An Empirical Analysis of SME and Large Business Linkages: Evidence from the Philippines
RSN - PCC Working Paper 17 - 007
43 Pages Posted: 1 Dec 2017
Date Written: November 1, 2017
The micro, small, and medium enterprises sector is an important segment in many economies, but it is often beset by productivity problems that hinder its ability to grow and develop. A recent strand of literature identifies a possible contributor to overcoming challenges to SME growth – linkages with large businesses. Using a survey of 530 SMEs and a series of key informant interviews in Metro Manila, Philippines, this paper 1) gauged the extent by which Philippine SMEs link with large businesses, 2) empirically verified the benefits (and disadvantages) to SMEs of linking with big firms, and 3) studied whether some forms of linkages are associated with certain SME success factors. Results showed that 1) Philippine SMEs are not extensively linked to large firms, 2) the primary benefits of linking with big firms to SMEs are knowledge transfer and access to markets and the primary disadvantages are bureaucracy in large firms and their strong bargaining power, 3) these linkages generally have net positive benefit to SMEs from the SMEs’ point of view, and 4) some forms of linkages are linked with certain SME success factors. This paper also analyzed the obstacles faced by SMEs in linking with large firms and offered some policy solutions to address this.
Keywords: Small and Medium Enterprises, business linkages, Philippines, SME - large business linkages
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