While SMEs were traditionally seen as crucial for employment and poverty
reduction, it is increasingly recognized that they can be an important driver of R&D
and growth. With fast evolving international markets, technological change and
sometimes the need of customized goods and services, the flexibility of SMEs is
an asset. Moreover, the internationalization of SMEs has strongly accelerated over
the past three decades. They are increasingly exporting further and are involved
with multinational firms in distribution, production, R&D, etc.
Evidence also shows a high correlation between the intensity of innovation in
SMEs and innovation in large firms, suggesting that the importance of a country’s
innovative potential is independent of the size of firms, and that there is a
complementarity between innovative large and small firms. The pioneering SMEs
are often young start-up companies, which can be more inclined to introduce
radical innovations because they do not need to be concerned with safeguarding
incumbent profits, or restructuring the existing technology profiles of the company.
The above reasons make the success of SMEs a top priority in both developed
and developing countries. However, the increasing globalization of the World
economy is such that firms face of intense competition. To survive, they must
improve their competitiveness in both domestic and foreign markets. One way of
improving firm competitiveness is by increasing productivity. The general objective
of the study was, therefore, to examine the status of productivity of SMEs in
selected European and Southern-Mediterranean countries and to suggest
recommendations for its improvement.