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

A snapshot of the summary - Enterprise and small business : Principles, practice and policy. Author: Sara Carter ISBN: 9780273702672

• 1 Defining and measuring the small business

• 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.
• 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.