The paper "The Economic Role of Small and Medium Enterprises" is a great example of a literature review on macro and microeconomics. Various literature has explored the contribution of Small and Medium Enterprises to the economy. There are those that have posted a positive view about the SMEs while there are those who approach it with caution and do not talk positively about the same. The proponents who are in support of SMEs appreciate the fact that this sector is integral for local, national economies of developed & developing countries and the international economy at large.
In their belief, they see SMEs as critical ion offering employment, source of innovation and entrepreneurial spirit, creation of required industrial linkages in terms of input and output, contributes to the balance of trade, regional development, and empowerment of citizens. On the other hand, the skeptics see it as an inefficient sector with the little to talk about. The subsequent expose highlights the roles of SMEs in the economy of a country and at the international level. 2.0 Contextualizing SMEs Due to the uniqueness of various economies in the world, various countries and scholars conceptualize SMEs using the same parameters with differing degrees.
Thus, there is no universal definition of the same. Before we can see the contribution of SMEs to the economy, it is important to examine what actually constitutes the term SME (Dellberg, 2011, p. 6). According to OECD (2002, p. 4), EU countries and other OECD members cap the number of employees at 200-250 as a parameter of determining an SME with Japan and America setting it at 300 and 500 respectively. Ayyagari, Beck, and Demirguc-Kunt (2005) conceptualize SMEs using various parameters like formality, turnover, and number of employees.
They note that for an enterprise to be categorized as SME, it has to have 0-250 employees. European Commission (2003, p. 37) adds another twist to the parameters by stating that for an organization to qualify has SME, it must have a turnover not exceeding 50 million euro and a balance sheet not surpassing 43 million euros annually. Ayyagari, Beck, and Demirguc-Kunt (2003, p. 3) citing World Bank give three definitions in an attempt of conceptualizing what SMEs are. The first relates to Micro-enterprises.
They observe that this is an organization with up to 10 employees and total assets/ annual sales of USD 100,000. The same has a turnover in excess of USD 400, 000, and tangible assets in excess of USD 200, 000.
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