Academic journal article European Research Studies

Analysis Tools of Connecting Investment Opportunities and Investment Means in the Area of Small and Medium-Sized Enterprises

Academic journal article European Research Studies

Analysis Tools of Connecting Investment Opportunities and Investment Means in the Area of Small and Medium-Sized Enterprises

Article excerpt

1. Introduction

Entrepreneurship is a form of investment in a number of investment opportunities. In a wider context, we can talk about various innovations taking different forms. Just starting a company is a form of investment, and so is its operation, investment in HR or market position, market development, development of new products, etc. An entity can be restricted in its use of investment opportunities, or even disabled, by various barriers. These barriers are closely connected to financing, either directly, via a budget restriction, or indirectly, via costs connected to overcoming these barriers. Small and medium-sized enterprises are at a disadvantage, compared to big companies, and many investment opportunities are not taken advantage of, due to these barriers.

SMEs are hugely important for the entire economy. For example, in the UK the sector of SMEs represents 99% of businesses and employs 81.6% people (The Telegraph, 2014). Worldwide, according to OECD, SMEs represent 95 to 99% of companies in different countries and represent 60-70% of jobs (OECD, 2006). Considering the importance of the SMEs segment, there are various forms of support, whose purpose is to eliminate this disadvantage, and to enable the implementation of investment opportunities also to entities, that do not have the relevant financial and operating capacities. This is a beneficial activity, however, fairly demanding in itself, and not fully suitable for small or starting businesses. Concurrently, there are many ways of how to fund these businesses in an innovative market method. This paper shows the opportunities and barriers associated with the use of a financial market in this area.

2. Literature Review

The issue of connecting investment means and investment opportunities is similar to the general issue of sharing restricted resources. Therefore, the source literature focuses either on sharing wealth (Moulin, 2003), or the theoretical issue of dividing shared water resources that is resolved using similar methodology as when dividing financial resources (Houba, 2013), (van den Brink, 2011).

The importance of small and medium-sized enterprises is supported by various articles (The Telegraph, 2014) and OECD publications (OECD, 2006). The theoretical basis and the importance of barriers for establishing a company strategy is based on a model by M. Porter (Porter, 1998), and specific examples are drawn from specific research (AMSP CR, 2014) and (Hashi, 2001).

3. Barriers to Market Entry

Barriers to market entry are one of the factors determining the power of competition on the market. These aspects are analysed by the Porter model of five forces (Porter, 1998 p. 5) for the category of "risk of potential competition entry". The more barriers are built, the less competition forces affect the existing companies. These barriers have many forms and are created both intentionally, by the existing companies, or as part of company organisation, etc. The barriers can be divided into the following categories and examples:

* Natural (Geographical restrictions, Access to natural resources, etc.)

* Know-how and Experience (Know-how, Experience, Contacts, Processes, etc.).)

* Financial (Investment Demands, Access to Adequate Financing, etc.)

* Legal (Purposeful Legal Disputes, Complexity of Law and its Ignorance, Predictability of Judicial Decisions, etc.)

* Administrative (Rules and Instructions, Regulations, etc.)

* Operational (Savings based on Volume, Access to Distribution Channels, Transaction Costs, etc.)

Barriers generally protect existing companies on the market that have had the chance to adapt to the environment over time and become financially strong and have the means to overcome obstacles quickly. However, the list clearly shows that not even established companies have it easy--they just have a certain advantage which they have to maintain. …

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