SMEs and entrepreneurship

Over the past few decades small and medium-sized enterprises (SMEs) have been recognised to account for a considerable share of economic activity. In the UK they represented 99.7% of all firms, contributed to 37% of employment, and accounted for 35% of sales in 2005. Similar figures exist for most developed and developing countries.

Although entrepreneurship can take place in both small and large firms, SMEs represent an exceptional vehicle for entrepreneurial activities: most of the start-up activity comes from SMEs; they are an important source of innovation, new products and services; and are a key element for regional development and social cohesion.

Nowadays governments and international institutions place small firms and entrepreneurship as essential elements in any plan or policy to promote economic growth and development. The SME owner-manager is identified by many researchers as the entrepreneur, because of his/her role in starting the venture, running the business, and being responsible to a large extent for its failure or success. This suggests that the fate of an SME is inextricably linked to the personality, capability, skills, and motivation of the entrepreneur in charge. Within this framework, research from both the Economics and Management disciplines has focused on investigating the effect of the entrepreneur’s characteristics on firm performance. This includes start-up activity, firm survival, size, and growth.