Effect of SMEs Expansion on Handmade Carpet Comparative Advantage. The Case of Isfahan City

Carpet industry in Iran is one of the most popular industries in non-oil sector that has a potential capacity to absorb the foreign exchange and in addition to promote employment, and more job opportunities. This industry is also capable to compete in international arena and has very important role in maintaining and enhancing competitive ability of industry, introduction of the Iran economy to world economy and expanding of small and medium enterprises. This paper aim to investigate the comparative advantages of Isfahan carpet industry which its silk carpets with beautiful designs is quite popular in international markets. In this regard, Domestic Resource Cost (DRC) Index has been used to measure the comparative advantage and then this index is calculated for SMEs based production to identify whether promotion of SMEs effect carpet industry comparative advantages. Findings show that Isfahan carpet industry generally has comparative advantage. Furthermore, breakdown of this industry in Isfahan city to small and medium enterprises and also individual outputs and calculating DRC index for both of them, is concluded that small and medium enterprises have more comparative advantage than individual outputs, while expanding of these enterprises should lead to improvement of this industry comparative advantage.