Economic, institutional and environmental drivers of SMEs’ development in the EU: sustainable development goals perspective

SMEs represent most businesses globally, making them essential players in reaching the Sustainable Development Goals (SDGs). This paper brings new insights to the sustainability field by analysing drivers and barriers to SMEs’ development and employment on SMEs for the panel of 21 European Union (EU) countries using random-effects generalised least squares techniques. The study empirically proves that an increase in crime and violence (SDG16, Target 16.1, ‘Reduction of violence everywhere’), the widening the gender employment gap (SDG8, Target 8.5, ‘Full employment and decent work with equal pay’) and prosperity (SDG8, Indicator 8.1.1, ‘Annual growth rate of real GDP’) negatively impacts on the number of SMEs in EU countries. The empirical results suggest if share of “young people, who do not study or work” (SDG8, Indicator 8.6) increases, then the SMEs per capita indicators decrease, since society has fewer potential entrepreneurs and qualified employees. The lower level of corruption in the EU (as a part of SDG16, Target 16.5, ‘Reduction of corruption and bribery’) leads to a fair and transparent economy. It increases the SME’s per capita indicators. Also, increasing overcrowding decreases the number of SMEs per capita, leading to the policy implication to improve SDG 11.1, ‘Safe and Affordable Housing’, for SMEs’ economic and employment activity. Expenditures on better social protection (SDG 11.1, Target 1.3, ‘Implementation of nationally appropriate social protection system’) and an increase in foreign-controlled enterprises positively impact employment at SMEs. Ultimately, this study highlights the necessity to increase life expectancy (a part of SDG 3) and mean and median income (a part of SDGs 1 and 8) to increase employment at SMEs.