Abstract:
Big majority of the total labor force in Turkey is being held by Small and Medium Enterprises (SMEs), as in almost all other countries. Therefore, steps taken to help growth of the SMEs are very important for the whole economy. The objective of this study is to investigate the firm and industry level factors that affect the growth of SMEs. In this study, firms are grouped as high-growth and low-growth ones based on their sales data and this classification is made for both nominal and industry adjusted sales growth rates. Additionally, analyses have been repeated for different growth criteria. Main hypotheses of this study are, there are statistically significant differences between the financial ratios (firm level factors) of high growth and low growth firms and the characteristics of the industries (industry level factors) that the firms are operating in, have effects on the growth of the firms. Aforementioned hypotheses have been tested on a wide sample covering 2004-2006 period. This sample is constructed by (i) the firm-level data of 2,256 SMEs which are provided by Central Bank of the Republic of Turkey (CBRT), (ii) the industry-level data showing the characteristics of the industries that these SMEs are operating in which are collected from various resources. As a result of the analyses, it has been found that age and size of the SMEs have no significant effect on their growth, but there are statistically significant differences between some of the financial ratios of high and low-growth SMEs suggesting that high-growth firms (i) carry more debt compared to their assets, (ii) use shorter-term debt, (iii) are more profitable, (iv) use more maturity matching, (v) have less trade receivables, (vi) have less short term receivables than low-growth firms. Additionally, it has been found that the characteristics of the industry that an SMEs operates in affect its growth. Specifically, high growth SMEs are found in industries where we observe high growth rates, low competition and high innovativeness.
