Building the International SME: A global policy response

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Authors: Lester Lloyd-REASON and Terry MUGHAN
Published in: Vol.7 / 2006

      The past twenty years has seen growing academic and policy interest in the role of SMEs within a global context. There has been much debate surrounding the negative impact of globalisation on the international SME arising from increased competitive pressures. However, SMEs have long found opportunities in the global economy and as international trade has expanded so too have these opportunities.
      The numerous benefits to SMEs engaged in international trade are well documented, with a considerable body of evidence that international trading activity stimulates increased productivity growth by strengthening competition and innovation and increasing access to new ideas and technology. International trading activity enables businesses to achieve growth and economies of scale which domestic markets alone would not provide. Exporters are consistently found to out-perform non-exporters using a variety of measures of success, including profitability, production, wages and sales volumes.
      Despite these advantages, the SME share in the total value of international trade is often found to be markedly lower that their share in GDP, evidence of the barriers facing the SME seeking to access international markets. Accordingly the international SME has attracted the attention of policy makers, as any barriers to international trade are likely to impinge disproportionately on this group of firms which are often the most productive, R & D intensive and most growth orientated, and thus potentially the strongest contributors to a dynamic national economy.
      This paper is based on a study undertaken by the OECD/APEC to gain a better understanding of the barriers to internationalising (defined as all those constraints that hinder the firm’s ability to initiate, to develop, or to sustain business operations in overseas markets) faced by SMEs, and to share knowledge of government interventions to reduce those barriers.
      In general, there seems to be a close match between the perceived barriers as reported by Member Economies and those that are perceived by SMEs. For the most part, support measures are appropriate to the key barriers reported by the international SME. Some mismatches do appear however. There appears to be something of a policy gap with regard to external barriers falling within the ‘business environment’ dimension. Here, governments appear to underestimate the barriers facing the SME as they attempt to access international markets.