Why and how do policy-makers and practitioners intervene to encourage new firm formation and development?
Intervention to encourage the growth of new firms is extremely common in the modern economy. The two main groups that intervene are policy makers and practitioners. A policy maker is defined as “a person responsible for or involved in formulating policies, especially in politics “ (Oxford University Dictionary 2013) in the case of firms formation this would usually be a government body local, regional or national or supra national in the case of the European Union. These people intervene generally for broad economic or macroeconomic reasons. Practitioners are defined as “one who practices something, especially an occupation, profession, or technique“ (American Heritage Dictionary 2000) in this context most likely a businessman of some kind. These professionals intervene for local economic or microeconomics reasons. Policy makers and practitioners often intervene to promote the creation and growth of new firms in the economy. Their reasons for doing are usually quite different but the results are often similar.
Policy makers wield huge influence when it comes to intervention in new firm creation and growth. Policy makers often put into place macro economic policies that seek to overcome attitudinal, resource, operational and strategic barriers to the formation of new firms. (Storey 1994) New firms represent a large portion of the new jobs created each year and therefore politicians are incentivized to make sure new firms are formed. In the past 17 years 63 percent of new jobs have come from small businesses in the United States. (SBA Office of Advocacy 2009) New firms are often closed within 5 years with only a third surviv...
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...y expand their sales base by having smaller businesses sell their products where it would be economical unfeasible for them to set up a branch. Practitioners such as bankers can provide support in the form of soft money to new businesses such as partial grants which do not have to be paid off until the business reached a certain size or level of profitability. (Disabilitymeansbusiness.com 2013)
In conclusion, policy makers and practitioners often try to assist in the formation of new firms but do not always succeed. Many firms fail despite all the assistance however the important factor is that the government continues to promote their creation so that new jobs and industries can be created. (Storey 1994) Both policy makers and practitioners need to ensure a level playing field so that the economy can grow, develop and compete with other economies around the world.
Brush, C. G., Kolvereid, L. L., & Widding, O. (2002). The life cycle of new ventures: Emergence, newness and growth. Boston, MA: Edward Elgar Publishing.
According to the U.S. Census Bureau, nearly forty-seven percent of all businesses employ fewer than ten employees. Small business is a vitally imperative to our nation’s well-being. Small business is responsible for creating the majority of our new jobs, employing nearly half of the American’s private workforce, and providing half of our country’s private non-farm gross domestic product (SBA 2009). Regardless of your politics, since President Barack Obama took office in 2008, an immense degree of emphasis has been placed on small business. Some of the emphasis has been positive while other parts have been negative.
New businesses will take longer to thrive with the United States falling economy. The faltering job market and the deepening slump in housing threaten to hurt consumer spending. Consumers are becoming more conscious of their spending and therefore using cash to pay for smaller necessary purchases. The cost of entertainment and other presumed luxuries may be pushed to the background by most families, when having to choose whether to pay for a bill or treat the family out. Thriving businesses will understand the need to provide a service or product at affordable prices.
...g. Businesses structures and regulations are strong and firm which help businesses around the nation. The rules and regulations from the federal government help and keep the people safe. Starting a business is easy and profitable. It may be easier to start a sole proprietorship rather than a corporation. But many can receive help from family or friend and start a partnership where there is help and support of a partner. There are advantages and disadvantages for all forms of business. There are endless opportunities for the American people. There optimistic attitudes can lead them to great wealth.
In America eight out of ten small businesses fail in just their first year. Competition and lack of financing are two huge factors that lead to businesses failing. In 2009 more and more workers started to leave their more secure jobs to start their own business and become entrepreneurs. (Hannon 68) Over six hundred thousand small businesses were started, but that number means nothing if eighty percent of them (480,000) were doomed to fail in only twelve short months. (68)
Although small businesses do not make a lot of major deals with large investors, most small businesses create profit revenue greater than large corporations. Small business creators are very brave considering only ten percent of small businesses survive. Unfortunately, some communities do not support local small businesses; they only support the large brand name and force small businesses to die out. Since small businesses will not have a name brand known around the world, many people from communities will not support them because they are not known on a national scale. “This, in turn will affect the local economy and drive capital out of their local economy. On average, for every one hundred dollars spent in an economy, if spent on a
Through my research I was able to relate what Klepper theorized makes an industry, and firms within it, successful to the theories of Schumpeterian entrepreneurs. Schumpeterian entrepreneurs are defined as entrepreneurs that enter new industries and create new markets, something that was seen with Henry Ford and the establishment of The Ford Motor Company. Prior to Ford, the automobile industry was split into two markets: high-end luxury vehicles, and cheap farming vehicles. Ford created a new market within the introduction of the Model T, forging the pathway for affordable, mass-produced automobiles. Within the concept of Schumpeterian entrepreneurship, there is a distinct difference between types of Schumpeterian entrepreneurs; through class discussions and Serguey Braguinsky’s essay Entrepreneurs and Their Economic Functions: Schumpeter and Knight, we defined pioneering Schumpeterian entrepreneurs as those who are the first to introduce new innovations to an industry, while imitating Schumpeterian entrepreneurs are those who enter the industry after the initial innovation in hopes of making a profit while also helping to diffuse the innovation. These distinct types of Schumpeterian entrepreneurs are reflected in Klepper’s idea of a shakeout--where many firms in an innovative industry drop out, despite continued industry growth, leaving a few large firms to dominate the industry. With this, we can conclude that pioneering entrepreneurs are most likely to survive a shakeout and become a dominating firm in the
...ividuals and systems should be developed to encourage innovation in a flexible way with few legal restrictions. Government and investors should work towards improving the infrastructure of the nation by providing facilities and platforms making it simple for any individual to innovate.
Government policy environment – a desire to reduce unemployment and make the economy attractive to inward investment as a source of employment and long-term growth
With globalization & liberalization opening up economies and shaping the world as one global village, competition has been on the rise & it is becoming harder day by day for firms to survive & flourish in this competitive environment. And for surviving in such an environment, where many companies go bankrupt any day, achieving business growth is a necessity, not an option. And for achieving growth companies have to diversify to multiple markets & multiple businesses, in order hedge their risks & keep growing & while doing so they have to be very quick, otherwise competition takes over the market & rest is history.
A lot of literature studied the ‘liability of smallness’ and the ‘liabilities of newness’ (Stinchcombe, 1965) especially for small and young firms. They suggest that entrepreneurial firms can minimize the costs and risks associated with foreign expansion over time (Lu & Beamish, 2001).
Growth in the small and medium business in Canada and other developed countries has been very significant. This sector of the business community now represents about 40 percent of GDP and accounts more than half of total employment. Today small businesses are more diverse and more vigorous than ever, but they also faces newer and more challenges or inhibitors to their growth than their older conter parts. This research will attempt to find the answer to the following hypothetical question:
Corporate Entrepreneurship can be seen as the process whereby an individual or a group creates a new venture within an existing organization, revitalizes and renews an organization ,or innovates. Zahra’s(1986) definition of corporate entrepreneurship suggests a formal or informal activity aimed at creating new businesses in established firms through product and process innovations and market developments,whereas sathe(1985) defines corporate entrepreneurship as a process of organizational renewal. Corporate Entrepreneurship has emerged as a much needed ingredient contributing towards the growth of any organization under a changing business environment.
Entrepreneurs create new businesses, and new businesses in turn create jobs, strengthening competition, and may even increase productivity through technological change. Increases in levels of entrepreneurship will result to an increase in economic growth (Nolan, 2003).Entrepreneurs by starting or setting up their businesses, will help with local development by locating less developed areas. The growth of industries and businesses in these areas leads to infrastructure improvements, such as better roads and stable electricity. Every business that is located in a less developed area will create opportunities that will improve the living conditions of people residing in that particular area (Nolan, 2003).
Small businesses have a clear relationship with the economy in general, and if we take an example like the U.S. where over 86% of businesses ...