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small firms in the United Kingdom employs 62% of the labour force and contribute 25% to GDP. In the European Community as a whole, small firms employ 66% of the work force. Burns emphasises the major role small firms’ play in the European Community, by citing the employment generated by small firms in various European countries. He suggests that small businesses contribute 79%, 63% and 60% to employment creation in Italy, France and Germany respectively. According to SENET (2004) over 99% of the 3.2 million businesses in the UK are small medium sized enterprises (SMEs) and they account for more than two thirds of the business turnover.

2.3.3 People’s Republic of China

According to the US Embassy (2002) the growing significance of SMEs in China’s economy is worth noting. Chinese and foreign experts estimate that SMEs are now responsible for approximately 60% of China’s industrial output, and employ around 75% of the workforce in China’s cities and towns. It is believed that SMEs are responsible for creating most new urban jobs, and have created opportunities for workers laid-off from state- owned enterprises that re-enter the workforce.

The brief overview of the contribution that small businesses make towards the economies of the abovementioned countries emphasises the importance of the small business sector. Governments around the world have realised just how important this sector of the economy is for the future growth of their respective countries. For the South African government, the growth and development of the small business sector is also playing a major role in addressing the imbalances of the past (DTI, 1995) as it is seen as a vehicle to create much needed employment and wealth.

The strong interest in entrepreneurship is largely due to finding that new business enterprises are the primary source of new employment opportunities (Boshoff, Theron and Schutte, 1998; Lunsche, 1997). McClelland (1987) and Harper (1991) (both cited in Boshoff et al., 1998) suggest that entrepreneurship has a critical role to play in the economic development of especially poorer nations of the world. This view is supported by Sweeney (1981) who suggests that “the ability of an economy to adapt to change and to continue economic progress would seem to be weakened if there is not a continuing infusion into the total economic system, at a numerically high level, of new products, new markets and new jobs generated by small firms. In addition, a strong small firm sector provides for the widespread and rapid diffusion of technical change and innovation on which economic growth is ultimately based.”

In summary, recent evidence (Hill and McGowan, 1999) does indicate that small firms and entrepreneurship do indeed play a major role in the world economy (Timmons, 1994) and that they do constitute the bulk of enterprises in most economies around the globe (Storey, 1994).

2.4 Measuring Growth

When researching factors affecting growth it necessary to first define firm growth and growth is measured. Various indicators are used to measure growth and there doesn’t seem to be any general measurement. Measuring sales growth and relative employment growth during a specific time period is the most common indicators used. Indicators such as assets, market share, profits and output are also commonly used, however not as commonly as sales and employment. Output and mar