States Role in Entrepreneurship Development - the UK - Case Study Example

Introduction

Entrepreneurship is the process of creating a business (Ruzzier, Ruzzier & Hisrich, 2013). A person who identifies an opportunity and uses available resources to venture into a business in order to make profits is an entrepreneur. A business opportunity is any chance that exists in one's environment, which can be implemented by selling goods or services with a motive of generating profits. Not all business ideas are business opportunities. For an idea to be classified as a business opportunity it must be viable and capable of generating enough profits to the business. Converting an idea to a profitable business idea requires creativity and innovation (Spadaccini, p 27, 2007).

However, business and entrepreneurship cannot exist without the state`s intervention. This calls for the support of the government to help entrepreneurs develop their business ideas. Many aspiring entrepreneurs face many challenges as they try to set up their new enterprises. Such challenges include lack of enough capital, structural rigidities, government policies and lack of an enabling environment. Entrepreneurship is what drives the economy towards achieving growth and development. It is from this realization that many states in the world have taken the initiative to support small micro enterprises. The small micro enterprises play a huge role in driving the economy towards growth and stability (Sherman, p 210, 2011). Many states are now involved in the process of establishing and creating a favorable environment for the entrepreneurs to come up with new ideas in business, the introduction of new products and invention of new methods of producing goods and services. This paper will look at the different ways in which the government helps to encourage people to take up entrepreneurship and be self employed. Consideration will also be made on the measure the government takes to protect the willing entrepreneurs in order to strengthen the growth of small micro enterprises (SME).

Easy access to credit

One of the factors of production is capital, which is a big challenge for entrepreneurs. Many are not able to secure loans from the banks because the banks demand for collateral, which many upcoming entrepreneurs lack. It is from this fact that some states have initiated the issuance of unsecured loans to upcoming entrepreneurs. This is in the form of creation of an enterprise fund managed and controlled by the state. The following illustrations show the importance of government funding to help entrepreneurs (Foster, 2011).

Government funding in the Netherlands

The government of the Netherlands is one of the countries that have taken the initiative to extend its support and help entrepreneurs realize their dreams. The country offers 12 different forms of loans to its willing citizens to start up their own businesses. The loan includes the following types; early stage financing (VVF) which is a form of loan for the starters. The Erasmus form of loan helps young entrepreneurs who are just starting up. The Micro credit loan is another form of loan that helps both the starters and those already with established businesses. Additionally the SME loan is offered to entrepreneurs who cannot be issued with a regular loan from the bank. From the above loans the government has helped the growth of over 200000 thousand small micro-enterprises in the Netherlands.

Government funding In Kenya

Kenya like many other sub-Saharan African countries have high levels of unemployment and the youth comprise a 50% of the unemployed in the country. It is from this that the government set up a youth fund known as Uwezo Fund to help the young people grow their business ideas into reality. The fund was started in 2008 and has helped over 3 million youths become entrepreneurs. The country also introduced the Kenya Women Finance Trust (KWFT) which is a fund geared towards helping the women who are willing to join the business sector.

Government regulations on the registration of companies

The process of registering a new company is sometimes tedious due to government bureaucracy and the transfer of power. Many entrepreneurs find it hard to register their enterprises and who successfully accomplish it take a very long time (Burns, 2014). Due to this, some governments have introduced new regulations for company registrations and reduced the time taken for one to register a company. Some of the procedures have been scrapped and the reduction in the documentation. In some instances, the registration fees have been reduced or totally done away with. Entrepreneurship that is done in large scale brings in foreign exchange to the nation whereby a business is involved in exporting its products or services. Entrepreneurship contributes positively to the economy of a nation by creating employment to the citizens, this therefore reduces unemployment and in turn it increases per capita income of a nation (Curtis, 2010).

Registration of a company in the UK

The UK government has simplified the registration of new companies for its citizens. Many of the requirements have been scraped away. The laid down procedures involve a regulation that the turnover should be at least a turnover of 10,000 Euros. The business should be for ones use and not for any other individual and must be ready to undergo a credit check (Burns, 2014).

The state has an essential role to support enterprise development. Using evidence from more than one country, critically examine the role of government in supporting and facilitating entrepreneurship.

Education and training reforms

Education and training are the basic skills an entrepreneur is equipped with to have success in their enterprise. These two are crucial for the success of any enterprise. The government has realized the importance of provision of market oriented education and moved from the traditional education set up (OECD, 2012). Traditionally, one got education in order to assist them find an employment. The current educational systems have seen the churning out of students who will be job creators rather than job seekers. Governments have put measures and this has only been possible by the revision of the curriculum, the introduction of market driven courses and creation of invention driven education. This has helped see success and the emergence of new entrepreneurs (Curtis, 2010).

USA reforms

In the USA, the government has set the Small Business Administration (SBA), which offers tutorials through the internet, which help in equipping people with business ideas and skills. The Stanford University, located in the Silicon Valley is an institution that was built to take advantage of the high tech innovations in the area. Many entrepreneurs have gone through the institution, which offers high standards of electrical and technological advancement, which is a major driver of the USA economy (Foster & Alison, 2012).

Education in Singapore

Singapore is one of the countries with a fast growing economy have been ranked as a developing country in late 1960`s. Since then Singapore has been steadily growing and has achieved an astonishing progress towards growth. This can be attributed to its strategy in reforming the education sector. The education system in Singapore known as” teach less learn more” has seen teachers incorporating technology in class and the focus on quantity and not quality education.

Reduced government taxation

Many businesses suffer high operational costs ranging from costs of labor and government taxes. Taxes add to the increased costs of running an enterprise. In some countries, taxes are so high and this discourages entrepreneurs from taking up entrepreneurship (Alison, 2007). The best way the government can foster new business growth is by ensuring good tax and regulatory environment. Strauss observes that taxes are the best instrument to promote the growth of small and medium enterprises. Some countries have taken measures to reduce the taxes and make them favorable for the upcoming entrepreneurs. This includes tax cuts, tax incentives and tax waivers and amnesty (Bayer & Sutter, 2009).

Tax reforms in Canada.

Small enterprises account for 98% of Canada`s businesses. The tax reform in the country has helped stipulate the growth and hence achieving a stable economy. The Canadian government was pushed by the Certified Management Accountants to carry out tax reforms, which were based on reducing the corporate tax, issuance of tax credits for investment, and increasing the deduction on investment.

Creation of business incubation centers

Business incubation centers are institutions that are able to hatch an idea into a business plan. These centers are made to ensure that business ideas are conceptualized and made into test before they are put into practice. Many governments have facilitated the introduction of these centers by funding research. Most of these hubs are geared towards technological advancements. Many entrepreneurs whose business ideas have passed through a business incubator often find success (Blackburn & Schaper, 2012). Many governments such as the USA have invested heavily to see the overall improvement of these centers. In the USA, for example the government has invested billions of money to create business incubators for its citizens. The Silicon Valley, which is a major USA tech center, was the brainchild of the government to bring up entrepreneurs to take the market share in the business. Similarly, business hubs have been created in Tel Aviv and Singapore. The government of Israel has incorporated the business hubs in institutions of learning (Roper, 2013).

Government tenders and procurement.

The government is essentially the biggest consumer of goods and services within a country. It buys goods and services from willing producers or sellers within the economy. The governments have devised mechanisms to ensure that the government tenders are awarded to the upcoming entrepreneurs in order to help them pick up (Carter & Jones-Evans, 2012). In most countries, government supplies fetch a relatively high profit as compared to supplying the same good to the private sector. Governments have stipulated laws governing government tenders which includes a certain percentage of the tenders be awarded to the youths and women in that particular country. These tenders help the entrepreneurs to kick start their business and drive them to some stability because government tenders pay well. The government procurement policies tend to favor small scale enterprises and this becomes a huge opportunity for the upcoming entrepreneurs. These tenders are highly paid in many African countries as a means to boost economic growth. In Kenya 35 % of the government of Kenya are awarded to the youths, which forms majority of the population. Consideration is also made to women and people with disability. In Kenya, this has led to growth of an informal sector known as “Jua Kali”.

The USA method to ensure that small businesses are not disadvantaged, involves the establishment of targets through the federal government. The agencies conducting the procurement should liaise with the Small Business Administration, which is the regulatory body for smaller enterprises. These SME`s have an exit plan and are always considered to be awarded tenders unless they transform to larger institutions hence fall out of the consideration bracket. In a set aside approach the SME will be considered if it is owned by a USA citizen (Burns, 2014).

The republic of Korea has a different approach to the award of tenders and procurement to its small and micro enterprises. The body in charge of procurement in Korea is known as The Korean Public Procurement Service Authority (PPS). This authority uses other initiatives unlike bidding methods used by other countries. The initiatives include a 70% advance payment for any SME that delivers goods and services to the government. A feeder program that guarantees up to 80% loan value for the SME`s with the directive of PPS an excellent business performance award has been set to award the overall best performing small enterprise. This award recognizes innovations in the technology sector and this helps create the sense of uplifting small businesses. The last initiative by PPS is the multiple award schedules, which is a process, which identifies consistent small enterprises in the country that have played a great role in the volume of the total transactions made (Mullins, 2013).

Government securing global markets

Businesses require markets for the finished products (Hayton, Salvato, & Manimal, 2014). The market forces of demand and supply, which dictates the sale and purchase of products, is not enough to enable small enterprises realize growth. Due to the market failures of imperfect information, hence the government steps in to offer marketing solutions to the young firms. The government first tries to expand the local market by being the first consumer of that product. Consequently, if the product or service from the small enterprise meets international standards, it will be open for export. The country can try to source for foreign markets by joining the international trade or the formation of trading blocks. Global markets offer an alternative for the small enterprises to realize growth as foreign trade may be much profitable and hence the SME can realize international recognition and become a preferred brand (Ndubisi & Nwankwo, 2013).

Opening global markets: Canadian government

The Canadian government relies heavily on its small enterprise set up firms distributed over the country. These are the main drivers and stimulators for the Canadian economy. The government devised the Economic Action Plan of 2012, which was aimed at the realization of the 2007 Global strategy, by consulting with the small enterprises in order to locate new markets and opportunities After the success of these new strategies, the country has adopted the newest strategy known as the New Global Markets Action Plan. The new plan will put efforts on markets that have high prospects to the small businesses. In looking for the markets the target will be on what the small business has strengths on and least cost production goods and services (Sicilia, p 13, 2000).

Government training seminars and exchange programs

Upcoming entrepreneurs need proper guidance and information before they can venture into any business related activity. For a business idea to materialize, proper guidance is required for any entrepreneur to achieve success. The governments and states have taken the initiative to train the entrepreneurs on the best skills to become successful business people. This is done by the government conducting training seminars for the youth and any willing person. The exposure has been through hosting international trade conventions that help local entrepreneurs interact with others globally (Christophe, p. 133 2005).

The global entrepreneurship Summit

The Global Entrepreneurship Summit is a conference held in different countries after every four years.Started in the USA, the forum helps entrepreneurs from different countries to interact and share business ideas. This exchange program is good for the upcoming entrepreneurs a they learn the skills of managing their businesses and ways to become successful in the future. The last Global Entrepreneurship Summit was held in Nairobi, Kenya in 2015. The theme of the summit was to foster a sustainable development. The summit has opened the doors for the sub-Saharan countries that have a weak economy (Robert, 2009).

Small and Medium Enterprises Working group (SMEG)

The Asian and Pacific countries fall under the APEC union, which is the trading block in the region constituted the Small and Medium Enterprises Working Group (SMEWG). The contribution of SME`s in the Asian economy is large, accounting for about 30-50% of the direct exports. The APEC has been in existence since 1994 and member countries have given the SMEWG the role to address the growth of SME`s in the region. It adopted its strategic plan for the year 2013-2016 with its main focus on the growth of SME`s. Its approach involves, building a management capability and innovation guided entrepreneurship, creating an enabling business environment, creating a market access to other countries and financing. The body has helped the SME`s join the international markets. This has been realized because the body has built capacity, technological help, matching businesses and networking for the small enterprises and among themselves (Robert, 2009).

Protection policy

Despite the opening up of the economy and SME`s being allowed into the global market, there is the threat from international companies. Opening of markets means that new trade partnerships will be formed which allow the exchange of goods and services across the two countries. Trading partnerships are agreements between two or more countries to exchange goods and services across their regions. However, these trading partnerships may harm the local SME`s as they have not been fully established (Mauro, p 2 ,2011). This calls the government to put measures into place in order to save its infant enterprises. The measures the government has put to save its infant industries are known as protectionist policies (Michael, p 50, 2003). Some of the protectionist measures include the imposition of tariffs on imported goods, import quotas, anti-dumping legislation, direct and indirect subsidies and administrative barriers. The biggest argument for the protectionist policy is to protect the infant industries in order to allow them grow up to the point that they can compete fairly. If protected, these industries will grow in strength and may be one day they will challenge the long established ones for market share. Some of the protectionist policies to protect the domestic industries include

European Union Common Agricultural Policy

After concerted efforts to reduce tariff rates, the European Union still imposes tariffs on agricultural markets in the world. The policy is meant to protect the farmer’s net income by ensuring that prices are high in Europe. Most of the affected commodities are dairy and beef products, attracting tariff rates of over 75%.

Tariffs on Chinese tires export to the US

The USA imposed a 35% tariff on tire imports from China in order to protect its local industries.

Argentina tariffs on food

The Argentine government imposed a tariff duty on many agricultural products from other countries. There were fears that the importation of powder milk would leave the farmers without a market and this led to a 9% tariff on milk powder.

Use of university as catalysts

The formal education is very crucial in equipping an entrepreneur with the right skills for undertaking any particular enterprise. Entrepreneurs need to learn the basic principles to enable them have the right discipline to tackle their ventures (Hew, 2004). The governments have come and helped set up new universities, which are geared towards teaching innovation and self reliance. The government knows clearly that the universities can act as the point to instill entrepreneurial skills and discipline to the students. Business incubation centers have been built within these premises and the involvement of high business figures to help the students realize their ideas. It is evident that, many business ideas have emerged from universities such as Microsoft and Facebook from Harvard University in the USA .Students are great inventors with the ability to change any problem into a solution (Williams, 2014.

Conclusion

It is e evident that the government plays a huge role to determine the growth of entrepreneurs and small micro-enterprises. The SME`s are the major contributors of growth per capital income in a country and hence are very important. A country may not achieve growth if this sector is let to fight on its own. Without the government intervention, it may be hard for the entrepreneurs` businesses to survive, especially in today`s world which is like a global village (Curtis, 2010). The governments have come up with different measures to ensure that willing entrepreneurs will have the opportunity to learn and own their own enterprises. This has been made possible by the government’s intervention in making credit easily available, relaxing the requirements for registration of companies, government training and reforms in the educational sector and reduced taxation. Further emphasis has been on the government establishing business hubs and incubation centers, issuance of government tenders and procurement, to the youth and vulnerable groups and upcoming businesses and the opening of global markets though international trade. Finally the governments have stretched their influence on business inception through creation of new entrepreneurs by hosting seminars and exchange programs, especially for the youth and using protection policies to protect the infant industries and the use of universities as a catalyst for innovations.