SMEs, keys to recovery

- "Hard hit by plummeting demand, threatened by globalization, facing unexpected financial difficulties and tackling a regulatory environment that has often been yet another obstacle, the more than three million small and medium-sized firms in Spain have suffered the worst of the crisis. A difficult time in addition to the customary competitive challenges facing SMEs, forcing entrepreneurs to redouble their efforts in order to navigate such rough waters. Because entrepreneurs make SMEs, their commitment and dedication, their view of the market, their management experience, their knowledge of the sector, their ability to take on risk. SMEs represent the entrepreneurial spirit in its purest state."
- "But the evidence shows that good entrepreneurs are not enough. The environment is also vital. A stable economy, with access to sources of both finances and skilled workers, good infrastructures and a suitable framework of labour, financial and accounting regulations are all essential to creating the right mix for SMEs to be born and grow. Society at large needs to realize and appreciate the crucial role played by SMEs in economic life and the development of shared wealth. Studies have confirmed that, proportionally, small firms create more jobs than large ones. Moreover, the new firms started up generate more competition and also make it easier for large firms to outsource, leading to synergies that enhance the progress and development of the economy in general and society."
- "Business people, public authorities and economic and social agents must sort out their capacities in order to optimize results. Entrepreneurs, committed to growing the business and striving to take on new challenges, and the rest, provide resources that help to overcome the intrinsic deficiencies of SMEs. In particular, their lower work factor productivity compared with large firms, in general resulting from the sector orientation, capital intensity or economies of scale, among other factors. Moreover, in a world where innovation and internationalization are decisive in economic progress, it’s important to recognize that SMEs play a fundamental role. In the case of innovation resulting from big investment in research and development, it’s evident that such heights are off limits to SMEs, but when we look at non-technological innovation, their role is key. This is a wide range of innovations that do not come out of the laboratory but result from contact with clients, suppliers and the market; particularly in a world where consumers develop a preference for variety, leading to many different demand niches that can be exploited with the agility and adaptive capacity of small firms."
- "On the other hand, SMEs must also be capable of taking on the challenge of globalization, although this may seem contradictory to their size, taking advantage of advances in information and communication technologies, establishing strategic alliances and cooperation networks that reduce the effects of economies of scale. Here economic policies (international promotion, providing efficient technological structures) also have a vital role to play."
- "SMEs were the first to notice the crisis but they will also be the first to bear out the recovery, once again contributing decisively to growth, to creating jobs and to supporting local and regional economies. Their success will be the success of all."

LaCaixa Monthly Report Sep2010

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