There is do doubt that market failure for the products coming from farms of small holders is a significant factor in third world development. Thus, appropriate policy for development is to provide technical and financial assistance to firms that can compete locally for goods imported. In other words import substitution. However, market demand must be used as justification. Assuming that farmers need to establish a coop can be a big mistake although if effective demand exists a coop may well be one solution. While Armenia is not a third world country, conditions there following the breakup of the former Soviet Union provided an excellent place to test the hypothesis I am stating. Do read millerbillr.com for the case study.

I agree with Bill that market demand must justify investment and policy where support and development of SMEs are concerned. I based my Master's thesis on this topic. Personally, I think that government sponsorship of incubators is a good idea and, once the business is established, private investment can then be considered. The survival rates of incubated businesses are very high, so it would be good policy to encourage this economic development system globally. I have attached an informative article on the subject. Hope it helps...

Innovation and R&D in SMEs is one of the hottest topics.

See the general introduction attached.

Regards,

Marco Vivarelli

I certainly appreciale the reference to Schumpeter by M.Cavarelli and  Ruth Maria Tappin. Shumpeter  has long been one of my favorites.  I believe, however, that trying to connect his theoretical thinking to SME in a development situation is something of a tempest in a teapot.  SME in a development arena simply have no funds for R&D, end of story.  In Armenia we had significant success in providing R&D via the USDA Marketing Assistance Project. (MILLERBILLR.COM can be downloaded from this web site)) We also provided investment funding and technical assistance in using R&D.  Had we only provided funding we would surely have failed, as have many other well intentioned development funding approaches.  Technology transfer of R&D results requires talent and time on the ground; unfortunately these are costly forms of technology transfer.  I am pleased that CARD.Am is continuing the legacy of UsdaMAP by providing all of the above. 

Ghulam,

Several perspectives are shared from an emerging market lens in this paper.

https://www.researchgate.net/publication/299747565_Towards_a_talent-driven_outward-oriented_globally-competitive_SME_framework_Discussion_Paper

Technical Report Towards a talent-driven outward-oriented globally-competitiv...

Role of MSMEs in Economic Development

Innovative Financing in MSMEs

Relationship between Promotion of MSMEs and Export Performance of a Nation