**Table 1.2   Contract Resolution Comparisons**

|**Country**|**Number of**<br>**Procedures**|**Duration**<br>**(days)**|**Cost (%**<br>**GDP per**<br>**capita)**|**Procedural**<br>**Complexity**<br>**Index**|**Creditor**<br>**Rights Index**|
|---|---|---|---|---|---|
|**Chile**|21|200|15.0|73.0|2|
|**Brazil**|16|380|2.0|48.0|1|
|**Mexico**|47|325|10.0|62.0|0|
|**Australia**|11|319|8.0|29.2|3|
|**Canada**|17|421|0.7|31.3|1|
|**France**|21|210|3.8|84.7|0|
|**Germany**|22|154|6.0|61.1|3|
|**Ireland**|16|183|7.2|42.4|1|
|**New Zealand**|19|50|11.6|36.8|4|
|**Spain**|20|147|10.7|82.6|2|
|**United Kingdom**|12|101|0.5|41.8|4|
|**United States**|17|365|0.4|45.8|1|
|**Average **|20|238|6|53|2|

Source: Doing Business, World Bank

# **Small and Medium Enterprises and Government Support**

Small and medium enterprises are different from large firms in a number of ways. For example, productivity, the use of factors of production, and the impact of regulations vary substantially with the size of the firm. Further, the labor productivity of a large firm can be between two and four times higher than that of smaller companies, as measured in number of employees and gross value of production. The same can be said of differences in capital efficiency. A firm’s objectives, strategic planning efficiency, use of resource bases, and quality of market contacts can vary substantially. Of particular importance are those factors that affect unit costs and costs of transaction and logistics.

Moreover, SMEs may not be as well integrated in the national and international value chains as suppliers to exporters and large firms. This is true even for the more successful exporting companies. These differences can have an impact on the prospects for growth and development. As a result, SMEs may require more working capital, as a percentage of total sales, than large companies.<sup>5</sup> Institutional issues and public policy further explain the differences between SMEs and large companies. In particular, these factors are related to costs of transaction, distortions, segmentation of labor markets (due to institutional rigidity), degrees of competition, and the businesses climate. Other factors, such as limited information, high labor rotation and imperfect capital markets, represent obstacles to employer-provided training. They are also related to decisions regarding performancebased labor practices, investments in new technology and quality control methods—thereby limiting the contribution that SMEs can make to economic growth and job creation. This argument points to the need to identify deficiencies in the market and develop selective government interventions to promote businesses development (business ties, innovation, training, technology improvement and new forms of organization of work) and thereby improve productivity.<sup>6</sup>

> 5 Little, Mazumdar and Page (19870; FIEL (1996);, Kosacoff (2000); Batra and Tan (2003).

> 6 The argument in favor of government intervention is based on the presence of market deficiencies or government obstacles that may hurt SMEs. The theory of industrial organization, emphasizes three principal groups of factors: (i) market power, segmentation and distortions in input and product markets; (ii) technical efficiency, that determines the minimal scale of efficient operations; and (iii) economies of scale that affect the capacity of a firm to respond to external and internal shocks. It should be emphasized that factors related to economies of scale remain outside the public policy arena. See: Tirole (1986), Guasch (1986), and Acs, Carlsson, y Karlsson (1999), among others.

5