2.3 Quality as a basis for competition
Despite an aggregate picture which shows widespread tendencies
for incomes and qualitative aspects of employment to deteriorate as firm size
drops, closer inspection shows that there are, in fact, major differences within
the general category of small enterprises. It is clear that small
enterprises as such need not necessarily providers of poor pay and inadequate
conditions. There are a variety of reasons why small enterprises might offer
better conditions than others, but it seems that a particularly significant
factor could be the basis on which they compete.
This was borne out in the extensive survey of manufacturing
enterprises carried out in Malaysia (World Bank, 1997), which found an
association between higher incomes, rising firm size, and superior efficiency.
The aggregate picture notwithstanding, it was also found that some small
enterprises could be as efficient, or even more so than large enterprises. It
was found that size in itself was not necessarily a limiting factor on higher
efficiency and higher wages. Efficient enterprises in Malaysia tended to compete
on a basis of emphasising and ensuring quality. They also were active in the
acquisition of technology and know how through licensing, joint ventures and
exports. They emphasised training and practiced human resource development
policies that encouraged job stability and the acquisition of further skills
(World Bank, 1997).
The evidence suggests that small enterprises that compete on
lines similar to the efficient enterprises described in Malaysia are more likely
to provide higher incomes and offer better working conditions than others. This
is consistent with a conclusion of the recent ILO study of export processing
zones, which found that quality conscious and innovative enterprises there
are invariably setting standards which are higher than national norms for
wages, working conditions, health and safety and training (ILO, 1998).
Such findings have important implications for strategies to
raise the levels of incomes and working conditions in small and
micro-enterprises: On the one hand, it seems that the more efficient, innovative
and quality conscious enterprises are more able to provide better incomes and
conditions associated with quality employment. On the other hand, as the next
chapter suggests the development of innovative, quality conscious, competitive
enterprises may, in turn, be significantly influenced by a range of qualitative
working and environmental factors.
There is the possibility, therefore, that enterprise
competitiveness and qualitative aspects of employment could become mutually
reinforcing. The challenge is to provide the right conditions to enable small
and micro-enterprises, and indeed broader communities, to move towards such a
goal along a path of constant