Many developed and advanced developing nations made and still continue to make vital decisions about taking the small and medium-sized enterprise (SME) route as their pathways to industrialisation. What makes the route monumental is that the SME option for industrialisation not only historically hastened the process but also still continues to support the progressive advance of the industrial status of advanced nations such as Japan, Germany and the United States.
Drawing lessons from those at the top end of industrialisation, advanced developing countries like India, Brazil, Thailand and even China have followed the same route – adjusted, of course, to their own social and economic conditions – with fulfilling results. A compelling move to the SME way needs to be viewed in this proven context of success.
What are the distinguishing characteristics of SMEs that render them singular as an option for industrialisation?
There are some factors, including accelerating industrial growth and development; capacity for increased employment creation; affordability in terms of capital requirements; demand for skills; and amenability to spatial or geographical decentralisation. Just as important is greater responsiveness to incentives; being mostly resource-based and basic needs-oriented; capability to serve as instruments for broader income distribution; and modest business size with latent potential to grow bigger.
SMEs are also optimal for developing entrepreneurial talents and serve as instruments for the wider inter-regional exchange of goods and services with less complex logistical and infrastructure requirements. They entail high potential to be markets for and suppliers of inputs for more established or large-scale businesses, the flexibility of capacity to produce increased diversities of goods and services, and boost the capacity to stem massive migration of people to major cities