Small and medium-sized enterprises — SMEs — have long been recognized for their vital role in creating jobs and supporting supply chains in national economies. In Europe, for instance, a full 99% of all businesses are SMEs. Of these 90% employ less than 10 people. Not surprisingly, two-thirds of all jobs created in the EU are created in SMEs.
Yet even in this age of globalization, SMEs — their massive presence in the economy and vital role in innovation notwithstanding — are still viewed as largely only effective in their domestic and, occasionally, regional markets. In the traditional view of the global economy, SMEs are seen acting merely as suppliers to multinational companies, allowing these giant shakers of the global economy to build complex value chains cutting across many countries.
Seeing SMEs in such traditional light compels policymakers and their policy wonks, such as the European experts who drafted the report on "Supporting the internationalisation of SMEs" to focus on run-of-the-mill supply chain participation stuff, such as capacity building of micro-enterprises for the export market.
In the United States, similar sentiments prevail. The Small Business Administration and the U.S. Trade Representative are the primary government agencies working on the issues of the international competitiveness of American SMEs in the global marketplace. At their most passionate, these agencies tend to concentrate on and agitate over the fact that while U.S. SMEs account for 97% of the total number of exporting firms they produce less than 30% of the total value of U.S. exports.
I feel that this Western-centric perception of SMEs and their struggles and prospects in the global marketplace misses a key trend that has already begun in earnest in emerging markets. There is growing evidence of global SMEs that do more than supply inputs for the global supply chain. Beyond their products or names becoming known in multiple countries, or even used across the globe, some SMEs will actually do what once only giant corporations could and actually establish operations in multiple countries. Or as they say in the more uppity business schools: build a global footprint.
That is to say, SMEs are now primed to move above where policy wonks believe is their best perch — as trade lubricators who facilitate the circulation of inputs in a global production machine controlled by big business — and become significant brands and final economic output generators. They shall become multinationals in their own right. Nano-multinationals.
Two major trends are shaping this development: the growth of network technologies and the growing cultural tolerance for foreign business practices even in countries far away from the global mainstream.
Nano-multinationals can spread their influence using strong trust-based networks, as their founders connect to friends and allies in different parts of the globe who can help them navigate the local business culture on the strength of shared principles and common entrepreneurial visions. In this way, nano-multinationals will be very different from the command and control machines built by expensive lawyers and consultants for giant corporations — not just because they shall remain small and lean, but also because their value systems and cultural models are essentially different.
Some of these nano-multinationals take their products global via network technologies. For example, both Kickstarter and Indiegogo are very small companies (about 50 and 20 employees respectively) with a massive and growing product footprint around the world. But my argument is that nano-multinationls will also increasingly develop an operational footprint in multiple countries, something that the Kickstarters of this world have not had to do.
The motivating factor for going beyond the reliance on network technologies and the low-cost distribution models they provide is strongest in emerging markets where the ecosystems for internet innovation are not as deep as in the West. Rather than depend entirely on network technologies, this new breed of emerging-market-based multinational would explore trust networks, as we have said already, but also benefit from a growing shift of high-powered professional services online. Whilst trust-powered overseas expansion does not require the same range of legal, tax, regulatory and risk management services as traditional multinationals, it does require a minimum of advisory services.
In the same way that IT consulting, security auditing, and publishing have moved online, allowing entrepreneurs to deploy new operational models, good quality, always-available, flexible advisory services will strengthen the quality of global expansion for SMEs while keeping the costs of operating in new countries low enough to justify the essence of the nano-multinational proposition.
Some of these on-the-ground nano-multinationals are in fact here already — although at this point most are still based in the West. Take Worldreader, a nonprofit working to spark an e-book publishing phenomenon targeted at school needs in the developing world. Or check out Jana, a marketing rewards platform that claims 3.48 billion mobile users around the world in its database, most in places where only a local deal with a local telco can make them accessible. If you want more glamour, you can try any of the new-age concierge services that curate local luxuries for the global jetset, such as Josh Spear's Valet.
This is just a beginning. Don't be surprised if a nano-multinational shows up soon on a High Street near you.