ABSTRACT
Competition, co-operation and EU industrial policy The networking arrangements outlined above are functional in that they allow small firms to exploit co-operative external economies of scale and gain access to business services on terms similar to those available to large firms. Moreover, to the extent that there are fixed costs associated with marketing, investment and R&D, co-operation has the effect of reducing the height of entry barriers and promoting competition. Hence, by facilitating the entry and survival of SMEs the promotion of co-operation in the SME sector is consistent with the promotion of competitive market structures. The economies that are realized through networking arrangements are external to the firm but internal to the network, hence SME networks can confer comparative advantage to particular localities/regions. In order to ensure fair competition and a level playing field, the EU has an important role to play to promote the widespread adoption of SME networks across regions and s member states. The foregoing analysis indicates that networks that are accountable and democratic are likely to maximize the chances of successful co-operation. In order to ensure open competition it is necessary that networks should be open to SMEs operating in particular industries/ localities.
