Enter almost any market in Uganda, Nepal, or Peru and you are likely to find streets filled with shops all selling the same items, whether it be rows of tire shops, stores selling the same wooden furniture, or shoe shop after shoe shop. It seems that if some of these firms merged to achieve larger scale, they could make more money. Are these firms behaving irrationally, or is the market set up in a way that allows many small businesses to collaborate rather than compete? Research looking at this and other key questions about the growth of small and medium enterprises (SME) was discussed in London last December at the Innovations for Poverty Action (IPA) SME Initiative’s fourth Working Group meeting.