SME
Small and medium-sized enterprises (abbreviated to SMEs) have been defined since 2003 by the Commission of the European Union using the following parameters: Number of employees, annual turnover or balance sheet total. By means of a company’s figures in the area of employee numbers, annual turnover or annual balance sheet total, it is then possible to calculate whether a company is to be classified as a “microenterprise”, “small enterprise” or “medium-sized enterprise”. Furthermore, a company is only recognized as a small or medium-sized enterprise by the EU if this company is independent, i.e. it is neither a partner of another company, nor is it affiliated with another company (less than 25 % share as shareholder/provider).
The SME thresholds
The thresholds of number of employees, annual maximum turnover and annual maximum balance sheet constitute the three criteria that determine whether, and if so, in which SME category a company falls. The number of employees of a company results from the total number of its full-time and part-time employees as well as its seasonal employees. This excludes apprentices, persons undergoing vocational training and persons on maternity or parental leave. The number of employees is expressed in annual work units (AWU). Each full-time employee counts as one unit. Part-time and seasonal employees, as well as persons who did not work for the company for the entire year, count as a corresponding fraction of a unit. The annual maximum turnover or the annual maximum balance sheet is calculated by the respective sales or service revenues generated by an enterprise during a year, taking into account all sales deductions (excluding value-added tax and other indirect taxes). In contrast, the annual maximum balance sheet of a company always refers to the main assets of the respective company.
Importance of SMEs
Attention to small and medium-sized enterprises has a long tradition both in (German) empirical economic research and in (West) German economic policy. Employment and innovation in Germany are based to a large extent on the services provided by small and medium-sized enterprises. However, this also allows the opposite conclusion: The current weak growth of the German economy and its innovation and employment problems are also partly problems of SMEs. At the beginning of the 19th and 20th centuries, small-scale forms of organization in craft trades and commerce were still seen as a hindrance to the emerging industry. This view did not change until the advent of the social market economy. This economic order sees small and medium-sized enterprises as the foundation of a functioning national economy. Particularly in the years from 1928 to 1948, small and medium-sized enterprises were seen as the solution to mass unemployment, shortage management and the agglomeration of large-scale industrial and dictatorial state power. Today, too, SMEs play a major role in view of the economic problems of our time. In particular, their potential in the areas of job creation, securing structural change, generating innovations and their contribution to the further integration of the German economy into the global economy make SMEs important participants in the economy.
