Public policy and SME development

Abstract

Charles Harvie and Boon-Chye Lee 13.1 INTRODUCTION Policies to promote the development of SMEs are common in both developed and developing countries (Storey, 1994; Levitsky, 1996; Hallberg, 2000). In the case of developed countries, it has become commonplace for governments since the 1970s to implement policies or programmes designed to promote aspects of small and medium-sized enterprises (SMEs). This has coincided with an increase in the importance, in terms of contribution to employment and GDP growth, of SMEs in most of the developed economies (Storey, 1994). In the OECD countries, SMEs currently account for more than 95 per cent of ?rms and 60-70 per cent of employment (OECD, 2000). This is in part the result of an ongoing process of industrial restructuring that began in the late 1970s which saw large ?rms substantially reduce their output and labour, creating large pools of unemployed workers, a proportion of whom were motivated to start their own businesses (Storey, 1982). That process was given added impetus with the move towards privatization and market deregulation in the late 1980s and 1990s, resulting in broad organizational trends that have included outsourcing and downsizing (Parker, 2000). Developments in information and communications technology, rising a?uence and the development of niche markets, as well as the declining importance of economies of scale as the key source of competitiveness, have also contributed to the growth of the SME sector in developed economies. In the case of developing economies, policies designed to assist SMEs have been an important.