In business world, small and medium enterprises have a long history of service for providing employment opportunity to the people of country. It increases the ability of people to make them more innovative and to cope with unemployment crisis. Small and medium-sized enterprises (SMEs) are seen as a key to economic growth, innovation and employment growth significant employment potential, revenue generation and technological advancement in most economies. It is very important sector in both developed and developing countries.
In Pakistan, SMEDA defines Small & Medium Enterprises, as approved in SME Policy 2007, as an enterprise that has up to 250 employees, or a paid up capital of 25 Million PK Rupees, or an annual sale of up to 250 Million PK Rupees. The Federal Government, in line with the economic development of Pakistan may, from time to time modify the eligibility criteria as it sees fit. All providers of services receiving funding from the Government may define more narrow scopes for specific targeting purposes (Smeda, 2007).
In developing countries like Pakistan SMEs play very important role by providing employment opportunities. SMEs provide platform to people to establish business with minimum capital. SMEs development depends upon many factors like infrastructure, finance, labor, location and market, political, law and order situation. The structure of SMEs changes in term of size, work force, market and outcome as they develop.
Recently in literature there is an issue about the existence of SMEs with increase in economic development of developing countries. Another issue which requires research is that how much government support requires for SMEs development (Tambunan, 2008). This study aims to address both issues in the setting of Pakistan.
Rational of the study
This study would add up the knowledge in the literature about the existence and success of SMEs in case of growth of Pakistan’s economy. It would tell us that with advancement of Pakistan’s economy SMEs sector would persist or replaced by large Les. Secondly this study would help to estimate the level of dependence of SMEs growth on government SMEs support programs. This calculated level of support would be very helpful for SMEs policy makers in formulation of SMEs policies.
The development of SMEs brings many changes in country like increase in employment level, output shares, input material, output composition etc. the development occurs due to many factors like economic development in the country and government SMEs support promotion programs. Main objective of this research is to examine empirically the effect of these two factors on growth of SMEs in Pakistan by using latest available data.
This study aims to answer two research questions (i) will the SMEs vanish with long run economic development? (ii) will the economy be dominated by large enterprises (LEs) in the long run, (iii) or these enterprises will survive...