The history of the concept "microenterprise" can be divided into two periods: the time before 2003 and the time after. Prior to 2003, businesses employing fewer than 10 people were studied within the fields of entrepreneurship research and small business research for decades, but the term microenterprise was rarely used. Furthermore, these small companies were often not treated as distinct research subjects but were grouped together with larger companies.
Although the term "microenterprise" was in use at the time, it was primarily associated with poverty-alleviation projects in North America and developing countries. In these projects, entrepreneurs who, due to their financial status, were unable to obtain market-based financing from banks were supported with loans aimed at small businesses. Charitable projects were also organized in developing countries with the goal of supporting local entrepreneurs engaged in or starting small-scale businesses. These target groups were referred to as micro-entrepreneurs, and their businesses were called microenterprises.
The term microenterprise gained a more formalized definition in 2003 when the European Union recognized, for the need of various business support instruments, that "it is necessary to define more precisely microenterprises, which form a class of small businesses particularly important for promoting entrepreneurship and job creation." As part of a broader classification of business sizes, the EU defined a microenterprise as an independent business with fewer than 10 employees and an annual turnover and/or balance sheet total not exceeding €2,000,000.
Despite the EU’s recommendation, definitions of microenterprises still vary, as there are different context-specific and national definitions. The terminology used in research is also diverse: microenterprise, micro-firm, micro-company, micro business, micro SME, micro-sized enterprise/firm/business/company are examples of the terms used in various forms, with different spellings and hyphenations.
International research on micro-entrepreneurship has been steadily increasing since the early 2000s. Our research group, MicroENTRE, has for over a decade contributed to producing research-based knowledge on microenterprises and micro-entrepreneurship. We have sought to support the sustainable growth of business activities and foster an entrepreneurship-friendly society.
In micro-entrepreneurship research, recognizing the diversity of concepts and clearly defining the terms used remains essential to better understand this most prevalent form of business and to support its development.
Author:
Martti Saarela, Research Director, PhD in Tech, M. of Laws, M. Sc. (Econ.), Microentrepreunership Centre of Excellence MicroENTRE, University of Oulu Kerttu Saalasti Institute
In Kerttu Saalasti Institute's blog we write about the topics of the Institute's research groups, micro entrepreneurship education and the Institute's general topics. The authors are researchers, experts and members of networks.
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