Trade and Industrialisation in Africa: SMEs, Manufacturing and Cluster Dynamics

The recognition that structural transformation and productivity growth provide the key to enhancing growth is a core component of economic theory and economic policy. These objectives could be met, Adam Smith argued, through the division of labour within and between enterprises. Further, added Smith, the division of labour was a function of the size of the market—the larger the market, the greater the scope for specialisation. Coupled with Ricardo’s argument that specialisation in comparative advantage allows for win–win outcomes through exchange, these core ideas in classical economic theory provide an effective rationale for international trade, especially for smalland medium-sized economies with limited domestic markets.