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Small business is an integral part of any market economic system, regardless of its level of development. World experience shows that large production and small business are not opposed to each other. If in industrial production 2/3 of all goods produced (in physical terms) are the result of the activities of transnational and large national corporations, then the value contribution to GDP creation and the share of employed workers is higher in small business. Big and small businesses interact and complement each other. However, the viability of small business requires a set of targeted government measures that initiate the launch of a self-sufficient mechanism to promote the development of this sector.
The role and place of small entrepreneurship in the national economy are best manifested in its inherent functions.
Firstly, small business forms a competitive environment. It is known that in a free market economy competition is a reflection of the relations of competition between economic elements, when their independent activity effectively limits the ability of each of them to influence the general conditions of circulation of goods in the market, and stimulates the production of goods that are needed by the consumer. Then the activity of market participants becomes dynamic, it is associated with economic responsibility and risk of the entrepreneur, which turns it into a kind of social engine of economic development. Small business helps to establish competitive relations, because it is antimonopolistic in nature, which is manifested in various aspects of its functioning. On the one hand, small business, due to the number of elements that make it up and their high dynamism, is much less susceptible to monopolization than large enterprises. On the other hand, under conditions of narrow specialization and the use of the latest technology, it acts as an effective competitor that undermines the monopoly position of large corporations. It is this feature of small business that has played a significant role in weakening and sometimes overcoming by developed countries the tendency of big capital to monopolize and delay technological progress.
Secondly, small business, responding quickly to changes in market conditions, gives the market economy the necessary flexibility. This feature has acquired special importance in modern conditions due to the rapid individualization and differentiation of consumer demand, acceleration of scientific and technological progress (STP), growth of the range of industrial goods and services.
Thirdly, the contribution of small business to the breakthrough in a number of important areas of STP, especially in the field of electronics, cybernetics, computer science, is huge. Contributing to the acceleration of the implementation of the latest technical and commercial ideas, production of science-intensive products, small business, thereby, acts as a conductor of STP. For example, most small firms that appeared in the late 80s in the UK are the most technically equipped. And in the USA, the small business sector accounts for about 50% of scientific and technical developments.
Fourthly, small business makes a significant contribution to solving the employment problem. This function is manifested in the ability of small business to create new jobs and absorb excess labor during cyclical downturns and structural shifts in the economy. In developed countries, small businesses account for an average of 50% of all employed and up to 70-80% of new jobs. While during the crises of the 70s and 80s in the developed countries there was a process of job cuts at large enterprises, small firms not only saved them, but even created new ones.
Fifth, an important function of small business is to mitigate social tensions and democratize market relations, because it is the fundamental basis for the formation of the middle class. Consequently, it serves the function of weakening the tendency towards social differentiation inherent in the market economy and broadening the social base of the reforms currently underway. Without focusing on the social base of the market environment, which is the middle class, the reforms introduced are doomed to failure.
Thus, the role and functions of small business are not only that it is one of the most important factors in the economic development of society, which is based on market methods of management. Its important function is to promote the socio-political stability of society, that is, it opens up space for free choice of ways and methods of work for the benefit of society and ensuring their own well-being.
In the conditions of economic destabilization and limited financial resources, it is small businesses that do not require large start-up investments, have a rapid turnover of resources, are able to solve the problems of demonopolization in the most rapid and economically feasible way, stimulate the development of economic competition.
