1. Enabling experimentation – why
young firms matter for jobs and
growth
Dirk Pilat and Chiara Criscuolo
Directorate for Science, Technology and Industry
dirk.pilat@oecd.org and chiara.criscuolo@oecd.org
The Europe 2020 Summit
Lisbon Council, Brussels,
22 May 2014

2. Outline
– New evidence on young SMEs
– Policies for entrepreneurship and experimentation
– The role of ICT and skills

3. 3
Small firms are important for
employment …
Contributions of SMEs to employment, job creation and job destruction, 2001-2011
Source: Criscuolo, Gal and Menon (2014), www.oecd.org/sti/dynemp.htm

4. 4
… but it is young SMEs that create the
new opportunities …
Contributions of young firms to employment, job creation and job destruction, 2001-2011
Source: Criscuolo, Gal and Menon (2014), www.oecd.org/sti/dynemp.htm

5. 5
… and not all SMEs
Average over 18 countries, 2001-2011, in %
Source: Criscuolo, Gal and Menon (2014), www.oecd.org/sti/dynemp.htm

6. 6
During the crisis, old firms
destroyed more jobs
Average over 18 countries, 2001-2011, in %
Source: Criscuolo, Gal and Menon (2014), www.oecd.org/sti/dynemp.htm
-8%
-6%
-4%
-2%
0%
2%
4%
6%
Young (entry-exit) Young (incumbents) Old (exits) Old (incumbents) Total

7. Growth of young firms is a challenge in many
OECD countries …
Average size of start-ups and old firms, in persons employed, services sector
Source: Criscuolo, Gal and Menon (2014), www.oecd.org/sti/dynemp.htm

8. … as resources in some countries don’t flow to
the most innovative firms
Change in capital stock associated with a 10% change in patent stock (2003-2010)
Source: Andrews, Criscuolo, and Menon (2014).

9. A range of policies influence the reallocation of
resources to innovative firms
Source: Andrews, Criscuolo and Menon (2014)
Change in firm capital associated with a 10% change in the patent stock
Selected OECD countries; 2002-2010

10. Key findings
1. Net job creation does not come from all small firms, but only
from those that are young.
2. Growth of young innovative firms means “up” or “out”;
entrepreneurs need flexibility to experiment with new
technologies (such as the Internet) and new business models.
3. Growth dynamics of firms differs across countries; in
some countries, firms hardly scale after entry.
4. Policy matters, and has impacts on the scope for
experimentation, and for the allocation of resources to the
more innovative firms.
10

11. Policies for Europe to unlock job creation from
young firms
• Enable experimentation: Reduce barriers to the entry (e.g. red
tape), growth (e.g. size-specific regulations), and exit/failure of
firms (e.g. penalising bankruptcy legislation, overly strict
employment protection legislation).
• Level the playing field for new and innovative firms: Some
policies favour incumbents and MNEs (e.g. R&D tax credits).
• Strengthen the innovation system for young and
innovative firms, e.g. through enhanced access to (risk) capital,
network development, mentoring of entrepreneurs, skills
development, etc.
• Complete the European Internal Market, so firms can scale
more easily across borders.
• Celebrate entrepreneurship.
11

12. Skills are a challenge: 2 out of 3 people lack the
skills to succeed in a technology-rich environment
12
185 m
259 m
159 m
36 m
very low skills or opted
out of the test
low skills
medium skills
solid skills
2 out of
3
people
lack
skills
for the
digital
age
Source: OECD Survey of Adult Skills, October 2013.

13. 70 50 30 10 10 30 50 70
United States
Poland
Ireland
Slovak Republic
England/NI (UK)
Japan
Denmark
Estonia
Australia
Austria
Average
Canada
Germany
Czech Republic
Norway
Flanders (Belgium)
Netherlands
Sweden
Finland
Korea
Level 2 Level 3
Young adults (16-24 year-olds) Older adults (55-65 year-olds)
Per cent
Though young people score higher!
Share of young and old adults at the two highest proficiency levels in
“problem solving in technology-rich environments”
Source: OECD Survey of Adult Skills, October 2013.

14. Need for national skills strategies
• Develop / strengthen links between the world of learning
and the world of work, e.g. in pairing ICT with sector-
specific skill needs
• Provide relevant training for workers, including ICT skills;
• Convince adults of the benefits from better skills – learn
to learn;
• Provide easy-to-find information about adult education
activities;
• Use new technologies for online learning, such as MOOCs
(Massive Open Online Courses)
• Recognise and certify skills proficiency.

15. Thank you
15
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DYNEMP:
www.oecd.org/sti/dynemp.htm
Website: www.oecd.org/sti
Newsletter: www.oecd.org/sti/news.htm
Contact: Dirk.Pilat@oecd.org
Chiara.Criscuolo@oecd.org
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