Small and medium-sized enterprises (SMEs, also small and medium enterprises) or small and medium-sized businesses (SMBs). SMEs are businesses whose personnel numbers fall below certain limits. The abbreviation “SME” is used in the European Union and by international organizations such as the World Bank, the United Nations and the World Trade Organization (WTO). 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.

Small businesses in many countries include service or retail operations such as convenience stores, small grocery stores, bakeries or delicatessens, hairdressers or tradespeople (e.g., carpenters, electricians), restaurants, guest houses, photographers, very small-scale manufacturing, and Internet-related businesses such as web design and computer programming. Some professionals operate as small businesses, such as lawyers, accountants, dentists and medical doctors (although these professionals can also work for large organizations or companies). Small businesses vary a great deal in terms of size, revenues and regulatory authorization, both within a country and from country to country. Some small businesses, such as a home accounting business, may only require a business license. On the other hand, other small businesses, such as day cares, retirement homes and restaurants serving liquor are more heavily regulated, and may require inspection and certification from various government authorities.

Economic freedom is more likely to encourage the growth of small enterprises rather than big business

Economic freedom or economic liberty is the ability of members of a society to undertake economic actions. This is a term used in economic and policy debates as well as in the philosophy of economics. One approach to economic freedom comes from classical liberal and libertarian traditions emphasizing free markets, free trade, and private property under free enterprise. Another approach to economic freedom extends the welfare economics study of individual choice, with greater economic freedom coming from a “larger” (in some technical sense) set of possible choices. Other conceptions of economic freedom include freedom from want and the freedom to engage in collective bargaining.

The free market viewpoint defines economic liberty as the freedom to produce, trade and consume any goods and services acquired without the use of force, fraud or theft. This is embodied in the rule of law, property rights and freedom of contract, and characterized by external and internal openness of the markets, the protection of property rights and freedom of economic initiative. There are several indices of economic freedom that attempt to measure free market economic freedom. Empirical studies based on these rankings have found higher living standards, economic growth, income equality, less corruption and less political violence to be correlated with higher scores on the country rankings. It has been argued that the economic freedom indices conflate together unrelated policies and policy outcomes to conceal negative correlations between economic growth and economic freedom in some subcomponents.