Enterprise and Small Business Principles
Chapter summary
This chapter has sought to provide various international definitions of smaller enterprises. It has shown that these vary internationally. Despite this, and the methodological problems of using a mix of survey (Labour Force Survey) and registration data (e. g. VAT registration), this chapter has clearly shown that SMEs account for the vast majority of enterprises in any given economy. The chapter has also demonstrated that the number of smaller enterprises has tended to increase over the last 30 years in most OECD countries. A variety of explanations - changes in the cost structure of industry, rapid technological development, innovation, an increase in the service economy, changes in the labour market and shifts in government policy - have been offered to explain why it is that the general pattern of business ownership has been increasing or ‘U’-shaped. These explanations, however, should not be seen in isolation with each other.
The chapter has also looked at economies that do not follow this pattern. Hence, it has looked at ‘decreasers’ such as France or Japan. The main concentration in the final section of the chapter has been on the US. It has shown that there are various static reasons for the US’s ‘n’-shaped pattern: measurement issues, the importance of larger enterprises or equilibrium rates. Two more dynamic interpretations were also offered: entry and exit; and the importance of fast-growth enterprises. Whilst the actual contribution of these two interpretations is still debatable, it is evident that what matters is not the actual static rate of business ownership in an economy but the dynamic nature of that economy.
