This paper discuses the basic managerial deficiencies of Small and Medium Enterprises (SMEs) in Sri Lanka with special reference to the SMEs in Ratnapura District. The study is mainly based on primary data gathered from 57 of SMEs, which were selected from 287 SMEs using stratified random sampling method. Data was gathered using a structured questionnaire and interviewing labourors, officers of various SME supportive organizations and observing SMEs. The study was supplemented with the data collected from secondary sources as well. Data was analyzed using qualitative and quantitative techniques. The study found that even basic management functions like planning, organizing, staffing, directing and controlling are not properly practiced in most of the SMEs. Most SMEs do not have clear plans for future development, production process, marketing, financial activities etc. Owners (entrepreneurs) of most of SMEs act as managers handling all the responsibilities, which are not delegated to others. Therefore, most of the SMEs do not function efficiently due to the delay of decision-making process, poor organization, poor staffing, weak controlling and directing. Financial management of most of the SMEs is found to be very weak. Most SMEs do not calculate total expenses, total revenue, profit etc, for they do not keep any account systematically. Most SMEs do not provide any welfare facilities and retirement benefits like EPF and ETF to encourage labourers. Poor production planning and production process, weak practices of marketing and poor quality of the products are the other deficiencies of SMEs. Performance of many SMEs is very poor due to the deficiencies in management. Poor knowledge in management of entrepreneurs causes the managerial deficiencies. Therefore, SMEs cannot judge problems and barriers coming from internal and external industrial environment. The paper concludes that the growth of SMEs can be accelerated by developing managerial knowledge of entrepreneurs of the SMEs.

Prime objective of this study is to explore how different dimensions of network affect the Transaction Cost (TC) of Small Enterprises (SEs) in Sri Lanka. The data were collected from 376 SEs in Sri Lanka, conducting face to face personal interviews with respondents. The data were analysed using Partial Least SquaresStructural Equation Modelling. The results revealed that network density and size have significant negative effect on TC of SEs. Both have a negative significant impact on opportunism of exchange partners, positive significant effect on rational ability of the Owners of Small Enterprises (OSEs), significant negative impact on transaction uncertainty and positive significant impact on transaction frequency. Thus, the study provided sufficient evidences to conclude that network structure has a significant impact on mitigating TC of SEs in Sri Lanka. The study provides important insights for SEs and policy makers to forces their strategies to develop SEs strengthening network relationship between SEs and different stakeholders.

The study reviews the government SME development programs of Sri Lanka in the lens of transaction cost economics in order to understand whether they facilitate the development of a favourable transaction environment for SMEs to govern their transaction cost in an economizing manner. Data were collected from the national development plan, strategic plans of the cabinet ministries, which are responsible for the development of SMEs and other publications related to the government national level SME development programs. The study mainly analyses the activities of each SME development program being currently implemented by the Sri Lankan government, employing qualitative content analysis to understand whether they facilitate to access information and to select appropriate governance mechanism. The study recognized that SME development programs of Sri Lanka do not positively contribute to develop a favourable transaction environment for SMEs. The government SME development programs do not facilitate SMEs to access sufficient and reliable information which lead to make more rational decision, to safeguard transactions from opportunism and to select suitable governance mechanism. SME development programs have neglected in supporting formal governance; instead, they encourage relational governance to some extent only for selected SMEs. As a result, there is a high possibility that SMEs in Sri Lanka have a greater transaction cost which averts the growth of SMEs. Therefore, SME development programs need to focus their attention to develop a favourable transaction environment for SMEs providing reliable information which facilitate to make more rational decisions avoiding opportunism on the one hand and to select better governance structure on the other in order to accelerate the growth of SMEs in Sri Lanka.

The study explores how inter-personal trusts between the Owners of Small Enterprises (OSEs) and their exchange partners affect the mitigation of Transaction Costs (TC) of Small Enterprises (SEs) in Sri Lanka. Data were collected from 373 SEs located in nine Districts representing all Provinces in Sri Lanka, by conducting face to face personal interviews with the respondents. The data were analyzed using Partial Least Squares-Structural Equation Modelling. Results revealed that inter-personal trust between the OSEs and exchange partners has negatively affected firm TC, providing sufficient evidence to conclude that interpersonal trust has a significant impact on mitigating TC of SEs and important ing provid insights for policy makers to ther than o s new direction on focus their strategies conventional approaches to support SEs.

Small Enterprises (SEs) do not have capacity to collect and evaluate information to predict future behavior of business environment on one hand and they fail to avoid the hazards from opportunism of exchange partners on the other hand due to the lack of information. SEs develop informal and personal relationships with different members of the network expecting supports in order to overcome their limitation of information. The network relationships lead to build Social Capital (SC) (values of social relationships; i.e. inter-personal trusts, relational norms, flexibility, integrity, common understand etc.) and thereby facilitate access to information which have an influence on mitigating Transaction Uncertainty (TU). Therefore, the study attempted to explore how different dimensions of SC affect the mitigation of TU of SEs in Sri Lanka. The study mainly employed the survey method to gather data using quantitative methodological approach. The data were collected from 373 SEs located in nine districts representing all Provinces in Sri Lanka, conducting face-to-face interviews with the respondents. The data were analysed using Partial Least Squares-Structural Equation Modelling. The results revealed that different dimensions of SC (structural, relational and cognitive) have a significant impact on mitigating TU of SEs in Sri Lanka. Thus, the study has provided sufficient evidences to conclude that SC has a significant impact on mitigating TU of SEs. The study contributes to theoretical knowledge by synthesizing all the dimensions of SC and TU into a new framework and testing it empirically which extends the transaction cost economics in the context of SEs in Sri Lanka. The study contributes to the methodology quantifying SC of SEs using a multi-dimensional conceptual model. The study provides important insights for policy makers to focus their strategies to new direction rather than conventional supporting approaches to develop SEs.