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Regardless of their definition, Small and Medium sized enterprises account for a large percentage of businesses worldwide, and are key contributors to a country's economy. SMEs are the engine in the economy - the driving force behind job creation - and are characterised by innovation, rapid expansion, and adaptability (Zimmerer et al, 2008). Termed "entrepreneurial growth companies" or "gazelles", they represent over 90 % of businesses and generate net employment of over £4 million (Storey, 2006). Despite their role in economic development, however, SME's suffer high mortality rates and face significant obstacles in both the start-up phase of business and short term business operations (Berger & Udell, 2006). In the midst of both national and international competition, gazelles must overcome inefficient capital markets, lack of resources, lack of transparency, constant instability, and shortages of credit availability in order to succeed (Kim et al., 2008). Hence, it is argued that, only with government intervention, can SMEs avoid hurtling down the precipice that is business failure.
Small and Medium Sized Enterprises: A Brief Overview 中小企业：简要概述
SMEs : A Definition
Small and Medium Enterprises are of pivotal importance in the economy, and yet, a consensus regarding their definition is yet to be reached (Storey, 2006). Nevertheless, a widely accepted definition classifies SMEs as firms that (1) have a relatively small market share, (2) are not managed solely through a formalised management structure and (3) are independent of larger enterprises. Despite wide recognition of the Bolton CommitteeÂ´s (1971) definition of SMEs, limitations of its applicability in reality have lead to the formation of alternative definitions, such as that introduced by Wynarczyk (cited by Storey, 2006). Originating from the work of Penrose, he argues that other than a deviation in size, it is uncertainty, innovation and evolution, which allow for the differentiation between SMEs and Large Enterprises. Hence, the fundamental characteristics of SMEs include resource poverty, heightened uncertainty, their role in innovatory processes and their adaptability (i.e. likelihood of evolution) (Welsh & White, 1981). This notion is further supported by MacCartan-Quinn & Carson (2003), whom argue that SMEs have a competitive edge over larger firms in regards to the latter, but are limited by a lack of market power, undercapitalisation and an inefficient management structure. Consequently, SMEs find survival in an ocean saturated with large predators a difficult task.
The SME Sector in the United Kingdom and its importance in the economy
"Small firms play a crucial role in our economy. [They] do not follow the economy - they lead it"
UK chancellor of the Exchequer, 1993
With the inherent difficulties associated with defining the sector as a whole, it is not surprising that there is no conclusive information regarding the size of the SME sector in the UK (Everett & Watson, 1998). Nevertheless, MacCartan-Quinn and Carson (2003). highlighted that, under the European Comission definition of an SME , â‰¤ 10 employees, the sector constitutes 92 % of all UK businesses (table 1). With an estimated 4.3 million SMEs in the UK, they account for 55 % of national employment and 51 % of annual turnover (DTI, 2006 andJones & Tilley, 2003). As underlined previously, the importance of SMEs in a country's economy is largely related to the job creation process and hence, the reduction of unemployment (Torre et al., 2010). As eloquently stated by Storey, "today, any consideration of the small firm sector which overlooks [the contribution of SMEs to employment] would be like Hamlet without the prince" (2006). Unlike large firms, whose contributions to employment statistics fluctuate depending on the economic climate, small and medium sized enterprises are consistent in the provision of employment opportunities, irrespective of macroeconomic conditions (Kim et al., 2008). The suggestion that SMEÂ´s role in employment creation does not vary with changes in the trade cycle is further supported by Schuman (1985, cited by Bartlett, 2001). He argues that UK businesses with â‰¤ 20 employees made the largest contribution to net job change ( + 20 %), with values varying very little between the different time periods. Furthermore, the SME sector is an essential for (1) innovation, (2) development of a highly competitive environment (3) technological progress (4) revival of certain regions (5) the production of intermediate goods through subcontract arrangements with larger firms and (6) economic growth (Bartlett, 2001).
Turbulent Waters: Market Failure and the SME 市场失灵与中小企业
Market Failure: A Reason for Concern
According to Allocation theory, market failure refers to the failure of price-market institutions in sustaining activities deemed desirable in the economy. It is essentially a situation in which resources are not allocated to their highest valued use or maximum welfare potential (Bator, 1958). Hence, at equilibrium, competitive markets will coincide with the conditions as dictated by Pareto Optimality - i.e. optimal utility efficiency. However, with imperfect information, financial gaps, compliance costs, resistance to change and uncertainty, very rarely does such a situation occur.
Despite their importance in the economy, SMEs, in the midst of a highly competitive environment, struggle to survive (Cressy, 2006). As a result of limited resources, both financial and human, economic instability, minimal economies of scale, unevenness of fixed costs and a constant influx of competition, the risk of failure in SMEs is high (Kim et al., 2008). With mortality rates exceeding 50 % after only 3 years in business, SMEs must overcome significant obstacles in order to develop, gain competitive advantage and function effectively on both a national and international scale (refer to figure 1); " Not only does the business have to run to stand still, it also has a long way to run" (Atkinson & Storey, 1994, p. 100).
SMEs: Barriers to Growth 中小企业：成长的障碍
According to Bartlett, financial barriers are one of the most significant impediments to SME growth and development (2001). Though the value of the finance gap has fallen since its publication, SMEs still struggle to obtain sufficient levels of long term equity capital to finance business start -up and operations (Storey, 2006). As a result, "the next Google, Microsoft or Starbucks might wither on the vine for want of funding" (Craig et al., 2008, p. 346). With institutional problems including asymmetric information, agency issues, higher objective risk, and costly monitoring, the availability of financial assistance from banks is limited (Berger & Udell, 2006). Although initiatives to increase access to financing, such as government subsidized credit lines, are in existence, the "opaque" nature of the sector acts as a financial constraint (Torre et al., 2010). Given that SMEs have limited resources, financial institution's interest rates are high, equity capital is only given against collateral, willingness is curbed by the high risk nature of the sector, and foreclosure, in the midst of difficulties, is rapid (Cressy, 2006). Hence, take-up of such funding in the UK is often less than 10 % (Curran, 2000). However, as argued by Torre, providing capital is only one string in the web of offerings such financial institutions have available to SMEs (2010). With cross- selling at the core of their policies, banks provide a variety of fee -based services including financial advisement, technical expertise and private consulting (Bennet, 2008). Reiterated by Vos et al., the network of ties created by such services will develop a firm's competitive advantage through the generation of "knowledge spillover effects" (2007). Additionally, while the scale of the UK venture capital industry has increased exponentially, provision of capital in the early stages of SME development accounts for only 1/5 of the total investment seen in the past 10 years (Cressy, 2006). As SMEs, from an investment perspective, are riskier in regards to their propensity to fail, funds provided by venture capitalism in the UK are geared more towards management buy -outs and buy-ins (Vos et al., 2007).
Policy: A Potential Solution 政策：一个潜在的解决方案
Public Policy and SMEs 公共政策与中小企业
With unanimous consensus in business literature, the lack of availability of equity capital for SMEs is highly attributed to the existence of a "gap" - also termed market failure or credit rationing (Storey, 2006). Defined as an unwillingness of equity suppliers to provide financial assistance on the terms and conditions required by SMEs, it highlights the difficulty in the acquisition of bank finance and external equity participation (Berger & Udell, 2006). In practice, public policy geared towards SMEs is concerned with both the creation of employment opportunities and improving SME access to external financing. Although the broad objectives are consistent among policies, the functionality of the policies themselves differ according to the underlying causes of market failure. While policies targeting endogenous or internal market failure focus on developmental strategies and the organisational "backbone", those directed at the exogenous causes aim to change the economic environment to which the firm is bound (Everett & Watson, 1998). Though there are numerous public support schemes in existence, European governments are yet to develop a coherent scheme towards the SME sector (Everett & Watson, 1998). According to Storey "public policies have been developed, jettisoned, and often reintroduced on a piecemeal basis"(2006, p.253).
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