THE IMPORTANCE OF SMALL AND MEDIUM ENTERPRISES IN MODERN ECONOMY

Abstract

Еntrepreneurship sector will be very important factor in future economic growth due to its ability to adapt to changing business conditions in terms of globalization. Entrepreneurship is often called the driving force of the economy, while entrepreneurs are agents of change that provide innovative ideas for companies. Small and medium enterprises are a key source of dynamism, innovation and flexibility, both in developed and in developing countries. Entrepreneurial framework describes the key components of entrepreneurship: entrepreneurs/team of entrepreneurs, entrepreneurial process, creation of new values and environment. An entrepreneur or team of entrepreneurs should recognize business opportunities, collect the necessary resources, and develop an appropriate business strategy with aim to create new value. The paper suggests that entrepreneurship creates entrepreneurship and entrepreneurial activity is the best incentive for further entrepreneurial activity. In order to gain a better insight into the operations of small and medium enterprises, the paper points to the advantages and disadvantages of starting a business through this form of entrepreneurial activity. Smaller enterprises achieve success in industries where flexibility and inovation are of great importance, while they are less successful in industries where resources and resource management are crucial. The advantages of small and medium enteprises are: independence, self-actualization, profit-making, market flexibility, more efficient use of available resources, and innovation. Nevertheless, the paper analyzes potential disadvantages: lack of knowledge and expertise of smal and medium enterprises, lack of managerial skills, risk of closing down the company, long working hours and hard work, uncertainty of income, high level of stress and total responsibility. The reasons for starting a business through small and medium enterprises can be analyzed as: push and pull motives. Pull motives exist when individuals are motivated by specific ideas they want to implement when starting a business. Pull motives include: desire for independence, desire to use the identified market opportunity, turning hobbies or previous work experience into business and financial incentives. On the other hand, a large number of individuals decide to establish a new company out of necessity, due to the push motives such as dismissal, job insecurity, disagreement with the previous employer, etc. Based on the advantages and disadvantages of small and medium enteprises and reasons and motives for starting the business, the paper points to the importance of SMEs in modern economy.