Small or Medium-Sized Enterprise (SME) Essay

Small or Medium-Sized Enterprise (SME) Essay

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Small or medium-sized enterprise (SME), of which definition varies in different countries and different economic development levels, normally is known as relatively small business unit in terms of employees, capital and operations scale in compared with large enterprises in the same industry.

In spite of the diversity of its definition, SME plays a crucial role in almost every economy, tremendously contributes to economic development, job creation, and social stability. According to Popa (2012), it becomes a common place to speak of SMEs as an engine of economic growth for any European Union country. Actually, the saying is not only limited with European Union country, but also works in almost every country, the data from the Chinese statistics department shows that the number of SMEs takes 97.2% of the enterprises in 2011.

In the process of SMEs development, money need to be invested to innovation and marketing for keeping its competitiveness under the circumstance that the labor-intensive economy are shifting to innovation-oriented economy, capital increase ensures the SME running normally and even grows to large enterprises. Without the external investment, the SMEs’ own profit accumulation amount can hardly meet the capital increase demand in most of the cases.

According to the well-known economic theory, the more investment being put into the business, the more profit it produces, and as the business develops, the yield rate slows down. And the yield rate of the developing SMEs is much higher than the large enterprises’ since there’s already large amount of capital available for the large enterprises. However, SMEs is not that competitive among large enterprises, government and overseas investment in the limi...

... middle of paper ...

...he efficient and diversified financing availability to SMEs cannot come true without the internal strength of SMEs and an economy environment with strong financial system. SMEs those who can take the opportunities of financing provides precondition to their development.

Works Cited

Berger, A.N. & Udell, G.F. 2006, "A more complete conceptual framework for SME finance", Journal of Banking & Finance, vol. 30, no. 11, pp. 2945-2966.
Brookfield, D (2001) “Business finance and the SME sector”
Irwin, D.(.1.). & Scott, J.M.(.2.). 2010, "Barriers faced by SMEs in raising bank finance", International Journal of Entrepreneurial Behaviour and Research, vol. 16, no. 3, pp. 245-259.
POPA, D. 2012, "Competitiveness of Romanian Small and Medium-Sized Enterprises in European Union", Journal of Knowledge Management, Economics & Information Technology, vol. 2, no. 2, pp. 63-70.

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