Small and medium-sized enterprises (SMEs) are the most dynamic and vital factor of progress in the contemporary society, main generator of economic performance and substance in any country, employment opportunity provider for most of population, major contributor to the national budget, and engine to improve the living standard of the population. SMEs represent 99% from all enterprises, drawing up the main human resource agglomeration. The higher flexibility of SMEs, the permanent contact of the entrepreneur with the organization, the capacity of producing goods and services to satisfy different needs and demands, the organizational environment favourable to change and innovation represent the elements that explain higher performance of the SMEs sector.small and medium-sized enterprises, macroeconomic indicators, performances, Romania.

Alina CIOCARLAN-CHITUCEA

Daniela POPESCU

English

Research Papers in Economics

Review of International Comparative Management                              Special Number 1/2011  195 
 
THE SMEs PERFORMANCES EXPLAINED THROUGH 
INFLUENCES OF THE ECONOMIC CONTEXT.  
STUDY CASE: ROMANIA 
 
 
Alina CIOCÂRLAN-CHITUCEA 
Daniela POPESCU 
The Bucharest Academy of Economic Studies, Romania 
 
 
KEYWORDS: Small and medium-sized enterprises, macroeconomic indicators, 
performances, Romania 
 
  The Small and Medium-Sized Enterprises (SMEs) from Romania 
 
  During 1990-1992, industrial production and productivity slightly fell and 
unemployment  rate  sluggishly  increased.  In  the  next  few  years,  1993-1995, 
industrial  production  and  productivity  values  grew,  the  unemployed  level  has 
stabilized, correlated  with relatively significant development  of SMEs, although 
such organizations were not in the forefront of legislative and executive attention. 
  Between  1996-2000,  the  number  of  established  SMEs  reduced, 
simultaneously  to  increasing  activity  reducing  decisions.  Causes  that  have 
contributed to this undesirable evolution were the unfavorable general economic 
situation and refuse of according special treatment of SMEs, in order to encourage 
conducting business. 
  After 2000, SMEs have experienced an upswing, by having a favorable 
macroeconomic environment as background: recovery of industrial activity, rapid 
growth of service sector development, construction and trade domains dynamics, 
increase of domestic and foreign investment, faster imports growth compared to 
exports  growth,  and  strengthen  economic  connections  between  the  Romanian 
economy  and  the  European  Union’s  economy  (Romanian  Government  SMEs 
Annual Report, 2007). 
ABSTRACT 
Small and medium-sized enterprises (SMEs) are the most dynamic and vital 
factor  of  progress  in  the  contemporary  society,  main  generator  of  economic 
performance and substance in any country, employment opportunity provider for most 
of population, major contributor to the national budget, and engine to improve the 
living standard of the population. SMEs represent 99% from all enterprises, drawing 
up the main human resource agglomeration. 
The higher flexibility of SMEs, the permanent contact of the entrepreneur with 
the organization, the capacity of producing goods and services to satisfy different needs 
and  demands,  the organizational environment  favourable to change  and  innovation 
represent the elements that explain higher performance of the SMEs sector.          Special Number 1/2011                         Review of International Comparative Management  196 
  The  following  consequences  refer  to  the  SMEs  sector  development: 
number  of  SMEs  in  Romania  increased  with  approximately  20-35  thousand 
annually;  technical  and  massive  imports  of  high  technology  have  encouraged 
SMEs  major  refurbishment;  modern  management,  marketing  and  financial 
approaches  have proliferated;  new forms  of SMEs (clusters, networks  of firms, 
industrial parks, spin-offs) have appeared; use, on a wider range of activities, of 
modern  electronic  forms  (e-commerce,  e-banking.  e-learning)  has  noticeably 
increased. 
  It  is  widely  recognized  the  fact  that  SMEs  became  the  most  generous 
source  of  employment  supply,  both  in  Romania  and  in  Western  countries.  But 
considering  SMEs  only  as  means  of  absorbing  workforce,  would  significantly 
reduce their role in the economy and society. SMEs play an essential role to foster 
a culture of competition based on higher flexibility and productivity. Widening the 
angle of approach, SMEs promote individual and organizational behavior change 
(Romanian Government SMEs Annual Report, 2007). 
 
  General View upon Romanian Economy in 2004-2009 
 
  The  main  macroeconomic  indicators to outline the  economic and social 
context in which SMEs operate, are presented in Table No. 1.  
  Annual GDP growth was significant up to 2008, higher than the average 
European Union level; furthermore, these positive results were recorded as a result 
of particular SMEs contribution, representing a dynamic sector, that, in spite of 
pessimistic  appreciations,  manages  to  continually  develop  and  adapt  to  the 
requirements of a functioning market economy.  
  The process of sustainable economic growth, installed since the country 
preparation  for  The  European  Union’s  membership,  has  continued  the  positive 
evolution, although not at the same rates and allowances as in the years prior to 
accession. Thus, in 2007, GDP grew of 6%, compared to 7.9% level achieved in 
2006; despite lower economic growth achieved in 2007, the economic development 
was characterized as stable, healthy. Values of macroeconomic indicators in 2008 
confirm the hypothesis (annual growth rate of GDP is 7.1%, GDP per capita and 
reaches the highest value in the last five years, of 23,440 lei per capita).  
  The  main  growth  influence  factors  continued  to  increase  domestic 
consumption of goods and services and increase of investment flows to Romania, 
especially in the first semester of 2007, as shown in The Romanian National Bank's 
Annual Report, referred to as the main source of macroeconomic data.  
  Severe and highly synchronized reduction of global economic activity had 
effects in the main macroeconomic developments in Romania: annual GDP growth 
turned sharply negative in 2009, which seriously affected both public and private 
sector: the number of layoffs increased by 4.4% (approximately 212,000 people 
became  unemployed  in  2009),  a  number  of  SMEs  (especially  microenterprises) 
were vanished (the number of SMEs has decreased by about 10%). The budget 
deficit increased by 47.65% (in 2009 compared to 2008, the budget deficit turned Review of International Comparative Management                              Special Number 1/2011  197 
from –24 654,9 million lei to –36 400,6 million lei). The value of imports and 
exports  declined  as  a  result  of  global  economic  context  pressures  and  negative 
Balance of Foreign Trade value reduced to–6 754 million Euro, the lowest value 
recorded since 2005.  
  Inflation  rate,  measured  by  consumer  price  index,  has  continuously 
decreased after 2000, reaching its lowest level in recent history (i.e. 4.9%) at the 
end of 2007, compared to 6.6% value of the previous year. This fact reinforced the 
tendency installed approximately three years ago, meaning the level of a single-
digit before the comma inflation, and reducing the difference between Romania 
and the level of the other European Unions country members. After an increase of 
1.4%  in  2008,  explained  by  higher  incomes  and  increased  consumption,  the 
inflation rate reached 4.74% in 2009, due to lower domestic consumption and due 
to state intervention in the economy.  
  In 2007 and 2008, unemployment rates maintain at a stable level of 4.1% - 
4.4%, correlated with economic growth; redundancies in the past year announced 
emerging economic and financial crisis, slumped the value at 7.8%, the highest rate 
since 2004.  
  Macroeconomic  indicators data, represented in Table No. 1,  outline the 
two major economic events in the considered period: firstly, economic and social 
context have been favorable, encouraging SMEs development; secondly, the SMEs 
development has generated benefic economic effects throughout the economy. 
 
Evolution of Main Macroeconomic Indicators of Romania, between 2004-2009 
Table 1  
 
Indicators  2004  2005  2006  2007  2008  2009 
Total GDP   
(million lei) 
246 469  288 176  344 536  404 709  503 958,7  467 673 
GDP Annual 
Growth Rate (%) 
8,5  4,4  7,9  6,0  7,1  –7,2 
GDP / capita (lei / 
capita) 
11 018  13 327  15 962  18 791  23 440  21 752 
Inflation Rate (%)  11,9  9,0  6,6  4,9  6,3  4,74 
Employed 
Population 
(thousands persons) 
9 158  9 147  9 313  9 353  -  - 
Employees  
(thousands persons) 
4 469  4 559  4 667  4 720  4 806,0  4 594,6 
Private Sector 
Employees  
(thousands persons) 
2 259  2 575  2 726  -  -  - 
Unemployeers 
(thousands persons) 
558  523  460  368  403,4  709,4 
Unemployment  6,3  5,9  5,2  4,1  4,4  7,8          Special Number 1/2011                         Review of International Comparative Management  198 
Indicators  2004  2005  2006  2007  2008  2009 
Rate (%) 
Foreign Trade 
Balance  
(million Euro) 
-5 323  –7 806  –11 759  - 17 586  -18 372  –6 754 
External Debt  
(million Euro) 
18 
298,0 
24 641,5  28 628,5  36 728,2  51 761,8  64 207,7 
Budget Excess / 
Deficit (million lei) 
–3 
693,3 
–2 268,4  –5 099,8  -9 448,9  –24 654,9  –36 400,6 
Source: http://www.bnro.ro/Publicatii-periodice-204.aspx, Monthly Form December 2009, accessed 
in the 29
th of March 2010 
 
  SMEs and The Economic and Financial Crisis 
 
  The  concept  of  performance  is  reflected  in  the  literature  with  different 
meanings, for instance: successful result of an activity, action, and economic, with 
the meaning of profitability, productivity, efficiency (Vâlceanu, Robu, Georgescu, 
2005).  
  Performance reffers to superior results achieved by businesses (i.e. SMEs) 
at a specific moment of time (2009), compared to the previous period.  
  In  2009,  the  majority  of  SMEs,  for  all  kinds  of  size,  recorded  lower 
performance than in 2008 (with values between 54.38% to 62.10% for micro and 
medium enterprises). In this case, the highest percentage relates to medium-sized 
enterprises for, as logical approachment, the performance of a medium enterprise 
(either  higher  or  lower)  is  generally  larger  than  the  performance  of  a 
microenterprise.  
  Approximately 30% of SMEs recorded similar performances, while only 
about 13.8% of SMEs were able to increase their results in 2009.  
  As shown in Table No. 2, the results recorded by SMEs are predominantly 
negative ones, with implications for human resources working in these enterprises. 
  Over  half  of  SMEs  have  reduced  activity  in  2009  compared  to  2008, 
approximately 20% of them maintained their activity at the same parameters (for 
each of the three types of SMEs), while 5% have able to record superior results in 
their activity. A percentage between 12.75% and 15.15% for medium to micro, no 
longer on the market resistant employing and went bankrupt. 
  Reduced resistance to external factors caused by SMEs small dimension 
generate a higher proportion of enterprises who went bankrupt in 2009, compared 
to the other two types: small and medium enterprises. 
 Review of International Comparative Management                              Special Number 1/2011  199 
SMEs Performances in 2009, Compared to 2008, on Size Classes 
Table 2 % 
 
Enterprises 
Micro 
(0-9 
employees) 
Small 
(10-49 employees) 
Medium 
(50-249 
employees) 
1.  Superior  13,87  13,83  13,71 
2.  Identical  31,75  30,55  24,19 
3.  Inferior  54,38  55,62  62,10 
Source: SMEs White Charter 2009, p. 142 
 
  Efficiency  and  profitability  of  SMEs  can  be  measured  using  several 
economic  indicators,  of  which  the  most  relevant  is  the  level  of  productivity, 
defined as the ratio between turnover and number of employees. Moreover, the 
growth performance of the SMEs sector regarding the issue of economic efficiency 
and  competitiveness represents a constant concern of the European  Union, also 
illustrated by the strategic  directions for action to support the  emerging private 
sector development.  
  Reducing  the  number  of  employees  is  a  direct  factor  of  influence  for 
increased productivity. Therefore, two courses of action can be considered towards 
increasing productivity, both extensive and intensive; the extensive course obtained 
by replacing and renewing technology, and the intensive course reffers to gaining 
skilled personnel through training and restructuring activities.  
 
SMEs Activity Dinamics in 2009, Compared to 2008, on Size Classes 
Table 3  % 
 
SMEs Activity 
Dinamics in 2009, 
Compared to 2008 
Enterprises 
Micro 
(0-9 employees) 
Micro 
(0-9 employees) 
Micro 
(0-9 employees) 
1.  SMEs that went 
bankrupt 
15,15  14,87  12,75 
2.  SMEs that have 
reduced their activity 
55,98  58,61  63,19 
3. 
SMEs that have 
maintained their 
activity 
24,63  21,50  22,03 
4.  SMEs that have 
developed their activity 
4,24  5,03  2,03 
Source: SMEs White Charter 2009, p. 158 
            Special Number 1/2011                         Review of International Comparative Management  200 
Average annual productivity expressed by turnover per capita of the SMEs 
sector  amounted  to  41,456  Euro/employee  in  2009,  compared  to  27,823 
Euro/employee  in  2004.  Productivity  amounts  to  38,957  Euro/employee  for 
microenterprises,  49,998  Euro/  employee  for  small  enterprises  and  54,125 
Euro/employee for medium ones, while the SMEs total average value is 41,456 
Euro/employee.  
  Considering the structure size classes, the highest level of productivity in 
Romania was recorded by medium-sized enterprises, meaning up to 30% above the 
SMEs sector average value. Moreover, as represented in Table No. 4, productivity 
of 49,998 Euro/ employee level was above the average of overall sector.  
 
Productivity per Capita, per Total SMEs Sector, on Size Classes 
Table 4 Euro / employee 
Enterprises  2004  2006  2007  2009 
Micro 
(0-9 employees)  26 592  32 304  39 500  38 957 
Small 
(10-49 employees)  30 984  42 051  50 786  49 998 
Medium 
(50-249 employees)  25 894  41 685  54 136  54 125 
TOTAL   27 823  33 406  41 183  41 456 
Source:  http://www.mimmc.ro/files/Raport_Anual_IMM_2008.pdf,  accessed  in  the  06
th  of  April 
2010, own calculations (exchange rate Lei/Euro has been considered 3,52 in 2006, 3,34 in 
2007, 10 in 2009) 
 
  Conclusions 
 
  All  these  considered,  key  changes  involving  the  transition  to  a 
competitive SMEs sector should take into consideration the following: 
  creating and implementing human resources development strategies of 
SMEs, as a prerequisite to increase their performance in the new socio-economic 
context.  SMEs  tend  to  give  greater  importance  to  human  resources  than  larger 
organizations,  because  of  the  simplified  hierarchical  structure,  which  promotes 
greater  interaction  between  management  and  execution  personnel,  and, 
furthermore, higher interest and commitment of organization employees;  
  supporting  innovation  in  SMEs,  argument  sustained  by  increasingly 
development and implementation of scientific progress. Innovative characteristics 
of SMEs should be harnessed and transformed into a competitive advantage in all 
sectors;  
  funding  research  and  development  from  the  state  budget  to  address 
some of the issues facing SMEs. Currently, there is a gap between the contribution 
that SMEs have to GDP formation and the benefits received to be allocated for 
research and development.  
  Unlike larger organizations, SMEs enjoy a number of advantages, such as 
small number of employees, which facilitate communication and propagation of Review of International Comparative Management                              Special Number 1/2011  201 
change  within  the  organization,  a  smaller  proportion  of  total  tangible  assets, 
economic  and  relatively  simple  management,  adaptability  and  flexibility  to 
changing external environment, entrepreneurial spirit, faster growth, development 
potential, but more intense interpersonal relationships and greater cohesion. 
 
 
  Bibliography 
 
1.  Nicolescu  O.,  Nicolescu  C.,  Small  and  Medium-Sized  Enterprises 
Management, Ed. Economics, Bucharest, 2008, pp. 309-315 
2.  Vâlceanu  G.,  Robu  V.,  Georgescu  N.,  Financial-Economical  Analysis,  Ed. 
Economics, Bucharest, 2005, pp. 236-240 
3.  Romanian  Government,  Annual  Report  2007  –  Small  and  Medium-Sized 
Enterprises of Romania, Project financed within The European Union’s PHARE 
Programme 
4.  White Charter of Romanian SMEs, Seventh Edition, Bucharest, 2009, pp.140-158 
5.  http://www.cnipmmr.ro/statistica/2009sem1.pdf,  SMEs  Annual  Report, 
accessed in the 06
th of April 2010 
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th 
of April 2010 
 
  This article is a result of the project „Doctoral Program and PhD Students 
in the education research and innovation triangle”. This project is co funded by 
European Social Fund through The Sectorial Operational Programme for Human 
Resources  Development  2007-2013,  coordinated  by  The  Bucharest  Academy  of 
Economic Studies. 

accessed in the 06 th of April

Annual Report

Financial-Economical Analysis,

http://www.cnipmmr.ro/statistica/2009sem1.pdf, SMEs Annual Report, accessed in the 06 th of

White Charter of Romanian SMEs, Seventh Edition,

The SMEs Performances Explained Through Influences of the Economic Context. Study Case: Romania

http://rmci.ase.ro/no12vol1s/Vol-12_No-1S_Article-31.pdf

The SMEs Performances Explained Through Influences of the Economic Context. Study Case: Romania

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