The concrete contribution towards development made by a small or medium enterprise is the product of an intricate combination of a) behaviour patterns and the associated attitude and knowledge of the entrepreneur; and b) incentives or obstacles which give rise to a particular behaviour pattern.

Attitude and behaviour are generally not changeable in the short term. They are formed by upbringing and education and the cultural system in the broadest sense (and are also conditioned by personal disposition), and become ingrained over a period of many months or years. Economic incentives and restraints, on the other hand, can frequently be changed in the short term (for example, in a few days or weeks), according to their scope and intensity. However, positive incentives or the removal of restraints can only lead to a particular change in behaviour pattern if this change is in any case consistent with the general attitude of the entrepreneur.

In trying to explain why the actual contribution made by small and medium enterprises to social and economic development and social welfare sometimes meets and sometimes falls below expectations, it is practical to divide these promotional and inhibitive factors into two broad categories: environmental factors (external to the enterprise); and corporate, or internal factors.

From the environmental viewpoint, one can see the kind of climate in which the small and medium enterprise operates. We are not examining the cultural and social environment, but are particularly concerned with influences exerted by the area of decision-making controlled by the state, since general economic conditions and the development policy adopted exert a very strong impact on the behaviour of the small and medium enterprise. Moreover, we shall address ourselves to the influence of factors of location, commodity market conditions, and the contribution of self-help organizations to economic life.

Examination from the internal, corporate point of view is intended to shed light on the factors within the enterprise which affect the extent and quality of its development contributions.