RESPONSIBLE BUSINESS PRACTICES IN SME'S IN INDIA: AN OVERVIEW
Introduction: The contribution of the Small and medium enterprises (SME’s) to the economic growth of a nation is well recognized. In developing countries, as some authors argue (Leutkenhorst, 2004) the contribution of SME’s towards employment generation is significant because they • tend to use more labour intensive production processes than large enterprises, boosting employment and leading to more equitable income distribution • Provide livelihood opportunities through simple, value adding processing activities in agriculturally based economies; • Nurture entrepreneurship; and • Support the building up of systemic productive capacities and the creation of resilient economic systems, through linkages between small and large enterprises While their significant economic contribution is well understood, their responsible business practices have not been extensively studied for any meaningful interpretation to be drawn. While individually each of these SME’s may not be a significant influence like the large corporations, their cumulative social and environmental impacts could be significant. This is already being witnessed in the textile belts and the chemical belts in India. There is an urgent need therefore to understand the responsible business practices adopted by the SME’s. Responsible business practices can be conceptualized as consisting of two dimensions ---- the ethical behaviours of the corporation and the Corporate Social Responsibility (CSR) practices that it adopts. This conceptualization allows us to capture the phenomena at two levels – at the level of individual managers and their institutions and at the level of the organization and the sector. A review of the literature indicates that a few studies have examined the value orientations and ethical stances of Indian managers in large corporations (Monga, 2004; Fisher, Shirole & Bhupatkar, 2001). One study empirically examines the cultural influences on the judgement of Australian, Malaysian and Indian SME managers to whistle blowing as an internal control mechanism (Chavan & Lamba, 2007). There is however, no discussion in the paper about the significance of the choice of SME managers. Since the findings are at the level of cultural influences, the SME managers appear to be just a sample, with no specific behavioral uniqueness attached to them. Vasanthi Srinivasan is an Associate Professor at the Indian Institute of Management Bangalore Diana Joseph is a consultant with The Fourth Wave foundation.
Much of the anecdotal evidence in India on SME managers appears to suggest that the ethical orientation of the SME’s is a product of the ethical orientation of its owner. Since the ownership structure of SME’s varies significantly, it is likely that the stringent Governance norms that apply to large corporations may not be relevant and therefore supports the view that the owner/managers in SME’s determine the ethical orientation of the firm. There is a need for more research in this area. In recent years, however, the CSR practices in SME’s in India have gained a lot of attention. This paper attempts to draw up on the existing body of knowledge, both from the academic and the popular literature in India to identify the CSR practices and develop a research agenda for responsible business practices in the SME sector in India
SME’s in India The SME’s alone contribute to 7% of India’s GDP. As per the Third All India Census of Small Scale industries conducted in 2004, the SME’s have increased from about 80,000 units in the 1940’s to about 10.52 million units. Their total employment is about 25 million and they produce about 7500 products including high technology products. In the sports goods and garments sector their contribution to exports is as high as 90% to 100%. They constitute 90% of the industrial units in the country and also contribute to about 35% of India’s exports. (Pandey, 2007) The...
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