Why and how do policy-makers and practitioners intervene to encourage new
firm formation and development?
The role of new enterprising businesses has received increasing attention over
recent years. Due to the considerable benefits generated by new small enterprises,
the policy-makers and practitioners tend to provide the assistance towards their
formation and growth. Although they share the same objective, they frequently
present in different ways. Policy-makers is a broad term which refers to people who
are responsible for making and amending policies (Publicengagement.ac.uk, 2019).
For instance, the government of a country can be defined as policy-makers who
represents the macro-economic perspectives. Conversely, practitioners are
individuals who engage in the practice of an occupation. It can be better seen as the
micro-economic perspective which seeks for personal or relatively small group
benefits. This essay will indicate the reasons why the policy-makers and practitioners
supports the development of start-ups and the measures taken to achieve as well.
Since there are numerous advantages caused by creation of new firms, stimulating
economic and employment development via the utilization of entrepreneurship has
become one of the crucial objectives of the government. The development of small
and medium-sized enterprises (SMEs) plays a pivotal role in employment promotion.
As the increasing of population, if the employment problem cannot be alleviated, the
unemployment rate is likely to rise. According to Mccue and Lawrence (2018), the
evidence suggests that there are 2.5 million jobs created by new firms in 2015 and
points out that it always has positive effects on job creation. Hence, it obviously helps
with the issue of unemployment and poverty in some respects. Once the new wealth
generated, the disposable money will rise which allows individuals or households to
choose whether to save or spend the extra money, the consumption will boost
naturally. Furthermore, the growth of SMEs not only relieve the pressure of the
government towards the issue of employment, but also add to national income.
Higher tax revenue enables the government has more discretionary money to spend
on education and medical treatment domain, which therefore benefits every citizen.
Another purpose of policy-makers and practitioner assist the formation and growth of
startups is to foster innovation. Small businesses are relatively unstable comparing with
larger operations, they often face a strong crisis of survival. In order to survive, it has
to continuously innovate. For example, SMEs approximately account for
approximately 20% of patents, in biotechnology-related fields in Europe (Eurostat,
2014, cited in OECD, 2017). SMEs introduce the new products and services into
markets which stimulate the existing markets to respond to changes made by them in
social environment and technologies. With the innovations and advances, it will
ultimately result in a competition within the market. Thus, the quality of goods of
existing companies will be improved and as well as the productivity and efficiency in
order to cope with the threats of new entrants. Although the new firms enter the
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market, the local businesses are less likely being replaced. On the contrary, if the
existing businesses force the new businesses to leave the market, the market that
they left has already become competitive. Thereby, no matter which consequence,
the benefits outweigh the drawbacks in general.
Start-ups often face various obstacles which may cause the failure of businesses or
the generation of negative attitudes towards starting a business. Therefore, the
intervention and encourage from government and societies would be essential to
these novices. In the light of the predicament and the challenges they will meet, a
series of policies are presented by the government which contains “hard” and “soft”
assistance (Westhead, Wright and McElwee, 2011). Literally, “hard” support
measures refer to the substantial assistances given by the government, such as
financial aid and premises which directly motivate the establishment of the company.
Moreover, it also offers the business grants, reduced rate loan, tax concessions and
loan guarantees for the purpose of lessening the pressure and investment of startups. According to the statement of Small Business (2019), the government grants for
SMEs is approximately between £1,000 and £100,000 in the U.K.. There is no need
to repay the funds if it does not against the regulations set by the grant scheme. In
addition, the United States introduced a program called Small Business Innovation
Research (SBIR) in 1982, it aims to inspire the SMEs to make technological progress
and innovations which may be helpful for government to solve problems in an
efficient and low-cost way (National Research Council (US), 2008).
The government encourages the establishment of SMEs by issuing beneficial
policies, whereas practitioners are using the “soft” support measures which enables
the new firms to deal with the problems in a correct path and reduce uncertainties as
well. Owing to the limited resources and knowledge that the small enterprises
possessed, the intervention from the societies could be extremely effective. First of
all, they can encourage the graduates to start various technology-intensive small
businesses by organizing related events in order to motivate their entrepreneurial
awareness. Additionally, the practitioners may strengthen the training of existing
small business owners and enhance the development capability of small enterprises.
Furthermore, the practitioner may provide the strategic consultants to avoid risks of
start-ups due to the expensive mistakes especially for new firms.
In summary, although the government and society support for start-ups is
comprehensive and vigorous, not every start-up can ultimately achieve success and
be rewarded. In the first few years, the profit may not be ideal and even become
negative. The problem is how can entrepreneurs meet the financial requirements in a
long-term perspective. Therefore, a long-term strategic plan is essential for those
who intend to build a new company since there are various barriers and difficulties
have to be taken into consideration. Otherwise, if the company is built however the
problems haven’t been solved or haven’t found solutions, it may lead to failure.
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Reference
Eurostat. (2014). Patent Statistics at Eurostat. Mapping the contribution of SMEs in
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MCCUE, K. and LAWRENCE, J. (2018). Startup Firms On The Rise But Still Below
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https://www.census.gov/library/stories/2018/01/startup-firms.html [Accessed 20 Nov.
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National Research Council (US). (2008). Committee for Capitalizing on Science,
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