The role of small and medium-sized enterprises in development what can be learned from the German experience?

Herr, Hansjörg, and Nettekoven, Zeynep M.,

ILO Working Papers from International Labour Organization

Abstract: Small and medium-sized enterprises (SMEs) play an important role for development. Of importance are Schumpeterian SMEs, which include start-ups that trigger innovation, boost productivity and bring about structural change. Normal SMEs, which only adjust to market pressure, are also important fordevelopment and employment. Germany is a role model for SMEs. This is due to several important factors: Germany’s local banking system, which is not profit oriented (made up of Sparkassen, or savings banks); the dual vocational system, with its combination of practical and theoretical education; the high social capital of strong employers’ associations and trade unions; government support of SME clusters and a big, government-owned development bank (the KfW). SMEs in developing countries typically suffer from limited access to long-term and affordable finance, insufficient institutions for developing a skilled class of entrepreneurs and workers, a low income, and poor policies to support economic and social upgrading of SMEs. Economic upgrading in developing countries is necessary, but it will not be successful without social upgrading. Germany – with its high social capital within the framework of a social market economy, its financial and education system, and its government support for SMEs – can stimulate debates about SMEs in developing countries.

Keywords: small enterprise; economic development; vocational training; educational system (search for similar items in EconPapers)
Pages: 55 p.) pages
Date: 2017
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Published in Working paper / Global Labour University

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