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views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB),
its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use.
Terminology used may not necessarily be consistent with ADB official terms.
B.C.H. Maduwanth
Lecturer, Faculty of Agriculture, Uva Wellassa University of Sri Lanka
6/02/2020 1
Content
Introduction
Problem Statement
Literature Review
Methodology
Results & Discussion
Conclusions & Recommendations
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Introduction
What is Global Value Chain (GVC)?
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Introduction
What is Global Value Chain (GVC) Cont.
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Introduction: The Process of GVC
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Introduction
Small & Medium Enterprises (SMEs)
The term SME is used to denote micro, small and medium
enterprises
Source: National Policy Framework for SME Development, Ministry of Industry and Commerce, Sri Lanka
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Problem Statement Global Value Chain
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Literature Review
Challenges face by SMEs in Sri Lanka
Key challenges face by SMEs in Sri Lanka are lack of access to finance
(Nanayakkara (2011) and non-financial barriers such as lack of technology and
managerial skills (Abeyratne (2006)
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Literature Review
Impact of linking with GVCs on SME Development
Participation in GVCs produce various benefits allowing superior
performance in their own markets by combining national and international
intermediate inputs, and by creating economies of specialization and
benefit from knowledge and technology spillovers (OECD, 2012)
According to Yuhua & Bayhaqi (2013) SME sectors identify one of positive
and influencing factors in economic growth specially in fast growing
economies
Data collection
– Enterprise survey with 329 SME holders (Snowball Sampling
Technique)
– Focus Group Discussions (FGDs) - 4
– Key Informant Interviews (KIIs) - 8
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Conceptual Framework
Dependent Variable Independent
(Y) Variables(Xs)
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Research Method
Data Analysis
Employed both Econometric and Descriptive Analysis
Table 02: Dependent and Independents variables of the study
Variable Name Explanation Expected Sign
Profit Annul profit of the firm
GVC Dummy variable for Global Value Chain Positive when GVC = 1
GVC=1 for SMEs who are engaged in GVC
GVC=0 for SMEs who are engaged in GVC
lnSL Log of annual sales revenue Positive
lnTR Log of number of employees who are trained annually Positive
lnRD Log of share of R&D expenditure in total revenue Positive
lnK Log of total capital of the firm Positive
lnL Log of number of workers Positive
lnHC Log of the level of education of SME holder Positive
lnAGE Log of number of years in the industry Positive
TYPE Dummy variable for Type of SME Negative when TYPE = 1
TYPE=1 for Small
TYPE=0 for otherwise (Medium and Large)
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Source: Developed by authors based on literature survey
Results & Discussion
15
Profiling the SMEs: Gender composition of SME holders
On average, female entrepreneurs are lower than that of males and this
trend is more pronounced in the Nuwara Eliya district. (20% female)
Figure 02: Gender composition of SMEs in four districts
90 84 85
81 79
80
68
70
60
Number of SMEs
49
50 46
42
39
40 35 33
30
20 17
10
0
Badulla Monaragala Matale Nuwara Eliya
Female Male Total
It is apparent from the table that the average age of SME holders is
between 40 – 49 years for any type of SME
Table 03: Age composition of SME holders in four districts
Age
Districts Type of SME Mean Mode Maximum Minimum
Agriculture 40.65 29 61 20
Badulla Industry 44.33 39 72 24
Service 44.67 52 55 28
Agriculture 44.68 31 76 25
Matale Industry 41.77 36 69 22
Service - - - -
Agriculture 45.61 32 66 21
Monaragala Industry 43.00 39 73 26
Service 48.80 31 67 31
Agriculture 42.78 50 57 22
Nuwara Eliya Industry 42.60 54 59 23
Service 40.44 43 59 28
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Source: Calculated by authors based on enterprise survey
Profiling the SMEs: Educational attainments of SME holders
The average years of schooling is between 10 – 14 years for any
type of SME
Table 04: Years of schooling of SME holders in four districts
Districts Type of SME Years of Schooling
Badulla Agriculture 13 14 19 8
Industry 13 12 19 0
Service 13 14 15 11
Matale Agriculture 14 14 19 12
Industry 12 14 15 4
Service - - - -
Monaragala Agriculture 10 14 15 0
Industry 12 12 18 5
Service 11 12 14 7
Nuwara Eliya Agriculture 10 12 18 0
Industry 10 12 18 0
Service 12 12 14 7
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Source: Calculated by authors based on enterprise survey
Profiling the SMEs: Average income of SME holders
The highest income was recorded in industrial related SMEs in the
Monaragala district while lowest from agriculture related SMEs Matale
Figure 03: Average income of SME holders
Service
Nuwara
Monaragala Eliya
Industry
Agriculture
Service
Industry
Agriculture
Matale
Service
Industry
Agriculture
Badulla
Service
Industry
Agriculture
0 50000 100000 150000 200000 250000 300000 350000 400000 450000 500000
6/02/2020 Source: Created by authors based on enterprise survey 19
Profiling the SMEs: Average income of SMEs by type of business
Table 05: SMEs’ average income by type of business
Source:
6/02/2020Calculated by authors based on enterprise survey 20
Impact of GVCs on the performance of SMEs
Variable Name Model 01 Model 02 Model 03
Number of Observations = 329
GVC 0.8091*** 0.7863*** 0.7231***
(0.1321) (0.2314) (0.2256) Three models were estimated by adding different
lnK 0.7732*** 0.6352** 0.6733**
(0.2124) (0.2931) (0.3167) independent variables gradually in order to check
lnL 0.2341*** 0.2031** 0.2122** the robustness of the relationship between GVC
(0.0814) (0.0987) (0.0923)
lnHC 0.0813** 0.0736** 0.0675 and profit of SMEs
(0.0387) (0.0352) (0.1064)
lnSL 0.8056** 0.7863**
(0.2787) (0.3848)
Estimated coefficients for GVC in all three models
lnTR 0.0245** 0.0271 are positive and statistically significant at 1%
(0.0109)
0.0223*
(0.0324)
0.0127
level. this relationship is consistent even when the
lnRD
(0.0116) (0.0267) models are controlled by other characteristics of
lnAGE 0.8201
(0.8971)
0.7861
(0.9171)
firms.
TYPE -0.1897*** -0.2787**
(0.0621) (0.1072) Apart from the direct, indirect effects of GVC
GVC x lnSL 0.2018**
(0.0827)
(both interaction terms (GVC x lnSL) and (GVC x
GVC x lnTR 0.0626 lnRD)) have positive coefficient and also
(0.7871)
0.0876**
statistically significant at 5% level
GVC x lnRD
(0.0372)
Constant 12.7161*** 8.8971*** 6.6371*** The estimated models are statistically significant at
(0.9781) (0.8181) (0.8761)
R2 0.4582 0.5672 0.7762 1% level and also have higher R2 value in model 03
Prob on F 0.0000 0.0000 0.0000 (0.7762) representing higher level of goodness of
6/02/2020 fit. 21
Recognizing Potential Local Business Sectors for GVCs
Potential local business sectors According to KIIs, five main business
Figure 04: Recognized potential local business sectors to be linked with GVC sectors such as information technology,
apparel, gems & minerals, tea, other
Information Technology
agricultural products and handcraft
73 18 6 21
were recognized as the most potential
Apparel 73 17 2 5 3
sectors.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Very Important Important Neutral Not Important Not Important at all
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Conclusion
Information technology, apparel, gems & minerals, tea, other
agricultural products and handcraft are the most potential
sectors for link with GVCs
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Recommendations
Strongly recommend to government, non-government organizations
and policy makers to encourage SMEs to participate GVCs by allowing
them to grow as internationally competitive entrepreneurs
Ensure solid public-private partnership in order to inculcate
entrepreneurial culture in the society
Provide advanced technological know-how, better financial facilities,
symmetric and efficient information and awareness on GVCs and
production networks, required infrastructures, appropriate BDSs,
training programs to develop human capital capabilities to enhance
the SMEs’ potential of linking with GVCs.
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• Thank you
• Ayubowan
Thank you
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