Investigating the effect of the added value of small and medium industrial companies in the economic development of Iran

Subject Areas : Regional Planning

sadegh rezaeimonfared ¹ , seyed javad iranban ^{2 *} , reza radfar ³ , Ali Hajiha ⁴

1 - Ph.D. Student in Industrial Management, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 - Assistant Professor, Industrial Management Department, Shiraz Branch, Islamic Azad University, Shiraz, Iran
3 - Professor, Industrial Management Department, Science and Research Branch, Islamic Azad University, Tehran, Iran
4 - Assistant Professor, Industrial Management Department, Tehran North Branch, Islamic Azad University, Tehran, Iran

Received: 2024-08-12 Accepted : 2024-10-15 Published : 2025-07-15

Keywords: Small and medium companies , Economic addition , Economic progress,

Abstract :

The Impact of Value Added by Small and Medium-Sized Industrial Enterprises (SMEs) on Iran's Economic Growth This study examines the impact of value added by small and medium-sized industrial enterprises (SMEs) on Iran's economic growth. SMEs play a pivotal role in economic development and employment generation due to their ability to create value added, foster innovation, and diversify the economy. Using a structural equation modeling (SEM) approach and a descriptive-applied methodology, this research focuses on a statistical population of 60 small and medium-sized industrial enterprises in Shiraz. The sample size, determined via Cochran’s formula, consisted of 169 senior managers and experts, with 200 questionnaires distributed to ensure adequacy. The questionnaires measured economic value added and economic progress, and their validity and reliability were confirmed. The findings reveal that SMEs significantly improve the country’s economic indicators. Notably, research activities and technological innovations exhibit the highest factor loading (0.262), playing a vital role in economic growth and advancement. Additionally, employment (factor loading: 0.225) and income distribution (factor loading: 0.243) contribute to improved labor conditions and equitable income distribution. Investments in these enterprises (factor loading: 0.148) further support sustainable economic growth. However, despite the importance of exports in economic development, this variable was excluded from the study. Thus, future research should investigate the impact of SME exports on Iran’s economy to provide a more comprehensive analysis of their role in economic development.

 

Extended Abstract

 

Introduction

The concept of statehood encompasses three main domains: national governance, public affairs administration, and societal operations. Governance entails guiding the country towards constitutional goals, shaping societal thoughts and behaviors in alignment with political philosophy. Leadership and guidance may come from various sources, including popular institutions, mass media, or international bodies, sometimes diverging from government objectives. Governance tasks include setting strategic goals, establishing moral frameworks, fostering national culture, ensuring compliance, and designing governance structures. The governing body oversees the government's performance and bears ultimate responsibility for the country. In essence, statehood involves mobilizing resources towards constitutional objectives, with governance serving as the mechanism for achieving societal aspirations. Cultural intricacies, societal interactions, and adherence to national norms are vital components, showcasing the art of governance in shaping collective behavior. Although governance and government are distinct concepts, they are closely intertwined in the mechanisms governments employ to shape national policy frameworks. Originating from Plato's analogy of steering a vehicle, governance denotes the art of governing society. In the 1990s, international institutions like the United Nations, the IMF, and the World Bank introduced various forms of governance, such as local or global governance, project governance, economic governance, and environmental governance. These different forms can be likened to steering a sailboat towards a destination amidst adverse external forces. Governance involves making decisions, akin to managing the steps of a journey, guided by policies and standards. Politics delineates societal goals and the means to achieve them, while management coordinates efforts to realize those goals. Governance, the most complex of the three, encompasses policy, management, consultation, and public participation to guide society. It involves interactions between governing bodies and the governed, employing various tools to ensure effective direction and control. Understanding these concepts lays the groundwork for comprehending "water governance" — the management of water resources and its associated governance structures.

 

Methodology

This applied research was conducted using a descriptive-analytical method and examined the impact of value added of small and medium-sized industrial companies in Shiraz using structural equation modeling (SEM). The research method was quantitative and the data were collected through standard and researcher-made questionnaires. The standard economic value added questionnaire was extracted from Hadigol's (2015) research. To prepare the questionnaires for this research, first, previous studies in the field of value added and economic progress were reviewed and the key research components were extracted. The economic value added questionnaire includes a set of standard questions to measure the amount of value added created by the companies under study. Also, a questionnaire was designed to measure economic progress, which includes 28 questions. The statistical population included 60 companies with less than 50 employees and significant production volume, which included a total of about 300 managers and specialists of these companies. The Cochran formula was used to determine the sample size, which resulted in a sample size of 169 people. In order to ensure the adequacy of the responses, 200 questionnaires were distributed. The validity of the questionnaires was confirmed through various criteria, and the Cronbach's alpha coefficient for the economic progress questionnaire was 0.876 and for the economic value added questionnaire was 0.717, indicating the appropriate reliability of the research instruments. Data analysis was performed using SPSS27.0 and SMARTPLS3.0 software, through which structural equation modeling was implemented to analyze the relationships between variables.

 

Results and Discussion

This study empirically examines the impact of value added of small and medium-sized industrial enterprises (SMEs) on the Iranian economy, focusing on key economic components. The results show that these enterprises play a significant role in improving economic indicators, especially in the fields of employment, income distribution, and investment. Based on the findings, research activity has the highest impact on economic progress with a factor loading of 0.262 and a significance coefficient of 18.876. Also, income distribution with a factor loading of 0.243 and a significance coefficient of 13.579, and employment with a factor loading of 0.225 and a significance coefficient of 14.819 are other key factors affecting economic progress. The economic value added obtained from the activities of these enterprises also has a significant impact on economic progress and plays its role in strengthening the country's economy with a factor loading of 0.179 and a significance coefficient of 8.014. Investments in this sector with a factor loading of 0.148 and a significance coefficient of 5.312, and innovation and technology with a factor loading of 0.212 and a significance coefficient of 12.779, show that investment and technological innovations contribute to sustainable economic growth.

The research activities and technological innovations of these companies strengthen their ability to face industry challenges and exploit new opportunities and contribute to the country's economic growth and progress. Theoretical studies show that exports play an important role in the economic development of countries. Increasing foreign exchange earnings, improving the trade balance, and reducing dependence on imports are among the important achievements of exports.

 

Conclusion

1. 1. Further analysis of the role of exports: It is suggested that future studies examine the impact of exports by small and medium-sized industrial companies on Iran's economic development. This will help to better understand the effects of these companies on foreign trade and securing foreign exchange earnings.
2. 2. Development of support policies: To strengthen and develop exports among these companies, it is necessary for the government and relevant institutions to formulate and implement support programs and policies. These policies can include providing financial facilities, specialized training, and access to international markets.
3. Attention to technological investments: Small and medium-sized companies should be encouraged to invest in innovative and research activities so that they can increase their productivity by using new technologies and play a role as effective factors in the country's economic growth.

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