Abstract
Micro, small and medium enterprises (MSMEs) have emerged as an accelerator of economic growth with a sizeable contribution in job creation, innovation development, and reduction of regional disparities in most world economies. This paper investigates the influence of external and internal factors affecting the growth of MSMEs in poor-performing Bihar state, India. The objective of the study is to identify the major deep-rooted causes for the inability of MSMEs to compete in developing states and identify potential solutions. The study is based on an empirical database; it tested various dimensions of MSMEs barriers in their potential growth. The target group included MSMEs of Bihar state, India, using a sample of 450 entrepreneurs. The paper adopted a multistage stage sampling and multivariate analysis technique. The results showed that there are twelve major potential barriers, both endogenous and exogenous, faced by MSMEs, such as availability of raw materials, financial issues, labor force challenges, technology inefficiency, power/electricity scarcity, poor marketing, competition, knowledge-related challenges, government and administration problems, infrastructure inefficiency, etc. The findings show that these barriers affect the promotion and growth of MSMEs in developing regions. In future, it is suggested to focus on the implementation of good governance that helps to remove effectively the major barriers of MSMEs in underdeveloped states, such as Bihar, India.
Highlights
The micro, small and medium enterprises (MSMEs) sector has been recognized as the most important pillar of the economy
The literature review revealed that MSME owners/managers faced the problems related to raw materials availability
MSMEs respondents agree that government needs to facilitate industrial training and technical education to improve the quality of goods that are delivered from enterprises to the market
Summary
The micro, small and medium enterprises (MSMEs) sector has been recognized as the most important pillar of the economy. It plays a vital role in developing and developed economies of the world. These enterprises work as the backbone and are essential for the economic potential growth and development of countries (Stel et al, 2005; Beck et al, 2005; Acs et al, 2008a, 2008b). MSMEs sector has a vast network with expansion throughout the country with 633.8 lakh enterprises offering 1,200 lakh of employment opportunities (Ministry of Micro Small and Medium Enterprises, 2018). The contribution of MSMEs to the economy consists of 90% of enterprises, 80% of the non-agriculture labor force, 6.11% of GDP manufacturing, 24% of GDP service sector, 33.4% in manufacturing activities, and 45% in total export (Confederation of Indian Industry, 2019)
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