Issue 25: June 2003

Small enterprises 'can't do
it all' in economic transition 

The small and medium enterprise (SME) sector cannot by itself create sustained economic growth in former socialist countries making the transition to a free-market economy, according to a new study sponsored by UNU World Institute for Development Economics Research (UNU-WIDER). 

"The events of the first decade of 'transition' have shown that . . . expectations [that small enterprises would play a predominant role] were false or premature," the study says. 

Unless the surrounding large enterprises have been successfully commercialised – meaning that privatization has either been delayed or done in a way that does not sever existing networks and working relationships – and overall demand conditions are not severely restrictive, sustained SME growth cannot be expected. The SME sector needs the large enterprise sector as a source of inputs, as a market for its outputs and also (it unexpectedly turns out) as the major source of individual entrepreneurial leadership. This points to the need to create a synergistic SME-large enterprise relationship.

Marjatta Rasi

The study was directed by Robert McIntyre, Professor of Economics at the Institute for International Economic and Political Studies, Russian Academy of Sciences, Moscow, and edited by Bruno Dallago, Professor of Political Economy and Comparative Economic Systems at the University of Trento, Italy. Results of the study will be presented an an open forum to be held at the Dag Hammarsköld Library auditorium at UN headquarters in New York on June 26 and 11 a.m. The event will be chaired by Finland's Ambassador to the UN, Marjatta Rasi.

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