Reducing poverty in the least developed countries: The role of small and medium enterprisesVladislav Maksimov, Stephanie Lu Wang and Yadong Luo Journal of World Business, 2017, vol. 52, issue 2, 244-257 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. Keywords: Poverty alleviation; Least developed countries; Small and medium enterprises; Institutional constraints; Institutional enablers; Organizational efficiency (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:worbus:v:52:y:2017:i:2:p:244-257 Ordering information: This journal article can be ordered from DOI: 10.1016/j.jwb.2016.12.007 Access Statistics for this article Journal of World Business is currently edited by David Collings and Jonathan Doh More articles in Journal of World Business from Elsevier |
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