Therefore, the contribution of SMEs to employment growth seems to exhibit some relationship with industrial growth rates. During the high growth period, large and medium firms seem to contribute more in terms of employment growth because many small firms graduated to become larger firms. The employment generation of a previously small firm became the contribution of a medium or a large firm. During the period of slowest growth or stagnation, not only did employment of large firms grow the slowest, but many firms also laid off workers and some even ceased operations altogether. In this situation, it is possible that we simultaneously observed the growth of many small firms and, in particular, firms of micro industries whose owners were former employees of a medium or a large firm. Many of these new business creators were formerly unemployed and possessed entrepreneurial ability or spirit to set up their own production for survival in their home towns during this difficult time. In this sense, we may view SMEs, particularly the small ones, as crisis shock absorbers that not only help provide employment during difficult times, but also prepare new entrepreneurs for graduating to run a larger firm when the economy recovers. It is interesting to note that during 1995–96 the growth rates of employment growth of micro and small industries were the highest in the northeast region and the provinces surrounding Bangkok, two areas that are the sources of most of Thailand’s workers.
Despite the fact that as more new small firms started up and they became sources of employment during the stagnation period, the capacity of SMEs to generate employment during normal times needs further investigation. This is because for the whole period of 1987–96, the proportion of SME employment out of total employment was much lower than the proportion of the number of SME firms out of total industrial firms, suggesting that large firms absorb more employees than SMEs. However, although SMEs generate less employment per firm by definition, they may be considered to created greater employment if it can be shown that they are more labor-intensive and thus employ a greater number of workers per unit of capital input or investment.