Defining Small and Medium Enterprises: a critical review

AuthorGentrit Berisha, Justina Shiroka Pula
PositionUniversity of Prishtina, Kosovo
Pages17-28
ISSN 2410-3918 Academic Journal of Business, Administration, Law and Social Sciences Vol 1 No 1
Acces online at www.iipccl.org IIPCCL Publishing, Tirana-Albania March 2015
17
Dening Small and Medium Enterprises: a critical review
Gentrit Berisha
University of Prishtina, Kosovo
Justina Shiroka Pula
University of Prishtina, Kosovo
Abstract
e OECD estimates that small and medium enterprises account for 90% of rms and employ
63% of the workforce in the world (Munro: 2013). Small and medium enterprises account for that
amount of businesses thatit is senseless the arbitrariness with which they are dened. Language
mainly used for denition is numbers, but it is dicult to nd two institutions, statistical agencies
or countries who speak the same language in terms of small and medium enterprises. Academics,
authors, policy makers apply SMEdenitions in terms of dichotomy between universality and
standardization of a unique denition and relativity and sectored specialization. Although
qualitative criteria-characteristics of SMEs easily distinguish them from large businesses,
quantitative criteria are mainlyused for their dimensional classication. is paper deals with a
critical approachto the denition of small and medium enterprises, inconsistencies in criteria and
various proposed approaches to the denition towards universal acceptance.
Keywords: SMEs, denition, quantitative criteria, quantitative indicators, standardization.
Introduction
e European Commission, the executive body of the European Union, with a
recommendation of May 2003 has standardized the denition of micro, small and
medium enterprises (European Commission: 2003). is denition isappropriated
beyond the geographical scope that falls under the jurisdiction of the EU. European
Commission at the request of the Council of Industry, has proposed in 1992 limiting
addition of the denition of small and medium enterprises that Commissionuses. e
rst recommendation that marked the beginnings of a unique denition of SMEs was that
of April 1996 (European Commission: 1996). It was based on the idea that the existence of
dierent denitions at Community level and at national level could create inconsistencies.
If economists claim that small and medium enterprises are the backbone of the economy,
how come they can’t determine the number and the order of its discs?
But SME denition is far from being a solved, meaningful and acknowledgedissue. One
of the main challenges in developing a cross-countryanalysis of SMEdata is the lack of
a universal denition of what constitutes an SME
(Ardic et al.: 2011). Pobobsky (1992) cites a study
of the International Labour Organization, which
identies over 50 denitions in 75 countries with
considerable ambiguity in the terminology used.
If economists claim that small
and medium enterprises are the
backbone of the economy, how come
they can’t determine the number
and the order of its discs?

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