average number of working days allocated per employee for training as per SMEs performance in 2015, compared to 2014 Nr Average number of working days for training in SMEs None 1-5 days 6-10 days Company performance in 2015 compared to 2014 Much better Better Identical Poorer Much poorer

212 4. Over 10 days The percentage of employees that have benefited from training The average percentage of employees beneficiating from training in 2015 is of 15.37, showing that Romanian SMEs have a slightly low interest in the training of their personnel. Regarding the average percentage of employees that have beneficiated from training as per the age, regional situation, size, form of legal activity, field of activity and performance in 2015 compared to 2014 of SMEs, we observe that the highest levels register within companies with ages beween 10 and 15 years (17.14), economic agents in the Western Region (30.08), medium-sized organizations (18.33), LLCs (16.13), companies in the field of Tourism (28.33) and enterprises with much better performance in 2015 as in 2014 (28.19). See Figures 9.8 to ,63 15,94 17,14 14,12 Under 5 years 5-10 years years Over 15 years Figure 9.8 Differentiation of the average percentage of trained employees as per SMEs age 214

213 The White Charter of Romanian SMEs in ,68 30,08 12,44 15,57 5,03 17,34 13,92 8,96 Figure 9.9 Differentiation of the average percentage of trained employees as per SMEs development region 20,00 15,00 10,00 5,00 0,00 Medium enterprises 18,33 18,36 Small enterprises 14,72 Micro enterprises Figure 9.10 Differentiation of the average percentage of trained employees as per SMEs size 215

214 14,09 16,13 20,00 15,00 9,83 10,00 5,00 0,00 Stock company Limited liability company Other form of legal organization Figure 9.11 Differentiation of the average percentage of trained employees as per SMEs form of legal organization 28,33 14,95 15,03 13,96 6,09 17,50 Figure 9.12 Differentiation of the average percentage of trained employees as per SMEs field of activity 216

215 The White Charter of Romanian SMEs in ,00 25,00 20,00 15,00 10,00 5,00 28,19 25,49 14,83 7,90 3,44 0,00 Much Better Identical Weaker Much better weaker Series1 28,19 25,49 14,83 7,90 3,44 Figure 9.13 Differentiation of the average percentage of trained employees as per SMEs performance in 2015 compared to The percentage of highly trained employees within the total number of personnel in small and medium-sized enterprises An investigation of SMEs regarding their highly trained employees shows the following: in of enterprises there are no higher education graduates, of companies register percentages of 75 to 100 of highly trained employees, of organisations indicate a 25 to 50 of employees as being higher education graduates, of economic units have a percentage of 0 to 25 of employees having graduated a form of higher education and 5.79 register 50 to 75 of their employees as highly educated. Given that the average percentage of higher education is of 41.36, and the percentage of highly educated individuals is under 20 in Romania and approximately 30 in the EU, we conclude that the SMEs sector in our country registers a good level of education, which represents a premise favourable to their competitive activities. The graphical representation of this situation is given in Figure

216 27,36 32,78 5,79 20,75 13, Figure 9.14 Percentage of highly educated employees The classification of economic units as per classes of size (Table 9.21) shows the following aspects: - the percentages of enterprises where highly educated individuals perform increase proportionally with the SMEs size; - companies where 75 to 100 of employees have graduated a form of higher education register frequencies that decrease, as their size increases; - small organizations register higher percentages of economic units where 25 to 50 and 50 to 75 of employees are highly educated. Table 9.21 Differentiation of percentage of highly educated employees as per SMEs size Nr Percentage of highly educated employees Microenterprises SMEs size Small enterprises Medium-sized enterprises

217 Industry Construction Commerce Transport Tourism Services The White Charter of Romanian SMEs in Upon the investigation of SMEs as per field of activity, we observe the following: - companies with no highly educated employees are more frequent among thos operating in Transport (39.53) and less frequent with enterprises in Services (28.53); - companies in Industry register a higher percentage of SMEs where 25 to 50 and 50 to 75 of employees have graduated a higher form of education (22.82 and 9.13, respectively); - regarding enterprises with a percentage of 75 to 100 of highly educated employees, the highest percentage is among entities in Tourism (40), while the lowest is within units in Transport (18.60). Table 9.22 Differentiation of percentage of highly educated employees as per SMEs field of activity SMEs as per field of activity Nr. Percentage of highly educated employees

218 Regarding the age, development region, size, form of legal organization, field of activity, entrepreneurs background and SMEs performance in 2015 compared to 2014 (Figures 9.15 to 9.21), we observe that the highest percentages of highly educated employees are registerd within companies of under 5 years of age (48.49), economic operators in the North-Western Region (54.38), micro-enterprises (43.88), entities with a different form of legal organization (42.84), units in Services (48.15), organizations whose entrepreneurs are highly educated (51.09) and enterprises with much poorer performance in 2015 compared to 2014 (46.35). 48,49 43,32 40,31 33,26 Under 5 years 5-10 years 10-15years Over 15 Years Figure 9.15 Average percentage of highly educated employees as per SMEs age 38,53 43,20 54,38 48,24 47,68 39,54 30,86 16,98 Figure 9.16 Average percentage of highly educated employees as per SMEs development region 220

219 The White Charter of Romanian SMEs in ,91 43,88 23,80 Medium enterprises Small enterprises Micro enterprises Figure 9.17 Average percentage of highly educated employees as per SMEs size 32,91 41,50 42,84 Stock company Limited liability company Other form of legal organization Figure 9.18 Average percentage of highly educated employees as per SMEs form of legal organization 221

220 35,96 34,68 41,55 30,56 47,50 48,15 Figure 9.19 Average percentage of highly educated employees as per SMEs field of activity 26,00 28,30 12,60 Elementary education Secondary education Higher education Figure 9.20 Average percentage of highly educated employees as per SMEs entrepreneurs educational background 222

221 The White Charter of Romanian SMEs in ,33 41,55 41,64 46,35 25,53 Much better Better Identical Weaker Much weaker Figure 9.21 Average percentage of highly educated employees as per SMEs performance in 2015 compared to The frequency of experienced employees within small and medium-sized enterprises Regarding their employees experience, the investigation s results show that SMEs register the following percentages of individuals with more than 15 years of experience in their respective fields of activity: of companies indicate a percentage of 0 to 25, of enterprises have more than 75, of organizations register percentages of 50 to 75 and 6.79 of enterprises have 25 to 50. Considering that the average percentage is of and that more than two thirds of companies have less than 25 of employees with extensive experience in their field of activity, we conclude that the frequency of highly experienced human resources within the Romanian SME sector is relatively low. 223

222 11,65 6,79 12,66 68,90 0, Figure 9.22 Percentage of SME employees with more than 15 years of experience in their respective field of activity The examination of companies as per their size (Table 9.25) shows the following aspects: - as the size of the organizations increases, so does the percentage of economic operators with 25 to 50 and 50 to 75 of employees having an experience of over 15 years in their respective fields of activity, while a decrease is registered within those companies whose of personnel is experienced in a percentage of over 75; - micro-enterprises register the highes percentage of entities where 75 of employees are very experienced (13.63), and small enterprises hold a lower percentage of economic units where over 75 of personnel have operated their activity in the same field for over 15 years (7.75). Table 9.25 Percentage of SME employees with more than 15 years of experience in their respective field of activity as per smes size Nr. Percentage of employees with more than 15 years of experience in their respective field of activity Microenterprises SMEs size Small enterprises Medium-sized enterprises

223 The White Charter of Romanian SMEs in Over Considering the age, regional situation, size, form of legal organization, field of activity and performance of SMEs, we observe that the average percentage of very experienced employees is higher within entities that have activated for more than 15 years (35.01), SMEs in the Southern Region (38.05), medium-sized enterprises (35.50), JSCs (36.44), operators in Industry (30.07) and companies that have performed much better in 2015 compared to 2014 (36.67). More information in Figures 9.23 to ,18 18,10 23,37 35,01 Under 5 years 5-10 years 10-15years Over 15 Years Figure 9.23 Differentiation of the average percentage of employees with more than 15 years of experience in their respective field of activity as per SMEs age 225

224 35,08 38,05 20,29 24,00 20,63 9,68 12,64 8,49 Figure 9.24 Average percentage of employees with more than 15 years of experience in their respective field of activity as per SMEs development region 35,50 26,48 20,24 Medium enterprises Small enterprises Micro enterprises Figure 9.25 Differentiation of the average percentage of employees with more than 15 years of experience in their respective field of activity as per SMEs size 226

225 The White Charter of Romanian SMEs in ,44 21,58 20,01 Stock company Limited liability company Other form of legal organization Figure 9.26 Average percentage of employees with more than 15 years of experience in their respective field of activity as per SMEs form of legal organization 30,07 24,51 22,06 25,70 8,00 15,46 Figure 9.27 Differentiation of the average percentage of employees with more than 15 years of experience in their respective field of activity as per SMEs field of activity 227

226 36,67 25,70 18,87 22,34 26,50 Much better Better Identical Weaker Much weaker Figure 9.28 Differentiation of the average percentage of employees with more than 15 years of experience in their respective field of activity as per SMEs performance in 2015 compared to

227 The White Charter of Romanian SMEs in 2016 MAIN FINDINGS In 2015 compared to 2014, the SMEs have hired an average of 1.87 people and 1.28 have been let go, thus resulting a personnel average plus of 0.59 people per enterprise. Over 92 of companies have hired less than 5 employees and only 1.47 have introduced more than 20 individuals into the labor market. The average number of individuals hired in 2015 registers a higher level in SMEs older than 15 years (3.47 individuals), companies in the Western Region (6.15), medium-sized enterprises (16.15), joint stock companies (9.69) and organizations in the field of Transport (3.91). The average personnel variation is higher in companies older than 15 years (1.43 employees), enterprises in the South-East Region (1.69), medium-sized enterprises (4.33), limited liability companies (0.68) and economic agents in the sector of Construction. The most frequent employee appreciation criteria within SMEs are: experience (in of organizations), specialized skills and knowledge (50.91), competency in the field of activity (49.73), loyalty towards the company (36.77), responsibility (35.40), the degree of implication towards the company (35.13), conscientiousness (34.31) and the ability to withstand effort (30.47) of economic units have maintained the same average wage level in 2015 compared to of enterprises have increased their employees wages with 0 to 5, 7.97 of companies have operated raises of the average wage of 5 to 10, and 2.93 of SMEs have decreased wages with 0 to 5. Organizations where the average salary has stagnated register a higher frequency among the companies established in the last 5 years (76.47), entities in the South-Western Region (83.78), micro-enterprises (73.55), LLCs (72.27) and units in Construction (86.67). Approximately two thirds of SMEs have not operated employee 229

228 training activities during the last year of companies have allocated 1 to 5 days/employee, 8.52 have dedicated 6 to 10 days and 2.11 over 10 days to the training of employees. The percentage of companies having trained their employees for more than 10 days in the last year is higher within enterprises older than 15 years (3.10), organizations in the Western Region (7.69), medium-sized enterprises (10.61), JSCs (2.78), companies in Tourism (6.67) and units with a much better performance in 2015 compared to 2014 (7.41). The average percentage of employees that have benefited from training is of 15.37, with higher levels among economic agents with ages of 10 to 15 years (17.14), companies in the Western Region (30.08), medium-sized enterprises (18.33), LLCs (16.13), companies in Tourism (28.33) and enterprises with much better performance in 2015, as compared to The average percentage of highly educated employees is of 41.36, with higher values among companies younger than 5 years (48.49), economic operators in the North-Western Region (54.38), micro-enterprises (43.88), entities with another form of legal organization (42.84), units in services (48.15), organizations whose entrepreneurs are highly educated (51.09) and enterprises with much poorer performance in 2015 than in 2014 (46.35). The average percentage of employees with an experience of more than 15 years in their respective field of activity is of and registers higher levels among companies older than 15 years (35.01), SMEs in the Southern Region (38.05), medium-sized enterprises (35.50), JSCs (36.44), employers in Industry (30.07) and enterprises with much better performance in 2015 than 2014 (36.67). Chapter

229 The White Charter of Romanian SMEs in 2016 THE MARKET, CLIENTS AND SMEs RELATIONSHIPS WITH THE BENEFICIARIES / SUPPLIERS The SMEs market The analysis of the markets where SMEs sell their products points out that of the companies activate only on the local market, of them consider the national market, of the enterprises target the European Union market, 4.11 of the economic agents turn also to the markets of some of the countries outside Europe and 2.65 of the companies sell their products/services in other European countries. We notice that over 4/5 of the SMEs focus on local markets, since their limited size do not provide them the economic power to enter other markets as well. See picture no ,00 60,00 50,00 40,00 30,00 20,00 10,00 0,00 63,78 Local market 42,15 National market 10,04 4,11 2,65 EU market Outside Europe countries market Other european countries market Picture no SMEs according to the market where they activate Taking into consideration the regional membership of the enterprises, it can be seen the following: - the companies from West Region operate in a higher proportion on the local market (92.31), EU market (30.77), outside Europe countries market (7.69) and other European countries market (15.38); 231

230 - the companies from North Western Region activate in higher proportion on the national market (63.64) and more less on a other european countries market; - the companies from South Western Region addresse more rarly on the national market (26.13). See table no Table no The average percentage of local / national markets within the whole market by the development regions No. The detination of the production North East SMEs grouped by the development regions South South North West Centre South East West West Bucharest -Ilfov The local market The national market The UE market Outside Europe countries market Other european countries market The classification of SMEs by size reveals that once with the increaseof the size of the enterprises grow also the percentages of companies that produce for the local and national market, EU market and the market of some countries outside Europe and the Small enterprises addresses more frequently on the market of other European countries. Additional information is presented in table no

231 The White Charter of Romanian SMEs in 2016 Table no The destination of SMEs production by the size classes No. The detination of the production Microenterprises The size of the companies Small enterprises Medium sized enterprises 1. The local market The national market The UE market Outside Europe countries market Other european countries market Considering the market of the enterprises by the branches where they operate (table no. 10.3), we can see that: - the industry sector SMEs have superior shares of units that sell products/services on the national market (49.79), the countries market from outside Europe (9.13) and the other european countries market (7.05); - the organizations from trade sector register the higher percentages of units that take into account the local market (71.81). Table no The destination of the SMEs production by fields of activity No. The detination of the production Industry Constructions Trade SMEs by fields of activity Transportation Tourism Services The local market The national market

232 3. The UE market Outside Europe countries market Other european countries market SMEs clients The analysis of SMEs by the categories of clients points out that out of the total number of questioned enterprises, have as clients individuals, companies from other sectors of activity, companies from the industry field, wholesale and retail distributors, the central and local administration and exporters. See picture no Individuals 86,95 Companies from other sectors of Companies from the industry field Wholesale and retail distribuitors Central and local administration Exporters 54,74 39,87 38,50 36,86 32,30 Picture no The structure of SMEs by the type of their clients According to classes of size (see table 10.4) it can mainly be found that: 234

233 The White Charter of Romanian SMEs in the percentages of SMEs that have as clients the companies from the industry field, the central and local administration and the exporters vary directly proportional to the size of the economic agents; - the micro enterprises have the highest percentages of the individuals clients (88.24). Table no The structure of SMEs by size classes, according to the type of clients No. Clients Microenterprises The size of the companies Small enterprises Medium sized enterprises 1. Individuals Companies from other sectors of activity 3. Companies from the industry field 4. Wholesale and retail distributors Central and local administration Exporters The examination of enterprises by legal organisation form reveals mainly the following aspects: - the joint stock companies record the highest percentages of units that have as clients the companies from industry (41.67), wholesale and retail distributors (44.44) and central and local administration (41.67); - the limited liability companies record higher proportions of companies who target individuals (55.27) and exporters (33.23). Details in table no

234 Table no The situation of SMEs by legal organisation form and nature of clients No. Clients SMEs by legal organisation form Joint stock actions Limited liability companies Other forms of legal organisation 1. Individuals Companies from other sectors of activity 3. Companies from the industry field 4. Wholesale and retail distributors Central and local administration Exporters Considering the branches where SMEs operate (table no. 10.6), we note that: - the entities from tourism field have the highest shares of SMEs that have as clients individuals (96.67) and the firms from other sectors of activity (70); - the economic operators from industry have mainly as clients the companies from the industry field (54.36) and wholesale and retail distributors (51.45). Table no The structure of SMEs by fields of activity according to the type of clients 236

235 The White Charter of Romanian SMEs in 2016 No. Clients SMEs by fields of activity Industry Constructions Trade Transportation Tourism Services 1. Individuals Companies from other sectors of activity 3. Companies from the industry field 4. Wholesale and retail distributors 5. Central and local administration Exporters The evolution of the SMEs relationships with clients and suppliers The SMEs performances and functionality are conditioned by the relations that they have with suppliers and clients, since they represent an important category of stakeholders of any company. The results of the investigation show that of SMEs will maintain their clients and suppliers during 2016 as well (picture no. 10.3), pointing out the fact that most of entrepreneurs make efforts not to lose buyers and express a strong will to conduct the supply activities with products / service under stable conditions. 20,35 79,65 SMEs that in 2015 lose or interrupt the connection with a part of the suppliers/clients SMEs that maintain suppliers and clients during

236 Picture no The SMEs relations with suppliers and clients If we referre to the companies that in 2016 lose or interrupt the connection with some of the beneficiaries and supliers, it can be seen that most companies stop relations with 1-5 customers (61.11) and 1-5 sources of purchasing products / services (88.24). Detail in pictures no and ,67 22,22 61, clients 6-10 clients Over 10 clients Pictures no The structure of SMEs according to the number of customers lost 8,40 3,36 88, suppliers 6-10 suppliers Over 10 suppliers Pictures no The structure of SMEs according to the number of suppliers with which stopped the cooperation 238

237 The White Charter of Romanian SMEs in 2016 Taking into account the SMEs regional membership it can be noticed that the companies from the West Region register the highest percentage of entities that keep their suppliers and clients during 2016, and the companies from Bucharest-Ilfov hold the lowest percentage of companies that maintain the suppliers and clients during Details in table no Table no The differentiation of SMEs relationships with suppliers and clients by development regions No. SMEs relationships with suppliers / clients SMEs which in 2016 lose or suspend the relationship with a part of the suppliers/ customers SMEs which maintain their suppliers and clients during 2016 North East SMEs grouped by development regions South East South South West West North West Centr e Buchare st -Ilfov 10,61 19,86 26,15 9,01 7,69 9,09 11,65 27,53 89,39 80,14 73,85 90,99 92,31 90,91 88,35 72,47 Grouping the SMEs by the size (table no. 10.8), we observe that microenterprises register a higher percentage of companies that end their relation with some suppliers and / or clients (21.21) and the medium sized enterprises hold a higher percentage of companies that maintain their clients and supply sources with goods / services during 2016 (82.95). Table no The differentiation of SMEs relations with suppliers and clients by size classes No. The SMEs relationships with suppliers/clients The size of the companies Microenterprises Small enterprises Medium sized enterprises 239

238 1. 2. SMEs which in 2016 lose or suspend the relationship with a part of the suppliers/ customers SMEs which maintain their suppliers and clients during The study the SMEs by the branches where they carry out their activity underline that the companies which lose a part of suppliers / beneficiaries are more frequent in the transportations sector (32.56) and the enterprises that keep their suppliers and clients are more often met in the tourism field (90). Details in table no

239 Industry Constructions Trade Transportation Tourism Services The White Charter of Romanian SMEs in 2016 Table no The differentiation of SMEs relations with suppliers and clients by fields of activity SMEs by fields of activity No. The SMEs relationships with suppliers/clients 1. SMEs which in 2016 lose or suspend the relationship with a part of the suppliers/ customers SMEs which maintain their suppliers and clients during Causes of contract cancelation with suppliers and customers The main causes for ending SMEs relations with a part of their suppliers and clients during 2016 are: too high costs (52.28), the identification of more advantageous business partners (30.57), non supplying services and products in due time (26.19), clients / suppliers bankruptcy (19.71 ), the change of partners main business activity (13.87) and the insufficient amount of products in order to satisfy beneficiaries demands (12.23). It shows that a half of entrepreneurs give up the collaboration with the suppliers / clients due to financial grounds and that about one fifth of the partners of small and medium sized enterprises fail to survive the contextual turbulences. See picture no

240 Too high costs 52,28 The identification of more advantageous business partners Non-supplying services and products in due time Clients`/suppliers` bankruptcy The change of parteners`main business activity The insufficient amount of products in order to satisfy beneficiaries` demands 30,57 26,19 19,71 12,23 12,23 Picture no The reasons for ending SMEs collaboration relations with suppliers and clients The analysis of the reasons for which the SMEs interrupt the relations with suppliers / customers, according to the regional affiliation of companies (table no ) reveals the following differences from the sample average: - the costs too high were indicated mostly frequently in the companies from Central Region (71.84) and least often in the enterprises from South East Region (43.15); - the identification of business partners more advantageous was wider recorded among companies in the North East (45.45) and lower in the economic units from North West (15.58); - the non supplying products / services in due time is met in half of firms of the South Region (28.21) and to only 7.79 of the enterprises from North West Region. 242

241 North East South East South South West West North West Centre Bucharest -Ilfov The White Charter of Romanian SMEs in 2016 Table no The differentiation of causes for ending the cooperation relations between SMEs and suppliers/customers by regional membership of enterprises No. The causes for the interupption of cooperation relations between SMEs and suppliers / customers SMEs grouped by development regions Too high costs The identificatio n of more advantageo us business partners Non supplying services and products in due time Clients / suppliers bankruptcy The change of partners main business activity

242 6. The insufficient amount of products in order to satisfy beneficiarie s demands Taking into account the SME by the size (table no ), it can be found the following aspects: - the percentages of organizations where have been reported the too high costs, non supply of products / services necessary at the right time, the change of partners main business activity increase directly proportional to the companies size. Table no The differentiation of the causes for ending the SMEs relations with the clients and suppliers by companies size No. The causes for interrupting SMEs cooperation relations with clients and suppliers Microenterprises The size of the companies Small enterprises Medium sized enterprises 1. Too high costs The identification of more advantageous business partners Non supplying services and products in due time Clients / suppliers bankruptcy The change of partners main business activity The insufficient amount of products in order to satisfy beneficiaries demands

243 Industry Constructions Trade Transportatio n Tourism Services The White Charter of Romanian SMEs in 2016 Studying the enterprises by the field where they activate (table no ), points out the following significant aspects: - the SMEs from the trade field register the higher percentages of SMEs, where is referred to the high costs (80.32), the change of partners main business activity (58.24), the insufficient amount of products in order to satisfy beneficiaries demands (21,62); - the companies from the tourism field register the superior percentages of economic units, where has been indicated Non supplying services and products in due time (46.67), Clients / suppliers bankruptcy (36.67) and the change of partners activity (26.67). Table no The differentiation of the causes for ending the SMEs relation with suppliers / clients by fields of activity No. The causes for interrupting SMEs cooperation relations with clients and suppliers Smes by fields of activity 1. Too high costs The identification of more advantageous business partners Non supplying services and products in due time Clients / suppliers bankruptcy The change of partners main business activity

244 6. The insufficient amount of products in order to satisfy beneficiaries demands

245 The White Charter of Romanian SMEs in 2016 MAIN FINDINGS of the enterprises activate only on the local market, of the companies target the national market, target the European Union market, 4.11 of the companies turn to markets from other countries outside Europe and 2.65 sell their products / services in other European countries of SMEs keep their clients and suppliers during Over 3/5 of SMEs half of the small and medium enterprises will lose between 1 to 5 clients in of the companies will interrupt the relation with 1 to 5 suppliers in The economic agents which maintain the suppliers and clients in 2016 register higher frequencies within the units from West (92.31), medium sized companies (82.95), economic agents from tourism (90). The percentages of organizations which in 2016 will lose or interrupt the relation with a part of the suppliers / clients register higher level among the companies from the Bucharest-Ilfov Region (27.53), medium sized enterprises (21.21) and companies from transportation (32.56). The main causes for ending the collaboration relations between SMEs and suppliers/clients in 2016 are: too high costs (52.28), the identification of more advantageous business partners (30.57), non supplying services and products in due time (26.19), clients /suppliers bankruptcy (19.71), the change of partners main business activity (13.97) and the insufficient amount of products in order to satisfy beneficiaries demands (12.23). The interruption of the relations of SMEs with a part of the suppliers/customers due to the costs too high it more common to companies from Central Region (71.84), micro enterprises (53.83) and enterprises from tourism field (80.32). 247

246 Chapter 11 INNOVATION WITHIN SMES Innovation activities In order to form a perspective over the medium-sized and small enterprises in Romania, knowing the nature of their innovative activities holds a great significance. Our research has shown that the innovation efforts within SMEs have mainly been focused towards new products (33.30), new management and marketing approaches (24.73), new technologies (23.18), IT modernization (7.85) and human resources training (7.03). We also note that absence of innovative approaches (23.18) holds the third place in the classification of innovative activities. See Figure We must also mention the fact a positive evolution has been registered, as compared to the previous year a p.p. decrease in the percentage of SMEs indicating the absence of innovative activities. From a structural point of view, we observe the following modifications, which represent an increase in all activities, respectively: new product development (+5.59 p.p.), new management and marketing approaches ( p.p.), new technologies (+7.92 p.p.) and human resources training (+2.44 p.p.). Not the case New Products New technologies New approaches to management and marketing Upgrading the information system Human Resources Training 33,30 27,71 24,73 12,58 23,18 44,95 22,17 14,25 7,85 5,16 7,03 4, Figure 11.1 Nature of innovation activities within SMEs 248

247 The White Charter of Romanian SMEs in 2016 Analyzing the innovation efforts in SMEs as per their age, we observe the following: - newly established companies register the lowest percentages of SMEs indicating a focus on development of new technologies (21.38), IT modernization (3.10) and training of human resources; - companies of 5 to 10 years of age indicate the highest frequencies of enterprises interested in new management and marketing approaches (26.52), IT modernization (10.39) and human resources training (7.89), but also the lowest percentages of interest in the development of new products (27.24); - enterprises with ages between 10 and 15 years register the highest percentage of entities indicating the development of new products (37.13) and new technologies (22.78); - economic agents of over 15 years register the lowest percentage of organizations interested in new management and marketing approaches (22.41); - companies indicating the absence of innovation activities are most common among entities older than 15 years (23.79). More information is presented in the table below. Table 11.1 Differentiation of innovation activities as per SMEs age SMEs age Nr. Innovation efforts focused on Under 5 yrs yrs yrs Over 15 yrs 1. New products New technologies New management and marketing solutions IT modernization Human resources training None

248 North-East South-East South South-West West North-West Centre Bucharest- Ilfov A classification of SMEs as per their development regions shows the following main elements: - companies indicating the development of new products are more often situated in the Western Region (46.51) and less often in the Centre (21.36); - SMEs concentrating their innovation efforts on the development of new technologies are in their highest percentage in the South-Eastern Region (34.93); - organizations interested in new management and marketing solutions are in higher numbers among SMEs in the North- Western Region (42.86) and smaller numbers in the case of the South-Eastern Region (8.90); - economic agents indicating the innovative potential of IT modernization are more frequent in the Western Region (46.15) and much less in the Bucharest-Ilfov Region (5.71); - SMEs interested in the training of human resources are in their highest percentage in the Western Region (38.46) and lowest in the Southern Region (3.08). More information is included in Table Table 11.2 Differentiation of innovation activities as per SMEs development region SMEs as per development region N o. Innovatio n efforts focused on 1. New products New technolog ies New managem ent and marketing

249 The White Charter of Romanian SMEs in 2016 solutions 4. IT moderniz ation Human resources training None Considering the impact of the companies size upon the innovative efforts (Table 11.3), we observe the following significant aspects: - there is a positive correlation between the SMEs size and the frequency with which they indicate new products and technologies and the training of human resources; - the percentage of companies indicating the absence of innovation activities is negatively correlated with the SMEs size: of micro-enterprises have no innovation activities a percentage 1.04 times higher (+1.05 p.p.) than that of medium-sized enterprises. Table 11.3 Differentiation of innovation activities as per SMEs size Nr. Innovation efforts focused on 1. New products SMEs size Micro-enterprises Small enterprises Medium-sized enterprises New technologies New management and marketing solutions 4. IT modernization Human resources training None

250 The analysis of Romanian SMEs as per their form of legal organization shows the following essential aspects regarding the nature and specificity of innovation activities operated (Table 11.4): - joint stock companies register the highest percentages of SMEs indicating the development of new technologies (33.33) and human resources training (13.89); - LLCs register more frequently innovation efforts focused on new products (33.65), new management and marketing approaches (25.45) and IT modernization (8.52); - enterprises with another form of legal organization hold the smallest percentage of entities mentioning the development of new products (30.58), new technologies (11.57), new management and marketing solutions (19.01) and human resources training (3.31); - companies indicating no innovation activities whatsoever are more frequent among entities with a different form of legal organization (38.84) and less among JSCs (19.44). Table 11.4 Differentiation of innovation activities as per SMEs form of legal organization Nr. Innovation efforts focused on JSC Form of legal organization LLC Other form of legal organization 1. New products New technologies New management and marketing solutions IT modernization Human resources training None

251 Industry Construction Commerce Transport Tourism Services The White Charter of Romanian SMEs in 2016 Table 11.5 Differentiation of innovation activities as per SMEs field of activity SMEs as per field of activity No. Innovation efforts focused on New products New technologies New management and marketing solutions 4. IT modernization 5. Human resources training 6. None The examination of innovation activities in SMEs as per their fields of activity (Table 11.5) reveals the following: - SMEs indicating an effort focus on the development of new products register the highest percentage in the case of organizations in Commerce (40.16) and the lowest in Construction (14.29); - companies focused on the development of new technologies are the most frequent among entities in the field of Tourism (36.67) and least frequent in Construction (14.29); - organizations indicating an interest in new management and marketing solutions are in highest percentage in Tourism (36.67) and lowest percentage in Industry (21.16); - economic agents registering IT modernization as important are more frequent in Industry (13.69) and least in Commerce (5.32); - SMEs mentioning the training of human resources hold the highest percentage among organizations in Construction (10.99) and lowest in Commerce (4.79); 253

252 - companies indicating the absence of innovation activities are the most frequent among entities in Transport (37.21) and least frequent in Tourism (10.00). An investigation of innovation efforts of SMEs, as per their performance in 2015 compared to 2014 shows the following elements (Table 11.6): - organizations with a much better performance register the highest percentage of SMEs interested in IT modernization (18.52) and human resources training (18.52); - companies with better results indicate an interest in the development of new technologies (32.62); - enterprises whose performance has stagnated register the highest percentage of companies mentioning the development of new products (35.99); - companies with poorer results hold the highest percentage of organizations interested in new marketing solutions (40.64); - companies indicating the absence of innovation activities are most frequent among entities with much poorer performance (75) and least frequent among those with better performance (18.03). Table 11.6 Differentiation of innovation activities as per SMEs performance Innovation efforts focused No. on Much better SMEs performance in 2015 compared to 2014 Better Identical Poorer Much poorer New products New technologies New management and marketing solutions 4. IT modernization Human resources training None

253 The White Charter of Romanian SMEs in Innovation investment Our research of innovation investment in products, process and organization shows the following elements: of SMEs have allocated no resources for innovation activities, while of companies have dedicated at least 1 of their total investment funds to innovation, over 6, over 11, over 21, over 51 and 0.63 of organizations have allocated 76 of their total investment funds to innovation (Figure 11.3). We observe that of economic agents dedicate 1 to 5 of their total investment funds to innovation, between 6 and 10, between 11 and 20, between 21 and 50, between 51 and 75, and 1.02 of companies dedicate over 76 of their total investment funds to innovation (Figure 11.2). The graphical representation of this situation is included in Figures 11.2 and ,46 24,75 10,99 1,85 1, ,68 34,26 0, Over

254 1, ,00 3,54 3,76 0, ,39 23,73 48, Over 76 Figure SMEs as per degree of investment in innovation in 2015 and 2014 Over 1 Over 6 Over 11 Over 21 Over 51 Over 76 10,24 12,73 6,70 2,20 2,49 0,63 0,95 27,63 24,55 46,53 51,36 65, Figure 11.3 Percentage of innovation in the total investment funds in SMEs 256

255 The White Charter of Romanian SMEs in 2016 The analysis of the SMEs percentage of investment dedicated to innovation as per their age reveals the following (Table 11.7): - SMEs indicating no resources allocated for innovation hold the highest percentage among organizations of 5 to 10 years (36.13) and lowest among those of 10 to 15 years (31.62); - companies allocating 1 to 5 are more frequent among newly established entities (22.49) and least among those older than 15 years (19.30); - organizations mentioning a level of 6 to 10 register the highest percentage among SMEs of 5 to 10 years (26.28) and lowest among those that are newly established (23.18); - economic agents indicating 11 to 20 are most frequent in the case of entities older than 15 years (8.42) and least frequent among companies of 10 to 15 years (4.27); - SMEs allocating 21 to 50 to innovation are most often among those of 10 to 15 years (13.25) and least among those of 5 to 10 years (9.49); - enterprises dedicating 51 to 75 to innovation are most frequent among entities of 10 to 15 years (2.14) and least frequent among those of 5 to 10 years (1.46); - organizations investing more than 76 of the total in innovation register the highest percentage among SMEs of 10 to 15 years (1.71) and lowest among those of 5 to 10 years (0.36). Table 11.7 Differentiation of investment percentage dedicated to innovation as per SMEs age Nr Percentage allocated to innovation from total of investments SMEs age Under 5 yrs 5-10 yrs yrs Over 15 yrs

256 Over Regarding the SMEs investment in innovation as per their development regions, we observe the following: - SMEs indicating no resources allocated to innovation hold the highest percentage among organizations in the Bucharest-Ilfov Region (42.06) and lowest in the Western Region (23.08); - companies mentioning a percentage of 1 to 5 allocated to innovation from their total investments are most frequent among the entities in the Western Region (30.77) and least frequent among those in the Southern Region (16.67); - organizations indicating 6 to 10 register the highest percentage in the Southern Region (35.42) and lowest percentage in the Western Region (15.38); - economic agents mentioning 11 to 20 are most frequent in the case of entities in the Western Region (15.38) and least frequent in the Centre Region (1.98); - SMEs directing 21 to 51 of their total investments toward innovation hold the highest percentage among organizations in the North-Western Region (22.37) and lowest percentage in the South-Western Region (5.45); - companies mentioning 51 to 75 are most frequent in the Western Region (7.69) and no manager in the Southern, North-Western and Centre Regions have indicated this option. - organizations whose 76 of the total investment have gone to innovation are the most frequent in the South-Eastern Region (3.42). More information is available in Table

257 North-East South-East South South-West West North-West Centre Bucharest-Ilfov The White Charter of Romanian SMEs in 2016 Table 11.8 Differentiation of investment percentage dedicated to innovation as per SMEs development region No. Percentag e allocated to innovatio n from total of investme nts SMEs as per development region over An investigation of the percentage of funds allocated to innovation from the total, as per SMEs size, we observe the following: - the percentage of companies indicating the absence of investment in innovation is negatively correlated with the SMEs size: of micro-enterprises a percentage 1.26 times higher (+7.73 p.p.) than the level corresponding to small enterprises and 3.86 times higher ( p.p.) than that of medium-sized enterprises; - companies mentioning having dedicated 1 to 5 of their total investments to innovation are most frequent among 259

258 medium-sized enterprises (26.98) and least frequent among micro-enterprises (19.89); - SMEs that have allocated between 21 and 50 of investments to innovation register the highest percentages among small organizations (14.52) and the lowest among micro-enterprises (10.17). More information is included in the table below. Table 11.9 Differentiation of investment percentage dedicated to innovation as per SMEs size SMEs size Nr. Percentage allocated to innovation from total of investments Micro-enterprises Small enterprises Medium-sized enterprises Over

259 The White Charter of Romanian SMEs in 2016 Table Differentiation of investment percentage dedicated to innovation as per SMEs form of legal organization Form of legal organization Nr. Percentage allocated to innovation from total of investments JSC LLC Other forms of legal organization Over The analysis of Romanian SMEs as per their form of legal organization shows the following elements (Table 11.10): - SMEs indicating no investment in innovation register the highest percentages among companies with another form of legal organization (52.89) and the lowest among LLCs (31.82); - JSCs register the highest percentages that have dedicated 1 to 5 of investment to innovation (17.65), 6 to 10 (23.53), 11 to 20 (17.65) and 51 to 75 (2.94) and no entrepreneur has indicated an allotment of over 76; - LLCs hold the highest frequency of companies dedicating 21 to 50 (12.08); - companies with another form of legal organization register the highest percentage of SMEs dedicating more than 76 of investments to innovation. 261

260 Industry Construction Commerce Transport Tourism Services The classification of companies as per their field of activity reveals the following essential aspects regarding the percentage of resources allocated to innovation from the total of investments: - SMEs mentioning no resources hold the highest percentage in the case of companies in Transport (41.86) and the lowest in Tourism (16.67); - companies mentioning 1 to 5 are most frequent among entities in Tourism (40) and least frequent in Construction (16.67); - organizations indicating a level of 6 to 10 register the highest percentage among SMEs in Construction (27.38) and the lowest among those activating in Transport (20.93); - economic agents indicating 11 to 20 are most frequent in the field of Tourism (13.33) and least in Commerce (4.55); - SMEs having dedicated 21 to 50 of investments to innovation are in highest numbers among companies in Services (14.19) and lowest in Tourism (3.33); - companies indicating 51 to 75 are most frequent among entities in Transport (2.33) and no entrepreneur in Tourism has indicated this option; - organizations having invested over 76 of their total investments register the highest percentage among SMEs activating in Tourism (3.33) and no entrepreneurs in Transport or Construction have indicated this option. More information is included in Table Table Differentiation of investment percentage dedicated to innovation as per SMEs field of activity SMEs as per field of activity No. Percentage allocated to innovation from total of investments

261 The White Charter of Romanian SMEs in Over The renewal of products and services The classification of our research s results regarding the percentage from the total turnover of income due to products and services newly introduced during the last year shows the following elements: of SMEs have received no income from new services and products, while of companies have billed at least 1 of the total number of orders, over 6, over 11, over 21, over 51 and 0.63 of organizations have indicated that over 76 of the total turnover has resulted from new or renewed products and services (Figure 11.5). We also observe that the percentage of new products and services generated revenue is in inverse ratio with the percentage of SMEs actually generating this revenue. Thus, of economic agents obtain 1 to 5 of their turnover from new products and services, between 6 and 10, between 11 and 20, between 21 and 50 and 1.57 of companies between 51 and 75 (Figure 11.4). 0, ,53 1,57 11,82 21,98 19,21 34,26 0,

262 3,98 1,55 10,17 15,11 18, ,44 50,48 0, Figure 11.4 Percentage of product renewal in SMEs in 2015 and 2014 Over 1 Over 6 Over 11 Over 21 Over 51 Over 76 31,24 24,55 16,13 12,73 5,96 2,20 1,98 0,63 0,43 65,74 49,52 58, Figure 11.5 Percentage of income generated from innovative products from the total turnover The classification of the percentage of income generated from innovative products within SMEs (Table 11.12) as per their age reveals the following aspects: - SMEs indicating no income from new products and services register the highest percentage among organizations of 5 to 10 years (36.13) and the lowest in companies of 10 to 15 years (32.05); 264

263 The White Charter of Romanian SMEs in companies mentioning 1 to 5 of their total income are most frequent among entities of over 15 Years (20.28) and least frequent among those of 5 to 10 years (16.79); - organizations indicating a level of 6 to 10 register the highest percentage among SMEs of 5 to 10 years (24.82) and the lowest among newly established enterprises (19.38); - SMEs with a percentage of 21 to 50 innovationgenerated revenue from their total revenue register the highest percentage among newly established organizations (10.73) and lowest among those older than 15 years (10.14); - companies mentioning 51 to 75 are most frequent among entities older than 15 years (2.45) and least frequent among the newly established enterprises (1.04); - organizations with more than 76 of their total turnover register the highest percentage among newly established SMEs (1.04) and lowest among those of 5 to 10 years (0.36). Table Differentiation of product renewal as per SMEs age Nr. Percentage of innovative products generated income SMEs age Under 5 years 5-10 years years Over 15 years Over The classification of companies as per their development region (Table 11.13) shows the following essential elements: 265

264 North-East South-East South South-West West North-West Centre Bucharest-Ilfov - SMEs indicating no revenue generated from new products and services register the highest percentage in the case of organizations in the Bucharest-Ilfov Region (41.53) and lowest percentage among those in the Western Region (15.38); - companies mentioning 1 to 5 from the total turnover are most frequent in the South-Western Region (28.83) and least frequent in the Southern Region (14.06); - organizations indicating a level of 6 to 10 register the highest percentage among SMEs in the Southern Region (28.13) and the lowest percentage in the North-Eastern Region (16.67); - economic agents mentioning 11 to 20 are most frequent among entities in the Southern Region (20.31) and least frequent in the Western Region (7.69); - SMEs indicating 21 to 50 register the highest percentage among organizations in the Western Region (30.77) and lowest in the Southern Region (3.65); - organizations mentioning 51 to 75 are most frequent among entities in the South-Western Region (3.60), while no entrepreneur in the Western Region has indicated this option; - companies with over 76 of the total turnover coming from innovation register the highest percentage among SMEs in the Centre Region (1.98) and no entrepreneurs in the Southern, Western and North-Western Regions has indicated this option. Table Differentiation of product renewal as per SMEs development region N r. Percentag e of innovative products generated income SMEs as per development region

265 The White Charter of Romanian SMEs in Over Regarding the impact of the companies size upon the percentage of innovative products generated income from the total turnover (Table 11.14), we observe the following significant aspects: - there is a positive correlation between the size of SMEs and the frequency with which they indicate 11 to 20 of income from innovative products, but also a negative one regarding SMEs that have indicated no income from new products and services: of micro-enterprises a percentage 1.39 times higher ( p.p.) than that of small enterprises and 2.90 times higher than that of medium-sized enterprises ( p.p.). 267

266 Table Differentiation of product renewal as per SMEs size Nr. Percentage of innovative products generated income Micro-enterprises SMEs size Small enterprises Medium-sized enterprises Over The analysis of Romanian SMEs as per their form of legal organization shows the following elements regarding the percentage of income realized from new or renewed products and services (Table 11.15): - SMEs indicating no income from new products and services register the highest percentage among companies with a different form of organization (52.07) and lowest with JSCs (31.79); - JScs register the highest percentage of SMEs with 6-10 (23.53) and 11 to 20 (17.65) of income deriving from innovative products, while no entrepreneur has indicated the intervals from 51 to 75 or over 76; - LLCs hold the highest percentage that indicate 1 to 5 (20.26) and 21 to 50 (11.42) and the lowest mentioning no income (31.79); - enterprises with another form of legal organization register the highest percentage of companies indicating a level between 51 to 75 (2.48) and over 76 (0.83). 268

267 The White Charter of Romanian SMEs in 2016 Table Differentiation of product renewal as per SMEs form of legal organization Nr. Percentage of innovative products generated income JSC Form of legal organization LLC Other forms of legal organization Over The classification of companies as per their field of activity (Table 11.16) reveals the following essential elements: - SMEs indicating no income from new products and services register the highest percentage among organizations in Construction (41.67) and the lowest percentage among those in Tourism (20.00); - companies mentioning 1 to 5 are most frequent in the field of Tourism (43.33) and least in Construction (14.29); - organizations indicating 6 to 10 register the highest percentages among SMEs activating in Construction (26.19) and lowest in Tourism (10.00); - economic agents with 11 to 20 register the highest percentages among entities in Industry (15.77) and lowest for companies in Transport (6.98); - SMEs with 21 to 50 innovation income from the total turnover hold the highest percentage among organizations in Services (15.43) and lowest in Transport (4.56); 269

268 Industry Construction Commerce Transport Tourism Services - companies mentioning 51 to 75 are most frequent in the field of Tourism (6.67) and no entrepreneur in Construction has indicated this option; - organizations with 76 register the highest percentage among SMEs activating in Tourism (3.33) and no entrepreneur from the field of Transport has indicated this option. Table Differentiation of product renewal as per SMEs field of activity Nr. Percentage of innovative products SMEs as per field of activity generated income Over The main methods of innovation within SMEs The main methods of implementing innovation within SMEs are: adaptation and modification of new elements initially developed by other organizations (38.52), individual research and development activities (34.65), the complete take-over of new elements initially developed by other companies (22.15) and cooperation with other organizations for research and development activities 270

269 The White Charter of Romanian SMEs in 2016 (4.67). Compared to the previous year, we observe the following modifications: (1) an increase in the percentage of individual research and development (+9.8 p.p.) and the complete take-over of new elements initially developed by different organizations (+2.3 p.p.) and (2) a decrease in adaptation and modification of new elements initially developed by other organizations (-10 p.p.) and in the cooperation with other organizations for research and development activities (-2.1 p.p.). The graphic representation can be found in Figure Adapting and modifying elements of novelty originally developed by other organisations Individual progress of research and development activities The full takeover of the innovations originally developed by other organisation 38,52 48,46 34,65 24,93 22,15 19,89 Cooperation with other organisation in order to conduct the research and development activities 4,67 6, Figure 11.6 Methods of innovation achievement within SMEs The classification of SMEs as per groups of age regarding their main methods of innovation shows the following aspects (Table 11.7): - SMEs indicating the adaptation and modification of new elements initially developed by other entities register the highest percentage among companies of 10 to 15 years (41.71) and lowest among those of 5 years to 10 years (46.58); - SMEs mentioning the cooperation with other organizations for research and development activities are most frequent 271

270 North-East South-East South South-West West North-West Centre Bucharest- Ilfov with entities of 5 to 10 years (5.56) and less frequent among the newly established companies (3.37); - enterprises indicating their own research and development activities register the highest percentage among companies older than 15 years (36.61) and lowest in organizations of 10 to 15 years (32.70); - organizations indicating the complete take-over of new elements developed initially by other organizations register the highest percentage among newly established SMEs (23.97) and lowest among those older than 15 years (20.47). Table Modalities of innovation achievement as per SMEs age Nr. Methods of innovation Under 5 yrs SMEs age 5-10 yrs yrs Over 15 yrs Adaptation and modification of new elements initially developed by other organizations Cooperation with other organizations for research and development activities Individual research and development activities Complete take-over of new elements initially developed by other organizations 39,33 36,11 41,71 37,40 3,37 5,56 4,27 5,51 33,33 35,71 32,70 36,61 23,97 22,62 21,33 20,47 Table Modalities of innovation achievement as per SMEs development region SMEs as per development region Nr. Methods of innovation 272

271 The White Charter of Romanian SMEs in Adaptation and modification of new elements initially developed by other organizations Cooperation with other organizations for research and development activities Individual research and development activities Complete take-over of new elements initially developed by other organizations The analysis of the main methods of innovation implementing as per SMEs development region reveals the following significant aspects (Table 11.18): - SMEs indicating as innovative approach the adaptation and modification of new elements initially developed by other entities register the highest percentage among organizations in the North-Eastern Region (50.00) and lowest among those in the Southern Region (29.41); - SMEs mentioning the cooperation with other organizations for research and development activities are most frequent in the Norh-Eastern Region (14.00) and lowest in the South- Western Region (2.83); - companies that prefer individual research and development activities register the highest percentage among entities in 273

272 the South (43.53) and least frequent in the North-Eastern Region (10.00); - organizations mentioning the complete take-over of new elements initially developed by other entities are most frequent among SMEs in the Western Region (36.36) and least among those in the North-Western Region (9.72). Considering the impact of the SMEs sizes upon the frequency of innovation methods implementation, we observe the following significant aspects (Table 11.9): - there is a negative correlation between the size of companies and the percentage of entities mentioning the cooperation with other organizations for research and development activities and the complete take-over of new elements initially developed by other organizations; - SMEs indicating as main innovation approach the adaptation modification of new elements initially developed by other entities register the highest percentages among medium-sized enterprises (57.89) and lowest among small enterprises (36.45); - companies that prefer the complete take-over of new elements initially developed by other organizations register the highest percentage among medium-sized enterprises (14.04) and lowest among micro-enterprises (3.78). Table Modalities of innovation achievement as per SMEs size No. Methods of innovation Micro-enterprises SMEs size Small enterprises Medium-sized enterprises 1. Adaptation and modification of new elements initially developed by other organizations Cooperation with other organizations for research and development activities Individual research and development activities

273 The White Charter of Romanian SMEs in Complete take-over of new elements initially developed by other organizations The analysis of SMEs as per their form of legal organization reveals the following essential aspects regarding their main methods of innovation implementation (11.20): - JSCs register the highest percentage of enterprises mentioning the adaptation and modification of new elements initially developed by other organizations (47.83) and the cooperation with other companies for research and development activities (8.70); - LLCs are the most frequent organizations indicating individual performance of research and development activities (34.89); - companies with another form of legal organization register the highest percentage of entities indicating the complete take-over of new elements initially developed by other organizations (39.25). Table Modalities of innovation achievement as per SMEs form of legal organization No Methods of innovation Adaptation and modification of new elements initially developed by other organizations Cooperation with other organizations for research and development activities Individual research and development activities JSC Form of legal organization LLC Other form of legal organization Complete take-over of new elements initially developed by

274 Industry Construction Commerce Transport Tourism Services other organizations The analysis of the main methods of innovation implementation as per SMEs fields of activity shows the following significant aspects (Table 11.21): - companies that prefer the adaptation and modification of new elements initially developed by other entities are most frequent among organizations in Construction (47.44) and least among those in Services (35.52); - SMEs indicating cooperation with other companies for research and development activities register the highest percentage among organizations in Construction (8.97) and the lowest among those activating in Commerce (3.23); - organizations mentioning individual research and development activities are most frequent among those in Tourism (37.93) and least frequent among organizations in Construction (20.51); - economic agents indicating the complete take-over of new elements initially developed by other organizations register the highest percentage among enterprises activating in Services (24.14) and lowest among organizations in Tourism (10.34). Table Modalities of innovation achievement as per SMEs field of activity SMEs as per field of activity N o. Methods of innovation 1. Adaptation and modification of new elements initially developed by

275 The White Charter of Romanian SMEs in 2016 other organizations 2. Cooperation with other organizations for research and development activities Individual research and development activities Complete takeover of new elements initially developed by other organizations The main financing sources for research and development investment within SMEs derive mainly from: own resources (76.19), bank credits and loans (15.97), European Union funds (4.93) and funds from central (1.09) and local (0.36) public authorities Own sources Loans and bank loans EU funds Other Funds from central public authorities Funds from local public authorities 15,97 21,09 4,93 2,04 2,19 2,04 1,09 0,44 0,36 0,15 76,19 71,35 277