Analysing the Determinants of Policy Preferences Expressed by European SME Interest Groups

Analysing the Determinants of Policy Preferences

Expressed by European SME Interest Groups

Jeffrey Melis – S2205785

Leiden University – Faculty Governance and Global Affairs

Master Thesis Public Administration

Advisor – Dr. N. A. J. van der Zwan

1. Introduction

In 2008 the financial crisis struck the European Union, the consequences of which were spread throughout all sectors of the economy. The failure of the banking sector also had widespread implications on the availability of credit for European companies. During the financial crisis the European Union developed a so called finance gap. A survey of European small and medium enterprises (SMEs) reported that 17% of surveyed SMEs were

experiencing difficulty with obtaining credit (European Commission, 2009, p.4), making it the second most common obstacle for SMEs, behind finding customers. In the European Union SMEs are defined as enterprises that “employ fewer than 250 persons and either have an annual turnover that does not exceed EUR 50 million, or an annual balance sheet not exceeding EUR 43 million.” (European Commission, 2016, p.10).

As is well known the financial crisis led to a great recession, but the numbers of the first year are quite staggering and are valuable to keep in mind when looking at the developments for SME finance. From 2007 to 2008 growth rates for exports, real GDP and employment dropped from 5,5%, 2,9% and 1,7% to 1,6%, 0,8% and 0,9% respectively(European Commission, 2009). In the following year these numbers reached -13,8%, -4,1% and -2,3% in the European Union. At the time, the expectations were that these effects would heavily limit the success of SMEs, with all sizes experiencing negative growth rates. These estimates paint a grim picture for European SMEs.

Furthermore, European banks were much more restrictive in providing loans, with more risk margins and larger collateral (UEAPME, 2009). This is especially dangerous given that since 2002 SMEs have been the driving force behind the European economy (European Commission, 2009, p.49). However, SMEs are not only being limited from the lack of

banks being more reluctant to provide loans to SMEs, they needed to turn to other finance streams, but the financial crisis had also lowered the willingness of other financial institutions to provide SMEs with capital. As a result, 63% of surveyed SMEs felt that the economic crisis had a negative effect on the accessibility of finance (European Commission, 2009, p.5). These developments have thus resulted in a finance gap for European SMEs, with otherwise healthy enterprises being unable to acquire funds to operate and expand their business. This, in turn, results in stagnation, especially since the problems are most common among small and young SMEs, which have little to fall back on.

To put the economic downturn in perspective, the European SME sector grew by 13% from 2002 to 2008 and was responsible for an annual job growth of 1,9% in the employment by SME. However, over the course of 2009 and 2010, European SMEs were projected to lose 3,25 million jobs (European Commission, 2009, p. 6). These developments pose a real threat to the European economy in the medium and long run if nothing is done to quickly pull European SMEs back up. These structural effects are caused by issues such as a temporary reduction in research and development or permanent labour market exits due to higher unemployment (European Commission, 2009, p.10). This is especially relevant because, in 2008, European SMEs were responsible for 67,4% of employment and 58% of value added to the economy(European Commission, 2009, p.15 & p.35). Taking into account that European SMEs are responsible for over half of the economic activity and employment within the EU it was imperative for the European Union to address the issues faced by these enterprises.

As mentioned earlier, one of these issues is the difficulty that European SMEs face in acquiring finance. The European Union has, since the start of the crisis, kept an eye on the developments of the credit access that SMEs have had and has put forth multiple programs to try and remedy the problem. In 2008, for instance, the European Commission adopted the Small Business Act (SBA), which aims to:

“improve the overall policy approach to entrepreneurship, to irreversibly anchor the “Think Small First” principle in policymaking from regulation to public service, and to promote SMEs’ growth by helping them tackle the remaining problems which hamper their development” (European Commission, 2008, p. 3)

It is within the framework of the SBA that the European Commission has tried to solve the problems caused by the financial crisis with regard to European SMEs. They mention the need for alternatives to debt financing to ensure SMEs have sufficient access to finance. The alternatives that have been used in the open consultations by the European Commission and will therefore be discussed in this thesis include: equity financing,

mezzanine financing, supply chain finance, and crowdfunding. Utilizing the SBA, multiple different programmes have been set up to tackle the issues faced by European SMEs. In light of studies on the extent of the finance gap, which was up to potentially 20% in the

Netherlands (de Silanes et al, 2015), it is clear to see why such alternatives needed to be developed. However, there are many parties that have an interest in these alternative finance solutions. These stakeholders include organisations such as the European Commission, national governments, banks, venture capitalists and national and international SME business associations. In order to get all these stakeholders to cooperate, the European Commission has, throughout the years following the crisis, set up multiple different programmes and institutions to address the issue of SME finance. Among these programmes are, among others, the European Fund for Strategic Investment, which was launched by Jean-Claude Juncker in 2014, and the programme for the Competitiveness of Small and Medium Enterprises (COSME). These programmes provide meaningful insight into how certain interest groups feel about specific initiatives. These opinions can be gathered from their responses to the open consultations that deal with these programmes and their own statements on issues brought up in and around these programmes.

The European Commission is often criticized for a lack of democratic processes in their operations (Hooghe and Marks, 2009). Open consultations are one of the ways in which the European Commission tries to solve its legitimacy problem by utilizing public support. They also help the European Commission receive feedback regarding the feasibility and challenges of the policy at hand (Rasmussen & Carroll, 2014). A study by Bunea (2017, p. 66) found that business stakeholders and insiders do not perceive that the system has a bias towards them, showing that it might help solve the legitimacy problem. On the other hand, Marxsen (2015, p.279) found that open consultations are neither representative of public opinion, nor do they remove the bias experienced by economic interests. An open

consultation gives the European Commission access to expert knowledge and information about both the domestic and European encompassing interest (Bouwen, 2004). Using all this information the European Commission also strengthens its position with regards to the other legislative bodies in the European Union.

In 2014, the European Commission was looking to update the SBA to ensure that SMEs would thrive in the European economy. In order to ensure that they considered the stance of all interest groups on the new SBA they conducted an open consultation. This open consultation provides a great opportunity to look at the different interest groups that might want to sway the European Commission one way or another. Because of the differences across countries and organisations this provides an excellent insight into how different SME interest groups feel about different approaches to solve the finance gap faced by European SMEs. In 2017, the European Commission also conducted an open consultation to evaluate the COSME programme, which provides another look at the stances of SME interest groups when it comes to SME policy.

Until now, research in the field of SME finance has determined that SMEs that are credit-rationed turn to several other tools of finance, such as trade credit and informal loans

(Casey & O’Toole, 2014, p.190). This shows that SMEs have an interest in alternatives to traditional credit lines if banks are unwilling to adequately supply credit. Another study has determined which type of finance different SMEs prefer in different stages of their lifecycle, demonstrating that established SMEs are more likely to receive bank financing than new enterprises (Andrieu, Staglianò & van der Zwan, 2018, p.257). This study also concludes that the size and age of SMEs has an influence on the success of applying for credit, but that these differ across countries, showing that differences in the structure of the SME sector might mean certain forms of finance are less attractive in certain countries (Andrieu, Staglianò & van der Zwan, 2018, p.259). At the same time, there is research on why SMEs join business associations (Wilts & Meyer, 2005) and why they lobby lawmakers for specific policies (Bengston, Pahlbeg & Pourmand, 2009). However there is very little research on how SME interest groups ensure that they adequately represent their diverse membership. Because of the fact that the members of the interest groups all have different demands and expectations of their representative this might help explain different levels of support for particular initiatives to secure credit for European SMEs.

This research will try to find an answer to the question: do the membership structure of an SME interest organisation and the state of the SME sector affect their support for SME finance initiatives? To answer this question, this thesis will employ a co-variational case study approach. Following the logic of the co-variational case study enables a clear way to study whether differences in the membership structure or macroeconomic circumstances affect the support of SME interest groups for SME finance initiatives, while keeping all else equal. Data will be collected on Dutch, German and Danish SME interest groups from open consultations conducted by the European commission and from documents published by the interest groups. In the second chapter the theoretical framework of the thesis will be laid out. The third chapter will describe the methodological approach employed in this thesis. The

fourth chapter will discuss the empirical findings of the thesis. The fifth chapter will discuss the findings of this thesis and reconnect it to the current literature. The sixth and final chapter will outline the most important findings of the thesis and discuss the answer to the research question.

2.

Theory

Before delving into any specific theories, there is one concept that needs to be defined. The question at hand is: what is an SME? In the context of this thesis, and within the EU, there is a clear definition of SME, which was already mentioned in the introduction. But, there are further distinctions to be made when it comes to SMEs. Once again, this thesis will utilize the definitions set forth by the European Commission. Table 1 provides an overview of the distinctions that the European Commission draws within the SME sector (European Commission, 2016, p. 11). Using this distinction solves the problem of over-homogenisation of firms that has historically been a problem when it comes to research that focuses on SMEs (Wapshott and Mallett, 2018, p. 766). However, since this thesis focuses on SME interest groups, which represent a large amount of varied SMEs, this distinction does not necessarily need to be made.

Enterprise Category Employees Annual Turnover or Annual

Balance Sheet Total

Medium-sized < 250 _{≤ €50 million or €43 million}

Small < 50 _{≤ €10 million or €10 million}

Micro < 10 _{≤ €2 million or €2 million}

Table 1 - SME division as defined by the European Commission

SME policy

The first thing that needs to be done is what SME policy is and what aspect of SME policy this thesis will deal with. SME policy focuses on firms starting at the start-up phase (Lundstrom & Stevenson, 2005, p. 55). This is in line with the aim of this thesis, which looks at opinions regarding the financial options that are available to European SMEs. Policies that

deal with the helping entrepreneurs set up their enterprises, known as entrepreneurship policy, are outside of the scope of this thesis. Furthermore, they set forth that policies that focus on opportunity and skill measures will become increasingly important as a firm moves through the phases of its life cycle (p. 56). The consequence of this is that SME interest groups are more supportive of policy changes that promote SME policy over entrepreneurship policy. This is because firms that do not exist yet are not members of the SME interest group. On the other hand, SME interest groups can be expected to have an interest in expanding their membership by promoting measures that encourage the creation of new enterprises, at the cost of more competition to their current members. This second measure is something that is expected out of Chambers of Commerce to a larger degree, since their aims often include expanding the total amount of businesses. Therefore, it is possible for SME interest groups to support both types of policy.

There are, however, many different aspects to SME policy. Not all of these policy areas are relevant to this thesis. Wapshott and Mallett (2018) have defined three common areas of interest in SME policy in their study of SMEs in the United Kingdom, namely potential for growth, struggle to access finance and the burden of regulation. In this study, the main focus is on the second aspect, access to finance. Interestingly, an article by Beck and Demirguc-Kunt (2006), finds that while creating a competitive business environment through policies addressing the lack of finance for SMEs is valuable, these measures might be more effective when aimed at all firms. This would mean that SME focussed policies might not be the best way for SME interest groups to improve the options available to their members. They also note that if the business environment is weak, it might be counterproductive to support SME growth. With regards to this research it means that SME interest groups might be expected to only favour expanding SME finance tools if there are proper institutions in place

to utilize these options. However, if these institutions are lacking these interest groups might instead put more focus on institution building.

While the main focus of this research is on access to finance, it is important to address the accompanying changes brought by the SBA COSME programmes. Among these changes are a reduction in the administrative burden, encouraging best practice among national administrations and creating analytical tools for better policy. These issues deal with the interaction of SMEs with the regulatory sphere, rather than the financial sphere. Since the focus of this paper is on the views that SME interest groups have on the availability of finance, these policy aims are outside of the scope of this research. However, it is important to note that adding these policies are in line with what we would expect with regards to the study by Beck and Demirguc-Kunt (2006) and their findings with regards to the importance of institutions and institution building for the successful implementation of SME policy. However, since the countries of interest in this study are the Netherlands, Germany and Denmark, these measures, while important, should not have a large impact on the support of SME interest groups for the COSME regulation. This is because that these countries all have relatively well developed compared to some of the countries used in the study by Beck and Demirguc-Kunt (2006), which included many South American countries. Furthermore, given the fact that all these countries are EU members and the policy proposals are all at the European level the institutions in place are similar across all three countries.

Interest Groups in the European context

In order to understand how SME interest groups influence policy in the European context it is necessary to first look at how business interests in general try to shape European Union policy. A study by Bouwen(2004), compares the type of access goods that business interest

are able to offer with those required by the three main European bodies, the European Parliament, the European Commission and the Council of Ministers. Since this study is mainly focussed on open consultations, the European Commission is the main body that needs to be analysed. These access goods are expert knowledge, information about the domestic encompassing interest and information about the European encompassing interest. The European Commission cares most about expert knowledge, followed by information about the European encompassing interest and least about information about the domestic encompassing interest (Bouwen, 2004, p.345). Unfortunately national associations are best suited to supply information about the domestic encompassing interest, which means that the European Commission might have little reason to allow them access to the policy process. Bouwen (2004, p.355) confirms this in his study. This shows that it is much more difficult for national SME interest groups to gain access to the European Commission compared to other interest groups. Access in this case is defined as a group entering a given political arena (or institution) after passing a threshold set by a relevant gatekeeper (Binderkrantz et al., 2016).

While Bouwen’s study indicates that access to the European Commission is hard to obtain for national SME interest groups, it does not necessarily mean that they will not try to make their voices heard in this political arena. Halpin and Fraussen (2017) put forth two other key concepts that relate to how interest groups engage with policy makers, namely involvement and prominence. They define involvement as the degree to which an organisation participates in the policy making process, with regards to, for instance, open consultations (Halpin and Fraussen, 2017, p. 725). The other concept discussed in the paper is prominence. This term is meant to capture the degree to which an interest group is taken for granted in a given policy arena. Prominence puts the focus on how external actors perceive a group. This creates a hierarchy of interest groups in a given field. (Halpin and Fraussen,

2017, p. 727). Because these three concepts all determine the effectiveness of a given interest group in lobbying European Union institutions it becomes possible that national SME interest groups are able to more effectively influence policy in the European Commission than in a different European Union body, especially if they obtain a higher degree of prominence. This remains possible because Bouwen’s (2004) study only demonstrates that on average national associations have less access to the European Commission than individual firms or European associations but this finding does not preclude national SME interest groups from using their resources to influence policy in this political arena. Additionally it is important for SME interest groups to participate in open consultations to obtain and maintain access, prominence and involvement, since it is one of the guaranteed ways in which they can voice their opinion to the European Commission.

Given that open consultations are one of the main ways for SME interest groups to reach the European commission it is necessary to consider the importance of the mode of communication. Chalmers (2013, p.41) found that “the medium is more important than the actual content of the information” when it comes to increasing access. Chalmers’ findings mean that there might be a significant difference in impact on policy when an SME interest group delivers their views through an open consultation as opposed to through influencing the media and public perception. The question this poses is what medium is the most effective for SME interest groups to use, should they focus on inside or outside tactics to push their preferred policies? However, this question might be an oversimplification of the issue at hand. Beyers (2004), argues that it is in fact better to use a large number of different tactics than to focus all attention on one single tactic. Chalmers’ (2013, p. 53) data shows that professional associations demonstrate a large focus on open consultations and forms of direct communication such as emails, letters and face-to-face meetings. The reason that national

SME interest groups might use such tactics is that they directly and quickly allow them to express their concern or support for policies without having to go through the lengthy process that is associated with outside tactics, such as media campaigns (Chalmers, 2013). Another key aspect of open consultations is that by providing the European Commission with insight through this medium demonstrates that the SME interest group is politically active, since open consultations are publicly available.

Another aspect that can explain national SME interest groups’ lobbying efforts in the European context is the idea that there are benefits to building a good relationship with the institutions. This hinges on the idea of prominence discussed earlier and relies on the idea that the European Commission encourages lobbying groups to adopt a more relational approach, instead of focussing on a transactional approach (Taminiau and Wilts, 2006, p. 124). These two approaches separate interactions between interest groups and the European Commission by the amount of times they occur. Maintaining a good relationship with the European Commission requires continued interactions, while a transactional approach tries to achieve one single goal and does not develop ties with the institution. An interesting consideration that follows is that in order to maintain a good relationship interest groups need to provide valuable information and insight on issues that they might not directly benefit from (Coen, 1997).

The final aspect of interest group lobbying in the European Union is the usage of lobbying coalitions. Bunea (2015, p.294) finds that in open consultations, organisations act and lobby in coalitions. What this means is that there is reason to believe that similar organizations might, through common membership of a European-level association, be able to communicate and agree on providing a common stance in the open consultations. Another

finding of the study by Bunea (2015) is that the inter-organizational relationships also influence whether or not an organization joins in the open consultation in the first place. The existence of lobbying coalitions points to the fact that interest groups would have similar policy preferences. If this is the case, it would mean that we would expect that both Dutch and German SME groups have similar positions on the SBA open consultation, and the same would hold for their chambers of commerce as long as they share a lobbying coalition.

SME interest groups and associations

Having discussed the position of interest groups in the European Union it is time to turn attention to SME interest groups. To understand why they hold certain policy positions it is necessary to know why they exist and what they do. In order to understand the positions taken by national SME interest groups it is important to understand who they represent and what this means for their lobbying strategies, especially in the European context. In the Netherlands, there are over 800 national business associations (Wilts and Meyer, 2005, p. 180). Wilts and Meyer (2005) use the membership in these associations to explain why firms join and stay members of business associations, SME interest groups among them. In general, there are two reasons to join a business association: collective action and individual considerations, such as access to expertise offered by the association that are discussed in the literature. Their study finds that over 80% of firms claimed collective action as the most important reason for membership, while individual motives were mentioned much less (p.181). However, these results are mainly focussed on small, sector-specific business associations, whereas this research is interested in the national inter-sectoral business associations, which can exert more political influence.

A study by Bengtson, Pahlbeg and Pourmand (2009) found that most firms use membership in a business association to gain information. We might therefore expect that SME interest groups put more effort into informing their members than in lobbying the European Commission for more favourable policies, since this is what their members expect from them. However, the limitation of the study by Bengtson et al. (2009) is that it is focussed on what small firms expect from their business associations. This means that it does not take into account the fact that SMEs might not understand the importance of actions that their interest group takes with regards to lobbying. The findings of Bengtson et al. are supported by a different study of French business associations showing a shift in emphasis from the logic of influence to the logic of membership (Woll, 2006). The logic of influence and logic of membership are concepts that try to explain how an interest group tries to maintain relevance. According to the literature they have two options, they can either pursue political influence or manage internal cohesion (Woll, 2006, p. 490). Interestingly, there is another option for business associations to shift their focus from influence to membership, namely an apolitical membership (Jordan and Halpin, 2004). An apolitical membership would allow the SME interest group to focus its attention to providing information to its members because they have simply no interest in their interest group lobbying to the European Union. In this sense it is important that the reform at hand is something that the members have an opinion on; otherwise there is no incentive for the interest group to act in this policy area. In this case, it is safe to say that SME interest groups would have an interest in expressing their support for policies that their membership agrees with and voicing concern on issues they disagree with, to show members that they are acting in their interests. Another reason for SME interest groups to stay politically active is that shifting focus to servicing members might diminish the political power of the association. This also has the consequence of making it difficult to reduce that amount or quality of services provided since

this would mean losing members. (Jordan and Halpin, 2004, p. 447) It is for this reason, that, even though firms might show less interest in certain policies, it is still in the SME interest groups interest to stay politically active, which means that SME interest groups will voice their opinion on relevant policy, regardless of their members’ indifference on the topic. A final point to note is that

Corporatist theories of business associations claim that the interests represented by business associations are those mainly in line with their largest members, which poses a threat to the internal cohesion of the interest group. This power imbalance between small and large members, combined with the fact that they often also have different policy preferences, means business associations in general have had a hard time retaining members (Traxler, 2010, p. 167-168). In a way SME interest groups suffer much less from this problem, since they are naturally limited in the resources they have at their disposal, due to the definition of what an SME is. Furthermore, SME interest groups also have the benefit that their members are much closer in size, since there is a cap on the size of the business. Therefore, the expectation is that SME specific interest groups show more support to SME centred policy than general business associations, such as a Chamber of Commerce.

All in all, this thesis analyses the actions of SME interest groups through the logic of influence and membership. This is because SME specific interest groups suffer much less from the issues that have caused a shift towards the logic of membership than broader business associations, because the size of its members are relatively similar, meaning one member cannot capture the entire interest group, whereas a Chamber of Commerce is much more impacted by the logic of membership. At the same time, there are some issues pushing SME interest groups away from the logic of influence, namely the broad sectoral reach of the

SME interest groups. However, because of the nature of this specific reform, which causes it to affect all SMEs, it is possible to expect the interests of its members to align. This means that there is no threat to the internal cohesion of the interest group. If this is the case, there is no reason for the inter-sectoral nature of national SME interest groups to force a shift away from policy influence to servicing members.

SME sector and macroeconomic indicators

Another issue that needs to be taken into account is that there are differences in the nature of the SME sector among countries in the European Union. Ideally, all countries would be in a similar situation when it comes to economic strength, the socio-political system, the state of the SME sector and the power of business insiders. However this is not the case. In Western Europe, for instance, the amount of SMEs that utilize debt financing is much larger than in northern Europe (Masiak, Moritz & Lang, 2017, p.30). Overall the study found that SMEs can be divided into seven clusters when it comes to their financing patterns: mixed-financed SMEs with a focus on other loans, mixed-financed SMEs with a focus on retained earnings or sale of assets, state-subsidised SMEs, debt financed SMEs, trade financed SMEs, asset-based financed SMEs and internally financed SMEs (Masiak, Moritz & Lang, 2017, p. 36). The shares of these seven taxonomies are not equal in each country. The study by Masiak et al. found that there are differences when looking at country regions, financial market system and the impact of the economic crisis. What this shows is that it is important to take country specific variables into account when trying to determine why SMEs interest groups support certain finance initiatives.

Another aspect to keep in mind is the legal and financial system that is in place in a given country. National characteristics such as a strong system of property rights protection

have a strong impact on the use of external finance (Beck et al., 2008, p. 479). To compare such abstract aspects as property rights protections across countries, it is necessary to group countries together under certain typologies. These typologies make comparisons easier, as they group a bunch of different characteristics into manageable variables. Esping-Andersen (1990) compared countries on two axes, degree of commodification and modes of stratification and later studies expanded on these typologies (Arts & Gerritsen, 2002). These clusters group countries that are similar together. This means comparisons can be made as the countries are relatively similar when it comes to the nature of their welfare state.

Another way to check if countries are similar is to see if they all fall within a certain definition. One such classification is whether or not a country is corporatist, an idea first introduced by Wiarda, who defines a corporatist country as a country organized in corporate groups with similar interests (1990, p.37).He defines the Netherlands as strongly corporatist, while Denmark and Germany are intermediate corporatist countries. Even though SME interest groups generally have a broad sectoral reach, they still have a corporatist nature. This classification is useful for the analysis of SME interest groups since it also implies a certain societal relevance for these corporatist groups in a country. As such, if one country has a stronger corporatist nature, it is more likely that interest groups have a strong influence, meaning that they might be more likely to voice their opinions. Therefore, it is important to take this aspect into account when drawing cross-country comparisons.

Given the context of the economic crisis that spurred the call for improvements in the field of SME finance it is important to keep the macroeconomic context into account when trying to see what causes SME interest groups to support SME finance initiatives. Inflation, for instance, has an unknown effect on the financing of firms. The rationale is that if

macroeconomic conditions are worse banks are more likely to restrict their credit lines to, among others, SMEs (Holton, Lawless & McCann, 2013, p.64). Two key indicators of economic stability are GDP growth and inflation rates. It should then come as no surprise that these indicators have an effect on the availability of credit for SMEs (Jenkins & Hossain, 2017, p. 90). This means that for the policy preferences SME interest groups to be comparable the economy needs to be in a relatively similar state, since if only one country is experiencing a decrease in the availability of credit from banks the results would be skewed as the differences cannot solely be attributed to the differences in the membership structure.

Alternative finance options

As discussed earlier, the recent push for alternatives for additional finance options for SMEs was a result of the finance gap created by the 2008 financial crisis. A recent empirical study by Holton, Lawless and McCann (2014, p.210), concluded that the effects of the crisis on SME supply and demand for bank credit varies based on what aspect of the crisis is being investigated. For instance, stagnation in the real economy harms both the supply of and the demand for credit, while a weak banking sector and an over-indebted private sector only harm the supply of banking credit. This means that the crisis did in fact have an effect on the availability of banking finance. The key question that needs to be answered is if this decrease has led to an increased demand for alternative types of finance. This is important because the assumption is that for a membership based interest group to support a given policy it is necessary for the members to support the policy as well. Casey and O’Toole (2014, p. 185) find that firms who are denied banking credit are 9% more likely to try to obtain finance through another channel. At the same time, firms who reject loans because they are too expensive are 13% more likely to apply for alternative sources of finance, which in this study include non-bank loans, factoring, debt, equity or leasing. These five categories cover most of

the finance types used in this study. What this shows is that the crisis has indeed forced SMEs away from banking credit to alternative forms of finance. A study by Moritz, Block and Heinz (2016) found that most SMEs were internally financed. Excluding this group, since they are not searching to utilize external finance, the largest group of SMEs (16,7% of all SMEs in their study) made used of mixed finance, with 36% using bank loans, 24% using equity and 41% utilizing trade credit. Combined with the results from the study by Casey and O’Toole this shows that it is likely that SMEs would have sufficient avenues to obtain additional finance if bank loans are no longer viable. Furthermore, it appears that these effects differ across countries, with the impact of firm age and firm size differing greatly across European countries (Andrieu, Staglianò & van der Zwan, 2018, p. 259).

When it comes to the lack of finance from the banking sector, the most important statistic is the huge decline in new lending to SMEs in the European Union, which was cut by almost 50%. As SMEs are often described as the driving force of the economy, and given that a large portion of the European population is employed by SMEs, they are definitely an essential part of the economy. The reason that banks are unwilling to provide finance to start-ups is largely due to a lack of ways to solve information asymmetries. For instance, they often lack tangible assets, which makes providing collateral difficult (Vanacker & Manigart, 2010). Furthermore, they lack a track record, since the only source of finance is often internal, coming from equity holders, so banks have a hard time to judge the trustworthiness of new enterprises. A possible way in which this stream of finance can be opened back up is by reviving the securitisation markets. This allows banks more space on their balance sheet to provide finance to SMEs, in practice reversing a part of the negative effect caused by the crisis. Another way to improve the debt financing market is through loan guarantee programs. This essentially provides additional collateral in the case the firm goes bankrupt. As such, it

decreases the risk faced by the provider of the loan. Since banks will be more willing to provide funds in the case risks are lower, this leads to more bank loans for SMEs, however this only applies if the loan guarantees account for the heterogeneity of firms (Boschi, Girardi & Ventura, 2014, p. 190).

The first alternative available to SMEs is equity financing, which includes venture capital and business angels. Where big firms generally rely on public markets and stock exchanges to obtain equity, SMEs generally rely on these forms of private finance (Berger & Udell, 1998, p. 660). Venture capitalists provide mostly high risk firms with funds in exchange for an ownership stake in the company; this is where it differs from a loan, in that there is no need to pay back the investor. Furthermore, the venture capitalist can sell their stocks at any time to recoup their investment or for any other reason. Currently venture capital is often provided by firms that use funds from individuals to invest and turn a profit. Business angels provide similar investments, but they do so at an earlier stage in the business lifecycle. At this point, the start-up has almost no track record on their financial reliability. Often times, business angels are relatives, who invest because they have a personal relationship with the entrepreneur, taking away the problem. Business angels thus fill the needs of SMEs at this point in time, but they also provide additional services to entrepreneurs, such as technical knowledge and advice (Ibrahim, 2008). Finally, business angels often have a non-financial interest in the enterprises they invest in, either through a familial relationship or simply by nature of their interest in entrepreneurship. Because venture capitalists and business angels provide finance at the crucial early stages of an SMEs lifecycle, countries that have a lot of start-ups will favour these types of finance more heavily. Enterprises need this option to be available, but, since it is rather expensive, countries with a large proportion of established firms will favour other avenues which are

often cheaper. They are able to do so because they already have a track record and clear place in the market.

The next alternative is mezzanine financing. This is a form of hybrid financing that fills the gap between debt and equity financing. Mezzanine finance covers financial instruments like subordinated loans, which are paid back later than senior debt in case of bankruptcy, silent participation, where an equity stake is provided to the financer but they get no liability in case of bankruptcy, and convertible bonds, which allow the loan to be transformed into shares in the company (Vasilescu, 2010, p. 61). This type of finance thus allows SMEs an additional source of finance, but it is not utilized to a large extent in the European Union because of its specific usage. Mezzanine finance is mostly used by mature and larger enterprises (O’Toole, Lawless & Lambert, 2015, p. 152). One of the key requirements for mezzanine financing to work is that the firm is already established in the industry (European Commission, 2018). The European Commission (2018) also lists five ways in which mezzanine finance might be beneficial to an enterprise: young high-growth companies, established companies with growth opportunities, company transition or restructuring, strengthening capital structure and leveraged buyouts. These examples all fit within the analysis of O’Toole et al. (2015) that mezzanine finance is aimed more at firms at later stages in their lifecycle.

Another potential form of funds is for SMEs to utilize contacts in their supply chain. This is mostly done through trade credit, which allows firms to pay their suppliers at a later time. The relationship between the firm and its supplier solves several of the problems that prevent more traditional forms of finance from being available, such as informational problems (Uchida, Udell & Watanabe, 2013) and enforcing debt contracts (Cuñat, 2006). A

study by Carbó-Valverde, Rodríguez-Fernandez and Udell(2016, p.137) finds that firms that are restricted in their access to credit rely more on trade credit than those who can obtain finance from the banking sector, and that this effect was stronger as the financial crisis went on. This demonstrates that alternatives to banking finance were important during the crisis, as firms that were rejected by banks require funds from other sources, which should be stimulated by the government.

Finally, European SMEs have recently been exploring crowdfunding as an alternative source of financing. Crowdfunding is uniquely positioned to solve SME finance constraints. There are several different types of crowdfunding, ranging from donation-based to equity-based. What they all have in common is that funds are provided by a large number of individuals (or firms). Recently, crowdfunding has become more accessible through websites such as Kickstarter, which easily connect entrepreneurs with possible customers (Belleflamme et al., 2013), since it is an example of reward-based crowdfunding. The diversity of crowdfunding possibilities is both a blessing and a curse for entrepreneurs looking for finance, since they need to select the appropriate type of crowdfunding for their product or service (Hervé & Scwienbacher, 2018, p.1524). As a result, much of the success of crowdfunding relies on the provision of necessary information, which is what the question in the SBA open consultation refers to.

Hypotheses

All in all, the European SME landscape provides interest groups and policymakers with numerous options at their disposal with regards to how they try to overcome the finance gap created by the 2008 financial crisis. All of these alternatives come with their own perks. However, they all require certain conditions to be in place to be implemented to their full

potential. This means that the expectation is that differences in the composition of the SME sector between countries should have an impact on what type of finance opportunities SME interest groups are likely to pursue to a larger extent. Furthermore, differences are also expected between the interest groups in any given country. Because of differences in their membership structure, SME interest groups will either be bound by the logic of membership or the logic of influence. This difference in the logic can lead to different policy alternatives being more favourable to the survival of the organisation. There is no need to specify what the effect of the arena in which policy is being made is in this study, since it is limited to open consultations by the European Commission. This means that all interest groups operate within the same parameters, they never differ with regards to which body of the European Union they are interacting with.

Assuming that all other aspects of the SME sector and the overall economic conditions are the same between the cases leads to the following hypotheses:

1. Business associations are more likely to express support for SME policy than chambers of commerce. This hinges on the fact that business associations are bound by the logic of influence, rather than by the logic of membership.

2. Similar SME interest groups will have express similar policy preferences. This consensus is caused by the existence of business ties, such as policy coalitions and by the fact that they should represent similar interests.

3. SME interest groups will be more supportive of strengthening traditional debt financing if they are located in a country with a strong banking sector than if the banking sector is struggling.

4. SME interest groups from countries with a large number of start-ups and young SMEs will show more support for policies that address equity financing than interest groups with a small amount of start-ups.

5. SME interest groups from countries with a small number of start-ups will show more support for policies aimed at developing mezzanine finance alternatives than interest groups from countries with a large number of start-ups.

6. SME interest groups from countries with a small number of start-ups will show more support for policies aimed at improving the availability of trade credit than interest groups from countries with a large number of start-ups.

7. SME interest groups from countries in which both debt and equity financing are weak will be more supportive of crowdfunding than SME interest groups from countries where either or both are strong.

3. Methodology

As laid out before, the main question this paper seeks to answer is: Do the membership structure of an SME interest group and the state of the SME sector circumstances affect their support for SME finance initiatives? To answer this question, this research uses a

co-variational case study approach. Making use of this approach requires several assumptions to be made. First of all, it is assumed that the relationship between the variable of interest and the outcome variable is deterministic; it must be a necessary and sufficient condition for the outcome. Furthermore, this thesis aims to keep other variables as similar as possible. In the first comparisons it achieves this by looking at SME interest groups within a single country and their policy stances at a specific point in time. Next, it creates variety in the

macroeconomic circumstances by selecting cases from countries that are similar when it comes to certain key control variables.

Variables

For this thesis, the support for different SME finance initiatives is the dependent variable. SME interest groups that view a specific form of finance as important are viewed as in support of such policies. A distinction is still made when it comes to the level of support displayed by SME interest groups.

This thesis tries to explain changes in the dependent variable by looking at variation in the membership structure of SME interest groups and the characteristics of the SME sector. The dependent variable in this thesis is support for SME finance initiatives. To see the level of support for a particular finance initiative, this thesis looks at how SME interest group rank the importance of developments for a given type of finance compared to the other available options. This support is measured for five different types of finance. The first is

supporting the debt financing market, by means of loan guarantees or reviving the

securitisation market. The second is equity financing, which includes mostly venture capital and business angels. The third is mezzanine financing, which bridges the gap between debt and equity. The fourth type of finance is trade credit, which utilizes the relationships in the supply chain to obtain credit from suppliers. Finally, alternatives to traditional finance, such as crowdfunding and trade credit, are taken into account.

To explain the variation in the dependent variable, this thesis will utilize three independent variables. The first independent variable is the membership structure of SME interest groups. The membership structure is measured by looking at whether the voluntary in the organisation is voluntary of mandatory. This data is obtained by looking at whether participation in the SME interest group is required by law or if individual SMEs can choose whether they want to be represented by the specific organisation or not. The second

independent variable deals with the state of the SME sector. This concept is divided to show the degree to which certain finance options are utilized within a given country. Since the selected cases all operate with a large membership, this should accurately reflect the division of finance options used by their members. This is measured by looking at how the debt and equity financing sectors compare to the European average. The final independent variable looks at the growth of the SME sector. This is measured by looking at the year over year difference in the amount of SMEs present. The higher this number is the more skewed the national SME sector is to young SMEs.

Finally, this thesis utilizes several control variables to ensure that fluctuations in the dependent variable are related to changes in the independent variables. First of all, the characteristics of the SME sector are measured by the share of enterprises, employment and

value added that they contribute within their countries economy compared to the European average. Another variable that needs to be taken into account is the development of the SME sector, this is measured with regards to the implementation of the SBA. Furthermore, the taxonomy of the SME sector must be taken into account, meaning that attention must be paid to which types of finance are most important to SMEs in the country. This is measured by looking at the utilisation of specific finance types compared to the European average. Next the availability of finance is taken into account. This variable is measured over two axes, namely performance and progress. By splitting the variable into two aspects it is possible to see both how the availability of finance is evolving and how the availability of finance in a specific country measures up against the European average. As a result the variable can take four values. Finally, a selection of macroeconomic variables, relative to the European average, are taken into account to ensure that support for policies is not simply caused by worse economic conditions.

Case Selection

The cases used in this thesis were selected from SME interest groups in Western Europe. The cases are: MKB Nederland, the Dutch Chamber of Commerce (KvK), Der Zentralverband der Deutschen Handwerks (ZDH), the Deutscher Industrie- und Handelskammertag (DIHK) and Dansk Erhverv. This means that the countries of interest for this study are the Netherlands, Germany, and Denmark. The reason for picking SME interest groups from these three countries is that they offer enough variance when it comes to the independent variables, which will be discussed in the empirical chapter of this thesis. Furthermore, there is a split between SME business associations and chambers of commerce, allowing comparisons to be made between the two groups. In the following section the SME interest groups will be briefly discussed.

MKB Nederland is a longstanding SME interest group founded in 1902. Simply put, its mission statement is to create a strong business climate for SMEs. It is one of the most influential SME interest groups in the Netherlands, which makes it a great place to start when trying to determine what shapes SME interest groups’ policy preferences.

The next case in the Netherlands is the Dutch Chamber of Commerce. Since 2014 this has been the one and only Chamber of Commerce in the Netherlands, taking care of six different goals. The Chamber of Commerce maintains a record of all businesses present in the Netherlands. Furthermore it advises businesses, stimulates innovation and regional economies, and maintains the physical and electronic ‘ondernemersplein’, which are spaces where businesses can look for advice on how to operate and for information on (European) legislation. The reason that such an organisation is interested in providing their opinion on SME finance is through their aim to stimulate innovation and regional economies. Most of the enterprises responsible for the achievement of these goals are SMEs; as such it is in the interest of the Dutch Chamber of Commerce to show their opinion on the topic at hand.

Similarly to the Dutch cases, the German cases also consist of one SME business association and a Chamber of Commerce. In this case the first interest group selected for Germany is Der Zentralverband der Deutschen Handwerks (ZDH). This provides a counter to the Dutch MKB Nederland and allows for a comparison between two business associations.

The second German organisation that will be looked at is a chamber of commerce, just like in the case of the Netherlands. This organisation is called the Unlike the Netherlands, which has one chamber of commerce, Deutscher Industrie- und Handelskammertag and

represents the interest of all German enterprises. Even though it encompasses both SMEs and large enterprises it can still be seen as advocating the interest of its smaller members, given that such a large amount of total enterprises fall under the SME category. Furthermore, because there are no membership fees larger corporations hold less monetary sway over the organisation.

The final case in this thesis is Dansk Erhverv, which is the Danish Chamber of Commerce. Dansk Erhverv an interesting organisation for this thesis, since it blends the line between the organisations that have been used for analysis until now. On one hand it is a public entity with not state support, but on the other hand it is a member of Eurochambres, which is for chambers of commerce.

Data Collection

Having decided on the cases, it is time to turn to the collection of data. Data on the stances of SME interest groups has been collected from several different sources. The first source is the Public Consultation on the Small Business Act, which was conducted by the European Commission between the September 8, 2014 and December 25, 2014. Replies to this open consultation were submitted by 1800 respondents, among which were the Dutch Chamber of Commerce, Der Zentralverband der Deutschen Handwerks, the Deutscher Industrie- und Handelskammertag and the Danish Chamber of Commerce. Because these documents are officially submitted to the European Commission and are also publicly available, they should accurately reflect the opinions of these SME interest groups.

The second source of data is the Interim evaluation of the programme for the competitiveness of enterprises and small and medium-sized enterprises. This open

consultation focusses on a specific program, namely COSME. Because this open consultation is performed by the same institution, replies are equally viable as those to the SBA open consultation when it comes to reflecting the opinions of the interest groups. However, this open consultation was performed three years later. Given that the accessibility of finance has improved over this time period, it is important to look at any data taken from this open consultation with the notion that the opinions of the interest groups on the importance of focussing on certain types of finance have decreased. This is especially important to take into account because of the impact that the crisis had on SME finance options, since some of the issues might have been solved in the interim. Replies to this open consultation were provided by MKB Nederland, the Dutch Chamber of Commerce and ZDH.

Additionally, in the case of MKB Nederland data on the outcome variable was taken from a publication by the organisation. Specifically its lobbying agenda from 2017, which provides insight into their views on the finance options available to SMEs. This publication suffers from the same time variation as the COSME open consultation, but it also differs in that it is not submitted to the European Commission. The question that needs to be answered to include this data in the thesis is if this publication accurately reflects the stances of the organisation, just like a reply to an open consultation would. Since the lobbying agenda is publicly available, there is no reason to think that it does not accurately reflect the position of its publisher. Any discrepancies between the stated goals and the actions of the interest group, such as in its reply to the COSME regulation, would greatly harm the reputation of the

Furthermore, data has been collected on the nature of the organisations that this study focuses on. This data, such as its membership structure and position in the European and domestic political arena, is collected from the websites of the organisations. Since all these organisations have a public role, all necessary information on how they operate is provided by the organisations. They do this either to show prospective members what they have to offer, or because they are obligated to follow certain procedures and try to achieve certain goals by the central government. Whatever the case, all information is publicly available on the websites of the interest groups.

Finally, data on the state of the national SME sector was taken from several sources. First of all, the European Commission publishes yearly SBA fact sheets on all member states. In these fact sheets they describe the state of the SME market, the implementation of the SBA and the domestic policies that are being implemented to support SMEs. The state of the SME market is reflected by data on the share of businesses that are SMEs, the share of people employed by SMEs and the share of value that SMEs add to the economy. By comparing these key figures over the years, developments in the SME market can be spotted. While the European Commission also pays close attention to how different sectors develop, that is not within the scope of this research. Furthermore, the implementation of the SBA is also discussed in the fact sheets, allowing the development of the SME sector to be taken into account. The SBA fact sheets also provide detailed information on the state of the types of financed used by SMEs. Here the European Commission provides data on the state of the debt financing sector by looking at the rejection of loan applications and the position of venture capitalists and the usage of loan guarantees, among others. This data makes it possible to look at the state of all types of finance in any given country, which allows for

differentiation between countries which are performing better or worse on a given type of finance than others.

Finally, additional macroeconomic variables have been taken from the World Bank to serve as additional control variables. These variables are inflation and GDP growth, which are the key measured when discussing economic stability. For GDP growth the valuable looks at a one year interval, meaning it measures the year over year change in GDP. Inflation is measured as the yearly value.

Validity and Reliability

The results of this thesis should hold from a validity standpoint. The measures for the control variables are mostly valid because they reflect the nature of the construct being measured. For instance, the size of the SME sector is a simple measurement that combines three aspects of the SME sector to reflect its impact on the economy. When it comes to the implementation of the SBA, the chosen measurements reflect several different aspects of the programme; this should on aggregate yield valid data. The construct that faces the most issues with validity is the opinions of the SME interest groups. Since this data needs to be classified in degrees it might be the case that different interest groups use different scales to judge if a given policy is very important or simply important. Unfortunately, there is little to remedy this problem without conducting interviews to determine exactly what the respondents mean when they say something is important.

When it comes to reliability, there is little problem when it comes to this study. The instruments should produce consistent results. For some cases data is taken from two points in time, 2014 and 2017, if both these occasions yield similar results the results should be

reliable, so long as the other variables do not change. With the methodology discussed it is time to turn to the empirical findings of this thesis.

4. Empirical Findings The Netherlands

The first two cases, MKB Nederland and the Dutch Chamber of Commerce, are both Dutch interest groups. Since some of the variables that are used in this thesis are specific to the country rather than to a specific case it makes sense to discuss these variables before delving into the specific cases.

The control variables used are all country specific, so this is a good place to start when discussing the findings. First of all, there needs to be some data on the size of the SME sector in the Netherlands. Compared to the European Union average, Dutch SMEs added more value to the economy, while the amount of enterprises and the amount of people employed by SMEs was in line with the European average in 2014 (European Commission, 2015a, p. 2). Following the crisis, the Dutch SME interest groups and the Dutch government have created several programs to provide more finance options for SMEs. In 2014, leading up to the open consultation, these included, i.e. programs that provide SMEs with knowledge about available finance and government guarantees for start-ups. Looking at the implementation of the SBA leading up to the open consultation, the Netherlands was performing well in five areas, while trailing behind the European average in three, among which was access to finance (European Commission, 2015a, p. 4). One of the main issues faced by Dutch SMEs is the high rejection of loan applications, with 43% of loans being conditional or rejected; there should be a push by SME interest groups for other sources of finance.

Since data is also gathered from an open consultation conducted in 2017 it is necessary to look at the numbers there to see if they are still comparable to the numbers of 2014. While the value added by Dutch SMEs still outperformed the European average, the employment of the SME sector had dipped significantly below the European average, while

the number of enterprises has remained stable (European Commission, 2017a, p. 2). The Dutch performance on the SBA still shows three aspects below average, among which access to finance, but it is now much closer to the average and is no longer deteriorating (European Commission, 2017a, p.5)

When it comes to the macroeconomic indicators, the Dutch economy is clearly still suffering from the effects of the crisis, with a GDP growth of only around 1,42%, while pre-crisis this was around 3,70%. Inflation on the other hand was at around 0,97%, which is a healthy level compared to the 3,5% spike experienced at the start of the economic crisis. By 2017, at the time of the COSME open consultation, Dutch GDP growth has risen to 3,16% and the inflation rate was at 1,38% (World Bank, “GDP growth (annual %)”; World Bank, “Inflation, consumer prices (annual %)”).

Finally some consideration needs to be paid to the classifications discussed in the theory chapter of this thesis. The question here is if the Netherlands can be compared to Germany and Denmark when it comes to the Esping-Andersen (1990) typologies of welfare states. Since 1990 there have been multiple frameworks in which to compare welfare states, out of these frameworks that include all three countries, the Netherlands is matched with Germany four times and with Denmark twice (Arts & Gerritsen, 2002, p.149-150). A look at the pension system also found that the Netherlands is comparable to Denmark, while the German system was different (Trampusch, 2010). When looking at the corporatist nature of the Netherlands it is clear as day that the Netherlands is a corporatist country. The Dutch ‘poldermodel’ is also an excellent example of corporatism in action. This way of corporatism is still in full swing in the Netherlands, though there are several changes that have to be made to maintain the system in the long term (Keune, 2016, p. 34-36).

Two of the three independent variables discussed in this thesis also refers to country wide variables and as such will be discussed here before delving into the specific SME

interest groups. The first concerns the division of SME finance types. In the Netherlands, the debt financing sector rejects a large amount of applications compared to the European average and the willingness of banks to provide loans is also weak compared to the European average. This shows that the debt financing sector in the Netherlands is not strong. Furthermore, the amount of venture capital investments in the Netherlands is also slightly below the European average, but can be considered to be of average strength (European Commission, 2015a, p. 10). By 2017, the position of the equity financing sector had massively improved, while the debt financing sector was still much weaker than the European average (European Commission, 2017, p.11). The second issue that needs to be discussed is the relative age of the SME sector. In 2014, the amount of Dutch SMEs grew by 8,4%, most of this increase can be attributed to an increase in microfirms, since the level of small and medium-sized firms stayed roughly the same. The total increase amounted to roughly 67.000 SMEs. In 2017, this changed to 3,4% and roughly 36.000 SMEs. These numbers were constructed with data from the Dutch SBA factsheets published in 2014, 2015, 2016 and 2017.

MKB Nederland

MKB Nederland is the largest representative of SME organisations in the Netherlands and as such, it provides valuable insight for this thesis. MKB Nederland has two different types of members. First of all, they represent sector organisations, ranging from housing to zoos, covering SMEs most sectors of the Dutch economy. Secondly, they also directly take on enterprises as members, giving them a total amount of members of over 170.000, which they provide with guidance and information on expanding and maintaining their business. This membership is voluntary for all SMEs in the Netherlands (MKB Nederland, “Wat doet MKB-Nederland”).

When it comes to organisational ties, MKB Nederland closely interacts with the Union Européenne de l'Artisanat et des Petites et Moyennes Entreprises (UEAPME), which serves as a representative for national SME interest groups to the European Union. It connects national SME interest groups. Finally, MKB Nederland has an office in Brussels, to make it easier to get involved in European policy making. From the sources used in this thesis the following information about the policy preferences of MKB Nederland can be extracted.

MKB Nederland’s lobbying agenda calls for increased options for banks to indulge in securitization practices to make SMEs more likely to obtain loans and for additional regulations to stimulate venture capitalist to invest in SMEs. This demonstrates that they are favourable to strengthening debt financing initiatives (MKB Nederland, 2017, p.8), because opening up the securitization market might lead to an increase in loans granted to Dutch SME by improving the balance sheets of the banks. Since this is published in their lobbying agenda it is safe to say that they view this issue as very important.

While the investments in the venture capital market are above the European average, MKB Nederland is still pushing for investments in this finance area (MKB Nederland, 2017, p.8). This demonstrates a preference for equity financing to be developed further. As for mezzanine financing, there is no mention of it in the MKB Nederland lobbying agenda in 2017 or in the COSME open consultation, and it appears there is no official stance by MKB Nederland on this form of finance. The same goes for trade credit, which is also not mentioned in any of the documents. Alternatives to traditional finance are mentioned in the lobbying agenda and are supported by MKB Nederland, but they do not provide much information on their stance besides calling for sharing of best practices with regards to this type of finance (MKB Nederland, 2017, p.8). MKB Nederland’s reply to the COSME open consultation sheds some more light on what they expect from a program aimed at SMEs.

They state that both guarantees for loan applications and providing instruments for equity financing are relevant to their needs in the current market and the COSME program achieves these goals to a large extent. Furthermore, they state that the COSME program does not need to concern itself with any other needs that the organization is facing; this points to the fact that perhaps MKB Nederland does not have an interest in promoting mezzanine finance. At the same time it is strange that this contradicts with the lobbying agenda they published where they do call for measures that look at alternatives to traditional finance, but then they do not mention this in an open consultation that deals with the subject of SME finance.

The Dutch Chamber of Commerce

The second Dutch SME interest group is the Dutch Chamber of Commerce. The membership structure of the Dutch Chamber of Commerce is significantly different than that of MKB Nederland, where MKB Nederland had paying members who they need to placate by trying to obtain favourable regulation; the Dutch Chamber of Commerce does not have this pressure to keep its members happy. This is for a simple reason; it does not have members that pay it. The Dutch Chamber of Commerce is an independent government body, which means that it gets a large part of its funding directly from the government (KvK, “Dit is onze opdracht”). It also hosts events that businesses can attend for a fee, but this is different than the membership benefits of MKB Nederland. The Dutch Chamber of Commerce is thus not pressed by the logic of influence to push for certain regulations. While not strictly bound by the logic of membership, the Dutch Chamber of Commerce does provide resources and information as one would expect from an organizational that maintains its members in this way. In order to service its ‘members’ as best as it can, the Dutch Chamber of Commerce tries to shape legislation in a way that is helpful to its goals of stimulating innovation and regional economies, specifically, in this case, through SMEs. Furthermore, the Dutch Chamber of

Commerce is a member of Eurochambres, an organisation that represents European chambers of commerce at the European level and facilitates knowledge transfer between the national chambers of commerce.

In its response to the SBA open consultation, the Dutch Chamber of Commerce expresses its opinion on the available types of SME finance policy (KvK, 2014). First off, the Dutch Chamber of Commerce states that reviving the securitization markets, which would allow debt financing to increase, would not be a useful way to make finance more available for SMEs. When it comes to equity financing the position of the Dutch Chamber of Commerce is that attracting venture capitalists to the European market is useful to the goal of improving SME finance. Next up the Dutch Chamber of Commerce mentions that both mezzanine finance and supply chain finance, among which is trade credit, are important ways to improve the situation. Its final statement is that removing obstacles to crowdfunding and offering advice on how to use crowdfunding is very important.

Looking at these results it is interesting that the Dutch Chamber of Commerce and MKB Nederland have a different view of improving debt financing through reviving the securitization market. Keeping in mind that MKB Nederland still favoured these measures in 2017, when the state of debt financing for SMEs was much better than in 2014, it is safe to say that they would have also supported these measures at that time. In their reply to the SBA regulation (p. 6), the Dutch Chamber of Commerce adds that solving bottlenecks should come before trying to focus on different types of finance, as such they might think that there is a bottleneck in the Dutch banking sector preventing SMEs from obtaining loans that is unsolved by allowing them to securitize their assets. This makes sense, as the Dutch Chamber of Commerce is trying to drive innovation, which is often coupled with a high degree of risk, in which case banks might still not want to invest in these new start-ups with no track record. Looking at the COSME open consultation this can be seen in that the Chamber of Commerce