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Which factors determine the upgrading of small and medium-sized enterprises (SMEs)? The case of Egypt

Author

Listed:
  • Loewe, Markus
  • Al-Ayouty, Iman
  • Altpeter, Annegret
  • Borbein, Lisa
  • Chantelauze, Marc
  • Kern, Maximilian
  • Niendorf, Elisabeth
  • Reda, Malak

Abstract

Most low- and middle-income countries have many small but only a few medium-sized and large enterprises. Small firms seem to have difficulties growing into medium-sized ones. This is problematic because medium-sized companies tend to be the main creators of higher quality and better-paid employment, motors of innovation and economic diversification, as well as future exporters. This study focuses on Egypt. It is based on the assumption that while companies grow for various reasons (such as a sudden increase in demand), the only strategy for growth that companies can control is growth through innovation – or ‘upgrading’. This study investigates the main constraints and success factors for small enterprise upgrading in Egypt. Based on enterprise panel data from 2004 and 2008 and a qualitative in-depth survey, the study concludes that in Egypt the main determinants of upgrading are the entrepreneur’s (i) human capital (quality education, work experience and international ex­posure), (ii) motivation and risk readiness, (iii) investment in human resources, (iv) market research, (v) access to finance and (vi) ability to deal with persistent deficits in the rule of law (especially in state-business interactions such as licensing, taxation and inspections).

Suggested Citation

  • Loewe, Markus & Al-Ayouty, Iman & Altpeter, Annegret & Borbein, Lisa & Chantelauze, Marc & Kern, Maximilian & Niendorf, Elisabeth & Reda, Malak, 2013. "Which factors determine the upgrading of small and medium-sized enterprises (SMEs)? The case of Egypt," IDOS Studies, German Institute of Development and Sustainability (IDOS), volume 76, number 76, July.
    • Handle: RePEc:zbw:diestu:76
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    References listed on IDEAS

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    1. A. Bhattacharjee & Higson, C. & Holly, S. & Kattuman, P., 2002. "Macro Economic Instability and Business Exit: Determinants of Failures and Acquisitions of Large UK Firms," Cambridge Working Papers in Economics 0206, Faculty of Economics, University of Cambridge.
    2. A. Bhattacharjee & C. Higson & S. Holly & P. Kattuman, 2009. "Macroeconomic Instability and Business Exit: Determinants of Failures and Acquisitions of UK Firms," Economica, London School of Economics and Political Science, vol. 76(301), pages 108-131, February.
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    Cited by:

    1. Love Kumar & Farah Nadeem & Maggie Sloan & Jonas Restle-Steinert & Matthew J. Deitch & Sohail Ali Naqvi & Avinash Kumar & Claudio Sassanelli, 2022. "Fostering Green Finance for Sustainable Development: A Focus on Textile and Leather Small Medium Enterprises in Pakistan," Sustainability, MDPI, vol. 14(19), pages 1-24, September.
    2. El-Haddad, Amirah, 2018. "Exporting for growth: identifying leading sectors for Egypt and Tunisia using the Product Space Methodology," IDOS Discussion Papers 25/2018, German Institute of Development and Sustainability (IDOS).
    3. Hayelom Abrha Meressa, 2020. "Growth of micro and small scale enterprises and its driving factors: empirical evidence from entrepreneurs in emerging region of Ethiopia," Journal of Innovation and Entrepreneurship, Springer, vol. 9(1), pages 1-22, December.
    4. Hahn, Tina & Auktor, Georgeta Vidican, 2017. "The effectiveness of Morocco’s industrial policy in promoting a national automotive industry," IDOS Discussion Papers 27/2017, German Institute of Development and Sustainability (IDOS).
    5. Soliman, Salma & Papanastassiou, Marina & Saka-Helmhout, Ayse, 2023. "The role of subsidiaries in Global Value Chains (GVCs): An institutional voids perspective on LVC upgrading and integration," Journal of International Management, Elsevier, vol. 29(2).
    6. Reeg, Caroline, 2015. "Micro and small enterprises as drivers for job creation and decent work," IDOS Discussion Papers 10/2015, German Institute of Development and Sustainability (IDOS).
    7. Hampel-Milagrosa, Aimée & Loewe, Markus & Reeg, Caroline, 2015. "The Entrepreneur Makes a Difference: Evidence on MSE Upgrading Factors from Egypt, India, and the Philippines," World Development, Elsevier, vol. 66(C), pages 118-130.
    8. Caroline Krafft, 2016. "Understanding the Dynamics of Household Enterprises in Egypt: Birth, Death, Growth and Transformation," Working Papers 983, Economic Research Forum, revised Mar 2016.
    9. Ali Rashed & Maia Sieverding, 2014. "Micro and Small Household Enterprises in Egypt: Potential for Growth and Employment Generation," Working Papers 831, Economic Research Forum, revised May 2014.

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