Competitiveness Strategy in Developing Countries: A Manual for Policy Analysis

By Ganeshan Wignaraja | Go to book overview

5

Industrial clusters and business development services for small and medium-sized enterprises

Eileen Fischer and Rebecca Reuber

Introduction

In most countries, small and medium-sized enterprises (SMEs) make up the majority of businesses and account for the highest proportion of employment. They produce about 25 percent of OECD exports and 35 percent of Asia's exports (OECD, 1997). Those SMEs that are internationally competitive are better able to grow as well as to survive in their domestic markets. In order to become internationally competitive, SMEs must be market-oriented and offer products and services of international quality. These objectives can be particularly difficult to achieve for SMEs in developing countries, and governments and non-profit agencies often need to provide assistance. This chapter identifies principles and best practices from worldwide experience with SME development assistance in the field of non-financial services. In particular, the chapter focuses on the role of industrial clusters and on the ways that public and non-profit institutions can help to promote SMEs by fostering the development of such clusters.

The following section of the chapter describes SMEs and their role in economic development. The section on "A cluster perspective" describes the nature and benefits of industrial clusters. These benefits are illustrated further through four case studies examined in the section on "Case studies of clusters underlying economic development". The section on "Best practice programs for SME development" outlines best practice examples for establishing business development services (BDS) for SMEs, and the section on "Delivering BDS to SMEs" discusses principles and guidelines for BDS provision. The final section summarizes the trade-offs that need to be made in developing and selecting policies and practices for SME promotion.


SMEs and their role in economic development

Definitions of SMEs

The term SME encompasses a heterogeneous group of businesses, ranging from a single artisan working at home and producing handicrafts to sophisticated software product firms selling in specialized global niches. What is, or is not, an SME

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