The Impact of Government Support on the Growth of Small Businesses

The Impact of Government Support on the Growth of Small Businesses
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The Impact of Government Support on the Growth of Small Businesses
Literature Review
Small and medium-sized enterprises (SMEs) are indispensable to the growth of any economy considering that they make up over 95% of all businesses in nearly all countries around the globe. The size of an organization can be measured based on its profit/revenue or the number of workers it has. While small business is one with a workforce of not more than 50 people, medium enterprises generally have a workforce of between 50 and 100 (Morrison, Breen & Shameen, 2015). The main measures of a company’s growth and development are as follows: market share, which indicates the fraction of the market served by the firm; turnover, which signifies the quantity of sales during the fiscal year; growth in the labour force, which implies more staffs such as administrative, technical, professional or management personnel; and growth in profitability, which denotes an organization’s capacity to make profits (Tan and Lopez-Acevedo, 2014).
In any economy in the world, some of the crucial factors which drive economic growth include the formation of new businesses as well as the take-off of young small and medium-sized enterprises which are yet to attain substantial competitiveness. In these instances, a major impediment for executing and boosting new business ideas is the lack of financing, which serves to limit the take-off of a small business and conditions such companies to remain small firms over time (Norrman & Bager-Sjцgren, 2013). For these challenges to be overcome, various countries in different parts of the globe have created government programs aimed at supporting young small and medium-sized businesses. According to Dobbs and Hamilton (2015), such programs generally range from subsidies given to small businesses commonly referred to as seed capital programs (SCPs), capital markets and bankruptcy laws, tax transparency and provisions programs, supporting innovation in high-impact small businesses, and promoting export capacity. Chudnovsky et al. (2013) pointed out that government assistance to small and medium-sized businesses is of great importance since these businesses often face a large number of problems which threaten their viability and growth.
In their study, Cancino, Bonilla, and Vergara (2015) analyzed the impact of the Seed Capital Program on Chilean businesses. Chile’s Technical Cooperation Services executed the program. The researchers surveyed 682 businesses: 304 businesses were in the control group while 378 were in the treatment group. The SCP program provided a non-reimbursable cash subsidy which was aimed at supporting the take-off of young small and medium-sized enterprises that demonstrated the potential for growth (Cancino, Bonilla, and Vergara, 2015). The government of Chile had declared this program as a program that supported the development of opportunity-driven entrepreneurship. This means it only supported entrepreneurship that arose out of the desire for independence, from the existence of a business opportunity that was not envisaged previously, or from the desire to...