Can Better Working Conditions Improve the Performance of SMEs? An International Literature Review
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Croucher, Richard; Stumbitz, Blanca; Quinlan, Michael; Vickers, Ian
[Excerpt] It is widely recognized that competitive private enterprise is the principal source of economic growth and wealth globally and makes a substantial contribution to poverty reduction. Although large and multinational enterprises have the higher public profile, the majority of businesses are small and medium-sized enterprises (SMEs). They are estimated to be responsible for over 50 per cent of the new jobs created globally and, in most developing and emerging countries, they also employ more people than do large enterprises. Given their importance as employers, SMEs clearly have the potential to contribute to the social and economic progress for workers and their communities. However, many SMEs – particularly those in developing and emerging countries – are not achieving this potential. Frequently, their employment is in low-quality and low-skilled jobs that offer low wages under poor and unsafe working conditions. In addition, SMEs often fall short in terms of productivity, competitiveness and market share. The ILO has long been convinced that, by improving working conditions, safety and skills in SMES, productivity and profitability can also be improved: a win-win scenario that is good for workers, enterprise owner, communities and economies. In June 2012, specialists from four ILO departments came together to implement a joint programme of work to explore how to help and encourage SMEs to achieve this. This independent research review was commissioned by ILO in order to contribute to establishing a solid empirical basis for future research and interventions. It reviews the empirical relevance of the assumption that a win-win scenario exists in SMEs, especially in the context of developing economies. It also seeks to identify the factors or conditions that influence its emergence. More broadly, the report builds upon a thorough review of international literature to present responses to a range of enquiries relating to the links between working conditions, safety and health, skills and productivity. Not surprisingly, the answers contained in this report are often conditional and are far from categorical. Although the report suggests that a win−win scenario may exist, in certain circumstances, it also underlines that more empirical research is needed, particularly in developing and emerging economies.
small and medium-sized enterprises; SMEs; working conditions; poverty; employment