Sustaining Growth and Performance in East Asia
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Sustaining Growth and Performance in East Asia

The Role of Small and Medium Sized Enterprises

Edited by Charles Harvie and Boon-Chye Lee

This third book in the series focuses on how small and medium sized enterprises (SMEs) contribute to achieving and sustaining growth and performance in their economies, as well as the ways in which governments can assist and enhance that contribution. This is of particular concern given the trauma suffered by East Asian economies in the wake of the financial and economic crisis of 1997–98.
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Chapter 13: Public Policy and SME Development

Charles Harvie and Boon-Chye Lee


Charles Harvie and Boon-Chye Lee 13.1 INTRODUCTION Policies to promote the development of SMEs are common in both developed and developing countries (Storey, 1994; Levitsky, 1996; Hallberg, 2000). In the case of developed countries, it has become commonplace for governments since the 1970s to implement policies or programmes designed to promote aspects of small and medium-sized enterprises (SMEs). This has coincided with an increase in the importance, in terms of contribution to employment and GDP growth, of SMEs in most of the developed economies (Storey, 1994). In the OECD countries, SMEs currently account for more than 95 per cent of firms and 60–70 per cent of employment (OECD, 2000). This is in part the result of an ongoing process of industrial restructuring that began in the late 1970s which saw large firms substantially reduce their output and labour, creating large pools of unemployed workers, a proportion of whom were motivated to start their own businesses (Storey, 1982). That process was given added impetus with the move towards privatization and market deregulation in the late 1980s and 1990s, resulting in broad organizational trends that have included outsourcing and downsizing (Parker, 2000). Developments in information and communications technology, rising affluence and the development of niche markets, as well as the declining importance of economies of scale as the key source of competitiveness, have also contributed to the growth of the SME sector in developed economies. In the case of developing economies, policies designed to assist SMEs have been an important...

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