National Income and MSME Density: A Cross-Country Empirical Investigation
Keywords:
MSME Density; GNI Per Capita; OLS Regression; Economic Development; SME Policy
Abstract
Knowledge of determinants of MSME density is important to inform evidence-based economic policy, especially in developing economies where MSMEs are the main drivers of employment, poverty reduction, and inclusive growth. This study fills an important knowledge gap in the body of empirical literature by offering cross-country quantitative data on how the level of national income determines the formal MSME environment. This research paper examines the factors of the density of Micro, Small and Medium Enterprise (MSME) within economies through Ordinary Least Squares (OLS) regression analysis. The Data had been collected through SME finance forum, which was a collection of 150 cross-country observations, including the years 2002 to 2018. MSME density per 1,000 people is the dependent and GNI per capita (USD), and Year were the independent variables. The OLS regression model is statistically significant (F(2, 147) = 8.42, p = 0.0003) with GNI per capita and Year having a positive but marginally non significant effect ( 0.0003992, p = 0.003 and 1.658, p = 0.054, respectively). These results imply that national income is a major contributor to formal MSME concentration, which is why income-growth and formalization policies should be specifically implemented in less affluent economies. The model needs to be extended to include more structural determinants in future research, including access to credit and quality of regulations, digital infrastructure, and institutional capacity, and use the panel data approach and more recent and current datasets as of 2018 to reflect the contemporary changes in the global MSME environment and increase the external validity of the findings.
References
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Mahfud, I., & Mahfud, I. (2025). The role of MSMEs (Micro, Small and Medium Enterprises) in improving the national economy. Journal of Economics and Business Letters, 5(5), 13–23. https://doi.org/10.55942/jebl.v5i5.915
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Salim, M. N., Abd Rahman, N. H., Susilastuti, D., Astuty, P., Abd Samad, K., & Marlapa, E. (2024). Macro Determinants of Export-Based MSMEs in Indonesia and Malaysia. Interdiciplinary Journal and Hummanity, 3(12), 843–861. https://doi.org/10.58631/injurity.v3i12.1373
Yasrizal, Y., Harmaini, H., Abd Manan, A., & Mahrizal, M. (2023). RELATIONSHIP BETWEEN MSMEs AND FINANCIAL INSTITUTIONS IN WEST ACEH. Jurnal Ilmiah Teunuleh, 4(1), 1–10. https://doi.org/10.51612/teunuleh.v4i1.116
Ghatge, D., Taware, R., Kshirsagar, P., Jadhav, D. K., Jagtap, V., & Bhosale, A. M. (2024). Marketmate: Systematic Literature Review on Correlation Between MSME Investment Turnover and Employment. Deleted Journal, 2(12), 2828–2834. https://doi.org/10.47392/irjaeh.2024.0391
Sinha, K. J., Sinha, S., & Sinha, B. J. (2024). Micro, Small, and Medium-Sized Enterprises (MSMEs): The Significant Role and Challenges in Indonesia’s Economy. International Journal For Multidisciplinary Research, 6(3). https://doi.org/10.36948/ijfmr.2024.v06i03.20824
Singh, M. (2025). The Role of “Micro, Small, and Medium Enterprises” (MSMEs) of India in Achieving United Nations Sustainable Development Goals (SDGs). https://doi.org/10.5281/zenodo.17131598
Alie, M. S. (2025). Driving Local Productivity: The Interplay of MSMEs, Government Spending, and Economic Growth. Shirkah Journal of Economics and Business, 10(2), 254–273. https://doi.org/10.22515/shirkah.v10i2.827
Vyas, D. K. (2013). Growth and Performance of Indian Micro, Small and Medium Enterprises (MSMES) in the Post Globalization Period.
Boateng, K., Sodem, N., & Nagaraju, Y. (n.d.). The Contribution of MSMEs to the Growth of the Indian and Global Economy. https://doi.org/10.5281/zenodo.2602969
Simanjuntak, F. H., & Putri, N. S. (2025). Membangun Ekonomi Berkelanjutan: Kontribusi UMKM dalam Peningkatan Pendapatan Masyarakat. Jurnal Nuansa, 3(3), 223–230. https://doi.org/10.61132/nuansa.v3i3.1955
Tahir, H. M., Razak, N. A., & Rentah, F. (2018). The Contributions Of Small and Medium Enterprises (SME’s) On Malaysian Economic Growth: A Sectoral Analysis (pp. 704–711). Springer, Singapore. https://doi.org/10.1007/978-981-10-8612-0_73
Rohatg, G. (2022). The Hidden Engine: Unraveling the Impact of Small Businesses on any National GDP. Journal of Economics & Management Research, 1–4. https://doi.org/10.47363/jesmr/2022(3)228
Batrancea, L., Balcı, M. A., Chermezan, L., Akgüller, Ö., Masca, E., & Găban, L. V. (2022). Sources of SMEs Financing and Their Impact on Economic Growth across the European Union: Insights from a Panel Data Study Spanning Sixteen Years. Sustainability, 14(22), 15318. https://doi.org/10.3390/su142215318
Nkamnebe, O. E., Nwokocha, A. F., & Oladipo, A. O. (n.d.). Do Small and Medium Enterprises Spur Economic Growth? Evidence from Nigeria (1999-2020). International Journal of Research and Innovation in Social Science. https://doi.org/10.47772/ijriss.2023.70968
Song, M., & Ahn, Y. K. (2024). The determinants of SME success in the Long Run: an ecosystem perspective. Applied Economics. https://doi.org/10.1080/00036846.2023.2301220
Markin, M., & Korableva, S. (2025). Analysis of the Development of Small and Medium-Sized Enterprises in Russia in the Long Term: Factors and Growth Barriers. Teoretičeskaâ Èkonomika, 0(4). https://doi.org/10.52957/2221-3260-2025-4-169-186
Al-Afeef, M. A. M. (2020). The impact of small and medium enterprises on gross domestic product and unemployment: evidence from jordan 2009-2018. International Journal of Economics and Financial Issues, 10(2), 181–186. https://doi.org/10.32479/IJEFI.9153
Memili, E., Fang, H., Fang, H., Chrisman, J. J., Chrisman, J. J., & De Massis, A. V. (2015). The Impact of Small- and Medium-Sized Family Firms on Economic Growth. Small Business Economics, 45(4), 771–785. https://doi.org/10.1007/S11187-015-9670-0
Jauhari, H., & Periansya, P. (2021). Economic Growth, Poverty, Urbanization, and the Small and Medium Enterprises (SMEs) in Indonesia: Analysis of Cointegration and Causality. Binus Business Review, 12(2), 143–150. https://doi.org/10.21512/BBR.V12I2.6573
Audretsch, D. B. (2002). The Dynamic Role of Small Firms: Evidence from the U.S. Social Science Research Network. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1510987
Rahimlou Benis, A. (2014). The Impact of Small and Medium-Sized Enterprises on Economic Growth in Iran. Global Journal of Management and Business Research, 14(2).
Amoah, J., Belás, J., Dziwornu, R. K., & Khan, K. A. (2022). Enhancing SME contribution to economic development: A perspective from an emerging economy. Journal of International Studies, 15(2), 63–76. https://doi.org/10.14254/2071-8330.2022/15-2/5
Imramziyeva, M., Исаева, А. У., Dzhubalieva, Z., Tapalova, A., & Бекетова, К. Н. (2024). The Role of Small and Medium Enterprises in Poverty Alleviation and Economic Well-Being. Eurasian Journal of Economic and Business Studies, 68(4), 101–112. https://doi.org/10.47703/ejebs.v68i4.454
Zafar, A., & Mustafa, S. (2017). SMEs and its Role in Economic and Socio-Economic Development of Pakistan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(4), 195–205. https://doi.org/10.6007/IJARAFMS/V7-I4/3484
Muthuraman, S. (2020). Economic Development through Small & Medium Enterprise – A Conceptual Framework. https://doi.org/10.33422/3RD.ICBME.2020.03.24
Pandey, P., & Chaudhary, A. K. (2024). The Role of Micro, Small, and Medium Enterprises in India’s Economic Development: A Critical Analysis. Asian Journal of Economics, Business and Accounting, 24(7), 366–384. https://doi.org/10.9734/ajeba/2024/v24i71416
Muthuraman, S. (2024). Enhancing SME impact on Economic Development in Sultanate of Oman. Deleted Journal, 2024(4), 333–339. https://doi.org/10.53935/jomw.v2024i4.396
Foreword. (2022). SME Policy Index. https://doi.org/10.1787/8fbe4087-en
Cerda, M., Cervantes, D., Gertler, P., Higgins, S., Montoya, A. M., Parrado, E., Serrano, C. J., Undurraga, R., & Yañez-Pagans, P. (2023). Covid-19 Pandemic and SMEs’ Performance in Latin America. https://publications.iadb.org/publications/english/document/Covid-19-Pandemic-and-SMEs-Performance-in-Latin-America.pdfhttps://www.smefinanceforum.org/data-sites/msme-country-indicators?utm_
Pandey, P., & Chaudhary, A. K. (2024). The Role of Micro, Small, and Medium Enterprises in India’s Economic Development: A Critical Analysis. Asian Journal of Economics, Business and Accounting, 24(7), 366–384. https://doi.org/10.9734/ajeba/2024/v24i71416
Pal, D. (2025). Government Policies and MSME Growth in India: Enhancing Entrepreneurship as a Growth Engine. https://doi.org/10.5281/zenodo.15108595
Saxena, A., & Dhaka, N. (2025). Role of MSMEs in Economic Growth of India. International Journal of Global Research Innovations & Technology (IJGRIT)., 03(03), 50–60. https://doi.org/10.62823/ijgrit/03.03.7888
Kumar, S. (2024). Funding of MSMEs in Developing Countries: An Overview of Innovative Approaches. https://doi.org/10.5281/zenodo.14544377
Kalu, C. U., Uzonwanne, M. C., Okeyika, K. O., & Maduka, O. D. (2015). Modeling MSMEs Financing and Economic Growth: Evidence from Nigeria. Social Science Research Network. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2789967
Yadav, V. K., & Mohan, A. C. (2023). Examining the Role of India’s Micro, Small, and Medium Enterprise Sector in Exports and Foreign Exchange Reserves. International Journal For Multidisciplinary Research, 5(5). https://doi.org/10.36948/ijfmr.2023.v05i05.6623
Uma, R. N., & Anbuselvi, R. (2023). Role of Micro Small and Medium Enterprises (MSME) in Employment Generation in India. Shanlax International Journal of Economics, 11(2), 22–27. https://doi.org/10.34293/economics.v11i2.5809
Kumari, K., & Chaudhary, A. K. (2024). Globalization’s Influence on MSME’s & Their Role in Economic Development: A Comparative Analysis. Asian Journal of Economics, Business and Accounting. https://doi.org/10.9734/ajeba/2024/v24i111557
Mahfud, I., & Mahfud, I. (2025). The role of MSMEs (Micro, Small and Medium Enterprises) in improving the national economy. Journal of Economics and Business Letters, 5(5), 13–23. https://doi.org/10.55942/jebl.v5i5.915
Morales Pedraza, J. (2021). The Micro, Small, and Medium-Sized Enterprises and Its Role in the Economic Development of a Country. Business and Management Research, 10(1), 33. https://doi.org/10.5430/BMR.V10N1P33
Bayraktar, M., & Algan, N. (2019). The Importance Of SMEs On World Economies. https://doi.org/10.36880/C11.02265
Stoesser, K. R. (2023). Exploring Factors Influencing Growth of MSMEs in Factor-Driven and Efficiency-Driven Economies. Advances in Finance, Accounting, and Economics Book Series, 189–214. https://doi.org/10.4018/978-1-6684-5647-7.ch010
Markin, M., & Korableva, S. (2025). Analysis of the Development of Small and Medium-Sized Enterprises in Russia in the Long Term: Factors and Growth Barriers. Teoretičeskaâ Èkonomika, 0(4). https://doi.org/10.52957/2221-3260-2025-4-169-186
Salim, M. N., Abd Rahman, N. H., Susilastuti, D., Astuty, P., Abd Samad, K., & Marlapa, E. (2024). Macro Determinants of Export-Based MSMEs in Indonesia and Malaysia. Interdiciplinary Journal and Hummanity, 3(12), 843–861. https://doi.org/10.58631/injurity.v3i12.1373
Yasrizal, Y., Harmaini, H., Abd Manan, A., & Mahrizal, M. (2023). RELATIONSHIP BETWEEN MSMEs AND FINANCIAL INSTITUTIONS IN WEST ACEH. Jurnal Ilmiah Teunuleh, 4(1), 1–10. https://doi.org/10.51612/teunuleh.v4i1.116
Ghatge, D., Taware, R., Kshirsagar, P., Jadhav, D. K., Jagtap, V., & Bhosale, A. M. (2024). Marketmate: Systematic Literature Review on Correlation Between MSME Investment Turnover and Employment. Deleted Journal, 2(12), 2828–2834. https://doi.org/10.47392/irjaeh.2024.0391
Sinha, K. J., Sinha, S., & Sinha, B. J. (2024). Micro, Small, and Medium-Sized Enterprises (MSMEs): The Significant Role and Challenges in Indonesia’s Economy. International Journal For Multidisciplinary Research, 6(3). https://doi.org/10.36948/ijfmr.2024.v06i03.20824
Singh, M. (2025). The Role of “Micro, Small, and Medium Enterprises” (MSMEs) of India in Achieving United Nations Sustainable Development Goals (SDGs). https://doi.org/10.5281/zenodo.17131598
Alie, M. S. (2025). Driving Local Productivity: The Interplay of MSMEs, Government Spending, and Economic Growth. Shirkah Journal of Economics and Business, 10(2), 254–273. https://doi.org/10.22515/shirkah.v10i2.827
Vyas, D. K. (2013). Growth and Performance of Indian Micro, Small and Medium Enterprises (MSMES) in the Post Globalization Period.
Boateng, K., Sodem, N., & Nagaraju, Y. (n.d.). The Contribution of MSMEs to the Growth of the Indian and Global Economy. https://doi.org/10.5281/zenodo.2602969
Simanjuntak, F. H., & Putri, N. S. (2025). Membangun Ekonomi Berkelanjutan: Kontribusi UMKM dalam Peningkatan Pendapatan Masyarakat. Jurnal Nuansa, 3(3), 223–230. https://doi.org/10.61132/nuansa.v3i3.1955
Tahir, H. M., Razak, N. A., & Rentah, F. (2018). The Contributions Of Small and Medium Enterprises (SME’s) On Malaysian Economic Growth: A Sectoral Analysis (pp. 704–711). Springer, Singapore. https://doi.org/10.1007/978-981-10-8612-0_73
Rohatg, G. (2022). The Hidden Engine: Unraveling the Impact of Small Businesses on any National GDP. Journal of Economics & Management Research, 1–4. https://doi.org/10.47363/jesmr/2022(3)228
Batrancea, L., Balcı, M. A., Chermezan, L., Akgüller, Ö., Masca, E., & Găban, L. V. (2022). Sources of SMEs Financing and Their Impact on Economic Growth across the European Union: Insights from a Panel Data Study Spanning Sixteen Years. Sustainability, 14(22), 15318. https://doi.org/10.3390/su142215318
Nkamnebe, O. E., Nwokocha, A. F., & Oladipo, A. O. (n.d.). Do Small and Medium Enterprises Spur Economic Growth? Evidence from Nigeria (1999-2020). International Journal of Research and Innovation in Social Science. https://doi.org/10.47772/ijriss.2023.70968
Song, M., & Ahn, Y. K. (2024). The determinants of SME success in the Long Run: an ecosystem perspective. Applied Economics. https://doi.org/10.1080/00036846.2023.2301220
Markin, M., & Korableva, S. (2025). Analysis of the Development of Small and Medium-Sized Enterprises in Russia in the Long Term: Factors and Growth Barriers. Teoretičeskaâ Èkonomika, 0(4). https://doi.org/10.52957/2221-3260-2025-4-169-186
Al-Afeef, M. A. M. (2020). The impact of small and medium enterprises on gross domestic product and unemployment: evidence from jordan 2009-2018. International Journal of Economics and Financial Issues, 10(2), 181–186. https://doi.org/10.32479/IJEFI.9153
Memili, E., Fang, H., Fang, H., Chrisman, J. J., Chrisman, J. J., & De Massis, A. V. (2015). The Impact of Small- and Medium-Sized Family Firms on Economic Growth. Small Business Economics, 45(4), 771–785. https://doi.org/10.1007/S11187-015-9670-0
Jauhari, H., & Periansya, P. (2021). Economic Growth, Poverty, Urbanization, and the Small and Medium Enterprises (SMEs) in Indonesia: Analysis of Cointegration and Causality. Binus Business Review, 12(2), 143–150. https://doi.org/10.21512/BBR.V12I2.6573
Audretsch, D. B. (2002). The Dynamic Role of Small Firms: Evidence from the U.S. Social Science Research Network. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1510987
Rahimlou Benis, A. (2014). The Impact of Small and Medium-Sized Enterprises on Economic Growth in Iran. Global Journal of Management and Business Research, 14(2).
Amoah, J., Belás, J., Dziwornu, R. K., & Khan, K. A. (2022). Enhancing SME contribution to economic development: A perspective from an emerging economy. Journal of International Studies, 15(2), 63–76. https://doi.org/10.14254/2071-8330.2022/15-2/5
Imramziyeva, M., Исаева, А. У., Dzhubalieva, Z., Tapalova, A., & Бекетова, К. Н. (2024). The Role of Small and Medium Enterprises in Poverty Alleviation and Economic Well-Being. Eurasian Journal of Economic and Business Studies, 68(4), 101–112. https://doi.org/10.47703/ejebs.v68i4.454
Zafar, A., & Mustafa, S. (2017). SMEs and its Role in Economic and Socio-Economic Development of Pakistan. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(4), 195–205. https://doi.org/10.6007/IJARAFMS/V7-I4/3484
Muthuraman, S. (2020). Economic Development through Small & Medium Enterprise – A Conceptual Framework. https://doi.org/10.33422/3RD.ICBME.2020.03.24
Pandey, P., & Chaudhary, A. K. (2024). The Role of Micro, Small, and Medium Enterprises in India’s Economic Development: A Critical Analysis. Asian Journal of Economics, Business and Accounting, 24(7), 366–384. https://doi.org/10.9734/ajeba/2024/v24i71416
Muthuraman, S. (2024). Enhancing SME impact on Economic Development in Sultanate of Oman. Deleted Journal, 2024(4), 333–339. https://doi.org/10.53935/jomw.v2024i4.396
Foreword. (2022). SME Policy Index. https://doi.org/10.1787/8fbe4087-en
Cerda, M., Cervantes, D., Gertler, P., Higgins, S., Montoya, A. M., Parrado, E., Serrano, C. J., Undurraga, R., & Yañez-Pagans, P. (2023). Covid-19 Pandemic and SMEs’ Performance in Latin America. https://publications.iadb.org/publications/english/document/Covid-19-Pandemic-and-SMEs-Performance-in-Latin-America.pdfhttps://www.smefinanceforum.org/data-sites/msme-country-indicators?utm_
Published
2026-06-06
How to Cite
Bahl, R. (2026). National Income and MSME Density: A Cross-Country Empirical Investigation. International Journal of Social Science Research and Review, 9(6), 34-45. https://doi.org/10.47814/ijssrr.v9i6.3447
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