13-Jul-07
Results of the vignettes on the test of a new definition of enterprises
13-Jul-07 Name of the presentation
Context of the study
Eurostat MEETS program – Need to develop statistics on globalisation
• ESSnet on profiling large and complex multinational enterprise groups (MNE)
– Need to improve consistency in European statistics• Consistency between countries• Consistency between domains of business statistics• ESSnet on consistency
– One common interest for the statistical unit “enterprise” in both projects,
• several reasons to change the definition of enterprise • Common statement on the necessity to change the definition
of enterprise
13-Jul-07 Name of the presentation
The profiling project proposes a new definition of enterprise
To better take into account the global dimension of economic activity
To improve relevance of national business statistics, significance and comparability at the European level
A top-down approach to delineate the new enterprises 2 levels of enterprises
– The global enterprises (GEN) defined regardless of the geographic dimension
– The truncated enterprises (TEN): the national parts of the GEN
13-Jul-07 Name of the presentation
How to test the new definition of “enterprise”?
The adoption of a new definition for enterprises: a sensitive topic – The NSIs expressed an opposition in the different working
groups (BR, SBS)• How to collect information on the new enterprises?• ESSnet profiling proposes a more collaborative way to
delineate the new enterprises– Loss of sovereignty of the countries
• Breaks in series due to the change of definition Need to transfer the debate from the political to the
technical level
13-Jul-07 Name of the presentation
What are the vignettes?
Technique used mainly – In questionnaire testing– In qualitative research and social statistics
Short stories Use the respondent’s words Contain a bit of ambiguity Enlighten the response process
Appropriate to test a new definition of enterprise– Need to elicit the context of a new definition and its impact
on NSIs' organisation and on statistics – Avoid preconceived judgment
13-Jul-07 Name of the presentation
Principles applied to build the vignettes
Stories must appear plausible and real to participants Stories need to avoid depicting eccentric characters and
disastrous events Vignettes need to contain sufficient context for
respondents to have an understanding about the situation being depicted, but be vague enough to ‘force’ participants to provide additional factors which influence their decisions
Vignettes must be presented in an appropriate format
13-Jul-07 Name of the presentation
The building of the vignettes
Describe current situations – supposed to be encountered yet in the EU countries– difficult to tackle for the business statisticians – Solved with the new definition
Cases presented according to a growing scale of complexity
Graphical illustration with a short text aside To be tested in different domains of business statistics
– SBS, STS, BR, NA
13-Jul-07 Name of the presentation
Topics treated in the 7 vignettes
Treatment of a legal unit performing an ancillary activity for another legal unit or for 2 other legal units in the same group
Treatment of vertically integrated activities in one country and in two countries
Treatment of international trading flows in the frame of a multinational enterprise group
Treatment of the headquarters Determination of the activity code in complex situation Treatment of a legal unit acting for 2 global enterprises in the
group Organisational aspects of gathering statistics on newly defined
statistical units
13-Jul-07 Name of the presentation
General results of the vignettes
42 answers received from 25 EU countries
7 countries sent a single coordinated answer for all the domains
10 answers from BR respondents
13-Jul-07 Name of the presentation
General results of the vignettes
0
2
4
6
8
10
12
0 1 2 3 4 5 6 7 8
Number of differences between the current situation and the theoretical view
Num
ber
of
tim
es
the "
pro
filin
g"
solu
tion is
chose
n a
s th
eore
tica
l vie
w
RAGL
GL NANA
GL
SBS
GL
BRBR
BSI
BR
GL
BR
GLNA
BRGL
Prof BR
BSI
SBS
GLNA
SBS
Prof
BSs
SBS
STS
BR
NA
BR BS
BR
prof
BSs
BR
BR-SBS
Prof
STSGL
the sceptics
the forerunners the cautious
the driving force of the change
Ability of changing
Degree of closeness toward the definition of profiling
13-Jul-07 Name of the presentation
A majority of respondents open to consider the enterprise as a set of legal units
NSIs promote the follow up of national activities against the global activity of the group
The use of administrative data does not win unanimous support: the NSIs prefer in majority to survey the new TEN
The split of legal units is not well accepted
General results of the vignettes
13-Jul-07 Name of the presentation
Vignette 1: One country / one ancillary activity serving one LeU
A domestic group has a single GEN with an activity “manufacture of footwear”.
– This activity takes place in 1 country and involves 2 legal units: • LeU1 performs the manufacturing
activity • LeU2 manages the human
resources for the whole TEN. – LeU 2 does not sell its output outside
the TEN
GEN1NACE:152Empl:100
Turnover:2000
TEN1NACE:152Empl:100
Turnover:2000
LeU1Nace:152
Empl:0Turnover:2000
LeU2Nace:7830Empl:100
Turnover:300
300
13-Jul-07 Name of the presentation
Vignette 1: One country / one ancillary activity serving one LeU
Proposed solution
Current solution
a- Consider TEN1 as a whole (NACE:152, empl:100, Turn:2000) and survey it (consolidated data collected)
28 13
b- Consider TEN1 as a whole (NACE:152, empl:100, Turn:2000) but use surveys on LeUs or administrative data (and remove the intra-TEN flows)
16 6
c- Consider TEN1 as a whole (NACE:152, empl:100, Turn:2300) but use surveys on LeUs or administrative data (without removing the intra-TEN flows)
1 2
d- Consider the LeUs as two separate enterprises
7 20
e- Other solution …………………………………………………………. ……………………………
0 6
YES NO Did you already encounter this kind of situation in your country? 40 2
13-Jul-07 Name of the presentation
Vignette 2: One country / vertical integrated activities/ one ancillary activity serving several LeUs
A domestic group has – A single GEN with an activity
“manufacture of footwear” – Activity takes place according to a
vertical integration: • LeU1: tanning and dressing of
leather • LeU3: manufacture of footwear • LeU2 manages the HR for the
TEN. • LeU1 and LeU2 do not sell
their output outside the TEN
GEN1NACE:152Empl:100
Turnover:2000
TEN1NACE:152Empl:100
Turnover:2000
LeU2Nace:7830Empl:100
Turnover:300
LeU3Nace:152
Empl:0Turnover:2000
LeU1Nace:151
Empl:0Turnover:1000
150
150
1000
13-Jul-07 Name of the presentation
Vignette 2: One country / vertical integrated activities/ one ancillary activity serving several LeUs
Proposed solution
Current solution
a- Consider TEN1 as a whole (NACE:152, empl:100, Turn:2000) and survey it (consolidated data collected)
23 9
b- Consider TEN1 as a whole (NACE:152, empl:100, Turn:2000) but use surveys on LeUs or administrative data (and remove the intra-TEN flows)
15 5
c- Consider TEN1 as a whole (NACE:152, empl:100, Turn:3300) but use surveys on LeUs or administrative data (without removing the intra-TEN flows)
1 1
d- Consider 2 national parts of the GEN, one with NACE 151 and one with NACE 152 and split the activity of LeU2 into the 2 national TENs
3 2
e- Consider the LeUs as three separate enterprises 8 19 f- Other solution 2 7
YES NO
Did you already encounter this kind of situation in your country? 34 8
13-Jul-07 Name of the presentation
Vignette3: Two countries / global integration of activities /1
A MNE has a single GEN with an activity "manufacture of footwear".
– Activity in 2 countries – vertical integration:
• In country C1: "tanning and dressing of leather"
• In country C2: "manufacture of footwear"
• In C1, the complete activity of TEN1 is integrated in the group (intra-GEN activity)
• LeU1 sells all of its output to LeU3 in C2.
• LeU1 has an exported turnover (intra-group) and then a value added outside TEN1.
GEN1NACE:152Empl:200
Turnover:4000
TEN1NACE:???Empl:100
Turnover:2000
TEN2NACE:152Empl:100
Turnover:4000
LeU2Nace:7830Empl:100
Turnover:300
LeU3Nace:152Empl:100
Turnover:4000
LeU1Nace:151
Empl:0Turnover:2000300
2000
C1
C2
13-Jul-07 Name of the presentation
Vignette3: Two countries / global integration of activities /1
Proposed solution
Current solution
a- Consider TEN1 as a whole and apply the NACE of the GEN (NACE:152)
2 0
b- Consider the TEN1 as a whole and apply the NACE of the production unit (NACE:151)
34 12
c- Consider the 2 LeUs in country C1 as two separate enterprises
8 16
d- Other solution ………………………………………………………… ………………………………
4 1
YES NO Did you already encounter this kind of situation in your country?
27 15
13-Jul-07 Name of the presentation
Vignette 4: Two countries / global integration of activities /2
This case is quite similar to example3. The difference is:
– Activity in 2 countries – vertical integration:
• In TEN1: LeU5 performs a small activity of "manufacture of footwear" (NACE:152)
• But the main activity is performed by LeU1 in NACE 151
• LeU1 sells all of its output to LeU3 in C2 and LeU5 in C1.
• However, the largest part of LeU1 production is used outside TEN1 (but intra-GEN1).
• The VA of LeU1 outside TEN1 is higher than VA of LeU5
• Both LeU5 and LeU3 sell their outputs outside the GEN
GEN1NACE:152Empl:220
Turnover:2500
TEN1NACE:???Empl:120
Turnover:1200
TEN2NACE:152Empl:100
Turnover:2000
LeU2Nace:7830Empl:120
Turnover:360
LeU3Nace:152Empl:100
Turnover:2000
LeU1Nace:151
Empl:0Turnover:1000
LeU5Nace:152
Empl:0Turnover:500
300
700
60
300
C1
C2
13-Jul-07 Name of the presentation
Vignette 4: Two countries / global integration of activities /2
Proposed solution
Current solution
a- Consider TEN1 as a whole and apply the NACE of LeU5 and GEN (NACE:152)
3 2
b- Consider the TEN1 as a whole and apply the NACE of the unit which has the highest value added (LeU1, NACE:151)
24 8
c- Consider 2 national parts of the TEN1, one with NACE 151 and one with NACE 152 and split the activity of LeU2 into these 2 national parts
8 2
d- Consider the 3 LeUs of country C1 as three separate enterprises
9 12
e- Other solution …………………………………………………………. ……………………………
5 1
B) YES NO Did you already encounter this kind of situation in your country?
22 20
13-Jul-07 Name of the presentation
Vignette 5: Two countries / International trading flows
GEN1 has an activity of "manufacture of wearing apparel“
– 3 LeUs in two countries • In C1, LeU1 performs
the manufacturing activity
• In C1, LeU2 is a wholesaler of the products performed in LeU1.
• In C2, LeU3 performs retail trade
• LeU2 has a totally intra-group but extra-TEN turnover.
• In C1, LeU1 produces the highest value added
• Only LeU3 sells its output outside the TEN2
TEN1Nace:???
TEN2:Nace:???
GEN1Nace:141
C2
LeU1Nace:141Empl:200
Turnover:1000
LeU3Nace:4772
Empl:50Turnover:4000
LeU2Nace:4642
Empl:50Turnover:2000
1000
2000
C1
13-Jul-07 Name of the presentation
Vignette 5a: Two countries / International trading flows
Proposed solution
Current solution
a- Consider TEN1 as a whole and apply the NACE of the production unit (141)
29 10
b- Consider the TEN1 as a whole and apply the NACE of the wholesale unit (4642)
1 1
c- Consider 2 national parts of TEN1, one with NACE 141 and one with NACE 4642
14 19
d- Other solution ……… 2 1 YES NO Did you already encounter this kind of situation in your country? 27 15
In country C1
13-Jul-07 Name of the presentation
Vignette 5b: Two countries / International trading flows
Proposed solution
Current solution
a- Attribute the NACE code of the GEN1 (141) 1 1 b- Attribute the NACE of the retail trade LeU3 (4772) 36 24 c- Consider a double coding (GEN1 and TEN2, levels:141
and 4772) 8 1
d- Other solution ……………………………………………………… 1 0 YES NO Did you already encounter this kind of situation in your country? 26 16
In country C2
13-Jul-07 Name of the presentation
Vignette6: Two activities, one common wholesale trade
A MNE has 2 GEN – GEN1 performs an
activity of "manufacture of footwear"
– GEN2 performs an activity of "manufacture of wearing apparel".
In C1, 3 LeUs: – LeU1 in TEN1, – LeU3 in TEN3 – LeU4 is a wholesaler
for both activities of TEN1 and TEN3.
– Only LeU4 sells production outside the group (in country C1).
TEN1Nace:152
TEN2Nace:152
TEN3Nace:141
GEN1Nace:152
GEN2Nace:141
C1
C2
LeU1Nace:152Empl:100
Turnover:1000
LeU2Nace:152Empl:100
Turnover:2000
LeU3Nace:141Empl:120
Turnover:1200
LeU4Nace:4642
Empl:50Turnover:4000
1200
200
800
13-Jul-07 Name of the presentation
Vignette6: Two activities, one common wholesale trade
Proposed solution
Current solution
a- Split LeU4 into TEN1 and TEN3 according to a sharing key and consolidate the figures in both TEN1 (NACE:152) and TEN3 (NACE:141)
14 1
b- Attribute the total LeU4 to TEN3 (NACE: 141) which generates the highest value added in LeU4 and consolidate the figures
1 1
c- Consider LeU4 as a separate TEN with an activity of wholesale (4642)
26 17
d- Other solution 6 4 YES NO Did you already encounter this kind of situation in your country? 23 19
13-Jul-07 Name of the presentation
Vignette7: Two countries / One global head quarterA MNE has 2 GENs in 2 countries C1 and C2.
– In C1: the head quarter has a role of animating and controlling the operational entities worldwide.
– Financial flows Between HQ and all the LeU in both GEN1 and GEN2 and in both countries C1 and C2.
– HQ does not have extra-group revenue
TEN1
TEN2
TEN3
GEN1 GEN2
HQNace: 7010
Empl:50Turnover:1000
C1
C2
LeU1Nace:151
Empl:0Turnover:1000
LeU2Nace:7830Empl:120
Turnover:360
LeU3Nace:152Empl:100
Turnover:2000
LeU5Nace:141
Empl:0Turnover:2000
LeU6Nace:7830Empl:100
Turnover:300
13-Jul-07 Name of the presentation
Vignette7: Two countries / One global head quarter
Proposed solution
Current solution
a- Split the activity of HQ into GEN1 and GEN2 and consolidate its results in TEN1 and TEN3 in country C1 (removing flows between HQ and GEN1 and HQ and GEN2)
7 2
b- Split the activity of HQ into GEN1 and GEN2 and consolidate its results? in TEN1 and TEN2 in country C1 and country C2 (removing the flows HQ and GEN1 and HQ and GEN2)
3 0
c- Split the activity of HQ into GEN1 and GEN2 and aggregate its results in TEN1 and TEN3 in country C1 (without removing the flows between HQ and GEN1 and HQ and GEN2)
0 0
d- Consider HQ as a separate GEN 27 21 e- Other solution 4 2 YES NO Did you already encounter this kind of situation in your country? 27 15
13-Jul-07 Name of the presentation
Preliminary conclusions
A door is open for the change
Answers provided contradicted opinion expressed in working groups– A majority of respondents open to consider the enterprise as a set of legal
units – Use of administrative data does not win unanimous support: the NSIs
prefer in majority to survey the new TEN – Consolidated data are preferred
Distinguish the definition and the principles proposed by the ESSnet profiling from their application– As results of the top down approach
• One GEN / one TEN• Split of legal units
– In practice• Double classification to adapt the NACE code of the TEN to the activity
performed in the country• Try to avoid the split of legal units as much as possible
(recommendation for profilers)
13-Jul-07 Name of the presentation
Preliminary conclusions
Need for pedagogy from the ESSnet profiling to the future users of the new statistical units
Provide them with solutions on how to concretely proceed– Aim of the documents:
• Methodological document• Guidelines• Instructions
Need to further explore how to use administrative data on legal units to build statistics on enterprises
13-Jul-07 Name of the presentation
Thank you for your attention!!