Role of Small Businesses in Emerging Economies as Drivers of Sustainability and Growth

Introduction

Small businesses around the globe work as the backbone of any self-reliant nation’s economy. Its significance is not just limited to the number of jobs it creates but, in driving the growth through innovation and fostering community development (Acs & Szerb, 2007). As per the World Bank SME’s account for 90 per cent of businesses and 50 per cent of total employment generated around the globe. Further SMEs contribute nearly 40 percent GDP of emerging economies. These statistics evidently reveal the very essence of small businesses and also put forward the kind of impetus it requires from governments to empower diverse groups such as the working poor, women, youth, and vulnerable populations. Thus entrepreneurial ecosystem in the form of SMEs plays a vital role in creating an economic ecosystem which positively impacts the overall economic performance parameters related to per capita income (Audretsch & Keilbach, 2004).

As catalysts of economic growth small businesses create new job opportunities, boost productivity, and foster healthy market competition. Small businesses foster innovation and entrepreneurship resulting in the creation of novel products, services and business strategies (Wennekers et al., 2005). By identifying and addressing unmet needs in the market, these enterprises drive disruptive innovations that positively impact entire industries. In emerging economies, small businesses are critical agents of inclusive growth and poverty alleviation as they provide opportunities for marginalized communities, and vulnerable populations, to be a part of economic activities and participate actively in the workforce (Storey, 2016). By offering employment and income generation opportunities, small businesses empower individuals to escape poverty and improve their overall well-being (Sharafat, Rashid & Khan, 2014). Further, small businesses tend to operate in local communities, strengthening the local supply chain and fostering economic development in previously neglected regions (Muske & Woods, 2004). Their contribution to rural economies is particularly vital, as they help bridge the urban-rural divide by promoting decentralized economic growth (Robinson, Dassie & Christy, 2004).

Small businesses have the potential to expand market reach beyond their domestic borders, contributing to export-oriented growth in emerging economies (Wagner, 2007). As per Government of India statistics the share of MSME exports in India is in excess of 34 percent which has led small businesses to explore international markets, drive economic growth and foreign exchange earnings. Moreover, the diversification of markets reduces the dependency on a single market and mitigates risks associated with economic fluctuations. Small businesses can expand their reach by tapping into markets, which not only opens up new opportunities but also helps them strengthen their resilience in the face of economic challenges (Masarira & Msweli, 2013).

Sustainability is a major issue for the small businesses as they have to deal with the changing needs in the marketplace where obligation for environmental and social responsibility is increasingly becoming more unrelenting. Looking at their relevant size it is a tedious but needed to be done task for the small businesses from which they cannot get away (Loucks, Martens & Cho 2010). However, in spite of having fewer resources in comparison to big corporation’s small businesses can play their role in sustainability. SME’s nimbleness, flexibility and linking to local communities can play an important role in aligning to sustainability goals. Many small businesses incorporate sustainable practices into their operations, such as energy conservation, waste reduction, and responsible sourcing. By adopting green practices, these enterprises contribute to a more sustainable future while attracting environmentally conscious consumers (Shields & Shelleman, 2015).