The Political Economy of Small and Medium-Sized Enterprise Development: Characteristics, Productive Value and Market Constraints in Industrial Manufacturing

Abstract

Abstract:This paper highlights the importance of small and medium-sized enterprise (SME) development and introduces the theoretical concept of productive value for qualitative analysis of firms. Vietnam's industrial development experience is used as a case study. Although the Vietnamese government has channelled rents and business opportunities towards the state sector, the domestic private sector has been crucial to the country's industrial development. Given this context, this study analyses how Vietnamese SMEs in the private sector generate productive value and overcome market failures that constrain their growth. Research findings demonstrate that most local SMEs in the industrial sectors rely on low pricing strategy to attract buyers. However, those that grow in size frequently go beyond price competition and concentrate on creating new productive value in their production and services. Furthermore, unlike SMEs in developed countries, in Vietnam, firm size is an indicator of productive value and strength. From this perspective, SME development policies in emerging economies must focus on promoting the growth of domestic firms over time.