聯(lián)合國亞太經(jīng)社會（UNESCAP）：電子商務(wù)與印度的零售業(yè)和制造業(yè)-確保可持續(xù)發(fā)展

No.236|2024

ESCAP

EconomicandSocialCommissionforAsiaandthePacific

E-commerceandIndia'sRetailandManufacturingSectors-SomeLessonsforEnsuringSustainableDevelopment

NibhaBhartiSugandhaHuriaAshleyJose

KanikaPathania

ASIA-PACIFICRESEARCHANDTRAININGNETWORKONTRADE

WorkingPaper

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ASIA-PACIFICRESEARCHANDTRAININGNETWORKONTRADE

WORKINGPAPER

E-commerceandIndia'sRetailandManufacturingSectors-Some

LessonsforEnsuringSustainableDevelopment

NibhaBharti',SugandhaHuria?,AshleyJose3,KanikaPathania?

Pleasecitethispaperas:

NibhaBharti,SugandhaHuria,AshleyJoseandKanikaPathania(2024).“E-commerceandIndia'sRetailandManufacturingSectors-SomeLessonsfor

Ensuring

February

SustainableDevelopment",ARTNeT

2024,Bangkok,ESCAP

WorkingPaperSeriesNo.236,

Ayailableathttp://artnet.unescap.orc

Acknowledgement:

Thispaperisasubmissionforthe2023ESCAP-UNCTAD-UNIDO-ARTNeTcallforpapers,underthetheme"UnleashingDigitalTradeandInvestmentforSustainableDevelopment."TheauthorisgratefulforthevaluablefeedbackandsupportfromthepeerreviewersattheESCAPSecretariat,whoseconstructiveinputwaspivotalinrefiningandfinalizingthiswork.

1ResearchAssociate,IndianInstituteofForeignTrade(IIFT),NewDelhi,email:nibha@

2AssistantProfessor,IIFT,NewDelhi,email:sugandhahuria@(CorresspondingAuthor)

3(Former)ResearchAssociate,IIFT,ResearchAnalyst,CSEP,email:ash.jose.360@

4AssistantProfessor,SriVenkateswaraCollege,DelhiUniversity,email:kanika@

iv

Abstract

Thesuddensurgeinthee-commercesectorhassparkedconcernsinseveraleconomiesintheworld,particularlyinIndia.Thecountry’straders’associationshavecomplainedthattheonlineretailsector(dominatedbye-commercemajors)hasbeengrowingattheexpenseoftheofflineretailsector,primarilytheMSMEs.Inthiscontext,thisstudymarksoneoftheinitialendeavourstoanalyticallyevaluatetheimpactofthethrivingonlineretailindustryonIndia’sorganisedmanufacturingandretailsegments.Theresultsindicatethat,whileonlineretailinghasassumedasignificantroleinpositivelyimpactingthesalesoftheoverallretailandmanufacturingsectorofthecountry(onaverage)duringtheperiod1989-2020,thesameeffecthasnotbeenobservedforitsMSMEs.TheimpactonMSMEshasbeenpositive,thoughnotsignificant–indicatingtheuntappedpotentialoftheMSMEsectortotakeadvantageofthegrowingonlinecommerce.SimilarresultsholdfortheretailsectorandretailMSMEswhenitcomestotheimpactontheirinternationaltradeparticipationduetothegrowingonlineretailsector.Finally,thestudyalsounderscorestheimportanceof“digitalisation”asaprerequisiteforaccessingthee-commercechannel,aligningwiththesocietalandenvironmentalobjectivesoutlinedinthe2030AgendaforSustainableDevelopment.Consequently,thefindingsadvocatesettingupacomprehensivee-commerceregulatoryframeworkinIndiatoensuresustainedandinclusivegrowthforboththee-commerceandMSMEsectors.

Keywords:E-commerce,India,RetailSector,ManufacturingSector,MSMEs,SDG2030

JELCodes:F14,F23,L86,D22

v

TableofContents

Abstract iv

Introduction 1

IssuesFacedbyMSMEs 5

DataandMethodology 9

EstimationResults 13

4.1E-commerceandTotalSalesbyFirms 13

4.2E-commerceandtheTradeParticipationofFirms 20

ConclusionandPolicyRecommendations 24

Listofreferences 27

Appendix 36

vi

Listoftables

Table1:SpecificIssuesRaisedAgainstE-commerceMajors:EvidencefromIndiaand

itsComparativeEconomies 7

Table2:Construction/Definitionsofvariablesusedforregressionanalysis 10

Table3:SummaryStatisticsforProwessAnalysis 15

Table4:EffectofOnlineRetailSalesontheRetailSector,theMSMERetailSector,the

ManufacturingSectorandtheMSMEManufacturingSector 16

Table5:EffectoftheE-commerceSectorontheTradeParticipationoftheFirmsusing

DynamicProbit 22

Listoffigures

Figure1:GeneralComplaintsRaisedbyMSMEs 8

Figure2:TrendinOverallSales 12

Figure3:StudiesonFactorsAffectingFirmsPerformance 14

1

Introduction

Globally,thefourthindustrialrevolutionhasledtothedigitalisationofeconomicactivities.Theevolutionofdigitalisationhasplayedanimportantroleinraisingtheproductivecapacitiesofeconomies.Ithasenhanceddigitaltrade,investment,financialinclusion,andfirmcompetitivenessleadingtothegrowthofeconomiesaroundtheworld(AsianDevelopmentBank(ADB),2021).Thedigitaleconomy,especiallythee-commercesectorinbothdevelopedanddevelopingeconomies,isachannelthatenablesbusinesses,particularlyMicro,Small,andMediumEnterprises(MSMEs)andconsumerstoengageindigitaltradeandinvestment.5Baseda(2018)pointedoutthatiftechnologyandthedigitaleconomyareleveragedproperly,thesecanbeusedtoachieveSustainableDevelopmentGoals(SDGs).SeventeenSDGswereadoptedbytheUNMemberStatesin2015,6aspartofthe2030AgendaforSustainableDevelopmenttodeveloparoadmapforpovertyalleviation,environmentalsustainability,economicgrowth,peaceandjustice,amongothers,byfocusingonleavingnoonebehind.Economicgrowth,akeycomponentofachievingAgenda2030,maybegreatlyaidedbythedevelopmentofthegrowinge-commercesector,particularlysmallandmediumenterprisesinvolvedindigitaltrade(Besada,op.cit.),andbybridgingtheso-calleddigitaldivideacrossMSMEsandlargefirms.Thee-commercesectorisapotenteconomicanddevelopmentchannelthatcanbeharnessedforattainingSDGsspecificallyfocusingonthecomponentsoftheEconomicPillar(SDGs8and9)7andSocialPillar(SDGs10and17).8BasedontheSDGIndex2022(SustainableDevelopmentReport2022),Indiarankedatthe121stposition(outof163),lowerthanits2021ranking.Accordingtothereport,India’sperformanceinachievingSDGs8and9hasmoderatelyimproved,butwithmajorchallenges;forSDG10,therearesignificantchallenges;andforSDG17,theperformanceisstagnated,andmajorchallengesremain.

Likemostcountriesintheworld,Indiahasbeenwitnessinganexpansioninitse-commercesectorinrecentyears.AccordingtotheUnitedNationsConferenceonTradeandDevelopment’s(UNCTAD)BusinesstoConsumers(B2C)E-commerceIndexfor2020,B2Ce-commerceinIndiawasranked71st,upfromthe75thpositionitsecuredin2019.Outofthe152countriesconsideredintheindex,Switzerlandsecuredthe1stposition,andtheUS,UK,RepublicofKorea,andChina,whicharealsoIndia’smajortradingpartnersandhaveprominente-commerceindustries,were

5Henceforth,weuse‘e-commerce’and‘onlineretail’interchangeably.

6TheSustainableDevelopmentAgenda.UnitedNations.

/sustainabledevelopment/development-agenda/

7SDGGoal8:Promotesustained,inclusive,andsustainableeconomicgrowth,fullandproductiveemployment,anddecentworkforall.SDGGoal9:Buildresilientinfrastructure,promoteinclusiveandsustainableindustrialisation,andfosterinnovation.

/2030agenda

8SDGGoal10:Reduceinequalitywithinandamongcountries.SDGGoal17:Strengthenthemeansofimplementationandrevitalisetheglobalpartnershipforsustainabledevelopment.

/2030agenda

2

positionedat12th,5th,18th,and55thpositions,respectively(UNCTAD,2021a).9Factorssuchasthegrowingpenetrationofsmartphones,inexpensivemodesofcommunication,betterlogisticssystems,digitalpayments,andanexpandingworkforce,amongothers,havecontributedsignificantlytothegrowthofIndia’se-commercesector.Whilethesectorearlierhadlimitedcoverageinproducts,todayitoffersmultipleproductranges,includingelectronics,apparel,grocery,loantoKiranastores,etc.Yet,itsshareinthecountry’stotalretailsalesisstillverysmall(IndiaBrandEquityFoundation(IBEF),2020).AccordingtoIBEF(2023),duetotheincreasingdemandinthesector,India'se-commercemarketisprojectedtoreachUS$111billionby2024andfurtherescalatetoUS$200billionby2026.Thisimpliesthatthegrowingonlinecommerceindustrycouldalsoturnouttobearealgame-changerforthecountry’sMSMEsbywayofemployingdigitaldevicesandinternetnetworkstotradegoodsandservicesandtomakepayments.Subsequently,thesectorholdsgreatpotentialinhelpingthecountryattainitsgoalofUSD5trillioneconomyby202510andadoptinganinclusiveandsustainablegrowthtrajectorybyfocusingonMSMEs,entrepreneurship,financialinclusion,digitalinfrastructure,technology,creativity,andinnovation.

However,theolddebateontheco-existenceoflarge(organised)andsmallfirms(unorganised)inanemergingmarketeconomylikeIndiahasaninevitableexistenceeventoday.Atpresent,withtheadvancementindigitalisation,thedebatehasshiftedtowardstheco-existenceofonlinemarketplaces(theso-callede-commerceaggregators)andMSMEs.Ononehand,theextantliteraturefavoursthee-commercesectorandhighlightsitsbenefitsintermsofcreatingsupplyjobsandwarehouses,facilitatingthemarketingofproductsaswellasthepaymentprocesses,savingconsumers’timeandprovidingthemaccesstoawidersetofproductchoices.SarkarandBhattacharya(2020)claimthatthee-sectorinvolvesadvancedtechnologywithahigherinnovationrateandincreasingreturnstoscalewithlowmarginalcost,whichcreateshigherprofitsforseveralbusinesses.AreportbyKPMG(2015),usingqualitativesources,statesthate-commerceplatformshaveapositiveeffectonthesales,revenue,anddistributionchannelsofIndianonlineMSMEs.AnotherstudybyGoyaletal.(2022),basedonasurveyof1537manufacturingfirmsfor6differentproductcategories,reportsthattheshareofonlinesalesbyMSMEsincreasedfrom12%in2018-19to27%in2020-21.Theirfindingssuggestthatabout64%ofthesurveyedMSMEssoldtheirproductsonlinein2020-21,withmanyofthemreportingstrongersalesthaninthepreviousyears.Thestudy,however,lookedintotheeffectofthee-commerceplatformsforonlytheonlineMSMEsandnottheMSMEsectorasawholeusingsurveydataforasingleyear.Further,theperiodofthestudycoincideswiththeCOVID-19pandemic,whichtriggeredtheexpansionofthee-commerce

9TheIndexmeasuresaneconomy’spreparednesstosupportonlineshopping.Itconsistsoffourindicatorsthatarehighlyrelatedtoonlineshoppingandforwhichthereexistscountry-widecoverage.Theseindicatorsare–(a)accountownershipatafinancialinstitution(b)individualusingtheinternet(c)postalreliabilityindexand(d)secureinternetservers.Thus,fromtheranking,India’spositionisstillquitebehindthatofitspeers,andthiscouldhave

implicationsforthegrowthofitse-commercesector.

10VisionofUSD5TrillionIndianEconomy.

.in/Pressreleaseshare.aspx?PRID=1549454

3

sectornotonlyinIndiabutinmostcountriesintheworld(WorldTradeOrganization(WTO),2020).Morerecently,astudybyKapoorandGoyal(2023)usingaprimarysurveyof2,007MSMEs(bothintegratedandnot-integratedwithe-commerceplatforms)inmajorstatesofIndiahighlightedthatintegratedMSMEfirmshavegainedhigherprofitabilityandturnoverthanthenon-integratedones.ThemajorreasonforMSMEsnotintegratingwithe-commercewasthelackofadequateknowledgeinutilisingdigitaltechnologyande-commerceplatforms.Thestudyalsoindicatedthattheexport-orientedMSMEswithhighersharewerefoundtobemoreintegratedwiththeonlinecommerceplatformsthanothers.Thisevidencespellsouttheimportanceofthegrowinge-commerceindustryinIndiaanditspotentialtoadvancethe2030agendaforSustainableDevelopment.

Onthecontrary,thesecondpieceofevidenceputsforthseveralallegationsraisedagainstthecountry’se-commercesector,morespecificallythetwoleadingforeignplayers,namelyFlipkart(orWalmart)11andAmazon.Thesetwoe-commercemajorscontributetoaround63%ofthetotale-retailsegmentinIndia(Dayalani,2021).ThecomplaintshaveprimarilybeenraisedbyIndia’sTradersAssociations12(representingagroupofsmallandmediumbusinesses)regardingunfairmonopolisticpracticessuchaspredatorypricing,deepdiscounting,preferentialtreatmentforsomesellers,etc.bythebige-commerceplayersofthecountry(CompetitionCommissionofIndia(CCI),2019,2020);SarkarandBhattacharya,2020;Aparna,2021).Theassociationshaveclaimedthatsuchpracticeshavebeenreducingthebusinessopportunitiesavailable(especially)toIndianretailMSMEs(Bundhun,2020),duetowhichtheirsurvivalisnowatstake,afterthefirsttwowavesoftheCOVID-19pandemic.Additionally,asreportedinBusinessToday(2021),morethan40,000tradeorganisationsinthecountryhavetogetherarguedthatsuchpracticeswouldultimatelyresultinalargee-commercesector(whichisgrowingatarapidrate)leadingtheentireIndianretailmarketinthelongrun.Citingtheimportanceoftheassociations’campaignagainste-commercemajors,oneoftheConfederationofAllIndiaTraders(CAIT’s)officialsalsosaidthat,

“Therefore,thereisanurgentneedtopurifythee-commercelandscapeofthecountrysothatevenasmalltradercanalsoadoptandacceptthee-commercebusinessasanadditionalavenueforraisinghisrevenueandmak[ing]PrimeMinisterNarendraModi’sAtmanirbharBharatcampaignasuccess.”

WithMSMEsassumingacrucialroleinIndiaofcontributingabout30%ofthecountry’sGDP,40%ofitsnon-agriculturalemployment,andapproximatelyhalfofitsexports,itisthusimperativeforthecountry’sgovernmenttotakenoteofsuchcases(MSMEAnnualReport,2021-22).However,withtheinitialevidencefavouringthee-commercesectorintermsofcontributingtoIndia’semploymentgeneration,creationofnew

11Walmart(US-basedcompany)acquireda77%stakeinFlipkart(Indian-basede-commercecompany)in2018(Das2018).

12TradersAssociationssuchasConfederationofAllIndiaTraders(CAIT),AllIndiaOnlineVendorsAssociations

(AIOVA),MicroSmallMediumEnterprises(MSME)associations.

/sector/sme/msme-eodb-traders-body-cait-invites-150-associations-trade-

bodies-to-forge-bigger-alliance-for-e-commerce-fight/2426856/

4

marketspace,facilitatingmarketingandsalesofproducts,etc.,inconclusion,itseemsthatabalancedviewneedstobeconsideredbythegovernmentwhileformulatingrelevantpolicies,asmoreandmoreofbothMSMEandnon-MSMEfirmsareexpandingtheironlineoperationsinthecountry.

Againstthisbackdrop,thepresentstudyaddstotheliteratureinthreenovelways.Thefirstisbyunderstandingthecontrastingevidenceathand,scanningthroughtheissuesfacedbyMSMEs,andattemptingtoconductaninternationalcomparisonoftheproblemsbeingraisedagainste-commercemajors.Second,giventhelimiteddataone-commerceactivitiesinIndia,thispapermakesoneofthefirstattemptstoquantitativelyassesstheimpactoftheIndiane-commercesectorontheperformanceofitsretailMSMEs,theretailsectorasawhole,manufacturingMSMEs,andalsothemanufacturingsectorasawhole.Theeffectsonthemanufacturingsector(includingMSMEs)havebeenconsideredsincee-commerceplatformsareapartoftheretailsector,which,inturn,possessessignificantbackwardlinkagestothemanufacturingsectorasitreliesonmanufacturedproductsforitsbusinessoperations.

Theexistingliteraturesuggeststhatthereisadearthofstudiesanalyticallyexaminingtheeffectofthee-commercesectorontheperformanceoftheretailsectorandspecificallyitsMSMEsintheIndiancontext,eventhoughithasgarneredgrowingattentioninrecentyears.Ascitedabove,KPMG(op.cit.),andGoyaletal.(op.cit.)donotspecificallyanalysetheimpactofthegrowthofe-commerceonIndia’sproductioneconomyovertheyears.Moreover,onlyonlineMSMEshavebeenconsideredfortheassessment.Giventhattherecentcomplaintsagainstthee-commercesectorhavebeenraisedbytheTraders’AssociationsrepresentingnotonlytheonlinebutalsotheofflineMSMEs,itbecomescrucialtoassesstheimpactofe-commerceontheMSMEsectorasawholeandnotjustontheonlineones.KapoorandGoyal(2023)didconsidernon-integratedfirms,however,theirstudyisacross-sectionalassessment.Itisalsoimportanttonotethatwhilethereisgrowingevidenceaboutthebenefitsofdigitalisation,digitalisationwithoutthepromotionofe-commercechannelsmayonlyhavelimitedbenefitsforthecountry.Thereare,however,afewstudiesthatexaminewhetherthepresenceofonlineretailore-commercefirmshurtstheirofflinecounterpartsincountriessuchastheUK,USA,theNetherlands,etc.(Deleersnyderetal.,2002;BiyalogorskyandNaik,2003;Weltevreden,2007;Pozzi,2013;Reitnarzetal.,2019andRatchfordetal.,2022).

Further,theadoptionofe-commercepracticesshouldalsoboostthetradeparticipationofIndianfirmsduetothebenefitstheyoffersuchasefficientpaymentsystems,betteraccesstoinformation,greatermarketaccess,etc.AccordingtoUNCTAD(2021b),digitaltradefacilitatessustainablegrowthandexpandsintegrationintotheGlobalValueChain(GVCs),particularlyfordevelopingnations,representingapotentialforinclusiveeconomicgrowth.SomestudiessuchasGautam(2017)andTakkarandSharma(2021)showthate-commercehasfacilitatedtheexportparticipationofIndianfirms,however,theydonotanalysethesamefortheIndianMSMEsortheretailsectorinparticular.Whiletheroleofdigitalisationinpromoting

5

theGVCparticipationoffirmshasbeenexploredsubstantiallybefore(Lanzetal.,2018;SasidharanandReddy,2021;VuPhuetal.,2022;Gopalanetal.,2022),tothebestofourknowledge,nostudyexplorestheroleofthee-commercesectorinfacilitatingtheentryoftheIndianretailandmanufacturingsectors(particularlywhenitcomestotheMSMEs)ininternationalmarkets.Weexaminethisassociationanalyticallyasthethirdobjectiveofthepresentstudy.

ItisworthpointingoutthatthisstudyisparticularlyrelevantinthecurrentscenariowhenIndia’se-commercepolicyisstillinitsdraftstage.ThisisalsoparticularlycriticalatatimewhendevelopingcountriessuchasIndia,whichstilllagsignificantlywhenitcomestodigitalisation,vis-a-vistheirdevelopedpeers,areurgedtoengageine-commercefreetrade(ETNOW,2022).Ourfindingsindicatethatwithoutthee-commercesector,theincrementalgrowthoftheIndianretailandmanufacturingsectorduringthelasttwodecadeswouldhavebeenlower.However,thecountry’sMSMEshavenotbeenableto(significantly)takeadvantageofthegrowinge-commerceandkeeppacewiththeso-calleddigitalglobalisation.Asimilarresultholdswhenitcomestothefacilitationofthetradeparticipationofthesefirms.Thismandatesarobustpolicyframeworkthatcanconcomitantlyensurethegrowthofboththee-commercesectorandtheMSMEretailsectorwhilecreatingpositivespillovereffectsfortheothersectorsofthecountryandattainingsustainablegrowth.

Therestofthepaperisorganisedasfollows:thenextsection(2)discussestheproblemsfacedbyIndianMSMEsandtheissuesraisedbythecountry’sTraders’Associationsagainstitse-commercemajors.Section3putsforththedataandmethodologyusedandattemptsapreliminarygraphicalanalysistoanswerthequestionsofinterest,whilesection4presentsthemainempiricalresultsofthestudy.Thelastsection(5)concludesandpresentspolicyrecommendationsbasedonourfindings.

IssuesFacedbyMSMEs

Inthissection,thestudyattemptstoassessthekindofcomplaintsbeingraisedbytheMSMEfirmsagainstthee-commercemajorsinIndiaandinspectsifsuchproblemsexistinothercomparativeeconomies.Weinvestigatethecomplaintsbeingraisedin12differentcountries(amixofsixdevelopedandsixdevelopingeconomies)besidesIndia.MostofthesecountrieshavebeenselectedbasedonthepresenceofbothFlipkartandAmazon(thetwoleadinge-commerceplayersinIndia)intheirrespectiveeconomies,apartfromthefactthattheyhaveahugee-commercemarket.

Whilethereisadiverserangeofissuesthathavebeenraisedbytraders,specifically,MSMEfirms,webroadlyclassifytheseintotwodistinctcategories.ThefirstrelatestoSpecificcomplaintsthathavebeenraisedrecentlyagainstthee-commercemajors.InthecaseofIndia,suchspecificissueshavebeenraisedbyboththesupplyand

6

demandsidesofthecountry(mostly)againsttwoe-commercemajors,namelyFlipkartandAmazon.Thedemandside(i.e.,consumers)issuemainlypertainstomisleadingadvertisementswithincorrectinformationthatpreventoptimaldecision-makingontheirend,whilethesupplysideissuesprimarilypertaintoissuessuchaspredatorypricing,deepdiscounting,andpreferredsellers,allofwhichcomeunderthegambitofunfairbusinesspractices.

AmongstthecomplaintsraisedbyTraders’Associationsagainste-commercemajorsin13countries(includingIndia)underconsideration(seeTable1),13predatorypricingisthemostfoundcomplaint.14While11countries(includingChina,CostaRica,theUS,theUK,andothers)reportthistobeasevereissueimpedingtheirbusinessatmosphere.However,suchacomplainthasnotbeenraisedbytheIndianCompetitionCommissionBoard.TheCCIcontinuestoprobeanti-competitiveevidenceagainsttheIndiane-commercemajors(BusinessStandard,2020).Nevertheless,othercomplaintssuchaspreferredsellers15anddeepdiscounts16havebeenrepeatedlyreportedinthecountry,andincountriessuchastheUS,China,andSouthKorea.ThismakesitclearthatsuchissuesarenotspecifictoIndia,buthavebeenraisedbyothermajorplayersintheworldtradingplatform.

13Furtherdetailsonthesamecanbeavailedfromtheauthorsuponrequest.

14Predatorypricingdenotestheanti-competitivebusinesspracticeofsellingaproductbelowitsmarginalcostbyadominantfirminthemarkettoeliminateitscompetition.

15Preferredsellersareabusinesspracticeadoptedbye-commercemajorswhichinvolvesgivingpreferentialtreatmenttocertainsellers.

16Deepdiscountsarebusinesspracticesadoptedbye-commercemajors,whereinthee-commerceplatformsofferheavydiscountsongoods/servicesthataresoldinhighquantities.

7

Table1:SpecificIssuesRaisedAgainstE-commerceMajors:EvidencefromIndiaanditsComparativeEconomies

DevelopingEconomies

DevelopedEconomies

Specific

Issues

India

Chin

a

Costa

Rica

Mexico

SouthKorea

Viet

nam

Brazil

Unite

d

State

s

UnitedKingdom

Germany

Canada

EuropeanUnion

Italy

Predatory

Pricing

Preferred

Sellers/

Choosingonly

one*

Deep

Discounts

Misleading

Advertisement/FakeReviews

Source:Compiledfromcountry-specificnewsreportsandtheexistingliterature.

*Note:Choosingonlyoneisananti-monopolisticstrategyadoptedbye-commercemajorswhichwereuniquelyidentifiedinChinaandnotinothercountries.

ThesecondcategoryofissuespertainstothegeneralweaknessesofMSMEs,vis-à-vislargefirms(seeFigure1).ThesestructuralissuesarisefortheseMSMEfirmsmainlyduetolowereconomiesofscaleandresultinc