sme sector

Essay by thomas2oakesUniversity, Bachelor'sB, October 2014

download word file, 11 pages 0.0


Entrepreneurship and Small Business Assessment Task

In 1979 David Birch suggested that Small Medium Enterprises (SME) were the motor of job creation as opposed to larger firms. Birch stated that 'small firms are the most important source of job creation in the US economy' (Birch, D. p…). He provided evidence that suggests that in the U.S. economy '66% of all net new jobs in the U.S. during 1969-1976 were created by firms with 20 or fewer employees' (Birch, D. p…). Relevant theory and theoretical analysts believe that this is also true. In this essay it will be discussed why these people believed that SMEs create more jobs than that of larger businesses. I will derive my points from theoretical analysis and evidence attained via academic literature and online sources as a base for the arguments and discussion.

David Birch's theory was based on three types of businesses, Gazelles, mice and elephants, all of which resembled the size of companies.

Gazelles were those businesses that 'have sales in excess of $100,000 and grow at least 20% in a year for 4 years, and represent the most dynamic sector of the economy' (Birch, D. (1987) p.dd). These businesses were the small percentage that Birch has seen the most 'net job growth he had observed in his research' (Burlingham, B. (2012) Who really creates the jobs?) Gazelles (SMEs) could be said to be the motor of the job industry for many reasons; one example is due to the high growth SME's. These businesses make a major contribution to job creation within the economies of over economically developed countries (OEDC's). During the early stages of the business when it begins to form properly, 'management capabilities are crucial to survival' (FIND QUOTE) therefore, people need to be trained and employed if...