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Large firms have more resources for innovation, especially when it comes to the financial and technological aspects, which means they are much more advantaged when it comes to innovations that require the use of specialized and advanced equipment, large teams, big scale investments etc. while small firms have the advantage of being dynamic in their entrepreneurial approach as they allow for internal flexibility and responsiveness to changing circumstances. The intertwining of both capabilities is what gives rise to true innovation. In a bid to localize the creation of value, many large companies in the world basically rely on local companies as an important component of their value chain. SMEs also supply materials needed by the larger enterprises. In other words, they provide specialized, and many times, personal services. SMEs help in the development of local technology and mobilization, and utilization of domestic savings. Thus, the more the increase in SME efficiency, the much more improvement happens in the competitiveness of larger firms that depend on these SME suppliers, and therefore, this improves the competitive position of a country’s economy. Due to the fact that SMEs have local knowledge and that they understand domestic consumer demands, and have access to remote regions much better than large enterprises, these SMEs represent important sources of innovation which might include re-engineering products or services to meet market demands, exploring innovative distribution or sales techniques, or developing new and untapped markets.
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When local SMEs are contracted to sell and distribute their products in the markets, large corporations help strengthen the sales capacity and income of local SMEs at the same time, strengthening their own distribution networks as they open up new markets for their product. Also, there is the easy entry and exit of SME’s, which make economies more flexible and competitive. These SMEs provide a good testing ground for new products and emerging production techniques, which a lot of large firms end up adopting. SMEs constitute important sources of local supply and service provision to larger corporations. As large and small firms collaborate for the development of an innovative new product or process, the large firm brings to the table the contribution of financial, manufacturing and marketing resources, while the smaller firm brings technological know-how and entrepreneurial dynamism to the table. It is no doubt that SMEs have very significant roles to play in the Nigerian economy, via generating employment for the increasing population of unemployed youths; alleviating poverty through incomes to the poor households; participating in the global economy and partnering with larger corporations and much more. Featured Image Source: Nigerian Infopedia
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