Small businesses and the growth of the economy

Question

How can one examine growth in a small enterprise and what is relationship of this growth to a country's performance

Answer

Small Enterprises form the backbone of most large economies across the globe (Howarth and Fredericks, 2012). The core notion here is linked with the fact that small businesses combine to form the basis of an economic path that allows a country to build a presence from within the internal supply and demand chain of national economy. Hussain et al (2016) state that the growth as well as the success rate of small enterprises can be measured with their ability to create jobs in the local market, generation of revenue and the firm’s size in the market of operation. Often small business turn into medium enterprises and start supporting a larger region, indicating a key factor of their growth and in-turn their success. The relationship between a country’s economic growth and performance are co-related to the overall success of small organisations within a country. Pickernell et al (2013) state that SMEs constitute a significant proportion (up to 70%) of a successful economy, indicating a direct link with the overall growth of a country. Furthermore, having a strong small enterprise structure allows a country to be self-dependent, with wealth circulation within the country itself. A higher number of successful small enterprises means that the overall production within a country is strong and hence encourages foreign direct investment after evaluating a strong local economic backbone.

References

Howarth, R. and Fredericks, J. (2012) "Sustainable SME practice: A reflection on supply‐chain environmental management intervention", Management of Environmental Quality: An International Journal, Vol. 23 Iss: 6, pp.673 - 685 Hussain, J. Millman, C. and Matlay, H. (2016) "SME financing in the UK and in China: a comparative perspective", Journal of Small Business and Enterprise Development, Vol. 13 Iss: 4, pp.584 - 599 Pickernell , D. Jones, J. Packham, G. and Thomas, R. (2013) "E-commerce trading activity and the SME sector: an FSB perspective", Journal of Small Business and Enterprise Development, Vol. 20 Iss: 4, pp.866 - 888