Small and Medium E nterprises (SME)

Small and Medium enterprises 

Enterprise has different meanings. Firstly, it means starting and running a business; it can also mean a set of personal qualities that make their holders more ready than others to seek their solutions to economic or other problems (Bridge et al , 2003). 

There is no universally accepted definition of SME. Different countries use various measures of size depending on their level of development. The commonly used yardsticks by small and medium enterprises are total number of employees, total investment and sales turnover (URT, 2003).

 Raju et al (2011) argues that in USA definition of SME is based on annual revenue of USD 13 Million or less with 500 or fewer employees while in Europe it is based on 250 employees or less and with revenue not greater than Euro 50 Million.

 In Tanzania, categories of small and medium enterprises are shown in the table below:

Category Employees Capital investment in machinery (Tshs)

CATEGOTY              CAPITAL INVESTMENT                   EMPLOYEES                                                                                                                _______________________________________________________________________

Micro-enterprise              Up to 5 million                        1- 4 employees                                                      

Small enterprise                       5-200 million                           5- 49                                                               

Medium enterprise                  200-800 million                        50-99                                                    

Large enterprise                      Over 800 million                    100+ Employees                                                                                                                                                                               ______________________________________________________________________

Source: URT, SME Development Policy, Apr. 2003, p. 5.

Significance of SME to the economy of the country

Small and medium enterprises are a big source of employment opportunities and wealth creation (Sata, 2004). In Tanzania, SMEs play a big role in tax revenue and country’s economic peace and stability. Moreover, it contributes 30% of the country’s GDP and it is a second employer after agriculture. 

It employs 5 million people out of county’s 20 million people labor force. It is a sector that contributes to county’s public private partnership initiatives of Tanzania’s economic growth since 2002 (Tanzania Daily News, 2012).

Moreover, healthy SME sector reduces a level of income poverty as well as black market activities (World Bank, 2011). Additionally, Dejardin (2000) argued that the more SMEs there are in the economy the faster the economy grow faster.

Difference between SMEs and Large enterprises

Raju et al (2011) argued that SMEs are more likely to have simple organization structure than larger organisation. Moreover, SMEs are likely to use formal planning procedures, more personal contact with their customers, they tend to compete in narrow market niche which could facilitate intelligence generation, more innovative and have greater propensity for action than large firms. 

Further to that, flexibility, adaptability and closeness to customers are attributes that facilitate higher degree of customer care among SMEs than larger organizations. Additionally, ability to introduce new products is a key factor in SMEs success.

The spirit of entrepreneurship

The spirit of entrepreneurship entails that entrepreneurs have to pursue opportunities regardless of the resources that they have.

Obama's comment on life

Entrepreneur and Entrepreneurial characteristics

Bjerke (2007) argued that it is not possible to define entrepreneur or to present a model or method of operating and supporting an entrepreneurial venture. However, Rodermund (2004) found that entrepreneur is individual who bring about improvement both for other individuals and for society as a whole. Entrepreneur is known for creating new products, processes and services. Entrepreneur can be found in all sorts of professions. However, Zimmerer & Scarborough (1998) argued that entrepreneurs are found only in business. They stated that entrepreneur is an individual who creates a new business in the face of risk and uncertainty for one purpose of achieving profit and growth, by identifying opportunities and assembling the necessary resources to capitalize on them.

Entrepreneurial characteristics are so common in wider range of studies such as high need for achievement, creativity and initiatives, risk taking and self confidence, internal locus of control, need of independence and autonomy, accomplishing task with great energy and commitment and persistence in following one’s aims (Bjerke, 2007)

Similarly, Johnson (2001) stated that entrepreneur is individual who takes agency and initiatives. A person who assumes responsibility of making things happens; a person who is able to create novelty, manage risks and processes. Moreover entrepreneur is an individual who identifies bright endpoints even when faced with obstacles and difficulties. Carland et al (1984) defined entrepreneur as the person who starts a business. However he made two distinct types of business owner managers who start businesses, which are Entrepreneurs and Small business owners. Whereas entrepreneurs capitalise on innovative combination of resources for principle purpose of profit and growth while  using strategic management practices; small business owners operates business as an extension of the individual’s personality to further personal goals and to produce family income. That is to say not all people with businesses are entrepreneurs rather some are small business owners. However other studies call both of them as entrepreneurs (Johnson 2001; Gartner 1988; Mescon and Montanari 1981; Bird 1988; Beugelsdijk & Noordenhaven, 2005)

Johnson (2001) argued that there is a difference between a person called entrepreneur and pattern or attitudes and behaviour that could be called entrepreneurial. The attitudes and behavioural of entrepreneurship are mostly found in entrepreneurs; however not everybody need to be an entrepreneur to possess them. These qualities can be fostered within individuals at all level within organizations. On top of that anyone can display facets of entrepreneurial behaviour as they can be assessed and developed. They assist individuals to engage with their tasks, their customers, their own and organizations. Example of entrepreneurial attitudes and behaviours are such as; motivation to achieve and compete, taking ownership and being accountable, tolerance of ambiguity and uncertainty, manage and ultimately reduce risks,considering,discussing and formulating a vision, capacity to make impact and persistence and determination in the face of challenge. Further to that, Stewart et al (1998) argued that entrepreneur is more achievement oriented than the general population. This is because an entrepreneur is individual who is sparked by the recognition of an opportunity, through the act of volition or intention to formulate a business venture. Entrepreneur is the catalyst of the process of entrepreneurship of venture creation.

For the purpose of this study the illustration by (Stewart et al , 1998)) is used as the definition of entrepreneur.

Innovation in Africa

Africa is a continent with a population of 1.1 billion people among which 902 million people live in sub-Saharan Africa (population reference bureau, 2012).This represent a great pool of potential consumers and customers. However, developing nations especially Africa has not experienced so many breakthroughs in the area of innovation. Thus, Africa has been depending on technologies from other developed nations or using its own local and un-developed technologies especially in agriculture, ornaments and medicine. In the same vein, most scholars from Africa have not been featuring much in the international journals or they do not have much stories to write on technology because of little breakthrough on technological innovation. However, there are good examples of other industries such as music and film such as Nolywood of Nigeria. Moreover, many countries in Africa seeing the challenges of technological innovations have taken some measures in enhancing innovations such as policy reformations such as encouraging the Diaspora to come back to Africa and dual citizenship, building of technology and Innovation institutions and inviting the FDI (Foreign Direct Investment) and building networking with world known universities and Institutes of Technologies.

Nyaundi (2011) argued that Africa’s unique environment needs innovations that are tailored to its unique needs. This is because it has many poor people at the bottom of the world economic pyramid, mushrooming middle class and few established elites. Thus relevant innovation for Africa has to be somewhat unique and should carter around the unique environment needs by targeting the African consumers. This implies that relevant innovations of other parts of the world must not necessary be relevant to majority of Africans because what is novel innovation in the developing world is the innovation that has been able to transform the environment profoundly (Ogburn (1941), as cited by Godin,, 2008) other than new products a firm introduces yearly (Katila, 2002).

Nyaundi (2011) stated that the yardsticks for measuring innovations in Africa can be number of researchers present in a country, Gross domestic expenditures on R&D, the number of publications in scientific and technical journals and number of patent applications.

In order Africa to attract attention of widest readership it must come with innovations that can solve its own challenges so that it may be able to alleviate its position as the continent behind technological frontier. This can be done by Africans and its scientists to networks with scientists from other parts of the world and study at other technologies and innovations done elsewhere and copy it to fit its own environment. This is supported by Eapen (2012) who argued that domestic firms and scientists with network ties to foreign ones, compared to those without network ties are better positioned to search and transfer innovations easily.

The research question of this essay hinges around what are the viable strategies that scholars in developing world and Africa in particular can use to make their theoretic work interesting enough to fetch the widest possible readership.

 The following strategies could be adopted in order to make African scholars’ work interesting, relevant and fetch widest possible readership:

Publication of scholars’ knowledge creation on discoveries that have proved to change people’s lives significantly into the international journals

People are used to new type of knowledge and innovations from developed world. However in the developing world there are many good things concerning   knowledge creation that go unnoticed because they are not reported. Such new knowledge creation can be obtained from R&D, production experience, informal trial and error and serendipitous insights. The new knowledge must be the one that have been able to impact people’s lives .Thus, developing world scholars can get widest possible readership of their theoretical work of  innovations by publishing them in the international journals. Publications can be from different sectors such as agriculture, medicine or engineering where new knowledge has caused innovations to occur. This could include experiences that have changed the way life and work is done significantly. For example how the Mobile banking has changed money transfer to the areas where there are no financial institutions in the remote areas of Africa or how the distance education has been enhanced by the use of technology especially internet in training services such publications can explore the opportunities and challenges experienced in African context (Dahlman, 2008).Or they can be traditional issues that indigenous have been used but better people’s lives such as medicine or foods.

Publication on researches that have contributed to economic development

Publications in the academic journal is a channel of transferring knowledge from academic to industry (Hong, 2008).Thus, scholars should publish how their researches have contributed to economic development, providing solutions  to  key developing world challenges and how it has contributed in reduction of poverty in such sectors as  agriculture, engineering and in medicine. This can be achieved by integrating university system, or research institutions with potential users of their research. This strategy was used by American Universities and research institutions and this is the reason why USA has experienced such a robust innovation development (Nelson, 2004). Almeida et al (2011) argued that collaboration between firm owners and university professors is the way to access knowledge on emerging technologies and scientific discoveries because universities focus more on risky early stage research that have no commercial value. In the same vein, Hong (2008) argues that localised ties with star scientists tend to raise firms performance.

Formulation of networks and collaboration with the world leading researchers

This type of research collaboration allows knowledge diffusion which make easy to create local knowledge that can be published in the international journals. This can be achieved when local scientists there is team up with world leading researchers. Due to this collaboration between world’s leading researchers and local scientists, the great audience of readers would like to know the new knowledge that explain about new exploration that happens in the developing world (Barnard et al, 2010)

Networking with local, extra local and World known Universities and Research Institutions

Hong (2008) argued that presence of universities and other research institutions is a major sign in creating learning and new knowledge. The presence of universities is a good indicator of innovation potential as universities are significant contributor of industry innovations through conducting applied research and making its results available for commercial use. Therefore through collaboration and networking, knowledge transfer can be obtained in codified and non codified forms. Through codified form, knowledge transfer can be obtained through publications, patents and contract R&D projects while in non –codified forms (tacit component) knowledge transfer can be obtained through collaborative research and informal consultations. This implies that when universities and research institutions from various regions of the world collaborate and network they open up new avenues for knowledge creation that can solve local problems facing local context. This is supported by Eapen (2012) who argued that domestic firms (universities) with network ties to foreign ones, compared to those without network ties are better positioned to search and transfer innovations easily. Besides, world known universities have enough funds that can be used for research purposes than domestic universities. Such researches can results into inventions that can results into new products and processes which can be very interesting when published worldwide as they solve people’s challenges.

Conclusion

In Africa there are plenty of innovations, only that they are not documented and it is not codified in a scientific manner. Moreover these innovations are found and utilized among the older generations of Africa. The requirement should be the scientists from Africa to team up with indigenous Africans users of technology and other world researchers to codify it and put it in the world exposure through publication and tell the world new innovations of Africa. Those discoveries can come from sectors such as medicine and agriculture. Moreover if Africa want much innovation she should improve institutions especially in the areas of patenting and licensing as this will encourage sharing of old tacit knowledge to be exposed into codification. Lastly strategies that scientist in Africa can use to attract widest readership is to create  new knowledge that can be obtained through  networking with local, extra local and world known universities and research institutions, formulation of networks and collaboration with the world leading researchers, publication on researches that have contributed to economic development and publish any new knowledge that has changed life profoundly in the African environment in the international journals and media.

Reference

Almeida, P., Hohberger, & Parada, P., (2011).Individual scientific collaborations and firm level innovation, Individual and Corporate change, 20(6),1571-1599.

Barnard, H., Coward, R.., & Muller, M.(2011).Global excellence at the expense of local diffusion, or a bridge between two worlds? Research in science and technology in the developing world. Research policy, 41:756-769.

Dahlman C., (2008).Technology, Globalization and International competitiveness: Challenges for the developing countries. In David O’Connor and Kjollerstrom (eds) Industrial Development for the 21^st Century.UK, Zed books.

Godin, B., (2008).Innovation: The history of a category. Project on the Intellectual History of Innovation working paper No 1, Montreal Canada. Retrieved from

www.csiic.ca/PDF/Intellectual No1.pdf

Hong W., (2008).Decline of the centre: The decentralizing process of knowledge transfer of Chinese universities from 1985 to 2004.Research Policy, 37(4) 580-595

Katila R., (2002).New product search over time: Past ideas in their prime? Academy of Management Journal, 45 (5), 99-110

Nelson, R.R., (2004).The challenge of Building an Effective, Innovation System for Catch-up. Oxford Development Studies, 32(3).365-374

Nyaundi, B., (2011).Success factors for innovation and new product development in Africa. The Marketing and social Research Association Conference, 2011: Africa a   new Frontier? Retrieved from http://www.msra.or.ke/documents/conference/2011/MSRA%20Conference%202011

Population reference bureau (2012).World Population data sheet

Schumpeter's elaboration on entrepreneurs mindset

Schumpeter (1934) stated that  entrepreneur is an individual who possess specific traits of creation of new firms and innovative activity. An individual with a dream and will to form private kingdom and dynasty; with a will to conquer, the impulse to fight, to prove superior to others and to succeed. He further described entrepreneur as an individual with the joy of creating, of getting things done and exercising one’s own energy and ingenuity.

The Philanthropic CSR is old model of Community engagement

Conventionally, many researches on community engagement and transformation are expressed on corporate social responsibility grounds. These researches consider corporate social responsibility as ethical transformation that organizations need to do as a way of returning back part of the profit to the community. Thus many organizations engage with philanthropic initiatives such as health, education and housing just to mention a few. Examples of such researches are (Hamann, 2004; Esteves & Barclay, 2011, Hartmann, 2011).

The motive behind this engagement is mostly to secure a licence to operate in the community where the organizations operate and to be relevant in the social context by doing the right things to the community rather than meeting the shareholders and growth of the company interests alone. Moreover this type of engagement is easy to quantify, enhances organization legitimacy, brings trust with the community in which organization operates and gives organizations competitive advantage than those organizations that don’t do so (Bowen, et al, 2010)

Whereas these researches have been advocating the significance of CSR theories, there has been so much discontentment and dissatisfaction on the part of communities where organizations (MNCs) operate. The discontentment is always expressed in the form of riots and strikes. The commotion results into deaths of some members of the community at times. Example of civil commotion and deaths are such as Marikana uprising in South Africa and Barrick Gold North Mara Mine uprisings and killings in Tanzania.

However, the practical results from these researches imply that the current CSR expressed in philanthropic initiatives is inadequate and not ideal community engagement method; further to that it proves that current CSR that goes in the name of philanthropic initiatives is neither sustainable nor transformational in community welfare; no wonder one can find rampant poverty, environment degradation and discontentment among the mining communities. Fundamental problem for dissatisfaction of the philanthropic community engagement is its failure in producing results on community welfare, and therefore communities feel cheated due to persistence of fundamental problems. Thus, there is a need of linkage between organizational transformation and societal transformation to solve these challenges.

I support Bowen et al (2010) and his new theory on community engagement as it emphasizes on collaborative leadership which insists on making partnership between organizations  and communities  that share common aim and vision. Similarly I challenge the philanthropic engagement of community engagement as it is traditional structure of community engagement and does not advocate win win approach which is partnership based. Bowen et al (2010) called the current Corporate Social Responsibility as transactional and transitional mode of community engagement; because it is not substantive, tit for tat, easy to practice, symbolic and short term strategy of community engagement. Moreover, it is based on occasional interaction with the community. It does not change society welfare but talk about changing the society welfare because it does not involve collaboration between organizations and community in terms of mutual understanding and agreement in addressing the real problems facing the concerned communities.

The solution should be to engage the community differently through transformation community engagement where there is mutual understanding and agreement with the community in addressing the real problems facing them. This could involve sharing ownership of the problems and vision of the solutions of the problem from the start, rather than giving back to the community through providing information, donating dollars, time or employee skills; as this is good strategy in gaining and maintaining firm legitimacy to operate into the community but not to transform the society to have a better welfare (Bowen et al, 2010).

Therefore in order to bring community welfare sustainability and societal transformation, there should be a win win situation between community and organizations(MNCs).In this new paradigm, there should be equal and enduring partnership that allows equal risk sharing and formulating solutions to real life problems with the communities where organizations operate from the beginning of community engagement and transformation.