Summary Enterprise and small business : Principles, practice and policy.

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ISBN-10 027370267X ISBN-13 9780273702672
239 Flashcards & Notes
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This is the summary of the book "Enterprise and small business : Principles, practice and policy.". The author(s) of the book is/are Sara Carter. The ISBN of the book is 9780273702672 or 027370267X. This summary is written by students who study efficient with the Study Tool of Study Smart With Chris.

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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
    • Finance
    • Provide information
    • Help with training & personal development
    • Provide specialist advice
  • There are three ways in which government can help SE
    • Aims
    • Methods
    • Targeting
  • 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
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