Small and Medium-Sized Enterprises in Ecuador: Evolution and Challenges

Abstract

The main objective of this article is to analyze the evolution of Ecuadorian Small and Medium-Sized Enterprises (SME), their contribution to the national economy, institutional framework, and internal operating characteristics. To this end, the focus is on companies related to the manufacturing sector in Ecuador. The main periods of the analysis are: i) the 1990s, ii) 2000-2008 and iii) 2009-2019; however, the decades of the 1970s and 1980s have been included in the first part of the article for their relevance. Literature review is the main data collection methodology, and the databases used are from official sources. Data from the Banco Central del Ecuador (BCE, Central Bank of Ecuador), the Instituto Nacional de Estadística y Censos (INEC, National Institute of Statistics and Census), regulations and research around the SME sector have been used. The main findings are that SMEs are crucial within the Ecuadorian industrial fabric, because of its specialization in products that contribute to satisfying basic needs, but also because they provide parts and supplies to other companies. The quantitative contribution of SMEs, however, has been declining over time, both in number of establishments, staffing, and production, which reveals the increasing relevance of large industries. In this process, the institutional framework has had an influence in the evolution of SMEs, with certain strengths and weaknesses in terms of supporting the development of SMEs. In turn, in regards to internal operation, it becomes apparent that despite some improvement, there has not been significant progress during the period under analysis. In short, this work contributes to the larger discussion about the relevance of SMEs in Ecuador, their history, and whether there might be grounds for public policies to support their development.