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Abstract
Recognition of the role of small enterprises in economic growth has resulted in a proliferation of support services in most developing countries. However, the initial high expectations about the effectiveness of these services now seem over-optimistic, giving rise to more critical examinations of the effectiveness of these services and the institutions involved. How these services can be evaluated is an important issue.
The article discusses these issues using data from a study of small enterprise support in Bangladesh, involving interviews
with the owner-managers of 161 firms and with officials from government and non-government support organizations. The article statistically compares the performance of assisted firms with that of non-assisted firms. The overall impact of assistance was found to be relatively low but significant. Assisted firms performed much better than non-assisted firms. Problems, however, were encountered in the interpretation of these findings owing to the complex nature of the selection procedures used by support agencies in targeting support to firms.
Substantial money and energy worldwide has been invested in support services for the small- and mid-sized enterprises (SME) sector, as interest has grown in the development of small enterprises (Bolton Committee 1971; Birch 1979; International Labour Organization [ILO] 1992). For example, the World Bank alone has lent over US $3 billion between 1973 and 1989 to foster a healthy growth in this sector in developing countries (Timberg 1992). Despite this interest, evidence suggests that the majority of programs and institutions designed to support small enterprises have reached and assisted only a minority of them (Farbman and Steel 1992). There has also been an ongoing debate over what effect support services have on the development of assisted firms (ILO 1992). The evaluation of support services remains under-researched, often inconclusive, anecdotal, and ex-ante in nature (Gibb and Manu 1990). On the one hand, empirical studies from developing countries have generally highlighted a limited impact in terms of growth, profit generated, or jobs created (Kill)y 1979; Little, Mazumder, and Page 1987). On the other hand, studies by Sharma (1979) and Bhatt (1988) on SMEs in India and leeson, Valcarcel, and Nunez (1989) on those in the Philippines reported a significant role for support services in imprcving the performance of assisted firms. These tend to reinforce conclusions drawn...