Professional Documents
Culture Documents
CH 2
CH 2
ESB
Economics of entrepreneurship
Marxist view
Growth of SMEs is explained by their
dependency on dominant large firms who
wish to mitigate risk & push down conditions
for workers
Schumacher’s view
Growth of SMEs is part of a trend towards a
more democratic & responsive society – ‘small
is beautiful’
Economics of entrepreneurship
Industrial economists’ view
Growth of SMEs is explained by the
attractiveness of an industry due to its
profitability, growth, barriers to entry &
concentration
Labour market economists’ view
Growth of SMEs is explained by an analysis of
the factors influencing individuals to set up
SMEs – their character traits, antecedent
influences etc.
Economics of entrepreneurship
Schumpeter’s view
Entrepreneurs set up SMEs to exploit
innovation and so create economic growth – a
process of ‘creative destruction’ with new firms
replacing inefficient firms
Product innovation
Process innovation
Market innovation
Charles Babbage & Chuck Hall
Radical
Scale of Major
innovation
Incremental
Frequency of innovation
Linkages with innovation
‘Gazelles’
Firm size
Industry structure
Location
Gazelles
Technology Economic
growth
Creative Talent
class
Florida
Astex
Entrepreneurial capabilities
Enterprise culture
Access to finance
Market conditions
Policy options framework
Nurturing Compensating
High
(e.g. Canada, (e.g. EU
New Zealand) countries)
Direct
assistance
to SMEs
Competing Limiting
Low (e.g. USA) (e.g. developing
counties)
Low High
Increasing
government Impediments to SMEs
intervention
Dennis, 2004
Policy options
Option 1
Option 2
Regulation
Competition policy
UK policy priorities for social enterprise
The bicycle