Public policy and barriers influencing SMEs' market expansion

Abstract

This study sought to determine the influence of four critical barriers (access to procurement contracts, access to funding, regulatory frameworks, and access to market information) on the market expansion of small and medium enterprises (SMEs) in a setting that includes both private and public institutions instead of only public institutions. To that end, the resource-based view of a firm (RBV) theory and institutional theory were adopted as main theories for the study on the premise that SMEs have limited internal resources, and the influence of resources on SMEs' performance is dependent on the institutional environment. A survey research method consisting of structured questions and statements administered through a web-based questionnaire was used for collecting data. To ensure quality results, the data collected from 178 managers of formal manufacturing SMEs was reduced to 79 through a rigorous data cleaning process. The multiple linear regression test results suggest that South African SMEs are still experiencing challenges regarding access to markets or procurement contracts, access to funding, access to market information, and an unfavourable regulatory environment. Given these facts, government must design and implement a public policy to facilitate the creation of business networks in a value chain between SMEs and large private firms with the aim of ensuring that SMEs have access to sufficient private funding, all necessary market information, and private procurement contracts. Furthermore, government together with relevant stakeholders must create a favourable regulatory environment through policies and regulations, through which large private firms would be encouraged to develop SMEs through supply chain or procurement development initiatives.