The Importance of SMEs in DevelopingEconomies

Abstract

The economy of the 20th and 21st century has a different set of rules than Smith‘s economy of the 19th century. The new ideology of neo-liberalism and globalization emphasizes the role of SMEs as promoters of a healthy business climate, economic efficiency and power for economic development, especially in developing countries. Today, instead of large-scale industries, SMEs having gained importance in the developing economies, become advantageous being economic enterprises having the capability of quick adaptation, working with less capital but more intense labor and having low cost of management and thus having cheap production. Although SMEs have some weaknesses, they are less affected from economic crises due to its flexibility and abilities which keep up with changed conditions. SMEs are vital actors for enhancing innovation, competitiveness, entrepreneurship and the establishment of an effective innovation system for developing countries. Therefore, in this study the importance of SMEs for developing countries is considered. First, the regulations related to SME definition and EU‘s SME definitions are mentioned. In the second section, the advantages and disadvantages of SMEs are considered. Then, the importance of SMEs in the economies is discussed by groups of countries with the help of various indicators. Finally, the importance of SMEs in developing countries is discussed.

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