Purpose -The purpose of this research is to show that small or medium enterprises (SMEs) have significant impacts on supply chain performance. They may take the roles of suppliers, producers, distributors, and customers. In this paper large firms and SMEs are compared in terms of strategic and operational choices. Design/methodology/approach -SMEs are classified on two dimensions -chain relationship position and strategic focus. Four types of SME characteristics are discussed: efficiency, coordination, collaboration, and innovation. Also presented are the five possible growth paths of SMEs, along with theoretical and managerial implications. Findings -The theoretical contribution of this paper to the nature of SMEs and their supply chain relationships is threefold: the differences between large enterprises and SMEs have been examined in terms of key management practices; key characteristics of four types of SMEs have been identified in terms of their supply chain relationship position and strategic focus; and the transition paths that SMEs may follow in moving from one type to another have been shown. The models presented in this paper give an informed insight and understanding of the dynamic changes that can transform SMEs within their supply chain relationships.Research limitations/implications -The growth paths that have been outlined for SMEs display diverse patterns. In view of the sheer numbers of SMEs that comprise the global economy, and their strategic roles as suppliers, component manufacturers, service providers, and distributors, their growth patterns may not be easily discernible over a short time period. Practical implications -Managerial implications of the study include: SME executives may diagnose their current business position and strategically plan intended changes by enhancing their operational capabilities and chain relationship positions, in view of changing market realities; most importantly, they may strive to take practical steps to evolve from Efficiency SMEs all the way to Innovation SMEs. The road-map presented in this paper may be helpful in benchmarking current operations and in planning future transitions. In this way, SME management may take practical steps to implement desirable growth paths through appropriate management practices that utilize appropriate intra-and inter-organizational capabilities. Originality/value -These SME growth patterns provide a useful framework for meaningful case studies that illustrate the potential for the dynamic transformation of SMEs.