The SMEs’ Role in Industrial Development Based on the Diffusion Process Modeling

Small and medium industries are some of the most important economic sectors in any country. These industries, usually transforming to business incubator by economies of agglomeration in industrial centers, while large industries are becoming growth poles based on economies of scale. In the regional economics framework, SMEs affect the geographic space and large industries affect the economic space. While small industries by relying on the diffusion effects play their role in industrial development and economic growth as a business incubator. The present article is examining and modeling two issues in the field of small and medium industries’ activities effects: the diffusion process modeling and the modeling of how information transmission (or similarly, technology and innovation). Both issues can be brought up in the wave theories. Among two given regions, differences between the type and function of industries can usually make the difference between the waves. considering that each industry has its own preceding and following effects, each region also proportion to the type of established industries in it can have preceding and following effects on the other regions in geographic space and economic space. For the diffusion process model, the approach of gravity model, and for the process pattern and how information transmission, a hierarchical system is used. In both methods, the results are shown in form of the diffusion models in general and under specific conditions. The extracted theoretical functions indicate how the regions interact based on the types of established industries in them. The effects of the considered models show that the SMEs can have significant effects on the surrounding regions around via sending permanent innovation waves, information, and other development waves.