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by Gilles McDougall and David Swimmer, Micro-Economic Policy Analysis, Industry Canada, October 1997
This research investigates the strategies for growth and competitiveness pursued by large firms and small and medium-sized enterprises (SMEs), to find out whether they differ and, if so, whether these differences can help identify problems specific to SMEs.
In this study, "business strategy" is defined as "all aspects of a firm's behaviour," including approaches to management, human resources, technology, investment, staff training, use of government programs, and sources of innovation.
The present study is based on a recent survey of SMEs and large firms conducted by Abt Associates of Canada for Industry Canada. The study increases understanding of large firms by using a larger sample than case studies do, thereby permitting generalization about the conduct of large firms. It also increases understanding of SMEs by permitting comparisons with large firms to find out whether the strategies SMEs follow are distinguishable from large firms' strategies and whether they might be a cause for concern.
This study finds the following important similarities between SMEs and large firms:
This study has identified the following important differences between large firms and SMEs:
In conclusion, SMEs and large firms generally follow similar business strategies. Both SMEs and large firms perceive management, marketing, access to capital and markets, and ability to adopt technology as the most important growth factors, and government assistance as the least important growth factor.
The results highlighted in this paper indicate that government policies should focus on improving the business climate. Sound macro-economic policies and fair, efficient market-framework policies do much to help both large firms and SMEs to become more competitive and prosperous, and to create more jobs.
However, some important differences between SMEs and large firms' business strategies indicate that some specific government interventions might be warranted. First, the overall business strategies of large firms focus more on the importance of employees than those of SMEs do. Large firms perceive skilled labour to be more important than SMEs do, and more large firms than SMEs offer their employees formal training. Government training programs could, therefore, be an important source of help to SMEs.
Second, large firms are more likely than SMEs to engage in strategic partnerships, joint ventures, and strategic alliances with other firms. SMEs could, therefore, benefit from exploring the potential for linkages with other firms. In this area, government can help by facilitating such linkages at both the national and international level.
Finally, the use of licensed intellectual property is more important as a source of innovation for large firms. SMEs could, therefore, benefit from further consideration of these potential sources of innovation, and government could facilitate that consideration.
The evidence presented in this paper indicates that government policy focus on SMEs is warranted. Although SMEs rank government assistance as their least important growth factor, they use government programs more than large firms do, and generally rate them as more important to their overall business strategy.