Small and Medium Enterprises (SMEs) - Essay Example

ized by high rates of unemployment and the effect of market liberation which has borne the SMEs has helped reduce the levels of unemployment in developing countries and steered economic development. SMEs have been instrumental in job creation to developing countries in the process of structural adjustment. Primarily, SMEs are labor intensive and this helps in alleviating unemployment burdens on the shoulder of the civilians and absorbing new job entrants into jobs. The trend in the developed countries indicates that there is a weakened job creation by economic growth as the industrial structure of domestic economy matures (Wang and Redmond, 2007).

This leaves the government policy makers of each government short of ideas about the urgency to search for policies of job generation. In this case, small and medium businesses have been seen as a perfect criterion in which new jobs are created. Researchers have found that, for example, small plants and firms have been the primary source of employment in the United States. Baldwin and Picot found that the net job creation in Canada by the small enterprises was more than those created by large enterprises.

It is very clear that SMEs play an important role in job creation and have arguably created more job chances than the large enterprises and this makes them very important in any economy (Ayyagari and Demirguc- Kunt, 2005). SMEs dominate many sectors in a contemporary commerce such as retailing, service industry and construction. This involvement in these sectors avails a crucial link; both backward and forward, in the chain of supply especially in the larges-scale capital intensive industries such as automotive, mining, marine, defense and the likes.

Further, their presence in the market provides an important balance to industries and many marketplaces that would otherwise have been firmly occupied by the few large-scale practitioners. This competitive structural balance is also vital in the provision of employment to