Macroscope | New research focuses on why growth tends to elude small and medium sized companies
A report by the Geneva-based International Trade Centre offers a gloomy critique, saying small companies face major growth challenges
A couple of weeks ago the Geneva-based International Trade Centre launched a new annual flagship report. The ITC is a subsidiary of the World Trade Organization and the United Nations Conference on Trade and Development, and was established in the 1960s with a mandate to promote trade.
The ITC is one of the very few agencies connected to the United Nations family that talks directly to business. That alone gives it particular value in a context where its parent organisations and many other inter-governmental institutions do not do enough to connect with the broader stakeholder community.
True to its orientation, the topic of the first report is small and medium sized enterprises, carrying the main title of “SME Competitiveness Outlook 2015”. SMEs are a fashionable topic of discussion these days. Forums like APEC devote work programmes to them.
SMEs are prominent in the global economy. According to the report, some 95 per cent of all firms are SMEs. They account for almost 70 per cent of global employment and half of GDP.
But SMEs generally lag in productivity compared to large firms, especially in developing and emerging economies. The gap is reflected in wage levels. This lack of competitiveness generally means a lower level of inclusiveness and has generated what the report refers to as a missing middle of mid-sized firms, particularly in developing countries.
There is some evidence, at least in richer economies, that subsidies and other benefits induce firms to remain small and less competitive
The productivity gap behind this bifurcation needs fixing in order to make the economy more balanced, and firms more competitive. The report is rich in its analysis of these challenges.
