Key Factors in the Design of Policy Support for the Small and Medium Enterprise (SME) Development Process - An Overview

Gibb, A.A. (1993). Key Factors in the Design of Policy Support for the Small and Medium Enterprise (SME) Development Process - An Overview. International Small Business Series (No. 12). Göttingen.

Allan Gibb seeks to explore influences upon the management of the SME growth process in Europe. To explain the context, he depicts stylised facts about the growth of the SME sector in general and within the manufacturing industries of various European countries. Questioning the traditional reasoning of scale/cost economies and transaction cost explanations, he focuses on what can be learned for the SME growth process from the past and present differentiating between the management of policy, the management of promotional institutions and the management of businesses.

Referring to the field of policy management, it has to be understood that a decentralised political base allowing for a differentiation in policies is of major importance. Such policies may aim at a marketplace that allows for the mobility of labour, lowers the opportunity costs for entrepreneurship, understands the interdependency between large and small enterprises and recognises the importance of competitiveness rather than cost reduction. With respect to support institutions, organisations managed in an entrepreneurial style may meet the needs of the SME community. The importance of NGOs and informal business networks is also stressed. Therefore, assistance on a networking basis is preferable to a bureaucratic one-stop shop model.

Small business growth is also about decisions of both small and large enterprises concerning the optimal size of their operations. The role of large firms in creating spin-off businesses and in developing subcontracting relationships and other cooperations may not be overlooked. The issue of the management of SME growth has been highlighted in a number of studies, but no convincing models of predictive ability have been developed so far. Thus, there are many different ways to achieve growth and one has to be cautious for academic prescriptions about "picking winners".

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