Sample Literature Review On Entrepreneurship And Public Policy
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On a global scale, the economic environment has shifted entirely. More and more enterprises are on the rise even as the public sector fails to provide enough employment opportunities. The levels and indices that are provided in relation to the rates of unemployment are staggering. Graduates and professionals are released from various institutions every other year only to be confronted by the market marred by joblessness. It is for this reason that consortiums and non-governmental organizations have come up with measures to curb the unemployment menace due to the various compounding effects that result from it. The government has also not been left behind in the fight against unemployment and economic growth.
A number of start-up companies have been instrumental in creating employment opportunities. The long term effect is that significant growths have been realized within the economic circles. In line with this realization, policy makers have taken it that entrepreneurship is a channel that can be used in bringing about economic growth and increasing job opportunities. As a result, they have developed public policies aimed at encouraging and enhancing the development of small businesses and enterprises as a way of boosting economic growth. This paper is a literature review that will examine the dynamics of entrepreneurship and what a rise in entrepreneurship means for the public policy sector.
“Entrepreneurship and public policy” by Mokry, is a book that explores the effects of policies that governments come up with and how they impact on various enterprises within a country. It looks at some of the guidelines that can be used to ensure an enabling environment for entrepreneurs to ensure economic development. Contrary to the argument presented in this paper, it provides reasons as to why entrepreneurship is a right path to follow with an aim to ensure that economic growth is attained. In the book, Mokry (1988, p. 67) explores the idea of understanding the dynamics that constitute entrepreneurship and the impact that the government initiative have on these enterprises.
In as much as the author advocates for the use of enterprises and start-up companies as a means of ensuring that jobs are created and the economy is grown, he also directs the reader to look at the various factors that arise in its wake. According to him, it is necessary to develop a framework that is somewhat realistic regarding the field of policy design on entrepreneurship. This book offers great insights both for and against the concept of enterprises being the key to economic growth. It allows the reader to explore both worlds with detailed research and eye-opening insights.
Lazear, in his article “Entrepreneurship” in the Journal of Labor Economics (2005), argues that in the current economic world and environment, an entrepreneur holds the single most important role. He brings the concept of small businesses being the holding-stones for the current economies owing to the fact that they create employment, encourage innovativeness and in the long-elicit growth in the economy. According to Lazear (2005, p. 647), it is due to such concepts that the government and various institutions take to providing individuals with loans, subsidies, and tax benefits if they are interested in starting businesses.
The book capitalizes on idolizing the world of entrepreneurship and small start-ups and painting them as the cornerstones of the economy. However, looking realistically at the success rate of these start-ups, it then begins to makes sense that these policies are misguided. Most governments today have ministries and departments dedicated primarily to encouraging entrepreneurship within their countries. Creating polices that are specifically directed towards providing conditions for the development of enterprises makes raises a number of questions. The long-term goals and effects have to be the basis of each and every policy that is created.
“Entrepreneurial action, public policy, and economic outcomes,” by Salvino, Tasto, Randolph and Edward (2014) is the first book that offers a realistic approach and analysis regarding entrepreneurship and economic growth. The book begins by acknowledging the importance and potential that enterprises and small businesses hold in regards to driving growth in the economy. It explores the relationships that exist between entrepreneurship, economic growth and economic freedom, but most importantly it brings out a new concept of productive and unproductive enterprises.
The argument is that in as much as small businesses and start-ups have the potential in bringing about growth in the economy, keenness and detail has to be ensured in determining which ones are likely to fulfill these goals. Loans and tax benefits to some start-ups are a waste of time since most of them fail to reach the profitable stage. It is necessary for policy makers to redefine their strategies and framework to ensure that the support they offer is accorded at specific stages of growth. It makes sense to provide backing for a company that has proved its potential. The best criteria that can be used to identify success potential of an organization is through
A number of reasons have been associated with the bad nature of creating policies that depict entrepreneurship as the crucial component of economic growth. Persson explores some of these challenges in his work termed “The survival and growth of new establishments in Sweden” (2004). According to Persson (2014, p 425) for one, the people creating most of the start-ups and enterprises are unemployed; as a result, most of their decisions are aimed at creating income for themselves before creating wealth and employment opportunities. The chances of such start-ups growing into wealth and job creating enterprises are quite minimal.
This is a direct postulation that can be used to come up with a general assumption regarding start-ups. In this line of thought, one realizes that it does not make economic sense to come up with policies aimed at facilitating such enterprises. Persson discusses the survival rates and growth stories of companies around Sweden. The picture depicted is one that has been replicated around the world in various countries.
In the long run, most start-up companies fail within the first two years of operation. This means that the jobs that had been created are lost, and any form of remittance that was being collected by the government disappears too. As dangerous at it sounds, policy makers still insist on creating enabling environment through policies to allow the flourishing of entrepreneurship. The loans and tax benefits are quite a huge price to pay for unguaranteed investments.
According to Carree, Van Stel, Thurik and Wennekers in their book “Economic development and business ownership” (2002, p. 271), it is more likely for people to develop or come up with enterprises in the impoverished areas compared to the wealthier regions. Having this in mind, one realizes that in most cases, such environments do not posit proper ecosystems for the growth and success of an enterprise. The conditions and challenges that a start-up faces in such an environment can be quite frustrating to allow a company to grow to its full potential. As a result failure and stunted growth is likely to be experienced. Looking at the some of the policies that are directed towards providing enabling environments for growth of such start-ups like tax benefits, become losses, in the long run.
In the article, “Employment growth and entrepreneurial activity in cities,” one can easily identify it as the classical definition and point out at the clear explanation it provides regarding the lack of rationality in developing and implementing policies that encourage the entrepreneurship and small business start-ups. Acs and Armington (2004, p. 912) discuss some of the policies that governments implement include offering loans, regulatory exemptions, and tax benefits just to name but a few. These are incentives that are aimed at encouraging people to develop business ideas and grow them into companies. The expected outcome of such moves, as explained in earlier, is to result in a subsequent growth in the economy and job creation sectors.
The resultant unexpected effect is that competition is created among the various industries that arise as start-ups. The enabling environment that is created by the policies leads to the development of numerous start-ups that choke each other up with the stiff competition amongst themselves (Acs and Armington, 2004 p.916). The very actions that are aimed at ensuring the growth of numerous companies and enterprises end up nipping them in their buds. Such are the policies that need to be looked at with rationality and the eventual outcomes that are gotten.
There is no doubt that small business and start-up companies hold a great potential for revitalizing the economic sector. The ability to create jobs and generate wealth is equally unquestionable; however, not all start-up companies are capable of achieving this fit. The literature review that is brought out in this paper takes the reader through the various aspects and dynamics that are associated with entrepreneurship. Policies are a major determinant in the field of entrepreneurship. The long term goal for an enabling environment for entrepreneurship is job creation and generation of wealth.
A number of incubation centers have been brought up to help entrepreneurs nature and grow their innovative ideas into meaningful start-ups. Another assumption that is often held is that the more the enterprises, the greater the growth in the economy. This, however, fails to be actualized owing to the very minimal success rate that most start-ups enjoy. Up to 60 percent of start-up companies fail to attain the profitable stage, as explained above.
This then begs one to reconsider the importance of encouraging start-ups and entrepreneurship in relation to the public policy. The idea that more enterprises result in improved economic situations is an idea that is flawed, and this makes it a dangerous myth. An important factor that comes out is the need to focus these policies on productive enterprises which are crucial for economic growth. The final assertion that can be deduced from this paper is that entrepreneurship is an important component of the growth of the economy, but it does not entirely mean that it can be used as the main avenue to generate economic growth or innovation.
Acs, Z. J., & Armington, C. 2004. Employment growth and entrepreneurial activity in cities. Regional Studies, 38(8), 911-927.
Carree, M, Van Stel, A., Thurik, A. R., & Wennekers, S. 2002. Economic development and business ownership: An analysis using data of 23 OECD countries in the period 1976-1996. Small Business Economics, 79(3), 271-290.
In Salvino, R. F., In Tasto, M. T., In Randolph, G. M., & Edward Elgar Publishing. 2014. Entrepreneurial action, public policy, and economic outcomes. Cheltenham, UK: Edward Elgar Pub. Ltd.
Lazear, E. M. 2005. Entrepreneurship. Journal of Labor Economics, 23(4), 649-680.
Mokry, Benjamin W. 1988. Entrepreneurship and public policy: can government stimulate business startups? New York: Quorum Books.
Persson, H. 2004. The survival and growth of new establishments in Sweden, 1987-1995. Small Business Economics, 23(5), 423-440.
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