Value Chain Glossary: Micro and Small Enterprise
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Micro and Small Enterprise (MSE)
A microenterprise can be defined as a self-employed person or enterprise with no more than four employees. A small enterprise is often defined as an enterprise with five to nineteen employees. While MSEs are often defined by the number of individuals they employ, they can also be defined by their common needs, problems, constraints and development opportunities.
In many cases, MSEs participate in global value chains and are increasingly affected by end market requirements such as the use of private international standards by supermarkets, the elimination of the quotas through trade agreements, and production opportunities that arise as multinational firms outsource the production function to an extended supply chain. Market and operational dynamics present risks as well as opportunities for MSEs.
MSEs often serve as a flexible and low-cost production resource, offering proximity to markets and access to land and other key resources, providing a storyline for companies and consumers interested in social responsibility, and supplying differentiated products. There are, however, persistent obstacles to be overcome when doing business with small firms, such as high transaction costs and limited production capacity.
Critical success factors that enable small firms to compete in global markets include a business-friendly enabling environment, strong inter-firm linkages (vertical and horizontal), opportunities and support for upgrading, and dynamic supporting markets, for products and services like finance, business services, inputs, and information and communications technologies.
