Academic journal article Journal of Economic Issues

Coordination and Competition in Small Business Policy: A Comparative Analysis of Australia and Denmark

Academic journal article Journal of Economic Issues

Coordination and Competition in Small Business Policy: A Comparative Analysis of Australia and Denmark

Article excerpt

Small business policy has become a major focus of industrial policy initiatives in the OECD countries (Storey and Tether 1998). A range of policy measures are utilized in support of small business, including direct financial support, the provision of advisory services, the education and training of entrepreneurs, and linkages between firms and the social environment. These policy measures are often regarded as interdependent, creating an overall public policy system in support of small firms (Parker 1999, 2000; Storey and Tether 1998). While there is a common trend of increasing support for small and medium sized enterprises (SMEs) across the OECD, different countries appear to have developed very different approaches to small business policy (OECD 2000a).

The purpose of this paper is to develop a conceptual framework for the cross-national comparison of small business policy. In the first section of the paper, existing frameworks for the comparative analysis of industrial policy are expanded to accommodate the focus on the firm in small business policy. This reflects the increasing tendency to link competitiveness to the strategic behavior of organizations within a particular national context (Porter 1990).

The "varieties of capitalism" or "business systems" approach (Soskice 1999; Whitley 2000) forms the basis of the conceptual framework that is developed in the paper and that is applied to Australian and Danish small business policy. The objectives of small business policy in the two countries are examined with reference to whether they seek to develop or reinforce a competitive or coordinated business system for small firms.

The "varieties of capitalism" approach suggests that competitive and coordinated business systems are oriented toward success in different types of industries. Small business policy can therefore be understood as encouraging competitiveness in different industry sectors, depending on whether it has a competitive or coordinating orientation. The implications of the Australian and Danish approaches to small business policy for industrial competitiveness are explored in the final section of the paper.

A Conceptual Framework

The development of an appropriate framework for the comparative analysis of small business policy can be guided to some extent by current approaches to the comparative analysis of industrial policy. Studies of industry policy have traditionally distinguished between two different types--those that involve targeted intervention and those that do not. Industry policy is targeted if it is directed to particular sectors of industry. Targeted industry policy is unique in the sense that it focuses on outputs of the production process and establishes policy influences over the structure of industry (Audretsch 1998, x). There is a difference between targeted intervention that is designed to promote new industries and that which is designed to manage decline in existing industries. The latter is sometimes defensive in nature, rather than transformative. In more recent times, policy has focused on horizontal measures that, by definition, do not involve sec-total intervention and do not directly distinguish between part icular industries, although they may have an indirect influence on industry structure (Audretsch 1998). Instead, horizontal measures focus policy initiatives on inputs in the production process. One category of horizontal measures focuses on upgrading the quality of inputs in the production process, including labor and technology. Public policies that influence the quality of labor include industrial relations policies, active labor market policies, and in particular, training policies. Policy intervention might also seek to enhance the technological capabilities of existing industries and firms and the development of new products and processes. The second category of horizontal measures includes policies that focus on business costs and price competitiveness. …

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