Globalization and the Small Firm: An Industry Value Chain Approach to Economic Growth and Poverty Reduction

This position paper articulates the overall USAID AMAP BDS Knowledge and Practice strategy. The paper argues that linking the poor to growth opportunities is key to generating sustainable economic growth with poverty reduction. Moreover, in light of intensified global competitive pressures, such efforts must focus on the performance of the whole industry in which small firms participate. This includes the business enabling environment and essential supporting and service markets. It also includes the degree to which vertical and horizontal relationships among industry participants contribute to overall industry competitiveness and impact the millions of small firms upon which many of these industries in developing countries depend.

This paper translates recent research into practical approaches for designing interventions that foster economic growth to reduce poverty. The paper starts with the conceptual and moves toward the project cycle, offering practical guidance to the project designer in selecting industries for intervention, analyzing selected industries, developing a vision for competitiveness, and designing project interventions.

The intended audience for this paper is the broader enterprise community, including both donors and practitioners, and project designers seeking to achieve economic growth and poverty reduction.

This paper presents an approach to intervening in globalized markets aimed at:

  • Improving the competitiveness of micro and small enterprise (MSE)-dominated industries, and
  • Expanding the depth and breadth of benefits to MSEs participating in competitive industries.

This paper is intended to open a dialogue on programs that link economic growth with poverty reduction.

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