Profile of the 'Enterprise-50' Companies and Other SMEs in Singapore.

Abstract

The role of small and medium enterprises (SMEs) is regarded as a key source of entrepreneurship and innovation in Singapore. SMEs play a vital role in the economic development, not only as dynamic innovative organisations, but also collectively as a constellation of organisations in supporting foreign MNCs. The aim of this study is to examine the profile of the 'Enterprise-50' companies and other SMEs in Singapore to determine their differences so that more appropriate assistance and government initiatives can be implemented to help them grow. These "Enterprise-50" companies refer to those 50 SMEs that are presented with awards by the government in recognition of their business excellence. This study found that the 'Enterprise-50' companies are larger companies compared to other SMEs. They are more international-oriented, dependent on foreign MNCs and supported by the government. This study sees the need for the government to put more emphasis on developing other SMEs, alongside the development of the 'Enterp rise-50' companies, as they lack the capacity and capability to support foreign MNCs and invest overseas. In contrast to the 'Enterprise-50' companies, other SMEs are more deficient in their management systems and require more support from the government.

Introduction

Local small and medium enterprises (SMEs) play a vital role in the economic development of Singapore. Their role is regarded as a key source of entrepreneurship and innovation (Ministry of Trade and Industry, 1991). Although foreign multi-national corporations (MNCs) contributed a greater share in the economic development, the contribution of local SMEs is not less significant. Drawing on their traditional strengths, they helped Singapore embark on the three decades of export-led growth. This has resulted in the emergence of Singapore as a central hub and as an attractive location for foreign investments. Since 1995, many successful SMEs have been recognised for their contributions to the Singapore economy. Each year, the top 50 successful companies are presented with an 'Enterprise-50' award. They are ranked in accordance to their performance and growth potential. These companies form a "seedbed" of future Singapore MNCs. As the 'Enterprise-50' companies and other SMEs continue to play an important role and contribute to the Singapore economy, it is important to examine the profile of these two groups of companies to determine their differences so that more appropriate assistance and government initiatives can be implemented to help them grow and develop. The results of this study would contribute to the current literature, and provide useful information for policymakers to set new directions for SME development.

Literature Review

According to the literature, SMEs as a group can be characterised by heterogeneity (Leo, 1986). They can be extremely different from one another and operate under a great variety of market conditions and produce a wide spectrum of products. They employ considerable diverse means of production, ranging from piece by piece, quasi-cottage systems to highly automated, assembly-line systems. This diversity embraces recently created "infant" enterprises as well as "stunted" enterprises which have no growth potential. It also includes highly productive enterprises as well as barely surviving, obsolete establishments that lack the financial and intellectual resources necessary to adapt to new markets and technological conditions. They possess different management practices, strategic orientations and firm performances. Vesper (1977) classifies SMEs into: (a) "mom and pop", (b) "stable high-payoff' and "growth-oriented" firms, from which it can be further consolidated, for the purpose of carrying out this study, into two main categories, namely, the 'Enterprise-SO' companies and other SMEs. Accordingly, numerous types of entrepreneurs and/or small business owners have been identified in the literature (Carland et al, 1984; Cooper, 1979; Hosmer, 1977; Liles, 1974; Simth, 1967; Vesper, 1979). Carland et al (1984) made the following distinction:

An entrepreneur [on one hand] is an individual who establishes and manages a business for the principal purposes of profit and growth. The entrepreneur is characterised principally by innovative behaviours and will employ strategic management practices in the business .... The small business owner [on the other hand] is an individual who establishes and manages a business for the principle purpose of furthering personal goals. The business is the primary source of income and will consume the majority of one's time and resources. The owner perceives the business as an extension of his or her personality, intricately bound with family needs and desires ....

According to Smith (1967), entrepreneurship reflects a constellation of characteristics and behaviours, and these vary among all individuals including small business owners. His continuum of entrepreneurial orientation is consistent with the distinction made between an entrepreneur and a small business owner described by Carland et al (1984), as well as the workmanship/empire building distinction described by Casson (1982), the 'craft, promotion, administration' types identified by Filley and Aldag (1978), and the 'caretaker/manager' distinction discussed by Braden (1977). The endpoints of Smith's continuum can be characterised as opportunistic entrepreneur and craftsman entrepreneur. In comparison, opportunistic entrepreneur reflects an individual who reacts to a broad range of culture exhibiting breadth in education and training, a high level of social awareness and involvement, flexibility and confidence, and an awareness and orientation towards the future (Bracker et al, 1988). He is more likely to believ e that the fate of the business is within his control than the one exhibiting a craftsman-like orientation. Craftsman characterisation, in contrast, reflects the opposite on each dimension (Still, 1974; Bracker, 1982; Smith and Miner, 1983). Bracker et al (1988) argue that the opportunistic entrepreneur will be more motivated to acquire and implement sophisticated strategic management practices than those characterised as craftsman entrepreneur in similar settings. Drawing on the distinction of past studies, this study posit that the opportunistic entrepreneur would be found more likely in the 'Enterprise-50' companies than other SMEs. These companies offer the possibility of high payoff through selling out or floating public issues of the company stock. They, typically, have a business plan to seek venture capital and to describe the way in which the firm is going to compete (Cooper, 1981). Their strategies usually position the firm in growing markets and involve innovative methods or products which give the firm a clear competitive advantage. Other SMEs, in contrast, would be operated more likely by a craftsman entrepreneur. The business is often started opportunistically with the availability of particular facilities or sites being considered as important determinants (Bracker et al, 1988).

By and large, the SME development can be classified into three main stages, namely, (a) the "Start-up", at stage I, in which the strategic decision is to find a firm and to position it within a particular industry with a particular competitive strategy, (b) the "Early-growth", at stage II, whereby the initial product-market strategy is being tested and when the owner maintains direct contact with all major activities, and finally, (c) the "Later-growth", at stage III, where the firm is characterised by multiple sites for retail and service businesses and by some diversification for manufacturing firms (Cooper, 1981).

Organisationally, at stage III, SMEs would have one or more levels of middle-management and some delegations of decision-making to the lower levels. Churchill and Lewis (1983) and Scott and Bruce (1987) propose a five-stage model of SMEs' growth, incorporating, (a) start-up, (b) survival, (c) growth, (d) take-off and (e) maturity. They argue that during the start-up stage when the business is first conceived and established, the entirely creation is of its entrepreneur founder(s). They would be the most important asset of the business, providing all necessary managerial skills, directions, and capital. If the business survives, it would pass into the second stage of "Survival" where the business is financially viable and may even hire additional staff. At this stage, the entrepreneur would still remain in control of the business and undertake only minimal formal planning (Churchill and Lewis, 1983). Many SMEs continue to operate at this stage for a long period of time with a single or limited product lines. A ny growth would be driven by the natural market expansion (Scott and Bruce, 1987).

Considering the organisational development of a firm in perspective, it is the third stage that is the most critical. At this stage, the business is usually economically strong and has sufficient size and product market penetration which enable the firm to sustain its present position. The size of a firm will be such that it requires hiring professional managers to manage the firm (Flamholtz, 1990). A successful growth strategy would take the business into the fourth stage of "Take-off' or "Expansion". At this critical stage, the business would either succeed in developing into a big business, if not, fail subsequently. The fifth and final stage of "Maturity" or "Resource maturity" would see the firm's management structure becoming more decentralised, and subsequently, there would be a separation between the ownership and the business, particularly in the area of financial and operational matters.

Research Hypothesis

This study argues that the description of SME development in the literature is also applied in local context. It depicts that the 'Enterprise-50' companies and other SMEs are different in many aspects: in their growth rate, organisational size, management practices, strategic orientation, and firm performance. In comparison with other SMEs, the 'Enterprise-50' companies would have more economic power to penetrate overseas markets. They are more likely to be supported by the government as these companies have the critical mass, capacity, and capability to meet the government's requirements to utilise the initiatives. Being more successful companies, they would be more likely to establish strategic alliances with foreign MNCs.

This study hypothesises that:

[H1]: The 'Enterprise-50' companies are larger companies than other SMEs.

[H2]: The 'Enterprise-50' companies utilise more government initiatives than other SMEs.

[H3]: The 'Enterprise-50' companies are more dependent on foreign MNCs in their business than other SMEs.

[H4]: The 'Enterprise-50' companies are more internationally-oriented than other SMEs.

Methodology

This study used the questionnaire survey method to conduct the research. This method was used in order that data of companies from different industries can be collected simultaneously. The questionnaire was developed in two phases. In the first phase, the format and content of the questionnaire were determined. Staff and MBA students in the Nanyang Technological University (NTU) were the focus group who provided a broad spectrum of opinions in the formulation of questions based on the objectives of this study. In the second phase, the revised questionnaire was piloted with four actual companies to determine their perceptions and minimise bias before it was sent to the rest of companies. In this study, two samples, comprising 78 'Enterprise-50' companies and 258 other SMEs, were selected for mailing.

The first sample was taken from the 'Enterprises-50' award-listings from 1995 to 1997. The awards are given each year to those companies that are recognised as the most enterprising privately-held companies in Singapore. The selection and ranking of these 'Enterprise-50' companies were conducted by Andersen Consulting and The Business Times, with the support of the Economic Development Board (EDB) of Singapore. The review of their performances was based on a set of indicators which include operating profits, growth in profit, turnover, growth in turnover, return on assets and contribution from overseas operations, over the preceding four-year period. From 1996, those companies participating in the review were also assessed based on a set of qualitative factors such as management philosophy, innovation and market presence. The selection of companies for the award is stringent and considered to be a reliable procedure by the government and researchers in this area. The second sample was taken from the Associati on of Small and Medium-sized Enterprise (ASME) company-listing. More than thrice as many other SMEs as compared to the 'Enterprise-50' companies were selected for this study simply because they represented a larger group of SMEs in Singapore.

The collection of primary data was carried out in two phases. In the first phase, the questionnaire was sent to selected SMEs with a covering letter. The letter was addressed to the CEO or managing director of the companies. They were requested to respond to the questionnaire within a week. The companies that responded in the first phase, comprised 15 (19.2 per cent) 'Enterprise-50' companies and 33 (13 per cent) other SMEs. Those companies that did not respond in the first phase were requested by the surveyor to do so by telephone. The same questionnaire was sent to them in the second phase. They were requested to respond to the questionnaire within two weeks. Additional two weeks were given in the second phase to allow them to have more time to respond to the survey. Altogether, there were 72 (21.4 per cent) completed questionnaires collected. The responses comprised 33 (42.5 per cent) 'Enterprise-50' companies and 39 (16 per cent) other SMEs. About 56 per cent of the respondents requested for a summary rep ort of the survey results, reflecting their interest in the topic. Nineteen companies could not be reached because they had shifted to new premises. The rest of companies that did not respond cited no interest and confidentiality as their main reasons. Effectively, the number of respondents in the two groups provide a good matching number (33 versus 39) for data analysis.

Findings

Profile of the 'Enterprise-50' companies and other SMEs

The 'Enterprise-50' companies differ from other SMEs in many aspects. This study found that the 'Enterprise-50' companies are larger in size compared to other SMEs. The size of a company, in this study, was measured by the company's fixed assets and number of employees (Table 1 and Table 2 respectively). The variables used are consistent with the small business literature which often uses fixed assets investment and number of employees to represent firm size (Flamholtz, 1990). According to the survey, more than 60 per cent of the 'Enterprise-50' companies participating in the study, invested more than S$12 million in their fixed assets (Table 1). None of other SMEs has invested at the same level. A majority of other SMEs (77 per cent), in contrast, invested less than S$6 million. In terms of number of employees, 30 per cent of the 'Enterprise-50' companies employed more than 200 workers (Table 2). A majority of other SMEs (67 per cent), in contrast, have less than 50 employees.

The t-test analysis in Table 3 reveals that the size of the 'Enterprise-50' companies and other SMEs, in terms of fixed assets investment and number of employees, is different significantly (t-value > 2.0 and p < 0.05). These findings support the hypothesis 1 of this study, namely, the 'Enterprise-50' companies are larger companies than other SMEs.

Table 4 reveals that the business organisation of the 'Enterprise-50' companies and other SMEs is somewhat similar. It is observed that a majority of companies (82 to 85 per cent) participated in the study were privately-held, limited companies. This is a common business set-up in Singapore as most entrepreneurs tend to minimise their personal risk from company's bankruptcy. Remarkably, however, 15 per cent of the 'Enterprise-50' companies have listed their companies publicly in the Singapore Exchange. The objective of listing their stock is to raise funds for their planned growth. Being listed in the stock market demonstrates the capacity and capability of the 'Enterprise-50' companies. None of other SMEs has a similar capacity and capability to list their stock. These findings suggest that the 'Enterprise50' companies are well-established companies. They have a good track record that allows them to issue shares in the Initial Public Offering (IPO).

Table 5 reveals that a majority of the 'Enterprise-50' companies (43 per cent) were manufacturing companies. This finding is interesting as it reflects the present economic structure of Singapore which gears more towards depending on high-tech manufacturing industries as the main engine of growth to boost its economy. Companies which are involved in high-value activities are encouraged and supported by the government. Table 5 reveals that a majority of other SMEs are traders (36 per cent) and service providers (31 per cent). This finding suggests that other SMEs, which are smaller in size compared to the 'Enterprise-50' companies, are likely to be found in the commerce and service sector as investment in these two sectors requires lesser capital compared to the investment in manufacturing industries. Over the last decade, the development of modem technologies, such as the Internet and electronic business together with the recent structural shift of the economy towards the commerce and service sector have resu lted in a disproportionately large number of new businesses being set up in these two sectors (EDB, 1993). The majority of these companies, however, are small enterprises.

In spite of their larger size, the 'Enterprise-50' companies utilised more government initiatives than other SMEs. The survey results in Table 6 reveal that 21 per cent of the 'Enterprise-50' companies utilised at least seven initiatives. This figure is comparatively greater than that of other SMEs (2 per cent). A majority of other SMEs (77 per cent), in contrast, utilised less than three initiatives. These findings support the hypothesis 2 of this study, namely, the 'Enterprise-50' companies utilise more government initiatives than other SMEs. It reflects the deficiency of other SMEs to utilise the initiatives. A majority of them do not possess a similar capacity and capability to acquire the same level of support from the government as the 'Enterprise50' companies.

Table 7 reveals that a majority of the 'Enterprise-50' companies utilised the Skills Development Fund (79 per cent) to upgrade their staff's capability. This initiative was also utilised by a large number of other SMEs (62 per cent). Unlike other SMEs, however, more 'Enterprise-50' companies utilised the Local Enterprise Finance Scheme (55 per cent) and the ISO 9000 Certification Scheme (55 per cent). The Local Enterprise Finance Scheme enables companies to acquire external funding at low interest rate, and the ISO 9000 Certification Scheme enables them to identify areas for improvement in their quality system and technology upgrading. A total of 36 per cent of the 'Enterprise-50' companies have utilised the Total Business Plan to formulate their strategies for market development, technology transfer; business diversification and collaborations, mergers and acquisitions, as well as specific plans for implementation. An equal in percentage of the 'Enterprise-50' companies (36 per cent) utilised the Local Indus try Upgrading Programme to foster closer business development ties with their foreign counterparts. This programme is designed to upgrade and strengthen local enterprises to support the increasing demands and expectations of foreign MNCs.

Besides utilising the Skills Development Fund, Table 7 reveals that 26 per cent of other SMEs, participated in the study, utilised the Local Enterprise Technical Assistance Scheme. This scheme alms to encourage SMEs engage external consultants, by defraying part of the cost, to help them modernise and upgrade their management system and operations. Although the number of other SMEs (26 per cent) utilised this scheme is not as many as compared to the 'Enterprise-50' companies (33 per cent), it is, nonetheless, ranked second in the table. This demonstrates the popularity of this initiative among other SMEs. The number of other SMEs utilised the ISO 9000 Certification Scheme (21 per cent) and the Total Business Plan (18 per cent) is comparatively smaller than the 'Enterprise-50' companies (55 and 36 per cent respectively), demonstrating their difficulties to acquire these initiatives.

In examining the business dependence of SMEs, Table 8 reveals that the 'Enterprise-50' companies are more dependent on foreign MNCs in their business than other SMEs. The table shows that 45 per cent of the 'Enterprise-50' companies depended more than half of their business on foreign MNCs. This figure is comparatively greater than that of other SMEs where only 13 per cent of them depended on foreign MNCs at the same level. Remarkably, 36 per cent of the 'Enterprise-50' companies depended greatly on foreign MNCs (>75 per cent). These findings support the hypothesis 3 of this study that the 'Enterprise-50' companies are more dependent on foreign MNCs in their business than other SMEs.

Table 9 reveals that a majority of the 'Enterprise-50' companies and other SMEs were servicing foreign MNCs as subcontractors (52 and 26 per cent respectively) although there were some supporting foreign MNCs as OEM suppliers (18 per cent and 13 per cent) and distributors (12 and 13 per cent). These findings reveal that local companies play a multifaceted role in supporting foreign MNCs in Singapore. The 'Enterprise-50' companies depended more significantly on foreign MNCs in their business, suggesting that they would not be merely MNCs' suppliers of parts and components, but their involvement also comprises high-value activities such as product design and development, and manufacture of MNCs' specific products. It would be expected that the 'Enterprise-50' companies set up various formal planning and operating systems, by adopting foreign MNCs' guidelines, to forge mutually beneficial relationships through strategic alliances with foreign MNCs.

In examining the extent of overseas investment, Table 10 reveals that a significant number of the 'Enterprise-50' companies (88 per cent) invested their business overseas. A total of 34 per cent of the 'Enterprise-50' companies have invested more than 25 per cent. In comparison, this figure is greater than that of other SMEs (13 per cent).

In terms of export sales, Table 11 reveals that 42 per cent of the 'Enterprise-50' companies exported more than half of their products overseas. Only a small percentage of other SMEs (13 per cent) have exported their products at the same level. Remarkably, 18 per cent of the 'Enterprise-50' companies depended greatly on the international markets (>75 per cent). These findings support the hypothesis 4 of this study, namely, the 'Enterprise-50' companies are more international-oriented than other SMEs. Due to the limited size of the domestic market, many 'Enterprise-50' companies have expanded their business overseas to sustain their growth rates. A higher degree of internationalisation, among the 'Enterprise-50' companies, is attributable to the success of "internationalisation push" by the government. One of the objectives of the economic policy is to help local companies invest overseas so that they could help Singapore build an external economy (EDB, 1989).

Table 12 reveals that the 'Enterprise-50' companies have adopted a more aggressive strategy to penetrate overseas markets than other SMEs. Indeed, 34 per cent of the 'Enterprise-50' companies adopted the direct investment method. Other SMEs are less likely to adopt the same strategy as it requires considerable resources such as production capacity, managerial expertise, finance, and proprietary knowledge to which they have limited access. They, in contrast, adopted less risky strategies, namely, franchising (23 per cent) and distributorship strategy (55 per cent), as compared to the 'Enterprise-50' companies (3 and 14 per cent respectively). Incidentally, joint-ventures and setting up of overseas subsidiaries were common strategies adopted by Singapore companies. Table 12 reveals that there were equal percentage of the 'Enterpise-50' companies (41 per cent) and other SMEs (41 per cent) with established subsidiaries overseas. 52 per cent of the 'Enterprise-5O' companies and 41 per cent of other SMEs adopted th ejoint-venture strategy. Joint-ventures appear to be one of the preferred strategies, among others, as it could make up for the missing skills or resources of local companies. It could also overcome their lack of knowledge of foreign contracts and the host country's regulations. Furthermore, it minimises risk as it can be shared among the joint venture's partners.

Result Analysis

The Pearson correlation analysis in Table 13 and Table 14 reveals that there is a positive correlation between firm size and internationalisation behaviour of the 'Enterprise-50' companies as well as other SMEs (p < 0.05). The correlation, however, only occurs between fixed assets and overseas investment. This finding implies that manufacturing companies, having a greater fixed assets, are more likely to invest overseas than those in the other sectors. A positive correlation between overseas investment and export sales only appears in Table 13 (p < 0.05), suggesting that the 'Enterprise-50' companies are more successful, in terms of generating more export sales from their overseas investments than other SMEs.

The t-test analysis in Table 15 reveals that the 'Enterprise-50' companies are more prominent than other SMEs in all the five aspects (t-value > 2 and p < 0.05). In comparison with other SMEs, the 'Enterprise-50' companies are more dependent on foreign MNCs, have invested more significantly overseas and generated more export sales than other SMEs. Between the two groups, the 'Enterprise-50' companies are more supported by the government to escalate their growth. They have utilised more government initiatives and benefited greatly from the utilisation.

Discussion

Increasingly, Singapore government has put a lot of emphasis on measures to support local companies. At the time of writing this paper, there were more than 60 assistance schemes and programmes formulated and fund set aside to help them develop in every stage of their growth (EDB, 1993). Unlike other countries, Singapore, however, has its own way of assisting local companies. While many of the incentives and financial assistance schemes were made available to all, there is a special emphasis on the winners (Doh, 1996). This can be discerned from the SME Master Plan (EDB, 1989). Accordingly, one of the objectives of providing the initiatives is to enable companies to contribute more significantly to the economy. The target group of government initiatives are mainly those innovative start-ups and local companies which have the critical mass, commitment, capacity and capability to innovate and grow (EDB, 1989). According to the SME Master Plan, these companies must possess the necessary factors to emerge and gro w, by adding value to their people, products, and capital.

The emphasis of the government policy is reflected in this study, where other SMEs which do not possess a similar capacity and capability as the 'Enterprise-50' companies are less able to utilise government initiatives. Although the two groups of companies were aware of the provision, the 'Enterprise-50' companies have utilised more government initiatives than other SMEs which, on the other hand, are more needful of the government's support. Without the provision of government initiatives, many other SMEs would find it difficult to invest in such modernisation programmes. In fact, due to their lack of capacity and capability, they are more susceptible to economic change than the 'Enterprise-50' companies. This study argues that the government plays a strong influential role in leading other SMEs as they need more external supports. More initiatives, therefore, could be made available to other SMEs alongside the support given to the 'Enterprise-50' companies. The utilisation of government initiatives would hel p them develop, and perhaps, become more successful companies.

The Local Industry Upgrading Programme (LIUP) has facilitated effective technology and management transfer between foreign MNCs and local companies. By intervening directly, the government helps to remedy imperfections in the transfer process by acting as a matchmaker between the two different groups of entities to increase the credibility and reliability of the process, and inducing the interest and willingness of both parties to make the process work. The involvement of the government has also encouraged the formation of a close and sustainable relationship between foreign MNCs and local companies. This study reveals that the presence of foreign MNCs in Singapore contributes to the SME development. The LUJP could be extended to other SMEs to help them work closely with foreign MNCs.

Presently, the criteria used to qualify SMEs for the LIUP are stringent. Besides the requirement for companies to have a right attitude and receptiveness of management towards upgrading and development, it also requires them to have the facilities and capacity to absorb the technology or skills being transferred, and the capabilities in terms of providing product or service quality, flexibility, reliability, delivery, and cost competitiveness. At the time of writing this paper, it was reported that there were only 130 local companies participating in the LIUP under the tutelage of 26 MNCs (Maddox, 1992). The government, perhaps, could consider helping more local companies to participate in the programme. Relevant initiatives could be provided initially to help other SMEs develop their capabilities in order to service foreign MNCs prior to encouraging them to participate in the LIUP.

This study argues that the assistance provided by foreign MNCs is crucial to the SME development as these large corporations have more experiences in corporate management practices and expertise. They could help local SMEs adopt new management practises and technologies. Developing strategic alliances with foreign MNCs could lead them to become part of the MNCs' operating systems as if they were one of their small business units (SBUs) which share the MNCs' operating objectives. Foreign MNCs could also provide a benchmark against which the organisational attainments of local SMEs can be measured. Furthermore, being part of the foreign MNCs' operating networks, it would provide opportunities for local SMEs to search for new business bases and market expansions which offer them an alternative to vertical integration models.

Since the last decade, the government has been encouraging local companies to globalise to help Singapore develop an external economy, and maintain its international competitiveness. This study found that other SMEs are less able to invest their business overseas compared to the 'Enterprise-50' companies. More government initiatives, therefore, could be directed towards other SMEs to help them globalise. They could participate in trade missions and international trade fairs organised occasionally by the Trade Development Board (TDB). Planning, however, is essential prior to internationalisation (Cavusgil and Zou, 1994). They must examine the threats and opportunities posed by the host country before taking steps to venture into that country. There is, therefore, a need to encourage local companies to plan extensively before they venture aboard. It is only when they established their core competence locally and have a clear sense of strategic direction that they can choose the best partner and network to opera te in. Presently, however, the Total Business Plan (TBP) is only utilised by a small number of other SMEs (18 per cent, refer to Table 7). This study recommends that the government could extend this programme to many other SMEs as it would encourage them to think more strategically and put more considerable thoughts and preparatory work prior to internationalisation.

Conclusion

This study concludes that the 'Enterprise-50' companies are larger and well-established companies compared to other SMEs. They also have greater capacity and capability to support foreign MNCs' demands and expectations. Furthermore, they are more international-oriented, seeking to invest in the region and elsewhere in the world. Other SMEs, in contrast, are smaller companies. They depend mainly on the domestic market for their products and services. This study found that the 'Enterprise-50' companies are more able to utilise government initiatives than other SMEs. The government, therefore, plays a strong influential role in leading them. More initiatives could help them develop their capability to support foreign MNCs and participate more actively in international trade and regional investment. With adequate support, they can be developed into more successful companies.

Note: Other SMEs are defined, in this study, as SMEs other than the 'Enterprise-50' companies

References

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Table 1

Comparison of fixed assets owned by 'Enterprise-50' companies and other
SMEs

                                  'Enterprise-50'           Other SMEs
                                     companies
Fixed Assets                    Number        Per cent     Number
                                (N=33)                     (N=39)

> S$12 million                    20             61          0
$6 million to $12 million          8             24          9
< S$6 million                      5             15          30

Total                             33            100          39

                           Other SMEs

Fixed Assets               Per cent


> S$12 million                0
$6 million to $12 million     23
< S$6 million                 77

Total                        100
Table 2

Comparison of number of workers employed by 'Enterprise-50' companies
and other SMEs

                  'Enterprise-50'                Other SMEs
                     companies
Employees  Number             Per cent     Number     Per cent
           (N=33)                          (N=39)

> 200        10                  30          0           0
50 to 200    21                  64          13          33
< 50          2                   6          26          67

Total        33                 100          39         100
Table 3

T-test analysis to compare firm size between 'Enterprise-50' companies
and other SMEs

                            'Enterprise-50'            Other SMEs
                               companies
                           Mean            Std         Mean
                          (N=33)        Deviation     (N=39)

Fixed assets              2.3939         0.8638       1.1796
Number of employees       2.1212         0.7809       1.2308

                     Other SMEs

                        Std     t-value   Sig level
                     Deviation            (2-tailed)

Fixed assets          0.4514     7.639      0.000
Number of employees   0.5361     5.709      0.000

Fixed assets: 1 = < S$6 million, 2 = S$6 million S$12 million, 3 = S$12
million

Employees: 1 = < 50, 2 = 50 to 200, 3 = > 200
Table 4

Comparison of business organisation between "Enterprise-50' companies
and other SMEs

                        'Enterprise-50'                Other SMEs
                           companies
                      Number        Per cent     Number     Per cent
                      (N=33)                     (N=39)

Sole Proprietor          0             0           2           5
Partnership              0             0           2           5
Subsidiary               0             0           3           8
Private Limited         28             85          32          82
Public Listed            5             15          0           0

Total                   33            100          39         100
Table 5

Comparison of industry sectors between 'Enterprise-50' companies and
other SMEs

                             'Enterprise-50'           Other SMEs
                                companies
                           Number        Per cent     Number
                           (N=33)                     (N=39)

Construction                  4             12          3
Business/Engineering          2             6           12
Trading                       8             24          14
Manufacturing                14             43          6
Other services                5 (a)         15          4 (b)

Total                        33            100          39

                      Other SMEs

                      Per cent


Construction             8
Business/Engineering     31
Trading                  36
Manufacturing            15
Other services           10

Total                   100

(a)logistics = 1, printing = 2, retailing = 1, utilities = 1

(b)education = 2, travel = 1, pest control service = 1
Table 6

Comparison of number of government initiatives utilised by the
'Enterprise-50' companies and SMEs

                              'Enterprise-50'           Other SMEs
                                 companies
Number of initiatives       Number        Per cent     Number
utilised by companies

> = 7                          7             21          1
> = 6                          7             21          4
> = 5                         12             36          5
> = 4                         15             45          5
> = 3                         22             67          9
> = 2                         26             79          19
> = 1                         30             91          33

                       Other SMEs

Number of initiatives  Per cent
utilised by companies

> = 7                     2
> = 6                     10
> = 5                     13
> = 4                     13
> = 3                     23
> = 2                     49
> = 1                     84
Table 7

Comparison of the type of government initiatives utilised by
'Enterprise-50' companies and other SMEs

                                              'Enterprise-50'
                                                 companies
                                       Number        Per cent  Rank

Total Business Plan                      12             36      4

Local Enterprise
Technical Assistance
Scheme                                   11             33      7

Local Industry
Upgrading Programme                      12             36      4

Local Enterprise Computerisation
Programme                                 6             18      9

ISO 9000 Certification
Scheme                                   18             55      2

Franchise Development
Assistance Programme                      1             3       11

Automation Leasing
Scheme                                   12             36      4

Local Enterprise Finance
Scheme                                   18             55      2

Market/investment Development
Assistance Scheme                         8             24      8

Skill Development Fund                   26             79      1

Other Programme Assistance                4 (a)         12      10

                                              Other SMEs

                                     Number     Per cent  Rank

Total Business Plan                    7           18      4

Local Enterprise
Technical Assistance
Scheme                                 10          29      2

Local Industry
Upgrading Programme                    1           3       9

Local Enterprise Computerisation
Programme                              4           10      6

ISO 9000 Certification
Scheme                                 8           21      3

Franchise Development
Assistance Programme                   4           10      6

Automation Leasing
Scheme                                 0           0       11

Local Enterprise Finance
Scheme                                 6           15      5

Market/investment Development
Assistance Scheme                      3           8       8

Skill Development Fund                 24          62      1

Other Programme Assistance             1 (b)       3       9

(a)Regional HQ status = 1, Investment allowance = 2, IDS = 1

(b)NSTB R&D = 1
Table 8

Comparison of extent of business dependence on foreign MNCs between
'Enterprise-50' companies and other SMEs

                           'Enterprise-50'                Other SMEs
                              companies
Business dependent  Number             Per cent  Number        Per cent
on foreign MNCs

> 75 per cent         12                  36       2               5
> 50 per cent         15                  45       5              13
> 25 per cent         19                  56       11             28
> 1 per cent          25                  76       21             54
Table 9

Comparison of business dealing with foreign MNCs between 'Enterprise-50'
companies and other SMEs

                              'Enterprise-50'           Other SMEs
                                 companies
                            Number        Per cent     Number
                            (N=33)                     (N=39)

Subcontractor                 17             52          10
OEM Supplier                   6             18           5
Distributor                    4             12           5
Others                         4 (a)         12           9 (b)
Not dealing with MNCs          2              6          10

Total                         33            100          39

                       Other SMEs

                       Per cent


Subcontractor             26
OEM Supplier              13
Distributor               13
Others                    23
Not dealing with MNCs     25

Total                    100

(a)Business services, Customers

(b)Clients, Vendors, Training providers, Suppliers, Trainees, Legal
matter providers Business partners
Table 10

Comparison of extent of business dependence on foreign MNCs between
'Enterprise-50' companies and other SMEs

                             `Enterprise-50'           Other SMEs
                                companies
Overseas Investments  Number             Per cent  Number

> 75 percent             1                  3        0
> 50 percent             3                  9        1
> 25 percent            13                 34        5
> 1 percent             29                 88       22

                      Other SMEs

Overseas Investments  Per cent

> 75 percent             0
> 50 percent             3
> 25 percent            13
> 1 percent             56
Table 11

Comparison of export sales between 'Enterprise-50' companies and  other
SMEs

                      'Enterprise-50'                Other SMEs
                         companies
   Export      Number             Per cent  Number        Per cent

> 75 per cent     6                  18        4             10
> 50 per cent    14                  42        5             13
> 25 per cent    19                  56       13             33
> 1 per cent     28                  85       29             74
Table 12

Comparison of mode of entry into overseas markets between
'Enterprise-50' companies and other SMEs

                           "Enterprise-50'                Other SMEs
                              companies
Mode of entry into
overseas market       Number           Per cent  Number        Per cent

Joint-ventures          15                52        9             41
Direct investment       10                34        4             18
Subsidiary              12                41        9             41
Franchising              1                 3        5             23
Distributorship          4                14       12             55

Others                   1 (a)             3        3 (b)         14

(a)Associateship

(b)Associateship, Export sales, Project basis
Table 13

Correlation of fixed assets, number of employees, export sales and
overseas investment of 'Enterprise-50' companise

Pearson Correlation       1        2         3         4

1. Fixed assets         1.000  0.390 (*)  - 0.101  0.438 (*)
2. No. of employees            1.000      - 0.111  0.152
3. Export sales                             1.000  0.436 (*)
4. Overseas investment                             1.000

(*) Correlation is significant at the 0.05 level (2-tailed)
Table 14

Correlation of fixed assets, number of employees, export sales and
overseas investment of other SMEs

Pearson Correlation       1      2       3       4

1. Fixed assets         1.000  0.151  - 0.180  0.508
2. No of employees             1.000  - 0.164  0.057
3. Export sales                         1.000  0.327
4. Overseas investment                         1.000

(*) Correlation is significant at the 0.05 level (2-tailed)
Table 15

T-test analysis to compare the extent of utilising government
initiatives, servicing foreign MNCs and internationalisation between
'Enterprise-50' and companies and other SMEs

                                'Enterprise-50' companies
                              Mean          Standard   Mean
                             (N=33)        Deviation  (N=39)

Utilisation of               3.9394          2.6802   1.8205
government initiatives
Benefited from               3.5152          1.6031   2.3590
government initiatives
Dependent on MNC's           3.0606          1.8017   1.8205
demands
Overseas investment          2.3939          0.8993   1.7179
Export sales                 3.0000          1.4361   2.3077

                                     Other SMEs
                          Standard    t-value     Sig. lev
                         Deviation              (2-tailed)

Utilisation of             1.7148      3.914        0.000
government initiatives
Benefited from             1.7089      2.958        0.004
government initiatives
Dependent on MNC's         1.3931      3.222        0.002
demands
Overseas investment        0.7591      3.411        0.001
Export sales               1.1955      2.199        0.032

Likert-type response scale: 1 = Not at all 5 = A great deal