An Investigation Into Smes Survival and the Discrimination Between Fgsmes and All Other Smes
Introduction
In a competitive global market, micro, small and medium-sized enterprises (SMEs) play an increasingly important role in a nation’s economy. Today they make a substantial contribution to job creation, innovation, as well as entrepreneurial skills. A report conducted by European Commision(2005) stated that in the enlarged European Union of 25 countries, 23 million SMEs provide about 75 million jobs and account for 99% of all enterprise. SMEs are also the vital attributes for lifting the productivity of economy. This is primarily because SMEs are been considered as having a key role to play in providing new products. Take UK for example, SMEs have become more and more dynamic. SMEs have enjoyed higher productivity growth than large firms since 1998, and the proportion of SME employers reporting that they have undertaken either product or service innovation in the past 12 months has increased from 32% in 2005 to 48% in 2006(BERR,2002).
An important aspect of SMEs, especially for the young SMEs, is their survival rate, according to Haugh and McKee(2000), survival means continue to exist in the future. Although we have seen a large increase in new company formations and higher levels of their survival rates than the past, we cannot neglect the fact that the rate of failure of these SMEs is also very high. Some of the firms fail in their infancy stage and some fail within several years after start-up. Some statistics suggest that the failure rate of SMEs in their first five years is more than 50% (Reiss, 2006). There are many reasons that contribute to SMEs’ failure: insufficient capital, poor management skills, poor human resources, lack of innovations and so on.
Factors that contribute to small business survival and non-survival
In order to prosper, all SMEs need to ensure that they are alert both to opportunities for achieving success and threats to their survival. Only when the company are aware of and deal with these factors correctly, they
In a competitive global market, micro, small and medium-sized enterprises (SMEs) play an increasingly important role in a nation’s economy. Today they make a substantial contribution to job creation, innovation, as well as entrepreneurial skills. A report conducted by European Commision(2005) stated that in the enlarged European Union of 25 countries, 23 million SMEs provide about 75 million jobs and account for 99% of all enterprise. SMEs are also the vital attributes for lifting the productivity of economy. This is primarily because SMEs are been considered as having a key role to play in providing new products. Take UK for example, SMEs have become more and more dynamic. SMEs have enjoyed higher productivity growth than large firms since 1998, and the proportion of SME employers reporting that they have undertaken either product or service innovation in the past 12 months has increased from 32% in 2005 to 48% in 2006(BERR,2002).
An important aspect of SMEs, especially for the young SMEs, is their survival rate, according to Haugh and McKee(2000), survival means continue to exist in the future. Although we have seen a large increase in new company formations and higher levels of their survival rates than the past, we cannot neglect the fact that the rate of failure of these SMEs is also very high. Some of the firms fail in their infancy stage and some fail within several years after start-up. Some statistics suggest that the failure rate of SMEs in their first five years is more than 50% (Reiss, 2006). There are many reasons that contribute to SMEs’ failure: insufficient capital, poor management skills, poor human resources, lack of innovations and so on.
Factors that contribute to small business survival and non-survival
In order to prosper, all SMEs need to ensure that they are alert both to opportunities for achieving success and threats to their survival. Only when the company are aware of and deal with these factors correctly, they