ECONOMIC MECHANISMS FOR THE DEVELOPMENT OF SMALL BUSINESSES AND ENTREPRENEURSHIP
DOI:
https://doi.org/10.5281/zenodo.20677464Abstract
Research objectives: This paper examines the economic mechanisms that catalyze the development of
small businesses and entrepreneurship, focusing on finance, taxation, regulatory frameworks, innovation systems, market
access, human capital, and digitalization. It seeks to identify which mechanisms most strongly correlate with firm growth,
formalization, productivity, and survival.
Design/Methodology/Approach: We employ a mixed-methods design combining (i) a systematic review of international
evidence (OECD, World Bank, IMF, ILO), (ii) a cross-country panel analysis (2006–2024) across 45 economies linking
policy indicators to SME outcomes, and (iii) a case-comparative analysis of five reform episodes. Econometric estimation
uses fixed effects with clustered standard errors; robustness checks include alternative specifications and lag structures.
Research findings: Access to credit via partial credit guarantees and digital collateral registries is associated with
higher SME employment growth and formalization. Simplified tax regimes and one-stop business registration reduce entry
costs and increase firm births. Innovation vouchers and cluster policies correlate with productivity gains when paired with
managerial training. Digital platforms expand market access, with stronger effects where logistics performance is high.
Effects are heterogeneous: informality, state capacity, and sectoral composition moderate impacts.
Theoretical contributions/Originality: The paper integrates transaction-cost economics with capability-based views
to explain how bundled mechanisms—finance, rules, and capabilities—lower uncertainty and coordination costs while
upgrading managerial and technological capabilities. It proposes a “complementarity stack” framework specifying necessary
policy bundles and sequencing.
Implications for practitioners/policy: Prioritize bundled reforms: (1) credit infrastructure (PCGs, e-KYC, collateral
registries), (2) regulatory simplification (e-licensing, tax thresholds), and (3) capability building (management training,
supplier development), sequenced alongside logistics and digital infrastructure upgrades. Target instruments based on firm
age, sector, and formality.
Limitations/Research implications: Data constraints on informal firms and policy implementation quality limit external
validity. Future research should deploy firm-level randomized or quasi-experimental designs and measure dynamic
capability accumulation and spillovers across value chains.
Keywords
logistics, frameworks, innovation systems, market access, human capital, and digitalizationReferences
OECD, “Financing SMEs and Entrepreneurs 2024: An OECD Scoreboard,” OECD Publishing, 2024.
World Bank, “Doing Business and Beyond: Business Regulations and Economic Outcomes,”
Washington, DC, 2020.
International Monetary Fund, “SMEs, Financial Inclusion, and Growth,” IMF Departmental Paper, 2019.
International Labour Organization, “Small Matters: Global Evidence on the Contribution to Employment
by the Self-Employed, Micro-Enterprises and SMEs,” ILO, 2015.
A. Beck, T. Beck, and R. Levine, “SMEs, Growth, and Access to Finance,” Journal of Economic Literature,
vol. 50, no. 2, pp. 409–445, 2012.
X. Glaeser and W. Kerr, “Entrepreneurship and Urban Growth,” Handbook of Regional and Urban
Economics, vol. 5, 2015.
N. Bloom, A. Mahajan, D. McKenzie, and J. Roberts, “Does Management Matter? Evidence from India,”
Quarterly Journal of Economics, vol. 128, no. 1, pp. 1–51, 2013.
D. McKenzie, “Identifying and Spurring High-Growth Entrepreneurship: Experimental Evidence from a
Business Plan Competition,” American Economic Review, vol. 107, no. 8, pp. 2278–2307, 2017.
A. de Mel, D. McKenzie, and C. Woodruff, “Returns to Capital in Microenterprises: Evidence from a
Field Experiment,” Quarterly Journal of Economics, vol. 124, no. 4, pp. 1329–1372, 2009.
J. Cull, T. Beck, and A. Morduch, “Banking the World: Empirical Foundations of Financial Inclusion,”
MIT Press, 2013.
OECD, “Taxation of SMEs in OECD and G20 Countries,” OECD Publishing, 2015.
World Bank, “Global Financial Development Report 2020/2021: Bank Regulation and Supervision a
Decade after the Global Financial Crisis,” Washington, DC, 2021. (Ch. on credit guarantees)
J. Criscuolo, R. Martin, H. Overman, and J. Van Reenen, “The Causal Effects of an Industrial Policy,”
American Economic Review, vol. 109, no. 1, pp. 48–85, 2019.
UNCTAD, “E-Commerce and Development Report,” Geneva, 2022.
S. Andersson and H. Lööf, “Innovation Grants and Firm Performance,” Research Policy, vol. 48, no.
, pp. 178–191, 2019.
Downloads
Published
How to Cite
Issue
Section
