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SMEs account for 95% of enterprises and 60-70% of employment in most economies

SMEs form a significant component of modern economies, both in terms of the number of firms and their contribution to a country's employment level. While comparable figures are not readily available due to the divergence in definitions for class size and underlying units across countries, when defined as firms with fewer than 500 employees, SMEs generally constitute around 95 percent of enterprises and account for 60 to 70 percent of employment.¹⁵ This definition is a little large for the purposes of this report. To best allow for the size of the economies considered in this section, we instead define an SME to be an enterprise with less than 100 employees.

The following table gives a comparison between selected countries of the contribution that SMEs make to the overall level of employment.

Table 9. - Distribution of Employment by Firm Size

Note: Statistical unit - establishment except for Canada (average labour unit).

Source: OECD (1997), Small Business, Job Creation and Growth: Facts, Obstacles and Best Practice. From table 1.2 (except New Zealand statistics, supplied by Statistics New Zealand).

SMEs contribute a relatively high proportion of total employment in NZ relative to other countries

The highest proportion¹⁶ of total employment generated by SMEs is observed in Italy, followed by New Zealand, with a significantly lower rate observed in the U.S. Although not considered here, SMEs¹⁷ also constitute a large share of total employment in Japan, accounting for 78 percent of all FTEs¹⁸.

Table 10. - Percentage of Employment in SMEs (<100 FTEs)

Source: OECD (1997), Small Business, Job Creation and Growth: Facts, Obstacles and Best Practice. From table 1.2 (except New Zealand statistics, supplied by Statistics New Zealand).

The OECD also collects statistics on the significance of SMEs in the manufacturing sector. This sector comprises 9 percent of all enterprises in New Zealand, accounting for 18.5 percent of all FTEs.

The New Zealand manufacturing sector shows a higher proportion of SMEs than most other countries

As illustrated in table 11, the New Zealand manufacturing sector has a higher proportion of SMEs than most other countries, with 90.6 percent of manufacturing enterprises employing 1-19 FTEs. This compares with an average of 70.5 percent for the countries considered in table 11. Correspondingly, the percentage of total employment generated by SMEs in New Zealand is significantly higher than average, with New Zealand (27.3 percent) recording the second highest proportion, behind Italy (38.7 percent).

New Zealand manufacturers have the lowest average number of employees

Table 12 shows the average size of establishments/enterprises by employment size class for the manufacturing sector. The average size of a New Zealand manufacturer in the 1-19 FTE size class is the lowest of all countries considered in the table, at only 3.8. For the three larger size groups, New Zealand firms have an average size close to or larger than the average of all countries considered. However, overall, New Zealand manufacturers record the lowest average number of employees, reflecting the predominance of small firms in the industry.

Table 11. - Size Distribution of Manufacturing Industry

Note: Statistical unit - establishment except for the United States, New Zealand, Czech Republic, Italy, Luxembourg, Portugal (enterprises). Size classes differ: Canada, New Zealand: 0-19; Mexico: 1-15, 16-100; Norway: 1-19, 20-99, 100-199, 200+; Czech Republic: 0-24; 25-99.

Source: OECD (1997), Small Business, Job Creation and Growth: Facts, Obstacles and Best Practices. Table 1.1.

Table 12. - Average Establishments by Employment Size Class - Manufacturing

Note: Statistical unit - establishment, except United States, Germany, New Zealand, Portugal. Size classes vary across countries: Canada, New Zealand: 0-19; Japan: 4-19; Mexico: 1-19, 20-99, 100-199, 200+; Turkey: 10-19.

Source: OECD (1997), Small Business, Job Creation and Growth: Facts, Obstacles and Best Practices. From table 1.3a.

¹⁵OECD (1997), Small Business, Job Creation and Growth: Facts, Obstacles and Best Practices.

¹⁶Of the countries considered in the OECD publication Small Business, Job Creation and Growth: Facts, Obstacles and Best Practices

¹⁷Defined in Japan as businesses with fewer than 300 employees (fewer than 100 in wholesale sector, fewer than 50 in retail and service sectors.

¹⁸Japan Small Business Research Institute (1988), White Paper on Small and Medium Enterprises in Japan - The Need for Small and Medium Enterprises to Change and Display Entrepreneurship