Entrepreneurship, Small Business and Public Policy Levers

By Dennis, William J., Jr. | Journal of Small Business Management, April 2011 | Go to article overview

Entrepreneurship, Small Business and Public Policy Levers


Dennis, William J., Jr., Journal of Small Business Management


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.

Part 2

The purpose of this paper is to provide a framework of typologies for the analysis of public policies impacting new, small, and entrepreneurial business. Part 1, appearing in the previous issue of this journal, presented a rationale for the analysis of generic public policy and smaller firms, developed typology as a method to frame the levers of public policy that impact these businesses, and advanced the first two and their implications of the four typologies constituting the overall structure. The first typology offered the dimensions of institutions and culture, and the second the dimensions of competition and beneficiaries. Part 2 continues, presenting the final two typologies in the framework.

Typology III--Impediments and Supports

The third typology in this analysis examines the policy levers available to constrain and/or encourage entrepreneurial firms, though the discussion applies equally well to new and small ventures. These levers are the laws and programs one would immediately recognize as the public policy, coordinated and not, which shapes the incentive structure for owners of new, small, and entrepreneurial businesses. The focus of Typology III is on programs, administrative burdens and rules, readily identifiable incentives and constraints, effectively the supports and impediments that together form what has been described as small business policy (Lundstrom and Stevenson 2001), the specifics of which could as easily be applied to new and/or entrepreneurial firms. This typology differs from the institutions dimension in Typology I in its specificity, immediacy, and limited application, for example, a lending program in contrast to a constitution.

Governments employ a mix of two approaches to affect the behavior of new, small, and entrepreneurial business owners. The first approach is to alter impediments regulating specific business activity. For the most part, "alter impediments" means to reduce them (Hoffman 2007; OECD 2005; World Bank series), in other words, to reduce transaction costs (den Butter and Hudson 2009). The objective in this approach is to diminish, hold minimal, or eliminate barriers to entry and growth that would not be present were it not for a government intervention and/or some type of anticompetitive business behavior.

Reduction of barriers can result from wholesale destruction of regulatory systems, such as experienced in the trucking and commercial airline industries in the EU and the United States over the past several years. Or, it can result by making regulatory structures more efficient across-the-board, that is, reducing the administrative burdens associated with regulation (World Bank series). Or, it can result by restructuring barriers to fit particular firm characteristics, such as size, thereby destroying systems and/or reducing costs for targeted firms (Brock and Evans 1986; Dennis 2009).

The second policy approach to encourage entrepreneurial and/or smaller firms and their owners is associated with public provision of assistance, also known as support programs, or sometimes termed economic development programs. These publicly subsidized initiatives typically offer services directly (or indirectly through third parties) to small-business owners and/or their firms. They rarely offer supports specifically to entrepreneurs unless entrepreneurs happen to be a subset of small businesses, though that may be changing (Audretsch and Beckmann 2007; Gilbert, Audretsch, and McDougall 2004). …

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