By Ganesh Rasagam, presented at the 18th TCI Global Conference, Daegu, 2015.

1. Revitalizing the SME Agenda
Ganesh Rasagam, Global
Practice Manager (Innovation
and Entrepreneurship), Trade
and Competitiveness Global
Practice, World Bank
Session Title (New Role of Clusters in the Broader Economic Context)

2. • Market Drivers
• Client Demand
• Institutional Drivers
• Market Failures
• Revitalized TC SME Engagement
• Firm size to venture lifecycle approach
• Global Engagements & Partnerships
II. A Revitalized SME Agenda
I. Global Drivers of the SME Agenda

3. Market Drivers: addressing declining productivity growth and
increasing firm level competitiveness
2
SMEs play a huge role in the global economy,
90% of all firms globally are SMEs and they contribute to 2/3 of formal non-farm jobs in
developing countries
…but face significant disincentives, and as a result,
Entry barriers: SMEs face significantly more barriers than large firms to access domestic and
international markets including a burdensome business environment, high fixed costs of
exporting, strong competitive pressures and prohibitive costs of compliance with international
standards.
Post entry growth barriers: SMEs face significant barriers to access finance and skills; upgrade
technologies; and innovate both vertically (upgrade quality and reduce production costs) and
horizontally (introduce new products).
…are less productive and struggle to survive and scale
SMEs are less productive than large firms (between 10-50% of larger firms); 30% of new SMEs
don’t survive beyond 2 years, 90% of surviving SMEs don’t grow and only 5-10% are high growth
firms (gazelles) that create 40-45% of jobs.
Participation and value share of developing country SMEs in global value chains is marginal and
adoption of digital technologies to enhance competitiveness is still limited.

4. Client demand for SME support to address non-financial
constraints
3
AFR EAP ECA LAC SAR MNA
Diagnostics Productivity
analysis
Competitive
industries
Informality
Productivity
analysis
Trade
competitivenes
s
Productivity
analysis
Productivity
analysis
Productivity
analysis
Knowledge
Case studies
and good
practice
models
Jobs and ent’ship Fiscal and
non-fiscal
incentives
M&E
frameworks
for SME
interventions
Smart
specialization
Constraints to
high growth
firms
Age vs size
analysis
SME linkages
and supplier
development
program
Technology
ent’ship
Innovation
systems
Developing
ent’ship and
start-ups
Spillover
effects of
SEZs to SMEs
Building
integrated eco-
systems
Inclusive
SMEs to serve
BoP clients
Ent’ship
culture
High growth
firms
Leveraging
diaspora
Operational
instruments
and
Advisory
VC/equity
investment
Managerial
training
Competition
policy
Market access
Export readiness
Support for
ent’ship
High growth
SMEs
GVCs: exports
and investment
MSTQ
infrastructure
Credit lines vs
TA
Skills
BDS
Linking to
GVCs
Industrial
zones
Business
climate reform
Support for
women owned
SMEs
Supplier
development
program
GVC/FDI and
SME linkages
VC funding
Firm entry
reforms
Competition
policy
IPR reforms

5. SDG Goals:
• SMEs are at the core of inclusive growth,
sustainability, & technology creation,
diffusion and adoption
WBG Twin Goals:
• Improved firm productivity, increased investment
& access to finance, increased sales
• Increased productivity & growth, more & better
jobs, goods, & services
• T&C GP Roadmap and IEG Review
• TC/FM/IFC SME Working Group Report
• WDR 2016 Digital Dividends (forthcoming)
Institutional Drivers: Renewed focus on innovation driven and
productivity led SME growth to achieve SDGs
• Addis Ababa Action Agenda:
promote affordable and stable
access to credit for SMEs
• WTO: Trade Facilitation Measures
shall not restrict SME participation

6. Pre-Seed/
Seed
Start-up Early growth Growth Developed/
Established
FIRM
CAPABILITY
MARKETS
FINANCE
ENVIRONMENT
Limited Human Capital (Skills mismatch)
Information Failure/ Knowledge Gaps
Barriers to Entry
(Uncompetitive Markets)
Barriers to Exit
Credit Constraints / Limited Access to Finance (Financing Gaps)
Regulatory & Institutional Constraints
Underinvestment in Public Goods (Infra, Basic R&D, Education,…)
Weak Managerial Capacity
Market Failures Interrupt the Growth of Ventures at
Various Stages of the Life-cycle
Underinvestment in Skills & Training
Weak Absorptive Capacity
Information Asymmetry
Free Riding

7. A Revitalized SME Strategy
6
Current Approach
Spray and Pray based on firm size
and static response
New Approach
Integrated along venture life cycle
responding to firm dynamics
Broad support based on firm size
definition (employment, turnover)
and formal, established firms
Targeted support based on venture
life cycle: tailored instruments for
pre-seed, seed, start-up, early stage
and growth enterprises
Standard interventions targeted on
firm business performance
outcomes (sales, turnover, jobs)
Evidence-based interventions for
increasing firm capability to innovate
and enhance total factor productivity
based on client demand
Limited and fragmented support for
entrepreneurship development and
firm-level innovation
Scaling up support for strengthening
entrepreneurship and innovation
through an ecosystem approach
No integrated country-level SME
offerings packaging TC/FM/IFC
products and expertise
New, integrated SME instruments,
packaged offerings to support
harnessing digital tech/e-commerce,
integrating with GVCs, green growth,
women-owned firms and HGEs

8. Pre-Seed/
Seed
Start-up Early growth Growth Developed/
Established
FIRM
CAPABILITY
MARKETS
Competitive Markets
Gov. Procurement
Trade Logistics Linkages to GVCs
Seed/startup funds
Credit Facilitation, SME funds, Early stage VC
Angel Investors NetworksSeed Grants
Crowdfunding Platforms
Venture capital
Emerging market PE funds
Incubators & Accelerators
FINANCE
Bi/multilateral Trade agreements
ENVIRONMENT
Competitive Trade regime
Adequate R&D capacity Functioning hard/soft infra.
Functioning IPR regime
Entrepreneurial Universities
Active university-industry linkages
Skilled Work Force
Access to regional/global markets
Dynamic Innovation and Entrepreneurship Ecosystems and Enabling Policies
Advisory for Fund ManagersProfessional Training
Business Dev. Services
Linkages to knowledge diaspora - Mentorship
Access to Tech / R&D
Quality & Standards
Access to Global Managerial skills
Building an Ecosystem for Productive Growth of Ventures
at Various Stages of the Life-cycle
Access to Talent (STEM)

9. SME17 Action Plan (2015-2017) to work towards
the 17 SDGs
8
1. Strengthening the
SME portfolio
2. Diagnostic tools
3. SME Knowledge
agenda
4. Global
engagements and
partnership
informs
informs informs
informs

10. 4. Global Engagement and Partnerships
9
FY15 FY16 FY17
World SME Forum B 20 x x x
G 20 SMEs and GVCs (with OECD) x x x
ECB CompNet-Productivity Network x
SPRING Singapore
Korea KBIZ, MOTIE, SMBA x
Malaysia (SME Corp; MAGIC) x
Others: Mexico, Turkey, Poland, Czech…
Aspen Network of Development Entrepreneurs x