Enterprise and Small Business Principles
Public policy
Another explanation for changes in business ownership rates is the role played by public policy since the 1980s. Greene (2002) has argued that faced with unprecedented levels of unemployment in the 1980s, the UK government of the time sought to shift the risk preferences of individuals towards setting up their own businesses. Hence, they supported a range of publicly or quasi-publicly supported schemes (e. g. the Enterprise Allowance Scheme, Small Business Loan Guarantee Scheme, Enterprise Zones, and the Prince’s Trust) that sought to improve the conditions for setting up a business.
Similarly, following on from the UK’s deregulation and privatisation of many of its public utilities in the 1980s, other OECD governments have sought to implement policies in the belief that over-regulated economies inhibit the entrepreneurial abilities of individuals. For instance, France which has seen a long-term decline in its business ownership rates has sought to reduce the administrative burdens faced by individuals seeking to set up a business (Henriquez et al., 2002).
This section has provided some explanations that attempt to account for the dramatic increase in the business ownership rates in very many OECD countries. Hence, prior to the 1980s, the business environment may be judged to be inimical to smaller enterprises given that consumer demand was relatively stable and, as such, there were cost advantages in developing economies of scale. Since the 1980s, though, consumer demand has become more uncertain and consumers more demanding. This has led to the development of particular niches. Equally, labour market changes and government policies may also have fostered changes in people’s propensities towards setting up a business. Finally, the section has shown that larger enterprises have sought to substitute capital for labour to compensate for uncertain demand and the rapid rate of technological change.
