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Role of SMEs in wealth creation
and wealth distribution;
problems and prospects
By
Mr. Lansana Sakho / March 2012

2. 2
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Impact in Labor, Job creation and Specialization of
labor force
n Social Capital improvement, Strategic bridge between
micro and large enterprises
n Importance in productive value chains by creating
networks or clusters
n Potential of innovation and entrepreneurial creativity
n Facilitate technology dissemination
n Facilitate transition and adjustment processes
n Helps to reduce poverty
n Regional integrator
n Improves Wealth Distribution in a Country
IMPORTANCE OF SMEIMPORTANCE OF SME’’ss

3. 3
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Definitions
¨ Almost every country has its own definition based
on: mixing: assets, sales, number of employees,
paid capital and sector.
¨ There are several definitions some of them are
clearly made to help (or not) SMEs development in
accordance to the country policies.
n What is important in SMEs´ classification is to
determine their common characteristics and needs
to improve their competitiveness
n This classification must help in the definition of
policies having the SMEs as the central focus
WHAT IS A SMEsWHAT IS A SMEs

4. 4
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Small participation in GDP
n Lack of access to knowledge
n Scale and terms of trade when to markets
n Low productivity (Use of resources effectively and
efficiently and capabilities)
n Number of SMEs in a country
n Contact with market to define needs from demand
n Lack of selectivity programs
n Lack of access to financing
PROBLEMS FACED BY SMEsPROBLEMS FACED BY SMEs

5. 5
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
FOUR LEVELS TO IMPROVE COMPETITIVENESS
OF SMES WITH IMPACT IN THE ECONOMY

6. 6
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
COMPETITIVENESS HAVING SMES AS THE CENTER OF
THE MODEL (SYSTEMIC AND MEASURABLE APPROACH)

7. 7
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Literature and research works are mostly
(exclusively) oriented to: Governance and
Corruption.
n Studies and results in general are based on
qualitative data
n Some common methods to measure governance
have been developed by the World Bank.
n Empirical results show a positive relation between
Governance and Competitiveness
META LEVEL : FINDINGS & APPROACHES

8. 8
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Most of the multilateral organizations have financed
studies of sectors’ competitiveness, value chains and
their relation with training programs.
n We have not found evidence of studies linking all
macroeconomic policies and their impact in
competitiveness policy.
n Neither the macroeconomic nor the competitiveness
studies have targeted SMEs and their development in
number and growth.
n SMEs are looked at this level only as bumpers for
economic shocks to absorb unemployment effect.
MACRO LEVEL : FINDINGS & APPROACHES

9. 9
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n To measure competitiveness as a whole it
is important for SMEs to have the resources
Ø Human
Ø Information and K-H
Ø Physical assets and infrastructure
Ø Financial
Ø Network and strategic alliances
MACRO LEVEL : FINDINGS & APPROACHES

10. 10
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
The challenge with those resources is toThe challenge with those resources is to
““JumpJump”” to superior stages of developmentto superior stages of development

11. 11
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
u Almost all authors agree that SMEs have a
major role in diffusion of technology as:
¨ Technology introducers and diffusers.
¨ SMEs are more flexible in adapting and adopting
new technologies than bigger companies
u In spite of SMEs technology adoption, their
effort in R&D are not important.
u If the integration of the economy and the links
among SMEs is strong, the diffusion of the
technology is faster in the economy
MEZO LEVEL : DIFFUSION & METHODOLOGY

12. 12
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Technology diffusion and training:
¨ Manager’s business education is important to
improve technology diffusion
¨ The informal learning paths in SMEs are important
to transfer technology to them
¨ Implementing and learning a technology must be
treated as a socio-technical practice
¨ Responsiveness to training is a function of
organizational absorptive capacity
¨ Technology adoption by SMEs depends on
professional training policies
MEZO LEVEL : DIFFUSION OF TECHNOLOGY

13. 13
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n HR and organizational knowledge are the main sources
of sustainable competitive advantage (for enterprises)
n Training helps to:
¨ Develop Innovation
¨ Develop sustainable competitive advantage
¨ Training transferred in job-related skills improves rapidly
business results.
n Cost vs. investment vision
¨ In SMEs the investment in training is important but still
low.
¨ In developing countries training is cost oriented.
¨ The level of investment in training is low because of the
difficulty to determine a ROI and their impact in goals
achievements.
MEZO LEVEL : TRAINING

14. 14
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
uTo have an expected result of training in
SMEs is important to:
¨Develop capabilities in external knowledge
¨Disseminate Intrafirm Knowledge
uManagement advice is more impor-
tant than technical skill to improve the
growth of SMEs
MEZO LEVEL : TRAINING

15. 15
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n SMEs Characteristics:
¨ Family Business origin and control
¨ Individual interests and Personal relations are
shown as the entrepreneurial objectives.
¨ Social capital and inter-firms relations determines
the forms of the economic exchanges
¨ Exchanges are highly dependant of the socio-
cultural context.
¨ Empirical evidence shows that in industrial districts
trust inter-firms is developed (Could create clusters)
n All the factors must converge into a level of
trust to organize Clusters and/or Networks
MICRO LEVEL: NETWORKING AND VALUE CHAINS

16. 16
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Some of the Economic results of clusters are:
¨ Clusters generate external economies
¨ Clusters present an exchange of knowledge.
¨ Clusters create the collective efficiency concept that enhances
SMEs upgrading
n Clusters and networks behaviors
¨ Upgrading are mostly supported by the leaders of a global
value chain that dominates the cluster
¨ Clusters take time to develop due to the need of cooperative
attitudes.
¨ While developing, the linkages with the outside world are
important
¨ Information and information systems help the consolidation of
exchanges
MICRO LEVEL: NETWORKING AND VALUE CHAINS

17. 17
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Management
¨ Is the main level studied
¨ Several models are presented in the literature
¨ The basic results and evolution of those models are
to see the enterprises as a system in which their
needs are analyzed with all enterprise subsystems.
¨ The literature found is developed in almost all the
important aspects of the BMS model
n Other topics related
¨ Succession and Performance of SMEs.
¨ Innovation, Environmental results.
MICRO LEVEL: INSIDE THE ENTERPRISE

18. 18
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n SMEs are important for the improvement of the entrepreneurial
environment of a country
n In our literature review we found number of papers that
¨ Studied some aspects of our four level
¨ No evidence was found of studies of the Meta, Macro and Mezzo
levels oriented to lower levels
n For SMEs
¨ Most of the works stay at the micro level defining problems
related to good managerial practices
¨ “Poor assisted units”
¨ Growth and upgrading is not the rule but only an isolated case
¨ Policies are oriented to Donors or Financiers goals
¨ Job creators without a relation with wealth creation and
competitiveness enhancement
¨ Bumpers for shocks in the Meta, Macro and Mezzo levels
CONCLUSIONS

19. 19
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Perspectives
¨ To enhance competitiveness all policies (in the 4 levels)
must have SMEs as their central actor.
¨ Generate Policies with a model that integrates the four
levels.
n Measure of impact and effects of current policies in
each of the four levels
n Determination of linkages among four levels and
effects on SMEs
n Select value chains and SMEs in those chains to work
with
n Policies must work in Value Adding, Job creation,
Education Enhancement and Trade Competitiveness
CHALLENGES & PERSPECTIVES

20. 20
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n The competitiveness index and ranking
measures:
¨ Institutions
¨ Infrastructure
¨ Macroeconomics
¨ Health and Primary education
¨ Higher education and training
¨ Market efficiency
¨ Technological readiness
¨ Business sophistication
¨ Innovation
COMPETITIVENESS INDEX

21. 21
Lansana Sakho
March 2013
Role of SMEs in wealth creation
and wealth distribution
n Distribution is not an issue for a Country
n A Country can not distribute wealth without
creating it
n Wealth creation can be done in a country by
international competitive enterprises
n SMEs is the major percentage of enterprises and
the major labor generator
n International competitive SMEs will contribute to a
sustainable wealth distribution in a Country
IMPORTANCE OF SMES