ECONOMICS

Factors Affecting Rapid Growth in the Small Business Sector in Many Economies in Recent Years

Factors Affecting Rapid Growth in the Small Business Sector in Many Economies in Recent Years

Introduction

Entrepreneurship may be understood as a function of several factors. There are certain micro and macro factors that are directly related with the rapid growth in small businesses in economies across the world. This is true in that an entrepreneur is essentially a person who sees an unnoticed profit opportunity and makes use of it. These factors have not only led to the growth of small businesses but also make the prerequisite for the existence of these businesses in the cut throat environment today (Holcombe, 2008, p. 5). The paper sheds light at the problems that were associated with the small business sectors and attempts to discuss the factors that have a positive bearing on the growth of small businesses in many economies in the past few years.

Problems with entrepreneurship

Reflecting on the past, about twenty years back, we see only a small number of small businesses. A survey of entrepreneurs revealed that there are certain problems that served as an impediment. Some of the most common ones highlighted in the survey include lack of availability of credit, technological deprivation, disparity in the rural and urban growth, and missing competent advice to small business owners (Khan & Alam, 2005, p. 33).

Management Capability

For the many years that were marked by the stagnation of small businesses and entrepreneurship, the small business owners had no experience required in running a business. There was no venue where they could seek this knowledge. They had a very low sense of business understanding. Much of what they receive is informal advice (Strahan & James , 2006, p. 1). It is only recently that government initiatives have been taken to address the issue. The government in New Zealand took this initiative by the name of Project Collaboration whereby they encouraged small businesses to employ business graduates to assure business development. This, they believed, could fill the gap of management capability.

This management capability is the key to success. This management capability in most cases comes from the family background. It is because of this reason that most of these businesses are set up as family businesses with several partners (Batista, 2008, p. 4). In this context, it is imperative to state that management capability differs with developing and developed countries. The entrepreneur in the developed nation is looked at with suspicion. He is essentially a profit maker in the eyes of the public.

There are personal factors associated with management capability as well. Some people are natural born entrepreneurs while the others develop the desire to work independently over time.

Technological Advancement

With the increase in the penetration of internet and personal computers, more and more small businesses are finding it easy to start their new ventures over the internet. This saves considerable amount of marketing, retailing and distribution costs for the start up ...