Reducing poverty in the least developed countries: The role of small and medium enterprises

Vladislav Maksimov, Stephanie Lu Wang, Yadong Luo

Research output: Contribution to journalArticle

25 Citations (Scopus)

Abstract

Alleviating poverty in the least developed countries (LDCs) requires raising the income level of local workers. We look at the poor as producers and explore drivers of higher employee wages. We focus on small and medium enterprises (SMEs) because they are a major driver of employment growth and poverty alleviation in these countries. To pay higher wages, SMEs need to increase organizational efficiency. We argue that in LDCs, characterized by substantial formal institutional constraints, SMEs can improve efficiency either by internalizing inefficient formal institutions or by taking advantage of institutional enablers, established not only by local governments, but also by international, non-governmental, non-profit, or social enterprises set up around the world. In a sample of 1273 SMEs from seven LDCs across Africa, Asia, and the Middle East, we find support for a mediated model, where SMEs with government contracts, higher exports, or female ownership achieve higher organizational efficiency, and in turn pay higher employee wages. The strongest mediation occurs for female-owned firms and the weakest for exporting firms, while the direct relationships to wages are strongest for exporting SMEs. The data support the idea that SMEs with a government contract are more efficient in transacting with other constituents in the business environment, those with higher exports have a broad base of efficiency sources, and those with female ownership are particularly adept at exploiting local business and societal relationships.

Original languageEnglish (US)
Pages (from-to)244-257
Number of pages14
JournalJournal of World Business
Volume52
Issue number2
DOIs
StatePublished - Feb 1 2017

Fingerprint

Small and medium-sized enterprises
Poverty
Developed countries
Wages
Ownership
Exporting
Organizational efficiency
Employees
Government
Employment growth
Institutional constraints
Enablers
Poverty alleviation
Asia
Africa
Formal institutions
Workers
Mediation
Middle East
Social enterprise

Keywords

  • Institutional constraints
  • Institutional enablers
  • Least developed countries
  • Organizational efficiency
  • Poverty alleviation
  • Small and medium enterprises

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Marketing

Cite this

Reducing poverty in the least developed countries : The role of small and medium enterprises. / Maksimov, Vladislav; Wang, Stephanie Lu; Luo, Yadong.

In: Journal of World Business, Vol. 52, No. 2, 01.02.2017, p. 244-257.

Research output: Contribution to journalArticle

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