SMEs in Asian Developing Countries by Tulus Tahi Hamonangan Tambunan

Author:Tulus Tahi Hamonangan Tambunan
Language: eng
Format: epub
Publisher: Palgrave Macmillan
Published: 2008-12-31T16:00:00+00:00

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Source: Beck et al. (2003, p. 23).

In addition, Biggs and Oppenheim (1986) show evidence which indicates that the sectoral shift or the shift from making traditional goods to making modern goods within an industry is also accompanied by changes in the size of industrial establishments, that is, from MIEs into SEs, from SEs into MEs, and from MEs into LEs. However, the authors do not clearly indicate in their study whether these sectoral shifts are causally related to, rather than only accompanied by, the shift in firm size.

In earlier studies of SMEs in developing countries, these enterprises, in particular MIEs, were commonly treated and in a way dismissed as tradition-bound, low-income and economically backward activities, offering few and probably decreasing opportunities for raising incomes. But, as found in many African countries, MIEs were actively engaged in a much wider range of activities, including various resource-based and agro-processing activities, than only traditional activities producing “inferior” goods, as often thought. This evidence may suggest that with economic development not all MIEs will disappear. Indeed, in many developing countries a sizeable number of these industries survive to the present day. Some of them remain small and traditional while some others have developed into larger factories.5 An important factor that might explain why in many “more-developed” countries within the developing world a large number of MIEs survived and even grew larger, despite heavy competition from larger industries and policies biased against them, is a specific skill or specialization owned traditionally by the producers/owners. This is also indicated by Hoselitz’s study (1959) on early industrialists in Germany who started out as artisans or craftsmen and later came to own large industrial establishments.

Within a country, differences in the pattern of transition within SMEs (that is, from MIEs to SEs, and SEs to MEs or from MEs to LEs) are also apparent between urban and rural areas. These differences are explained mainly by differences in the level of development between rural and urban economies and in the characteristics of rural and urban SMEs. As for differences in characteristics, many studies show that more “traditional” crafts such as blacksmithery, weaving, and mat- and pottery-making are relatively more important in rural areas and that they are characterized by a higher proportion of self-employment units, while MEs tend to predominate in urban areas. Apprentice and wage labor are relatively more important components of total employment in urban SMEs, while rural MIEs rely more heavily on unpaid family labor. Furthermore, the larger share of manufacturing employment, particularly in MIEs, in rural areas as compared with urban-based SMEs is highly seasonable, consisting of part-time non-farm activities that peak during the slack season in farming activities.6

With respect to entrepreneurship, Liedholm (1973, p. 5) argues that in rural areas micro or small entrepreneurs have substantially different educational and occupational backgrounds from those of their counterparts in urban areas. People engaged in rural enterprises have a lower level of education than those in urban enterprises, even in the same size category,

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