The Employment Contribution of Small and Medium-sized Enterprises According to the EU-definition First Evidence Based on the IAB-Establishment-Panel for Germany

Statements emphasizing the major contribution of the small and medium sized enterprises (SMEs) for net job creation are quite frequent. Concerning the current definition of SMEs provided by the European Commission (EC), this paper makes a first attempt to approximate SMEs’ contribution to net employment change based on the IAB-Establishment Panel Data over the years 1998 to 2005 for the whole private economy. Due to sufficient data, independent oneplant firms with less than 250 employees may approximate the group of SMEs according at best. Comparisons with the firm-level Amadeus database validate the suitability of the IABestablishment panel data for calculation of the SMEs’ employment share, as long as one controls for the establishments’ independence status. The employment share lies about fifty percent. As a matter of fact, the employment share of affiliated SMEs increases over time. Furthermore, independent small plants do not show higher net employment change rates than neither affiliated plants nor middle-sized and large plants. The results reinforce once again the impression that empirical evidence for the assumed superiority of SMEs, is very weak. Further research should mention the role of ownership and firms venturing on the level of firm as well as for the economy at all in more detail.