+380.000 other summaries
A unique study tool
A rehearsal system for this summary
Studycoaching with videos
Remember faster, study better. Scientifically proven.
PREMIUM summaries are quality controlled, selected summaries prepared for you to help you achieve your study goals faster!
Summary - Enterprise and small business : Principles, practice and policy.
1 Defining and measuring the small business
The Enterprise Churn
- Because there are fewer burdens to start a business, entry barriers are lower, so greater number of new enterprises.
- This stimulates efficiency, which means that inefficient organizations will exit the sector.
Trends in SE statistics
- Fast increase of SE in 80s, gentle increase since 1995.
- U shaped pattern of ownership rates: 30s high, 60s low, 80s high.
Labour Force Surveys
- Used to estimate number of self employed individuals and uncorporated businesses.
- Data is coming from a survey.
'N shaped business ownership' puzzle of the US. Two explanations:
- Static explanation: there is an equilibrium rate between economic development and business ownership.
- Dynamic explanation: rate of entry & exit. The enterprise churn.
Explanations for changes in business ownership
- Cost disadvantages: BO went down. Because before 80s, era of mass production, this means the minimum efficient scale (ME) was important. This promoted concentration of ownership and drove SE away.
- Technological changes: in 80s more PC, so BO went up. Lead to less economies of scale, smaller MES, more flexibility and new industries.
- Innovation: SE have advantages, less bureaucratic and more flexible.
- LE fragmentation: LE transfers risk by franchising. Leads to rise of BO.
- Development of service sector: more tailor made goals, rise of BO.
- Changes in Labour Market: unemployment pushed to selfemployment. BO rises.
Bolton's Quantitative approach of SE
- There is no single measure (asset, turnover) likely to fully account for size of an enterprise.
- So there's a variety of measures.
EU definition of SE
- Micro: <10 employees, 2 miln turnover, 2 mln balance sheet
- Small: <50 employees, 10 mln turnover, 10 mln balance sheet
- Medium <250 employees, 50 mln turnover, 43 mln balance sheet
Storey criticised Boltons qualitative approach- LE may run in highly personalized manner- Independent is relative concept (SE may be legally independent, but still rely on LE)- SE may perform in niche, and therefor have large market share
Problems with Bolton's quantitative definition
- Quantitative criteria are arbitrary and country/industry specific
- measures are eroded over time (inflation)
- no uniform definition
- How to measure informal/illegal/homeworking/network marketing?
Bolton's qualitative approach of smaller enterprise
- Independent (not part of LE)
- managed in a personalized matter
- relatively small share of market
- greater uncertainty
2 Government and Small Business
Implications for government action
- SE wants to maintain and develop product markets themselves.
- SE wants government to maintain strong economic environment.
- No demand for government to do things for specific firms.
Government action is good for 3 reasons
- Market failure: SE have lack of control and suffer specific barriers or unequal treatment, government should help this remove. (Training example)
- Create Jobs: SE can encourage economic growth.
- Develop a vision: strategic vision for the whole economy. Government should try to boost this.
LE dominance has long been encouraged by government
- Planning of supply during wars led to consolidations.
- Until 60s government encouraged price cartels.
- Growth of socialism led to nationalism & big subsiding.
The existence of a market failure does not justify government action. There are other alternatives. The limitations in government action are
- Lack of information
- Lack of business skills
- Difficulty in admitting mistakes are made
- Conflicting targets
- Difficulty in providing help that adds to total net ouput.
A Niche for government action:
- No generalized market failures
- Stabilize the economy
- Improve the regulatory regime
- Specific support should be channeled through B2B interfaces
Peacock identified 4 more weaknesses of government action
- Aims are vertroebeld by keeping everybody happy.
- policies are slow.
- Cost & Benefits are rarely assessed.
- No real costs for policy makers themselves, when things go wrong.
Government can focus targetting on
- stages of busines development (idea formation, startup, growth etc)
- Types of businesses
- factor inputs (land, capital, personel)
- general business climate (culture, ethics)
Government can take 3 roles in SE
- As regulator: determine rules of game and institutions.
- As economic agent: taxes, etc. Has effect on business finance and risk taking.
- As strategic planner: education, research, industrial policy.
Methods of government support
- Provide information
- Help with training & personal development
- Provide specialist advice
There are three ways in which government can help SE
The means of targeting policy is to target those businesses which either
- Will benefit the greatest from assistance.
- Will yield the greatest policy benefits.
- Avoid displacement.
dangers of targetting
- starting point of any change in business activity must be a managerial appraisal, not government
- Target groups are not stable
Aims of government support
- cost reduction (subsidies, loans)
- risk reduction (stabilize economy)
- increase information flow (make it available)
Benefits of targeting policy
- reduce range of expenditure
- focus resources where they are needed
- easier to market
Read the full summary
This summary. +380.000 other summaries. A unique study tool. A rehearsal system for this summary. Studycoaching with videos.