The scalability of small and medium enterprises in South Africa

It has long been recognised that small and medium enterprises (SMEs) account for an overwhelming part of businesses worldwide and that they contribute considerably to private sector Gross Domestic Product (GDP), growth and are the source for most new employment opportunities. It may therefore be postulated that scaling and growing SMEs are of notable importance to the economic wealth of the country and to this extent it eliminates economic stagnation. This treatise argues the significant impact that entrepreneurship exerts on the South African economy. This would allow the role players to identify the strategic interventions necessary to grow and scale SMEs. A literature review was conducted to develop insights on the factors that affect the scalability of SMEs. The aforementioned section expounds on the concept of SMEs. Secondly, the emergence of SMEs across developed and emerging economies is discussed by exploring the United States of America, Europe and the BRICS economies respectively. Thirdly, SMEs in the South African context are explored. Fourthly, the requirements and challenges of SMEs in the South African economy are highlighted. The primary data for this study were collected from the sample by means of an online questionnaire and through fieldworkers who were deployed to collect responses from the sample group. A representative sample of n = 295 responses were received. Descriptive statistics were used to summarize the data in a way to simplify the interpretation of the data. Inferential statistics were used to authenticate conclusions made from the data. The model was developed and identified the following factors as exerting influence on the scalability of SMEs: Access to Finance, Access to Markets and Access to Human Capital, Entrepreneurial Intention, Regulatory Framework, Business Support and Networks. The average mean values of the factors were then used to establish their position or ranking as determined from the responses received. All factors ranked above a mean value of 3 which indicates that SMEs have a neutral to positive opinion of the factors identified in the model. According to a one-tailed t-test from the sample of SMEs it was shown that two of the nine factors had a large effect size in the factors of Human Capital and Entrepreneurial Intention. The Scalability of SMEs’ model developed in this study specified the factors that influence the growth of SMEs

An Ounce of Prevention: What Promotes Crisis Readiness and How Does It Drive Firm Performance?

Organizations develop crisis readiness to avoid and mitigate crises. This study investigates several factors that influence crisis readiness, including market dynamism, perceived likelihood of a crisis (PLC), and firm size. It also evaluates the impact of crisis readiness on firm performance. Results from a PLS-SEM assessment of 301 managers in the United States suggest that market dynamism drives firm performance while heightening both PLC and crisis readiness. When compared to large organizations, managers in small- and medium-sized enterprises (SMEs) reported higher PLC but lower crisis readiness, underscoring the challenges faced by small firms regarding crisis preparation. Crisis readiness was also positively linked to both financial and non-financial performance. The model tested in this study supports the influence of external and organizational factors on crisis preparation, as well as subsequent links with firm performance

Promoting environmentally sustainable enterprises: some policy options

Governments around the world are taking an increasing interest in promoting environmentally-sustainable economic activity. They have developed a variety of policy approaches in an effort to address environmental issues that range from localised pollution incidents to global climate change. This chapter examines the kinds of intervention tools that are being used to improve the environmental performance of SMEs, and to guide entrepreneurial energies towards more environmentally-benign goals. The chapter aims to: (1) outline the main options available to policy-makers; (2) compare specific intervention tools, noting their strengths and limitations; and (3) discuss the case for adopting more holistic approaches to address the pervasive, complex and often deeply-rooted challenges of sustainable development. Key lessons are that policy makers need to select appropriate combinations of tools based on careful reviews of the evidence, and that well-integrated, context-sensitive policies are likely to prove the most effective

Trade Adjustment Assistance for Firms

The Trade Adjustment Assistance (TAA) programs were first authorized by Congress in the Trade Expansion Act of 1962, as amended, to help workers and firms adjust to import competition and dislocation caused by trade liberalization. Although overall economic welfare can be increased by trade liberalization, TAA has long been justified on grounds that the government has an obligation to help the “losers” of policy-driven trade openings that may cause adjustment problems for firms and workers adversely affected by import competition. TAA programs that cover workers, firms, and farmers aim to “facilitate efforts by the domestic industry to make a positive adjustment to import competition and provide greater economic and social benefits than costs.” Congress continues to monitor TAA program performance and to periodically reauthorize and amend the governing legislation. This report discusses the Trade Adjustment Assistance for Firms (TAAF) program, which is administered by the Economic Development Administration (EDA) of the Department of Commerce. The TAAF program assists eligible American companies that have been harmed by increasing imports; this harm is defined by lower domestic sales and employment because of increased imports of similar goods and services. Through the TAAF program, EDA provides technical assistance, on a cost-sharing basis, to help eligible businesses create and implement business recovery plans that may allow them to remain competitive in a dynamic international economy. The TAAF program provides technical assistance through a partnership with a national network of 11 EDA-funded Trade Adjustment Assistance Centers (TAACs)

ADB–OECD Study on Enhancing Financial Accessibility for SMEs: Lessons from Recent Crises

During the era of global financial uncertainty, stable access to appropriate funding sources has been much harder for small and medium-sized enterprises (SMEs). The global financial crisis impacted SMEs and entrepreneurs disproportionately, exacerbating their traditional financing constraints. The financial conditions of many SMEs were weakened by the drop in demand for goods and services and the credit tightening. The sovereign debt crisis that hit several European countries contributed to further deterioration in bank lending activities, which negatively affected private sector development. The global regulatory response to financial crises, such as the Basel Capital Accord, while designed to reduce systemic risks may also constrain bank lending to SMEs. In particular, Basel III requires banks to have tighter risk management as well as greater capital and liquidity. Resulting asset preference and deleveraging of banks, particularly European banks with significant presence in Asia, could limit the availability of funding for SMEs in Asia and the Pacific. Lessons from the recent financial crises have motivated many countries to consider SME access to finance beyond conventional bank credit and to diversify their national financial system. Improving SME access to finance is a policy priority at the country and global level. Poor access to finance is a critical inhibiting factor to the survival and growth potential of SMEs. Financial inclusion is thus key to the development of the SME sector, which is a driver of job creation and social cohesion and takes a pivotal role in scaling up national economies. The Asian Development Bank (ADB) and the Organisation for Economic Co-operation and Development (OECD) have recognized that it is crucial to develop a comprehensive range of policy options on SME finance, including innovative financing models. With this in mind, sharing Asian and OECD experiences on SME financing would result in insightful discussions on improving SME access to finance at a time of global financial uncertainty. Based on intensive discussions in two workshops organized by ADB in Manila on 6–7 March 2013 and by OECD in Paris on 21 October 2013, the two organizations together compiled this study report on enhancing financial accessibility for SMEs, especially focusing on lessons from the past and recent crises in Asia and OECD countries. The report takes a comparative look at ADB and OECD experiences, and aims to identify promising policy solutions for creating an SME base that is resilient to crisis, from a viewpoint of access to finance, and which can help drive growth and development

The CPTPP and Digital Trade: Embracing E-Commerce Opportunities for SMEs in Japan and Canada

One of the most innovative features of the CPTPP is its material on digital trade, especially its chapter on e-commerce which contains a number of provisions aimed at enhancing this vital sector of the economy by eliminating distortive trade barriers such as restrictions on data transfer and data localization requirements. Such provisions should be important to the CPTPP’s two largest parties: Canada and Japan, both of which are highly advanced economies seeking to enhance their digital trade capacity across the Pacific Rim. This paper explores the main features of the CPTPP concerning digital trade from the perspective of Small and Medium Sized Enterprises (SMEs) in Canada and Japan. Such businesses have a poor track record of e-commerce uptake and may be disadvantaged relative to their larger competitors which enjoy dominance in the online marketplace. Whether or not the CPTPP will assist these businesses while striking the right balance between an open internet and safeguarding of issues such as privacy is a matter of some debate

The role of high-performance people management practices in Industry 4.0: The case of medium-sized Spanish firms

Purpose: This paper wants to build the case for the key role of high-performance people management practices in the development of I4.0 in SMEs. The research upon which this paper is based wants to prove that the consolidation of those practices should be a priority for any company willing to embark in this journey. The paper deals specifically with medium-sized Spanish firms which, on top, are already having significant issues with digitization. Design/methodology: The paper starts by digging into the literature to see how past technologies have impacted productivity, followed by a review of the material available on digitization and Industry 4.0. It moves on to explore the relationship between people management practices, productivity and innovation. Finally, the focus is placed on Spanish medium-sized companies, understanding their current levels of consolidation of high-performance people management practices as well as digitization. With all this information, several propositions are posited for validation using the Delphi methodology. Findings: I4.0 is, at its core, about productivity improvements through business process and business model innovation. People management practices are found to be strongly correlated with both productivity and innovation. It has also been found that Spanish medium-sized firms already have a significant initial gap compared to those of other OECD countries not only in productivity, but also people management practices and digitization. The experts seem to agree on the key role of people management practices and that they should be a high priority for any firm seriously thinking about industry 4.0. This is not to say that strategy or leadership will not play a paramount role in any digital transformation, but to emphasize the fact that the normally-forgotten people management practices will be important enablers in this process. Originality/value: It is believed that this is a topic that has been mostly neglected in the I4.0 literature. In that sense, the findings of this paper could be relevant for small and medium-sized businesses embarking on the industry 4.0 journey. This will entail a significant investment of time and money and, if the key role of people management practices is not on the radar screen, it may have significant implications for the success of those ventures.Peer ReviewedPostprint (published version

Muppets and gazelles: political and methodological biases in entrepreneurship research

Despite an almost universally accepted belief outside academia that entrepreneurial activity is a positive driving force in the economy, the accumulated evidence remains largely inconclusive. This article positions the increased interest in entrepreneurship since the 1980s within its historical context and highlights the significant methodological problems with its analysis. Taking these problems into account it reevaluates the performance of entrepreneurial firms in terms of innovation, job creation, economic growth, productivity growth, and happiness to show how both positive and negative interpretations can emerge. A pattern of increasingly positive interpretation is observed as one moves from analysis to policy. To address this bias, the article suggests the single category “entrepreneurial firms” be broken up along a continuum from the large number of economically marginal, undersized, poor performance enterprises to the small number of high performance “gazelles” that drive most positive impact on the economy. This would allow a more realistic evaluation of the impact of entrepreneurs by avoiding a composition fallacy that assigns the benefits of entrepreneurship to the average firm

Can Better Working Conditions Improve the Performance of SMEs? An International Literature Review

[Excerpt] It is widely recognized that competitive private enterprise is the principal source of economic growth and wealth globally and makes a substantial contribution to poverty reduction. Although large and multinational enterprises have the higher public profile, the majority of businesses are small and medium-sized enterprises (SMEs). They are estimated to be responsible for over 50 per cent of the new jobs created globally and, in most developing and emerging countries, they also employ more people than do large enterprises. Given their importance as employers, SMEs clearly have the potential to contribute to the social and economic progress for workers and their communities. However, many SMEs – particularly those in developing and emerging countries – are not achieving this potential. Frequently, their employment is in low-quality and low-skilled jobs that offer low wages under poor and unsafe working conditions. In addition, SMEs often fall short in terms of productivity, competitiveness and market share. The ILO has long been convinced that, by improving working conditions, safety and skills in SMES, productivity and profitability can also be improved: a win-win scenario that is good for workers, enterprise owner, communities and economies. In June 2012, specialists from four ILO departments came together to implement a joint programme of work to explore how to help and encourage SMEs to achieve this. This independent research review was commissioned by ILO in order to contribute to establishing a solid empirical basis for future research and interventions. It reviews the empirical relevance of the assumption that a win-win scenario exists in SMEs, especially in the context of developing economies. It also seeks to identify the factors or conditions that influence its emergence. More broadly, the report builds upon a thorough review of international literature to present responses to a range of enquiries relating to the links between working conditions, safety and health, skills and productivity. Not surprisingly, the answers contained in this report are often conditional and are far from categorical. Although the report suggests that a win−win scenario may exist, in certain circumstances, it also underlines that more empirical research is needed, particularly in developing and emerging economies