The definition of ‘Small Medium Enterprise’ is a complex issue and in most cases, it would vary from country to country, depending on certain variables. In most cases, it would depend on who is giving the definition and what they regard to be SME in their economical background. Generally, SME or Small Medium Enterprise refers to companies or businesses whose overall turnover is below certain levels or limits.
Some of the variables used in defining SMEs in most regions include things such as whether the enterprise is a service-based or goods-producing business, its size, and probably the number of workers they employ (Acs and Morck, 1997).
In Canada, for instance, Small business refers to businesses whose employees’ rate is below 100 in a goods-producing business or less than 50 employees for a business which is based on services. Anything beyond these cut-offs, but one that doesn’t exceed an employee rate of 500 would be classified under middle-sized enterprises.
Small-medium enterprises are observed to be more than large enterprises or businesses in most developed and developing economies world-wide (Fink, 1998). The most typical characteristics of Small Medium Enterprises in the whole world is determined by factors such as the size of business or its independent ownership; whether it’s a family enterprise or a group investment.
As it would be observed, there are many potential benefits that can be associated with SMEs and this explains the need for a vibrant small and medium-sized enterprise sector in any developing nation. One of the common key benefits of this type of enterprising is that they are important sources of employment in a country, especially for low-skilled labor.
Another outstanding benefit of SMEs is in their more flexibility capacity compared to large corporations and this makes them more sustainable. SMEs are also observed to have the significant advantage of being less mobile compared to large corporations; a feature which makes them more sustainable for development and advancements in emerging economies.
In countries such as the United States, various types of business administration would set different levels of businesses, based on ownership structure, industry type, revenue produced, and the number of employees (Asheim, 2007). As observed previously in this paper, there is hardly any universally accepted definition for SMEs and in that case, classifications of SMEs in the U.S. apply differently in various types of businesses.
Basically, the United States International Trade Commission has defined SMEs as corporations that employ fewer than 500 employees, regardless of the context of the business (Chiao, 2007). In USA, SMEs are classified into two main classes known as the product SMEs and the service SMEs. Generally, both categories plays a crucial role to the development of the country’s economy and for that reason, the role of SMEs can never be underestimated at any value.
According to the U.S. International Trade Commission, SMEs contribute about one third of the total exports in merchandise products every year, with Canada being the largest destination for most of these exports (Man, 2007). SMEs have indeed proved to be a major source of employment in USA, by constituting for more than half of the private sector employment, thus leading to a constant growth of employment in the country.
More importantly, SMEs have always been significant contributors in matters of product, services, and processes innovations in the country. For these reasons, SMEs are highly regarded as promising initiatives that can effectively support the country towards a complete recovery from the longstanding effects of the 2007 financial crises, among other economical turbulences such as the current high rates of unemployment.
According to Qian (2002), the business environment in USA offers very slight challenges to the SMEs compared to large multinationals, and this provides the SMEs with a strong platform for sustainance.
A good example of an SME company in USA is Integrity Applications, Inc (IAI) established in the year 1998. This is a private engineering and software services company with a nationwide recognition across the states.
The business is categorized under ‘Consultant of Systems Engineering’ and is located in Chantilly, VA. Some of the company’s products and services include Space Systems engineering, Software Systems Engineering, Corporate Systems Engineering, Control Systems Engineering, and Enterprise Systems Engineering, among other services. Currently, it is estimated that the mid-sized company generates revenue of around $20 to 50 million in an annual basis.
The company has a workforce of approximately 100 to 250 staff, working on various segments of the organization. Integrity Applications Incorporated is arguably one of the fastest advancing consultant companies in the country in matters involving system engineering (Forth and Bewley, 2006).
The company was recently recognized as the second best medium-sized workplace in the ratings of the Best Small and Medium Workplaces in the U.S. More importantly, the company was also recognized as a key employer in the regions around San Diego and Washington, by the San Diego Business Journal and Washingtonian magazine, respectively. IAI has been in the forefront in steering the country ahead in innovative matters, through its qualified and highly-skilled professionals in software engineering.
References
Acs, Z.J. and Morck, R. (1997). The internationalization of small and medium-sized enterprises: A policy perspective. Small Business Economics, 9 (1), 7-20.
Asheim, B. (2003). Regional innovation policy for small-medium enterprises. United Kingdom: Edward Elgar Publishing.
Chiao, Y. (2006). Performance, internationalization, and firm-specific advantages of SMEs in a newly-industrialized economy. Small Business Economics, 26 (5),475-492.
Fink, D. (1998). Guidelines for the successful adoption of information technology in small and medium enterprises. International journal of information management, 18 (4), 243-253.
Forth, J. and Bewley, H. (2006). Small and medium-sized enterprises: findings from the 2004 Workplace Employee Relations Survey. New York: Department of Trade and Industry.
Man, T. (2007). The competitiveness of small and medium enterprises* 1: A conceptualization with focus on entrepreneurial competencies. Journal of Business Venturing, 17 (2), 123-142.
Qian, G. (2002). Multinationality, product diversification, and profitability of emerging US small-and medium-sized enterprises. Journal of Business Venturing, 17 (6), 611-633.