Small and medium-sized enterprises

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Small and medium-sized enterprises (SMEs) or small and medium-sized businesses (SMBs) are businesses whose personnel numbers fall below certain limits. The abbreviation "SME" is used by international organizations such as the World Bank, the European Union, the United Nations and the World Trade Organization (WTO).

In any given national economy, SMEs sometimes outnumber large companies by a wide margin and also employ many more people.[1] For example, Australian SMEs make up 98% of all Australian businesses, produce one-third of the total GDP and employ 4.7 million people. In Chile, in the commercial year 2014, 98.5% of the firms were classified as SMEs.[2] In Tunisia, the self-employed workers alone account for about 28% of the total non-farm employment and firms with fewer than 100 employees account for about 62% of total employment.[3] The United States' SMEs generate half of all U.S. jobs, but only 40% of GDP.[4]

In developing countries, smaller (micro) and informal firms, have a larger share than in developed countries[5] SMEs are also said to be responsible for driving innovation and competition in many economic sectors. Although they create more new jobs than large firms, SMEs also suffer the majority of job destruction/contraction.[6]

Overview[edit]

SMEs are important for economic and social reasons, given the sectors role in employment. Due to their sizes, SME are heavily influenced by their Chief Executive Officer, a.k.a. CEOs. The CEOs of SMEs often are the founders, owners, and manager of the SMEs. The duties of the CEO in SME are difficult, and mirror those of the CEO of a large company: the CEO needs to strategically allocate her/his time, energy, and assets to direct the SMEs. Typically, the CEO is the strategist, champion and leader for developing the SME or the prime reason for the business failing.

At the employee level, Petrakis and Kostis (2012) explore the role of interpersonal trust and knowledge in the number of small and medium enterprises. They conclude that knowledge positively affects the number of SMEs, which in turn, positively affects interpersonal trust. Note that the empirical results indicate that interpersonal trust does not affect the number of SMEs. Therefore, although knowledge development can reinforce SMEs, trust becomes widespread in a society when the number of SMEs is greater.[7]

Legal boundary on SMEs around the world[edit]

Multilateral organizations have been criticized for using one measure for all.[8][9] The legal boundary of SMEs around the world vary, and below is a list of the upper limits of SMEs in some countries.

See also[edit]

References[edit]

  1. Compare: Fischer, Eileen; Reuber, Rebecca (2000). Industrial Clusters and SME Promotion in Developing Countries. Issue 3 of Commonwealth trade and enterprise paper, ISSN 2310-1369. London: Commonwealth Secretariat. p. 1. ISBN 9780850926484. Retrieved 18 November 2020. In most countries, small and medium-sized enterprises (SMEs) make up the majority of businesses and account for the highest proportion of employment.
  2. "Chile", Financing SMEs and Entrepreneurs 2016, Financing SMEs and Entrepreneurs, OECD Publishing, 2016-04-14, pp. 155–173, doi:10.1787/fin_sme_ent-2016-11-en, ISBN 9789264249462, retrieved 2018-10-01
  3. Rijkers et al (2014): "Which firms create the most jobs in developing countries?", Labour Economics, Volume 31, December 2014, pp.84–102
  4. United States. Commission for Assistance to a Free Cuba (2004). Report to the President. Department of State publication, volume 11164. Colin L. Powell. U.S. Department of State. p. 233. Retrieved 18 November 2020. In the United States, small business accounts for 50 percent of jobs, 40 percent of GDP, 30 percent of exports, and one-half of technological innovations.
  5. Compare: Antoldi, Fabio; Cerrato, Daniele; Depperu, Donatella (2012). Export Consortia in Developing Countries: Successful Management of Cooperation Among SMEs. Berlin: Springer Science & Business Media. p. v. ISBN 9783642248788. Retrieved 18 November 2020. Small and medium-sized enterprises (SMEs) are highly significant in both developed and developing countries as a proportion of the totl number of firms, for the contribution they make to employment, and for their ability to develop innovation.
  6. Aga et al. (2015): SMEs, Age, and Jobs: A Review of the Literature, Metrics, and Evidence, World Bank Group, November 2015.
  7. P.E. Petrakis, P.C. Kostis (2012), “The Role of Knowledge and Trust in SMEs”, Journal of the Knowledge Economy, DOI: 10.1007/s13132-012-0115-6.
  8. Kushnir (2010) A Universal Definition of Small Enterprise: A Procrustean bed for SMEs?, World Bank
  9. Gibson, T.; van der Vaart, H.J. (2008): Defining SMEs: A Less Imperfect Way of Defining Small and Medium Enterprises in Developing Countries", Brookings Institution website, September 2008