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The role and market functions of small business are clearly defined by both modern economic theory and the practice of implementing state economic policy. The main economic advantages of this economic sector are that small business responds much faster to fluctuations in market conditions, and even in conditions of developed competition, it is able to quickly identify and fill a free market niche, develop and effectively implement a new range of products and services that are in demand.
At the same time, small business effectively takes over the most technologically complex and resource-intensive production operations of large industrial enterprises, cooperating with them on the basis of contract or subcontract. As the prominent Austrian neoliberal economist L.F.Mises wrote, “a true entrepreneur is the one who produces a large number of better and cheaper goods, who, remaining the engine of progress, offers consumers goods and services that were previously unknown and inaccessible to them. It is thanks to the continuous ingenuity of the entrepreneur, his innovativeness and propensity for innovation in a market economy that competition, rivalry, the struggle for the consumer, a high level of labor productivity, reducing the cost and improving the quality of goods and services are maintained.”
In a market economy, small business performs the following main functions
- provides rapid and relatively low-cost creation of new jobs;
- ensures the introduction of innovations and commercialization of new technologies;
- ensures the growth of the level of innovation of industrial production and productivity of economic activity, effective restructuring of large industrial enterprises on the basis of such forms of economic integration as industrial business incubators and innovation and technology centers;
- promotes the weakening of monopoly and stimulates competition.
The small business sector is increasingly penetrating sectors of the world economy and becoming the functional basis of large industrial giants and corporations. For example, in the United States, small firms receive subcontracting orders worth about $ 20 billion annually from large enterprises.
In the United States of America, small business creates more than half of the gross domestic product produced in the private sector. In the US over the last decade, about 60% of all innovations were created in the SME sector and almost 75% of new jobs. In the United States, two-thirds of jobs are created by structures and companies belonging to the category of small business. At the same time, the efficiency of investment in small business is about 9 times higher than in large business.
In China, small business is a key area of economic modernization and economic development. Back in 2005, there were more than 3 million private enterprises and about 30 million individual entrepreneurs in China, most of which operate in the manufacturing sector. Today, Chinese goods produced by small firms can be found on the shelves in almost every corner of the world.
Every economically developed country in the world implements an effective and comprehensive state policy to support small businesses and even has specialized government agencies to support and stimulate small businesses.
In order to assess the effectiveness of the entrepreneurial policy of regional and local authorities, experts of the Open Society Foundation took part in the study of the effectiveness of the use of local financial and material resources in order to increase the revenues of local budgets at the level of regions and cities of regional significance, the implementation of local socio-economic programs, the organization of social dialogue and institutional interaction of local executive authorities and local self-government with the business sector of the territorial and local communities.
In the course of the monitoring, an analysis of the regulatory framework for the implementation of state and municipal policies to support the development of entrepreneurship, in particular, the small business sector, was carried out; the number and effectiveness of the implementation of regional and local programs to support entrepreneurship, including the number of new jobs created, as well as the amount of financial resources allocated from local budgets for their implementation were tracked.
During the monitoring, the experts also assessed the number of entrepreneurship support infrastructure facilities (business incubators) created as part of the implementation of local programs, and the results of state and municipal funds to support entrepreneurship in the regions and cities of regional significance, as well as analyzed other parameters and indicators of the implementation of regional and local policies to support small business development and unlock the entrepreneurial potential of local communities.
Based on the results of the monitoring and evaluation, proposals and recommendations on priority measures that need to be implemented at the central level of government in order to improve the state policy of supporting the development of small business as a driver of socio-economic development of territorial communities were prepared.
