CQ 3: Should governments support small businesses?
8 important questions on CQ 3: Should governments support small businesses?
Should governments support small businesses? (2)
- General support/ incentives
- Develop entrepreneurial ecosystems to foster business venturing
- "The necessary oxygen of resources, incentives, markets and supporting institutions for the creation and growth of new firms"
What is the main finding for 'Example: Unemployment policies'?
- Lowering benefits a good idea?
- Do these individuals have the skills? (necessity entrepreneurship), is there sufficient local demand?
Strategic direction of policy: what is the segmentation of entrepreneurship policy decided by? (3)
- Mice
- Gazelles
- Elephant
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What are potential market failures for mice? (4)
- Competition policies in developed economies designed to fight against a lack of competition or unfair practices
- late payments by large firms to small firms
- Financial support to help disadvantaged communities to start up
- loans/ grants
- refugees
- Business support services to help young people become aware of the entrepreneurial option and develop their competencies
- mentoring/ counselling/ information/ signposting
- Silicon Valley
- spillover benefits from demonstration/ learning
- knowledge
- networks
What are other reasons for supporting mice? (4)
- Small firms generate new jobs
- New firms provide innovation, choice and variety to consumers
- Valuable source of competition
- replace inefficient businesses and threaten existing business
- Need a 'pipeline' of start-ups to achieve fast growth firms
What are the main reasons for not supporting mice? (2)
- Doubts about the 'quality' of jobs: earnings in self-employment relatively low, long working hours, considerable 'job destruction' amongst small businesses
- The self-employed are happier with their work than wage-workers but choose self-employment for non-pecuniary reasons: so why should government subsidise people's preferences
What are more reasons for not supporting mice? (4)
- Many start-ups and small businesses do not innovated; instead they enter easy to enter markets which often face hyper-competition
- Efficiency of production is relatively low in small firms (family firms)
- New self-employment is often due to job substitution effects (solo self-employment)
- Not so efficient for long-term job creation: Shane (2009) shows that it takes 43 new businesses to create just 9 jobs over a 10 year period
- 'Stop subsidising the formation of the typical start-up and focus on the subset of businesses with growth potential'
What are potential market failures for gazelles? (4)
- Entrepreneurs lack managerial training
- they are not prepared to run a large firm
- Entrepreneurial firms struggle to access appropriate finance (debt/ equity) which makes it difficult for them to grow
- Firms lack support and assistance in terms of developing networks that can support them
- Entrepreneurial firms are unaware of potential export opportunities
- export assistance
- export guarantees
The question on the page originate from the summary of the following study material:
- A unique study and practice tool
- Never study anything twice again
- Get the grades you hope for
- 100% sure, 100% understanding
