In an era of globalizing economies many markets become increasingly international and competitive, however the
story is different for SMEs than it is for multinational corporations (MNCs) (Muhammad et. al, 2010:66).
Globalisation is a source of opportunities as well as a source of threats. Specific advantages derived from operating in
a global market seem to be exploitable only by large organisations unless SMEs can find an organisational solution
allowing them to cope with global business opportunities without suffering from limited resources and without
exposing themselves to the risk of direct investment (Mundim et.al, 2000).
An increase in the number of exporters or MNCs implies more intense competition.
The overall effect of competition on the performance of SMEs is unclear, however. On the one hand, increased product market competition may cause SMEs to reduce their price mark-ups. On the other hand, the “learning by competition” analogy suggests that the pressure to survive may speed up the adoption of new technologies and thereby enhance the productivity of SMEs.
With regard to the labour market, higher wages paid by multinationals and exporters may have spill over effects to other industries, resulting in an increase in the cost of production for SMEs (Asiedu and Freeman, 2007: 368).