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Role of SMEs in wealth creation and wealth distribution;problems and prospects

ByMr. Lansana Sakho / March 2012

2 Lansana SakhoMarch 2013

Role of SMEs in wealth creation and wealth distribution

n Impact in Labor, Job creation and Specialization of labor force

n Social Capital improvement, Strategic bridge between micro and large enterprises

n Importance in productive value chains by creating networks or clusters

n Potential of innovation and entrepreneurial creativityn Facilitate technology dissemination n Facilitate transition and adjustment processesn Helps to reduce povertyn Regional integratorn Improves Wealth Distribution in a Country

IMPORTANCE OF SMEIMPORTANCE OF SME’’ss



n Definitions¨ Almost every country has its own definition based

on: mixing: assets, sales, number of employees,paid capital and sector.

¨ There are several definitions some of them areclearly made to help (or not) SMEs development inaccordance to the country policies.

n What is important in SMEs´ classification is todetermine their common characteristics and needsto improve their competitiveness

n This classification must help in the definition ofpolicies having the SMEs as the central focus

WHAT IS A SMEsWHAT IS A SMEs



n Small participation in GDP

n Lack of access to knowledge

n Scale and terms of trade when to markets

n Low productivity (Use of resources effectively and efficiently and capabilities)

n Number of SMEs in a country

n Contact with market to define needs from demand

n Lack of selectivity programs

n Lack of access to financing

PROBLEMS FACED BY SMEsPROBLEMS FACED BY SMEs



FOUR LEVELS TO IMPROVE COMPETITIVENESSOF SMES WITH IMPACT IN THE ECONOMY



COMPETITIVENESS HAVING SMES AS THE CENTER OF THE MODEL (SYSTEMIC AND MEASURABLE APPROACH)



n Literature and research works are mostly (exclusively) oriented to: Governance and Corruption.

n Studies and results in general are based on qualitative data

n Some common methods to measure governance have been developed by the World Bank.

n Empirical results show a positive relation between Governance and Competitiveness

META LEVEL : FINDINGS & APPROACHES



n Most of the multilateral organizations have financed studies of sectors’ competitiveness, value chains and their relation with training programs.

n We have not found evidence of studies linking all macroeconomic policies and their impact in competitiveness policy.

n Neither the macroeconomic nor the competitiveness studies have targeted SMEs and their development in number and growth.

n SMEs are looked at this level only as bumpers for economic shocks to absorb unemployment effect.

MACRO LEVEL : FINDINGS & APPROACHES



n To measure competitiveness as a whole it is important for SMEs to have the resourcesØHuman

Ø Information and K-H

ØPhysical assets and infrastructure

ØFinancial

ØNetwork and strategic alliances

MACRO LEVEL : FINDINGS & APPROACHES



The challenge with those resources is toThe challenge with those resources is to““JumpJump”” to superior stages of developmentto superior stages of development



u Almost all authors agree that SMEs have a major role in diffusion of technology as:¨ Technology introducers and diffusers.¨ SMEs are more flexible in adapting and adopting

new technologies than bigger companies

u In spite of SMEs technology adoption, their effort in R&D are not important.

u If the integration of the economy and the links among SMEs is strong, the diffusion of the technology is faster in the economy

MEZO LEVEL : DIFFUSION & METHODOLOGY



n Technology diffusion and training:¨Manager’s business education is important to

improve technology diffusion¨ The informal learning paths in SMEs are important

to transfer technology to them¨ Implementing and learning a technology must be

treated as a socio-technical practice¨Responsiveness to training is a function of

organizational absorptive capacity¨ Technology adoption by SMEs depends on

professional training policies

MEZO LEVEL : DIFFUSION OF TECHNOLOGY



n HR and organizational knowledge are the main sources of sustainable competitive advantage (for enterprises)

n Training helps to:¨ Develop Innovation¨ Develop sustainable competitive advantage¨ Training transferred in job-related skills improves rapidly

business results.

n Cost vs. investment vision¨ In SMEs the investment in training is important but still

low.¨ In developing countries training is cost oriented. ¨ The level of investment in training is low because of the

difficulty to determine a ROI and their impact in goals achievements.

MEZO LEVEL : TRAINING



uTo have an expected result of training in SMEs is important to:¨Develop capabilities in external knowledge¨Disseminate Intrafirm Knowledge

uManagement advice is more impor-tant than technical skill to improve the growth of SMEs

MEZO LEVEL : TRAINING



n SMEs Characteristics: ¨ Family Business origin and control¨ Individual interests and Personal relations are

shown as the entrepreneurial objectives.¨ Social capital and inter-firms relations determines

the forms of the economic exchanges¨ Exchanges are highly dependant of the socio-

cultural context.¨ Empirical evidence shows that in industrial districts

trust inter-firms is developed (Could create clusters)n All the factors must converge into a level of

trust to organize Clusters and/or Networks

MICRO LEVEL: NETWORKING AND VALUE CHAINS



n Some of the Economic results of clusters are:¨ Clusters generate external economies¨ Clusters present an exchange of knowledge.¨ Clusters create the collective efficiency concept that enhances

SMEs upgrading

n Clusters and networks behaviors¨ Upgrading are mostly supported by the leaders of a global

value chain that dominates the cluster¨ Clusters take time to develop due to the need of cooperative

attitudes.¨ While developing, the linkages with the outside world are

important¨ Information and information systems help the consolidation of

exchanges

MICRO LEVEL: NETWORKING AND VALUE CHAINS



n Management¨ Is the main level studied¨ Several models are presented in the literature¨ The basic results and evolution of those models are

to see the enterprises as a system in which their needs are analyzed with all enterprise subsystems.

¨ The literature found is developed in almost all the important aspects of the BMS model

n Other topics related¨ Succession and Performance of SMEs.¨ Innovation, Environmental results.

MICRO LEVEL: INSIDE THE ENTERPRISE



n SMEs are important for the improvement of the entrepreneurial environment of a country

n In our literature review we found number of papers that¨ Studied some aspects of our four level¨ No evidence was found of studies of the Meta, Macro and Mezzo

levels oriented to lower levels

n For SMEs¨ Most of the works stay at the micro level defining problems

related to good managerial practices¨ “Poor assisted units”¨ Growth and upgrading is not the rule but only an isolated case¨ Policies are oriented to Donors or Financiers goals ¨ Job creators without a relation with wealth creation and

competitiveness enhancement¨ Bumpers for shocks in the Meta, Macro and Mezzo levels

CONCLUSIONS



n Perspectives¨ To enhance competitiveness all policies (in the 4 levels)

must have SMEs as their central actor.¨ Generate Policies with a model that integrates the four

levels. n Measure of impact and effects of current policies in

each of the four levelsn Determination of linkages among four levels and

effects on SMEsn Select value chains and SMEs in those chains to work

with n Policies must work in Value Adding, Job creation,

Education Enhancement and Trade Competitiveness

CHALLENGES & PERSPECTIVES



n The competitiveness index and ranking measures:¨ Institutions¨ Infrastructure¨Macroeconomics¨ Health and Primary education¨ Higher education and training¨Market efficiency¨ Technological readiness¨ Business sophistication¨ Innovation

COMPETITIVENESS INDEX



n Distribution is not an issue for a Country

n A Country can not distribute wealth without creating it

n Wealth creation can be done in a country by international competitive enterprises

n SMEs is the major percentage of enterprises and the major labor generator

n International competitive SMEs will contribute to a sustainable wealth distribution in a Country

IMPORTANCE OF SMES

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