Entrepreneurship, Small Business and Public Policy Levers

Abstract

The author develops a progressively refined framework consisting of four typologies to help understand, explain, and analyze how various public policy levers impact new, small, and entrepreneurial businesses. Dimensions for the typologies include institutions and culture, competition and intended immediate beneficiaries of competition, impediments and supports, and policy objectives and direct/indirect action. Implications emerging from the typologies lead to potential hypotheses that can be subject to further investigation and empirical testing.

Notes

1 Not all taxes lead to higher transaction costs. Taxes to pay for a legal system that enforces contracts is an example. There is also some trade‐off between public services efficiently provided and taxes paid (Bergh and Henreckson 2010).

2 Culture also can create impediments, often quite severe ones. For example, the extraordinary degree of expected nepotism in the Philippines can turn an otherwise promising business into a family employment agency regardless of the firm's employment needs or the family employee's value compared with other (nonfamily) potential employees. Typology III refers exclusively to institutional impediments.

4. The Index of Economic Freedom yields similar results on comparable items.

4 Vesper (1984) outlines seven reasons that underlie barriers to action supporting entrepreneurs: (1) discontent is the heart of entrepreneurship. Politicians cannot promote the type of discontent that often yields entrepreneurial activity, (2) entrepreneurship means competition and nobody likes competition, (3) entrepreneurs, particularly the people who form businesses are an invisible constituency, (4) people who start and grow businesses are self‐disciplined, successful people, not the needy that society typically supports, (5) entrepreneurship takes time and politicians do not have it, (6) more successes inevitably mean more failures and politicians do not want to be associated with failures, and (7) failure to produce an entrepreneurial start‐up is not a clear and obvious failure, an outcome children of win/lose elections cannot understand.

6. The reader will note the public choice rationale behind this argument and its corollary.

7. Garrett and Wall (2005) employ a similar concept, referring to Direct and Indirect as Active and Passive policy. In their scheme, active policy effectively targets firms or industries while passive policy targets the environment.

8. There can be more effective ways than immediate ownership to use enterprise to address broader social interests than does business ownership (Dennis, 1998; Schreiner 1999).

Additional information

Notes on contributors

William J. Dennis jr.

William J. Dennis Jr. is a senior research fellow at the National Federation of Independent Business (NFIB) Research Foundation.