From Static Stages to Non-Linear States: Rethinking SME Growth

Marwan Attaallah, Henndy Ginting, Melia Famiola, Dedy Sushandoyo

Institute Teknologi Bandung

Small and medium-sized enterprises (SMEs) are commonly discussed through stage-based models that describe firm development as movement from start-up and survival toward growth, expansion, and maturity. These models remain useful because they offer a simple language for classifying firm development and identifying common managerial challenges. However, they become limited when SME growth is treated as a linear, predictable, and universal process. Many SMEs do not follow a smooth path from early stage to maturity. They may progress, stagnate, regress, restructure, renew, or exit depending on internal capacity and external pressure. This review paper examines the transition from static stage models toward a non-linear state-based view of SME development. It argues that SME development should be understood through current developmental conditions rather than fixed chronological stages. Five non-linear states are proposed: foundational viability, coordinated expansion, strain and misalignment, retrenchment and reconfiguration, and renewal and adaptive competitiveness. The paper also explains how SMEs may move forward, backward, circularly, or discontinuously across these states. By shifting attention from fixed stage progression to dynamic developmental conditions, this review provides a more flexible foundation for understanding SME growth, instability, decline, recovery, and renewal.

Article link: https://www.asianinstituteofresearch.org/JEBarchives/from-static-stages-to-non-linear-states%3A-rethinking-sme-growth