Thriving SMEs Crucial For Economic Growth

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Small and midsize enterprises, or SMEs, are referred to as the "engines of the economic development" because they provide around the half of all jobs and contribute from 40 percent to 50 percent to the gross national product in developed countries.

By contrast, the 750,000 Russian SMEs made a contribution of only 6 percent to the GDP in 2006. It is of paramount importance to develop Russia's SMEs. Although supportive and legal measures by the state are important to create the right conditions for entrepreneurship, we think developing a more managerial approach is even more crucial. Hence, we see the main factors that prevent a proper SME development in Russia in the enterprises themselves.

Thinking entrepreneurial is the first step to efficiency and innovation. In order to successfully stimulate entrepreneurial behavior of employees, they have to enjoy a certain freedom of work and benefits for potential extra efforts.

The second step is the establishment of a professional innovation management. Innovation is the key to success in all companies, but this is particularly true for SMEs.

Companies that already operate according to high standards should definitely apply for a corresponding certificate, such as ISO or Certified Entrepreneur.

Last but not least, customer orientation should be a high priority. A company that does not appreciate the customer's needs will not survive for two reasons. Customer orientation strongly influences the image of a company and is one of the best sources of innovation. Integrating the customer in a company's innovation process generates products and services with an actual demand. SMEs, which often stay in much closer contact with their customers than big companies, should involve them in the development of new products and services.

By implementing the above- mentioned management concepts, Russian SMEs will become the driving force of the domestic economy. To these ends, the promotion of SME-related academic research and corresponding study programs is also important.

At this point, the government comes into play. A climate of awareness for the importance of SME development must be created, and funds for the establishment of SME-related academic institutions have to be provided. This will lead to professional and successful SMEs that will stimulate Russia's economy.

Jorn-Axel Meyer is the CEO and Alexander Tirpitz is a research assistant at the German Institute for Small and Midsized Enterprises in Berlin.