Economic Analyses On The Survival And Growth Of Small And Medium-sized Enterprises

The 20th century is a century for the large enterprises system to establish, develop and mature. If viewed from the modernist thoughts of purification, small- and medium-sized enterprises (SME) should perish. While the large enterprises system doesn't wipe out the disadvantaged SMEs in the economic life, SMEs have shown tenacious vitality and played an important role irreplaceable in the socio-economic life. The 21st century we are in will be an era of great changes, with social reforms triggered by information technology having already emerging. The future's pillar industries will shift to information, new materials, biotechnology, new energy, aeronautics and space, environmental protection, cultural industries and scientific and technological information services; economic forms will change from processing to services; and consumption will show diversified, personalized, artistic…characteristics. What will SMEs become under this transformation? And what is the positive meaning for analyses and observations of constant changes from SME perspective? This paper, taking the 21st century knowledge economy as background, basing on domestic and foreign SME researches and from the perspective of innovation and entrepreneurship, has discussed the basis of survival for SMEs under the new environment with economics approaches, aiming to explore what is the basis for China's SMEs to survive at the current stage and how to build a basis suitable for the survival and growth of SMEs and thus forming a sound environment. This study hopes to serve the sound development of China's SMEs. The paper is divided into five chapters:1. Review of SME studiesThe paper has SME theories divided into"elimination theory","existence theory"and"growth theory"along the industrial historical evolution, and gives reviews and comments respectively basing on the division. The"elimination theory", starting with the fact that SMEs have reduced greatly at the initial stage of industrial revolution, gives none optimistic estimation on the future of SMEs. Due to its inconsistency with the development of SMEs the theory has little influence on later SME studies. The"existence theory"is a pessimistic SME theory. It tries to explain, from many theoretical aspects, why SMEs, the disadvantaged in the economic life, are not eliminated so as to explore the basis for SME existence. The"growth theory"is a positive SME theory. Starting from the irreplaceable role of SMEs in social political and economic life, it explains the basis for SME existence. Through reviews of SME theoretical studies the paper has found that different times of history have different understandings on SMEs and that the bases for SME's existence and development are also not the same in different periods. With the knowledge economy, the basis for the existence and growth of SMEs has changed. Although there are some researches concerning the existence and growth of SMEs, direct and positive studies from the perspective of innovation and entrepreneurship are still insufficient.2. Defining SME rangeConcept is the highly generalized connotation of things. It is a precise judgment on the nature of things. Only when knowing the essence of things, can we establish the freedom of thinking, and only then can we act freely. The answer to the question of"what is SME"is not only the stating point of SME studies but also the aim of studies. That is to say, all SME studies are, in some forms, to explain"what is SME". While answers to this question have had various views and disputes all the time. This paper starts with discussions on"qualitative"and"quantitative"standards of SME, and then compares internationally the defining criteria of SME, followed by actual cases of SME defining from China and other major countries. Basing on these the paper conducts an explorative study on the ways of existence of SMEs using classification. The study shows SMEs are not"miniatures"of large enterprises. SMEs have unique operational characteristics different from large enterprises and they also have intrinsic problems. A prerequisite for giving full play to SME's unique operational characteristics and solving SME's intrinsic problems is to understand and define rightly SME's range in different industries of different countries at different times of history. Viewed from external forms SMEs have both strong driving forces for growth and problems hindering the development, which make SME a unity of growth and vulnerability. Due to differing degrees of growth and vulnerability SMEs usually shows a multiple state of"heterogeneous plurality"in real economic life.3. Analyses on the existence mechanism of SMEsEconomics is a worldly and useful science. It should always innovate and advance with the development of economic realities. Its objects of study and contents of study should and need be enriched by the changing economic realities. Since the 1970s, in particular with the coming of the age of information economy, SMEs have obtained unprecedented development opportunities, with the basis for its existence changed. So how to understand and explain the economic phenomenon that there is a large amount of SMEs existing? The chapter first explains, from economics perspective and in historical and empirical methods, that the institutional frameworks of market economy system, large enterprise mechanism and governmental macro-control are the important"soil"for the existence of a large amount of SMEs.This paper believes that market economy system is indispensable for the existence of SMEs. It illustrates the compatibility of SMEs and market: If there is market there should be SMEs definitely, as SMEs are inborn"marketers". The existence of SMEs is also closely related to large enterprise mechanism. SMEs, through establishing"divided"and"mutually beneficial"coexistent relations with large enterprises, form the industrial structure of a country, together with large enterprises. The achievements of SME's operations under market economy have driven industrial structures to change. The existence of SMEs is dependent on governmental supports. In the market with large enterprise mechanism existing there are problems checking the growth of SMEs like exploitation (of producer value), resources of operations (limits to value creation), and market adaptation (difficulty to actualize value), hindering the capital accumulation of SMEs. How the nation and local governments as main bodies of policies should see those problems and what policies are adopted to solve the problems are again necessary and sufficient conditions to guarantee SME's existence. Through both theoretical and empirical analyses the paper proves that the sound growth of SMES under China's current stage is closely bound to the perfection of market economy system, development of large enterprise mechanism and governmental macro-controls.4. Empirical analyses of SME's growthThe 21st century has provided SMEs with unprecedented opportunities of development and SMEs have played roles in the social political economic life, which have attracted attentions from all circles. Now many countries of the world have taken the promotion of small business growth and encouraging entrepreneurial spirits as important ways to solve problems like economic growth and high-rate unemployment. However, there are phenomena like"more births along with more deaths"in the SME group: While new SMEs are emerging all the time, there are large amount of SMEs shutdown and bankrupt. So how to make SMEs grow soundly has been a question that contemporary economics must give answers to. After resolving the environment necessary for SME's existence, how should SMEs realize reproduction of qualitative change propelled by competition and unused resources of the enterprise? What is the internal mechanism of SME growth? This chapter starts with the economics theory, integrates the key factors for SME growth of resources for growth, motivation for growth and growth environment under entrepreneurial and innovative orientations, and analyzes the key factors influencing SME growth under multiple points of view through empirical methods. It puts forward that to make the maximum use of those key factors, and to evaluate those factors continuously, carefully and realistically are key to SME's rapid growth.The paper believes that studies on SME growth should describe its growth characteristics, modes and paths form the three layers of SME's existence (survival), reproduction (quantitative change) and growth (qualitative change). Raising those issues and answering them are not only the beginning of studies of SME growth, but also the basis for the study. As to the status quo of research economics has only discussed the internal mechanism of SME growth from scale economic theory, resources theory, strategic adaptation theory, motivation theory and life-cycle theory. While very few people have studied the feasibility of discussing the growth mechanism of SMEs within one research framework integrating the above theories. Basing on sorting out literature, this paper puts forward that studies on the internal mechanism of SME growth can conduct under a research framework integrating relevant theories. The paper also gives empirical test on the theoretical integrating model through modeling, theoretical hypothesis, scale design, questionnaire, and data processing. Results of the empirical research prove most of the hypotheses.5. SME's existence and growth within the revitalization of northeast China's old industrial baseTheory comes from practice, and at the same time directs practice. The existence and growth of SMEs are dependent on certain space. So what is the relationship between regional economic development and SMEs? According to regional economy point of view, SMEs have more close relationships with regional economy than large enterprises. If an economic area can prosper and attract personnel, capital and wealth, the continuous development of the area's industries is necessary. The prosperity and development of regional economy are inseparable from the strong development of SMEs in the region. Therefore, when studying regional economic development, we must reinforce and focus on the development of SMEs in the region. This chapter first proves the correlation between SMEs and regional economic development using quantitative methods. It assesses the contribution rates to key economic indicators like assets, profits, and employment of SMEs in different regions, which shows that SMEs are playing important roles regardless of developed regions or underdeveloped areas economically. The paper then turns to the policy orientation of the nation's revitalization of northeast China's old industrial bases. Comparing with economically developed regions, the paper analyzes the SME factor within the old industrial bases of northeast China, and reviews the economic contribution, capability of existence and growth, and constraints of SMEs in the old industrial bases. Finally the paper proposes policy suggestions to the revitalization of old industrial bases in northeast China from innovative and entrepreneurial perspectives.The paper is innovative in the following points:First, it tries to understand and master SMEs under innovative and entrepreneurial orientations and has SME's existence and growth closely linked to entrepreneurship and innovation.Second, the paper goes beyond the normal way of SME studies basing on scale standard. It has discussed the SME existence problem not only from large enterprise mechanism but also from market economy system and governmental macro-controls, thus linking the SME growth to the perfection of market economy system. Third, the paper does not focus on the discussion of whether large enterprises or SMEs are more favorable to economic development, but emphasizes what kind of large enterprise and SMEs more favorable. It also explores positively the factors beneficial to the growth of SMEs from multiple dimensions using empirical methods.Fourth, while not denying the intention of governmental policies to solve SME's existing problems, the paper puts forward that orientations of the government policy on SMEs should be at entrepreneurship and innovation, market competition and the development of regional economy.