SMEs Failure

Inhaltsangabe:Abstract:
During the last decades, small and medium-sized enterprises (SMEs) have been one of the major driving forces of worldwide economic growth, employment and prosperity. Moreover, they are considered to be of high importance in ensuring a friction-free adaptation to economical, technological, and social changes. Especially European economies, foremost Germany being the third largest economy in the world, highly depend on this class of companies as important contributors to the increase of living standards, productivity and competitiveness. As Hommel & Schneider (2003) conclude, any structural problem affecting this mass of economic 'backbone' businesses is thus likely to cause macroeconomic frictions to an economy as a whole Vice versa, it seems reasonable to argue that negative macro-level economic performance can be easily caused by an underperforming SME sector.
A glance at the current business environment gives evidence that SMEs are navigating in a dramatic time of economic turmoil: Corporate bankruptcy in Germany e.g. has more than doubled during the last 10 years to a record level of almost 40,000 filed cases in 2003. Bankruptcy rates (i.e. 'Insolvenzquote') have raised to a peak in 2001 since the 1980's - a level, which has not been touched even in times of economic downturn within the last 15 years.
The near future of many European SMEs is embossed by big threats and opportunities triggered by the upcoming EU member extension in May 2004, which will provide easy market access to SMEs from 10 East European, Baltic, and Mediterranean countries. As more than 35% of all German SMEs are not engaged outside Germany, the opportunity of gaining access to new sales markets could easily be dominated by impending competition threats an the price dimension in German regional markets.
One might think that with respect to economic theory business failure is „a problem that may not exist (or may be overrated)“, as a certain level of failure would be expected in a competitive environment, due to mechanisms of resource allocation and the replacement of inefficient firms. However, such a large scale of corporate bankruptcies causes dramatic costs to an economy, as not all liabilities can be paid back by an insolvent firm. Moreover, indirect economic losses can occur, e.g. due to the destruction of established stakeholder relationships, and temporary „vacuums“ in certain markets. Business failure thus is a central issue not only in […]