Chapter 4 Overview of government interventions to stimulate SME development
4.2 A literature review of government interventions to stimulate the growth of SMEs in developed nations
The University of Michigan defined a developed country as one which has a high per capita income by world standards (University of Michigan, Deardorff's Glossary of International Economics, On-line, 2 February 2003).
For the purpose of this literature review, interventions will be considered as either functional or selective interventions, as defined by Wint (1998:281).
4.2.1 Functional interventions in developed countries
This section will review the functional interventions of developed countries to stimulate the growth of SMEs, in order to ascertain whether there are similarities, or not, in their approach to intervention.
This will in turn allow comparison to data from developing countries.
This process might assist in evaluating and then developing a range of effective interventions suited to South Africa.
The research into functional interventions in developed countries covered a range of developed countries, from small to large with differing sized economies, and included Ireland, Japan, France, USA, Canada, New Zealand and Australia.
In the early 1960s the Irish government decided to focus on foreign
capital support infrastructures to support this FDI. This led them to focus on skills development, particularly at management level. Their research indicated that management development was the third largest contributing factor to Ireland’s phenomenal economic growth (Heraty and Morley 2003:63). Heraty and Morley (2003:68) used the top 2000 institutions in Ireland as their population and had a 22.7%
response in arriving at this conclusion.
Similarly, it was considered important that the macro-economic fundamentals were correct. During the period 1994 to 2000, Ireland experienced six straight years of GDP growth at an approximate average of 10% per year (Heraty and Morley 2003:62). This appears to endorse Wint (1998:294) who suggests that functional intervention at a macroeconomic level is more likely to lead to economic growth as opposed to selective interventions.
Following this educational option was Japan. Japan focused part of it’s efforts on increasing the number of start-ups by a factor of 2 or more as they were experiencing more close-downs per annum than start-ups (Japan, Online 15 April 2004:3). The Japanese government intended to achieve this by a range of educational projects, and by reducing the barriers to recovery from bankruptcy based upon research that indicated that entrepreneurs who had failed often made a recovery and success on a second attempt. (Japan, Online 15 April 2004:3).
A further supporter of educational interventions was New Zealand.
New Zealand found that many efforts to stimulate the country’s growth were still too slow and so focused on promoting an entrepreneurship culture, enabling access to skills and expertise, and enabling access to innovation and new technologies (New Zealand,
Online 15 April 2004:8). They also attempted to educate individuals and firms on how to access finance (New Zealand, Online 15 April 2004:6).
Australia too followed the education route. Australia has implemented a number of functional interventions ranging from human resource development to improving their education system (Australia, Online 16 June 2004:1).
Japan, Ireland, New Zealand, Australia, France, the USA and Canada also implemented a number of other functional interventions that did not follow the educational option (Hancke, Online, 12 February 2004:5; USA, Online 15 April 2004:3; USA 2, Online 15 April 2004:1; USA 3, Online 15 April 2004:2; Canada, Online 15 April 2004:3; Hancke, Online, 12 February 2004:5; Japan, Online 15 April 2004:3; USA, Online 15 April 2004:3;USA 2, Online 15 April 2004:1;
USA 3, Online 15 April 2004:2; Canada, Online 15 April 2004:3; New Zealand, Online 15 April 2004:6, New Zealand, Online 15 April 2004:8; Australia, Online 16 June 2004).
These interventions are captured in Appendices 1 and 2. The purpose of documenting these is for comparative purposes only, as the focus of this thesis is on the South African interventions.
The data related to the various functional interventions in developed countries is collated in the two tables listed in Appendix 1 and Appendix 2. Appendix 1 provides an overview of the functional interventions implemented in the developed countries studied, listing interventions by country. This provided an insight into what each country has done. Appendix 2 provides an overview of the functional interventions implemented in the developed countries studied, listing
countries by interventions. This provided an insight into how many countries have implemented each particular intervention.
No mention is made of objectives for the intervention, nor whether measurements of the intervention were taken to see if objectives were achieved.
In the following section, selective interventions within developed countries are reviewed.
4.2.2 Selective interventions in developed nations
The use of selective interventions in developed countries must also be considered in order to see when and how these are utilised and whether any relationship exists between the level of intervention and improvement of the SME sector.
Similar to the functional interventions on the education side, the UK government recognized the need for the upgrading of management skills in SMEs and consequently launched Training and Educational Councils (TECs) to provide this training to SMEs (Boocock, et al.
1998:187; Smith and Whittaker,1998:176; Chaston, Badger and Sadler-Smith, 1999:191; Devins and Johnson, 2002:370). However, the conclusions of the researchers into the success of this project indicate that the delivery agents have not kept sufficient or correct data, in order to fairly evaluate the success of this management training and development project (Boocock, et al. 1998:187).
Furthermore, it was also found that there was no clear relationship between this training and improvements in respect of business performance (Smith and Whittaker,1998).
The USA, Japan, Canada, Italy, Germany and Austria have all applied a range of selective interventions in their countries (Barreto, Online, 21 February 2004:2; USA, Online 21February 2004:1;
Austria, Online 10 July 2004:3; Canada, Online 15 April 2004:5;
Canada, Online 15 April 2004:3; Welter, 2004. Online 10 July 2004:2;
Garofoli Online June 1999:3; Japan, Online 15 April 2004:3-4; USA 4, Online 15 April 2004:1; United States of America, Online 21February 2004:1; USA 5, Online 15 April 2004:3, Barreto, Online, 21 February 2004:2).
These interventions are captured in Appendices 3 and 4. The purpose of documenting these is for comparative purposes only, as the focus of this thesis is on the South African interventions.
The data is collated in the two tables listed in Appendix 3 and Appendix 4. Appendix 3 provides an overview of the selective interventions implemented in the developed countries studied, listing interventions by country. This provides an insight into what each country has done. Appendix 4 provides an overview of the selective interventions implemented in the developed countries studied, listing countries by interventions. This provides an insight into how many countries have implemented each particular intervention.
No mention is made of objectives for the intervention, nor whether measurements of the intervention were taken to see if objectives were achieved.
In the following section, selective interventions within developed countries are reviewed.