A review of academic research undertaken in relation to Small and Essay

A review of academic research undertaken in relation to Small and Medium Sized Enterprises - Essay Example In the study, United Kingdom’s SMEs have been observed. It has been identified that SMEs also have a role to play in the economy of the UK. However, there are underlying challenges and problems that the country’s SMEs face which need to be addressed by the government and other stakeholders involved. The paper intends to identify the current academic research into small and medium sized enterprises and the major issues faced by these firms. It also tries to present the role of SMEs in the UK. The paper will try to provide a brief summary of the overall scenario at the end and will provide recommendation based on the challenges that the SMEs in the UK face so that significant improvements in the SMEs can be introduced and better opportunities created. Table of Contents 1 Executive Summary 2 Introduction 4 Critical Review into Current Academic Research 5 Challenges of SMEs 7 Role played by SMEs in the United Kingdom 8 Conclusion and Recommendation 12 References 14 Introduc tion Small and medium-sized enterprises (SMEs) are those firms that do not have any subsidiary and are independent in nature thus employing a certain number of employees. The number of employees may be different in different countries. In European Union, the limit set for employing the employees has been set to 250 for SMEs. However, certain countries lay down the limit of employing 200 employees. The use of the financial assets is also evident in order to define SMEs. A new European definition of SMEs came into existence in the year 2005. The new definition offers increase in the financial upper limits and therefore it states that the turnover of medium-sized enterprises must not be more than EUR 50 millions. Similarly, the turnover of small enterprises must not be more than EUR 10 millions and for the micro firms the turnover must not go above EUR 2 million. Consequently, the balance sheet of the medium enterprises must not surpass EUR 43 millions. The balance sheet of small and m icro enterprises must not go above EUR 10 million and EUR 2 million respectively (OECD, 2005). The SME sector comprises a wide range of firms such as recognized conventional family businesses that utilize nearly hundreds of workers. The SME sector also makes use of â€Å"survivalist† self-employed workers functioning in unorganised micro enterprises (International Institute for Sustainable Development, 2004). The main aim of the paper is to identify the role of the SME in the economy of the United Kingdom. The study will try to focus upon the current academic research on SMEs. Theories on SMEs will be identified and the role of SMEs in an international context as a mechanism for job creation, innovation and long term growth will be studied in detail in the sections below. Critical Review into Current Academic Research Small and medium-sized enterprises can avail innumerable behavioural benefits in comparison to their larger counterparts in the process of innovation. However, it has been identified that they also face certain material disadvantages. The problem they face has been evident in the process of developing suitable network of contacts with outside sources of both mechanical and technological expertise as well as advice (Rothwell & Dodgson, 1991). It is quite difficult to measure the importance of SMEs. However, it is a well known fact that small and medium enterprises are considered as the basis of most of the economies, generally in relation to influences on employment as well as