SME Development in Indonesia and China1

From a worldwide perspective, it has been recognized that small and medium enterprises (SMEs) play a vital role in economic development, as they have been the primary source of job/employment creation and output growth, not only in developing but also in developed countries. In Piper’s (1997) dissertation, for instance, it states that 12 million or about 63.2 % of total labor force in the United States (US) work in 350,000 firms employing less than 500 employees, which considered as SMEs. According to Aharoni (1994), SMEs make up more than 99 % of all business entities and employ more than 80 % of total workforce in this country. These enterprises, often called the foundation enterprises, are the core of the US industrial base (Piper, 1997). SMEs are also important in many European countries. In the Netherlands, for instance, they account for 95 % or more of total business establishments (Bijmolt and Zwart, 1994). As in the US, also in other industrialized/OEC