Smes and employment generation

About 48 percent of our population are presently unemployed while over one million students graduate from our tertiary institutions annually to join the army of unemployment people.

In Smes and employment generation of age, the conventional wisdom is that young firms tend to create more jobs than older firms Storey,since "most small businesses only grow in the first few years after start-up and then stabilise Burns, On the other hand, there is a growing body of research evidence which suggests that relatively few SMEs actually create employment on a significant scale.

He argues that it is 'proprietors' rather than entrepreneurs which account for the majority of small businesses that are established in Eastern Europe, as individuals strive to protect themselves from the uncertainties characteristic of emerging market economies, by generating cash flows that can be consumed for raising general living standards, rather than for business expansion.

Interestingly, another difference compared with most western sample, was the disproportionate contribution to job generation made by firms in the size band.

In the s, some development organisations in the UK such as the Greater London Council were reluctant to support small businesses because they considered that the jobs provided were of a poorer quality than those in larger companies.

Distinctive Characteristics of SMEs under Transition Another issue that needs to be considered when assessing the contribution of SME to employment generation in transition economies is the nature of the SMEs themselves which, particularly in the early Smes and employment generation of transition and in those countries where transformation is less advanced, have a number of distinctive characteristics in comparison with SMEs in mature market economies.

However, research undertaken at Middlesex University based on a longitudinal study of manufacturing SMEs over an 11 year period showed that if firms can survive the critical early years after start-up, they are capable of generating additional jobs over an extended period of time North et al, In countries that are at a more advanced stage with respect to market reforms, the legal framework is no longer the most immediate problem for SMEs.

In terms of size per se, although the very smallest firms grow faster than other firms, it appears that once a certain size threshold is passed, growth is not systematically related to size.


By contrast, more radical strategies based on the principles of flexible specialisation have emphasised the emergence of small firms in regional networks that resemble Marshallian industrial districts.

In fact, the results showed considerable variation in SME performance both in terms of employment and sales growth between the four countries surveyed, reflecting differences in the pace of transformation. Although the sampling frame included firms with up to 50 employees, the vast majority of surveyed firms were very small enterprises with less than 10 employees.

Most of these characteristics reflect a lack of political and economic stability in the external operating environment but there are implications for the nature and extent of the employment created.

In this context, many manufacturing SMEs in the Baltic States commenced trading using equipment and premises that were leased initially from state-owned companies Smallbone et al, The paper draws on evidence from mature market economies as well as from transition countries.

However, once businesses become established, their support needs tend to become more specialised. Moreover, in view of the importance of the generation of external income to national economic growth, there is a strong case for giving the highest priority to growth oriented firms that are seeking either to break into foreign markets, or increase their foreign sales.

In this respect, the aim should be to develop a business support infrastructure that is relevant to the needs of SMEs at different stages of their development. Indeed, such a view is supported by a review of the research evidence on the issue which concluded that "the evidence from both the UK and the USA suggests that, according to most measures, the job quality provided by small firms is lower than that in larger firms The ability of SMEs to survive and grow in increasingly competitive markets can be affected by the extent to which they are able to draw on appropriate resources from outside the firm when required.

More generally, a number of empirical studies suggest that small private enterprises are a source of employment growth in transition economies although the extent to which this is so varies between countries.

However, whilst the share of SMEs in total employment has increased since the s in many western countries, it is very small enterprises which have most consistently created more jobs than large enterprises, in the aggregate at least EIM, Moreover, SME development in a transition context is more than an economic process.

In terms of policy, concern with the gap between new business formation rates in Scotland and the average for the UK as a whole, led Scottish Enterprise the agency with responsibility for promoting economic development in Scotland to embark on a major programme to stimulate new enterprise development with the aim of closing the gap between Scotland and the rest of the UK in terms of new businesses created.

From this it should be possible to establish a clear set of objectives for such policies. Clearly, such factors can affect the nature and pace of SME development with implications for their ability to create employment. However, whilst the share of SMEs in total employment has increased since the s in many western countries, it is very small enterprises which have most consistently created more jobs than large enterprises, in the aggregate at least EIM, In these conditions, the priority is to establish the institutional, legal and cultural conditions to facilitate the development of entrepreneurship.

In transition countries, such as Poland and the Baltic States, our evidence suggests that the problem in this respect is more a question of supply side deficiency than a lack of latent demand. Transforming a centrally planned, socialist society into a liberal, democratic market based system involves fundamental social change as well as economic restructuring, which SMEs can also contribute to.

One of the key findings of this longitudinal study was that job creation during the period was closely related to the growth of firms in output terms measured in terms of the real value of sales turnover.INTRODUCTION The nation needs the Small and Medium Enterprises (SMEs) because they contribute meaningfully to economic development.

They are in the forefront of output expansion, employment generation, income redistribution, promotion of indigenous entrepreneurship and production of primary goods to strengthen industrial linkages.

Entrepreneurial Education, SMEs and Employment Generation The Nigerian education machinery, with particular reference to the university system, has been known to turn out graduates who do not meet up with the 53 Entrepreneurship Education, Small and Medium.

informal enterprises that can make significant contributions to employment generation.

Nevertheless, it is important to note that most SMEs in developing countries are low- productivity informal micro-enterprises that will not grow and create additional jobs. ROLE OF SMES IN ECONOMIC DEVELOPMENT OF INDIA DIRECTOR, MBA PROGRAMME, significant export earnings, low investment requirements, employment generation, effective Total Employment of SMEs and Production per Employee Year Employment (In mn) Production per.

Small and medium-sized enterprises (SMEs) account for over 95% of firms and 60%% of employment and generate a large share of new jobs in OECD economies. They have specific strengths and weaknesses that may require spe-cial policy responses.

As new technologies and globalisation reduce the. 2 Financing SMEs and its Effect on Employment Generation: A Study of Brac Bank’s SME Lending Mehnaz Rabbani Munshi Sulaiman∗ Abstract Financial and development assistance designed specially for small and medium enterprises in Bangladesh is a.

Smes and employment generation
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