Small and medium-sized enterprises

Small and medium-sized enterprises or small and medium enterprises (SMEs, 중소기업/中小企業) are companies whose annual sales or number of employees fall below certain criteria. Small enterprises outnumber large companies by a wide margin and also employ many more people. SMEs are also said to be responsible for driving innovation and competition in many economic sectors.

SMEs are usually defined in relation to the stage of economic development of a certain country depending on the economic situations and environment. See the official criteria provided by the SMBA.

Key words
small and medium business, social enterprise, full-time employees, independence of management from ownership

Definition
The Framework Act of Small and Medium Business (중소기업기본법) states in Article 2 (1) that an SME shall, by industry, satisfy the criteria such as the number of full-time employees, capital amount, total sales or total assets, etc. as well as another standard of substantial independence of management from ownership based on ownership and investment relationship, as stipulated by the Presidential Decree.

Now a new definition appears. According to the Social Enterprise Support Act (사회적기업육성법), among the social enterprises subject to paragraph 1 of Article 2 (Definition), the social enterprise as stipulated by the Presidential Decree means an SME which provides social services and job opportunities to the vulnerable social group, or, being engaged in business operations manufacturing and/or selling goods and services, pursues the social purpose by enhancing the quality of life of local residents and by contributing to the communities on condition that it is to be designated by the Minister of Employment and Labor subject to the deliberation of the Employment Policy Deliberation Committee.

By size and independence
According to the Implementing Decree of the Framework Act of Small and Medium Business, SMEs are defined by standards of size and independence. In this context, the enterprises of full-time employees over one thousand or total assets over 500 billion won are excluded from the category of SMEs.

For example, the size of SMEs by industry is as follows:
 * Manufacturing: full-time employees less than three hundred or capital amount less than eight billion won;
 * Mining, Construction and Transportation: ditto less than three hundred or three billion won; or
 * Wholesale, Retail, Services business: full-time employees by range from 50 to 300 and total sales from 5 to 30 billion won.

In terms of the standard of independence of management from ownership, though an SME satisfies the size standard, it shall be excluded from the concept of SMEs if:
 * More than 30 percent of the total shares issued of the SME is owned by a large company of total assets over 500 billion won; or
 * the SME belongs to the business group in which direct reciprocal shareholding is restricted.

Small enterprises (소기업/小企業) mean SMEs with the following criteria:
 * Mining, Manufacturing, Construction, Transportation: full-time employees less than 50;
 * Wholesale, Resale, Services business: full-time employees less than 10.

Win-win partnership
In view of the fact that 99 percent of all companies are categorized inot SMEs and 88 percent of labor forces are employeed by SMEs, the government has initiated a win-win partnership program with big corporations. See Win-win partnership.

Enterprise of middle standing
Thus, an enterprise of middle standing (중견기업/中堅企業) is differentiated from SME.