Generally speaking, SMEs plays an important role in the economic development of a country. Their role in terms of production, employment generation, contribution to exports & facilitating equitable distribution of income is very critical.
An increased number of SMEs will bring more flexibility to society and the economy and might facilitate technological innovation.
They produce predominantly for the domestic market, drawing in general on national resources. They use and develop predominantly domestic technologies and skills.
This will also increase the demand for CIO’s and CTO’s. In addition, future development of SMEs and their contribution to the national economy is closely related to globalization and its effects. Globalization, aided by rapid developments in information and communication technologies, improved transport facilities, behind the border regulatory reform, and tariff reductions affect SMEs and large multinational enterprises differently. The current phase of globalization, characterized by the globalization of production processes, has required important modifications in the relationships among partners throughout the value chain.
Participation in global value chains can bring stability to SMEs and allow them to increase productivity and to expand their business. This is often accomplished by the upgrading of their technological and human capital, as a result of their greater exposure and facilitated access to information, new business practices, and more advanced technologies. Co-operation with a network of upstream and downstream partners can enhance a firm’s status, information flows and learning possibilities and increases the chances of success of small firms in the value chain.
However, SMEs’ involvement in value chains usually entails greater demands on their managerial and financial resources, and pressures on their ability to upgrade, to innovate and to protect in-house technology. SMEs may be limited by their inability to undertake R&D activities and training of personnel, and to comply with the growing number of requirements of product quality standards demanded by others.
Insufficient working capital can also be a barrier to SME participation in global value chains, in terms of their ability to upgrade technologies and services. Cash-flow can also be affected adversely through delayed payments from international partners. Moreover, in order to upgrade its position in the value chain, a small firm may need to take on a larger and more complex set of tasks: for example, in addition to manufacturing a product or providing a service, it may involve contributing to the product development, organizing and monitoring a network of sub-suppliers, implementing internal systems of quality control and assuring compliance to an increasing set of standards, and ensuring delivery and quality at competitive costs.
“Role of SMEs in Economic Development.” All Answers Ltd. ukessays.com, November 2018. Web. 28 January 2019. <https://www.ukessays.com/essays/economics/smes-role-in-national-economies-economics-essay.php?vref=1>.