Drivers of Philippine SME Competitiveness: Results of the 2018 SME Survey

Abstract

The paper studied the factors affecting SME competitiveness in terms of their capacity to access, link, and upgrade as well as entrepreneurial characteristics and the business environment.Using a survey of 480 randomly selected SMEs in Metro Manila, Cavite, Laguna, Batangas, Rizal, and Quezon, the objectives of the study are 1) to determine the obstacles and enablers in day-to-day operations and to overall success of SMEs; 2) to describe SME competitiveness in terms of entrepreneurial characteristics and firm-level capacity to access resources, link with value chain partners, and upgrade capabilities; and 3) to make recommendations on policy aimed at promoting SME competitiveness. Survey results show that while skills and product quality alongside opportunity-seeking entrepreneurial mindset are top enablers to SME success, hostile business environment (i.e. tight competition, corruption, poor infrastructure) and low product quality are top obstacles to SME competitiveness. This suggests that although firm and entrepreneur characteristics affect firm productivity, the business environment at various levels of the economy can provide barriers for SMEs to grow and develop. At the enterprise level, findings show that barriers to SMEs’ access to labor, technology, markets, and finance can impede SME growth and productivity. Lastly, findings highlight that, in response to tight competition, younger and small SME respondents are more likely to respond in ways that are not conducive to growth compared to older and medium-sized firms. The paper concluded that SME competitiveness is driven by the entrepreneur and firm characteristics as well as business environment, but the latter can restrict or influence the first two. Thus, it is incumbent upon the government to strive for a competitive business environment and alleviate obstacles (i.e. corruption and poor infrastructure) to provide a level-playing field for SMEs to compete.