Western and Central Africa
Eastern and Southern Africa
Eastern Europe and Central Asia
The SME Competitiveness Outlook is a "one-stop shop" on the topic of SME internationalization, and combines unique analysis, thought leader insights and case stories about developing country SMEs in international markets. The report argues that SMEs are the fundamental missing link to inclusive growth. SMEs are significantly less productive relative to large firms in the developing world than in the developed world. The productivity gap in developing countries will typically be at least double and sometimes triple the productivity gap in industrialized countries. Indeed in some developing countries, large companies are 10 times more productive than small companies.
This leads to large wage differences between workers and is a root cause of income inequality. Boosting productivity by enhancing competitiveness will help SMEs bridge the productivity gap, and raise standards of living. But how to increase competitiveness?
Based on three pillars of competitiveness – connect, compete, and change – the SME Competitiveness Grid presented in this report makes it easy to spot strengths and weaknesses of enterprises. It determines whether these reflect weaknesses at the firm level, within their immediate business environment or in the national environment. This helps countries understand the nature of their SMEs’ competitiveness, and what is inhibiting their continued development.
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Connect: Focus on e-connectivity for SMEs to succeed in international markets.
• The biggest gap between small and large firms is in e-connectivity, with three regions – East Asia and the Pacific, sub-Saharan Africa and South Asia - performingworst.• LLDCs have more than just a physical challenge with roads and ports. They also havea virtual challenge: e-connectivity rates are among the world's lowest.• Bridge the ‘connectivity gap’ between small and large firms in LDCs: Small firmsin LDCs only attain 22% of the connectivity score of large firms in LDCs, compared to 64% in developed countries.Compete: The strongest pillar for SMEs from developing countries is the ‘compete’ pillar.
• Compete gap: As measured by the SME Competitiveness Grid, the ‘compete’ gapbetween medium-sized and large-sized firms is only 11% in developed countries,compared to 18% for developing countries (excluding LDCs).• In LDCs, small-sized and medium-sized firms only score 57% and 77% of the‘compete’ score attained by large firms, compared to 74% and 89% in developed countries. Dragging LDCs’ scores down are the low rates of firms with bank accounts(25% and 40% for small-sized and medium-sized firms, respectively). • South Asia: Small firms in South Asia and East Asia and the Pacific score poorly on quality certification.Change: Firms in developed countries do not systematically outperform firms in other development groupings in the ‘change’ pillar.
• Average scores for the firm level capabilities ‘change’ pillar follow similar patternsin all country groupings. Small firms score between 45-60%, and medium firms score 70-80% of what large firms score. • In LDCs, the differences are somewhat larger. The low proportion of investmentfinanced by banks is a factor in dragging the scores down. General trends:
• The score gap between large firms and SMEs varies. It widens considerably as thelevel of economic development falls.• Look to Latin American SMEs as a model? The firm level capacities of medium-sized firms are second only to those from Europe and Central Asia, with small-sized firms actually outscoring Europe and Central Asia. They are strong entrepreneurial performers, on a par with the best developing country SMEs, and outpace countries inthe other regions assessed by ITC, including in Asia and the Pacific. The report is targeted at SME experts, trade and investment support institutions, businesses, and governments, interested in a comprehensive review of SME internationalisation, and hard numbers on SMEs, under ITC’s new competitiveness framework. It is the first issue in an annual series.
Governments can use the SME Competitiveness Grid to better determine whether competitiveness enhancing solutions lie in policies, regulations, business training, infrastructure building or other measures.
Businesses can use the SME Competitiveness Grid to influence their investment and procurement decisions – to better understand the firms they are considering doing business with abroad, with specifics related to their capabilities to access finance, ensure certifications and more.
Trade and Investment Support Institutions can use the SME Competitiveness Grid benchmark their companies; advocate with government and business coalitions more effectively; and tailor specific training programmes to address weaknesses.
SME and trade experts in academia, think tanks and international organizations have a new SME competitiveness framework and country profiles to assess the central role of SMEs in development.
The SME Competitiveness Grid has many practical uses. Here are a few examples.
Chambers of commerce have firms that can’t access finance because they don’t have the paperwork required by banks (e.g. an audited financial statement). The grid automatically identifies that the problem lies at the firm-level, and not at the macro-economic level. It can encourage members to attend special training to solve their access to finance bottlenecks.
Multinationals will appreciate information on firms, such as the percentage of firms with international quality certifications and the average years of managerial experience. This helps multinationals gauge the types of challenges they may face when dealing with foreign firms, and enabling to create a strategy to pre-empt problems.
Policymakers may be unsure whether to invest in national infrastructure or boost firms’ business skills, particularly in developing countries. The Competitiveness Grid calculates scores by normalising according to international best practices, and highlights whether the country outperforms countries at a similar stage of development. For example, e-connectivity has become a major competitiveness component, with many governments investing heavily in ICT infrastructure. But do firms leverage this infrastructure, e.g. create websites and use email? Indicators in the SME CO 2015 will enable government to see if their investments are being leveraged by firms. Where they are not, they will be able to identify which firms do not, helping them to design policy solutions.
Businesses and policymakers have strategic choices to make about selecting and investing in standards, a key to international value chains. This session outlined key findings of ITC’s flagship report “SME Competitiveness Outlook 2016: Meeting the Standard for Trade” and showed how businesses and policymakers can address these issues...
As part of the 2015 Trade and Development Symposium taking place in Nairobi, ITC and IDB are organising a joint session to discuss how SMEs can effectively connect to global markets. The increased integration of developing countries into the global trading system continues to transform the trade landscape. The logic of such integration is that firms can no longer just rely on being competitive in the domestic, or even regional, market to ensure their long-term survival. Watch the event here.
ITC presented its new annual flagship publication, the SME Competitiveness Outlook 2015. This year’s theme was: Connect, Compete, and Change for inclusive growth. The report contains rich data for trade and investment institutions, and investors.
In 2015, ITC launched its new Working Papers series. The first set of working papers focus on SME competitiveness, trade and development.
At this ITC policy debate first findings of the forthcoming ITC SME Competitiveness Outlook were presented to the Geneva based policy and trade expert community as part of ITC’s consultation exercise on the forthcoming flagship publication.
In preparation for the launch a new flagship publication on SME Competitiveness, ITC organized a workshop where the authors of the SMEs, Trade and Development Series presented their initial findings. You can find more information including their presentations here.