ABSTRACT
In a superficial sense, the answer to the question posed by the title of this chapter is obvious. As shown in the Appendix, SMEs account for about 60 per cent or more of employment and 20-30 per cent of GDP in the advanced countries, and perhaps for more in the developing world. Of course, small firms must matter. Yet SMEs are generally regarded as poor cousins to large firms: less productive – look at the disparity between their shares in employment and value added – less sophisticated, less powerful and, well, smaller. That is the static view; in a dynamic perspective, it has not been possible to ignore the fact that almost all large firms started out as small, many of them quite recently. Think for example of Pfizer (1942), Honda (1948), Intel (1968), Wal-Mart (1969), Microsoft (1981) and Cisco (1984). The seedbed role of the small business sector has been accommodated into conventional thought through the perfectly correct perception that only a tiny minority of small firms ever do grow to really significant scale. The mass of SMEs are still seen as vestiges of the agricultural, craft-dominated past – indeed, almost as a backward peasantry. The universal persistence of official measures for the support and modernisation of small firms bears witness to the prevailing view that while SMEs are in need of help and are something of a drag on the economy, the real motor of economic growth is large enterprise which can benefit from economies of scale, investment, research and development (R&D) and scientific management.
