Micro, small, and medium-sized enterprises (MSMEs) play a meaningful role in the global economy, making up the majority of business employment, and influencing the social dynamics of communities. Regardless of fewer resources than larger companies, MSMEs trigger innovation, foster competition, and quickly adapt to changes due to their intimate local markets knowledge. However, they often face challenges including limited access to capital, regulatory issues, technology gaps, and a significant productivity gap compared to more prominent corporations.
The productivity of small businesses, particularly in emerging economies, is only about half of larger corporations. However, bridging this gap could lead to substantial economic growth. To do this, it’s essential to empower MSMEs with sufficient resources, continuous training, and access to advanced technology. These tools can optimize MSME operations and set the stage for economic expansion. Policy reforms could also aid in creating a more conducive environment for their prosperity.
The productivity difference between MSMEs and larger businesses varies across sectors and countries. For instance, eight out of 24 manufacturing segments could gain more than 60% value if the productivity gap is bridged.
Empowering small businesses for global economy growth
This gap and its significant economic implications are prevalent across different sectors and geographical regions. More importantly, bridging these gaps can trigger enhanced competitiveness, stimulate innovation, and contribute to income and employment growth, regardless of the sector or region.
A shared economic model could boost productivity for both MSMEs and larger corporations. There are real-world examples of small firms improving efficiency through collaboration with bigger businesses. In addition to economic benefits, such synergistic relationships also offer opportunities for technological advancement and increased sustainability. Such collaborations could lead to the development of advanced technologies and the more efficient use of resources.
In order to address productivity issues faced by both larger and smaller entities, infrastructure improvements and policy reforms could be oriented towards areas where both struggle. This step could entail establishing business networks where small entities struggle and larger ones excel or promoting cooperation in sectors where all perform well. Tailored support, resources for skill development, technology incorporation, and regulatory measures that protect smaller entities without hampering the growth of larger ones could further contribute to a balanced business ecosystem.
Overall, MSMEs, which constitute more than 90% of all businesses, significantly contribute to job creation and value addition. However, with their productivity lagging compared to larger corporations, fostering growth within them is critical for overall economic development.
