Stalled-Growth SMEs and Directions for Policy

Deokhee Cho ()
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Deokhee Cho: Korea Institute for Industrial Economics and Trade, Postal: Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea, http://www.kiet.re.kr

No 21/2, Research Papers from Korea Institute for Industrial Economics and Trade

Abstract: Recent research says 20 percent of Korean manufacturers are stalled-growth small and medium enterprises (SMEs), or companies that have been business for at least 20 years but have under 50 employees, with market factors causing 65 percent of such stagnation and the businesses themselves 35 percent. Market factors included excessive competition in main markets (18.5 percent), low market growth (17.6 percent), and small market scale (16.7 percent), while chronic shortages of both workers and money (10.6 percent) and a lack of marketing capacity (8.3 percent) were among the faults of businesses. Most stalled-growth SMEs lacked growth capacity and experience and stuck to strategies targeting conventional business areas with limited growth opportunities rather than those eyeing development of new high-growth markets. Accordingly, many such SMEs are not expected to overcome growth stagnation on their own without policy support. Seen this way, the problem is serious and broad. Even so, policy interest in such SMEs has been lukewarm and related support lacking. This explores the shape that an effective future-centric response to the problem might take. It proposes aggressive expansion and reform of core policies that support changes to the way business is done, and in particular generous aid (in the form of both consulting and funding) to boost the capacity of such SMEs to pursue alternative lines of business.

Keywords: small and medium-sized enterprises; corporate governance; SME governance; SMEs; SME policy; growth policy; insolvent firms; zombie firms; industrial policy; Korea; restructuring; firm performance; firm strategy (search for similar items in EconPapers)
JEL-codes: G30 G33 G34 G38 H25 H81 L10 L16 L22 L23 L25 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2021-11-29
New Economics Papers: this item is included in nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kietrp:2021_002

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