The development of local entrepreneurship has become an integral part of the urban culture, creating an interest in the impact of small and medium-sized enterprises on the local economy, the satisfaction of the residents and their desire to remain in the city and bring up the next generation in their place of residence. A qualitative research approach, using semi-structured interviews with stakeholders of small and medium-sized enterprises in several cities in Israel was adopted to examine the situation of small and medium-sized enterprises from an economic, and social perspective. The findings indicated that while the local businesses fulfill a role in the social fabric of the city by connecting residents to their urban place of residence, the small and medium-sized enterprises are struggling economically, since they are faced with heavy competition from chain stores, malls and trading centers established in the peripheral regions.

Keywords: small and medium-sized enterprises (SMEs), economy, central authority, local authority, entrepreneur