State Development Strategies for Small Enterprises: The Role of Structural Service Agencies

Abstract

How can small and medium-sized enterprises (SMEs), collectively and individually, improve their capacity to compete in international markets dominated by large, resource-rich firms? Beyond providing financial assistance or market protection, can the state contribute to the development of SME capabilities? The creation of structural service agencies in certain Italian industrial districts suggests that the state may promote the development of specific competencies and capabilities among populations of small firms. This paper describes the logic and operation of structural service agencies, quasi-public organisations, which offer services possessing scale and scope economies to spatially clustered industries. Examples from Asia, North America and Europe are used to illustrate the discussion. The environmental conditions and organisational choices facing agency managers are examined. A transactions costs perspective frames the discussion but also draws upon the literature on organisation trust and industry clustering.