Theories of Growth of Small Scale Enterprises - 3310 Words

Theories of Growth of Small Enterprises Various theoretical models have been developed which describe the growth of small businesses. One class of theoretical models focus on the learning process, either active or passive, and the other models refer to the stochastic and deterministic approaches. In the passive learning model (Jovanic 1982 cited in Liedholm 2001), a firm enters a market without knowing its own potential growth. Only after entry does the firm start to learn about the distribution of its own profitability based on information from realized profits. By continually updating such learning, the firm decides to expand, contract, or to exit. This learning model states that firms and managers of firms learn about their†¦show more content†¦These include in the first place the capital of the entrepreneurs themselves, occasionally supplemented with capital or loans from family members or friends. In line with this, Liedholm and Mead (1999) stated that initial investments in developing countries are almost wholly financed from personal savings or those of relatives and friends and subsequent investments are financed largely from retained earnings. The empirical evidence shows that small businesses owners do not come from a particular social background and education, rather their business experience is developed through opportunities provided by the social background, and family links in their locality (Liedholm 2001). A study by Daniels (1995) cited in Liedholm 2001 and Stel et al 2002 indicates that initial capital requirements and the level of regulation are found to be inversely related to the new start up of businesses. Potential entrants face various obstacles. According to Kawai and Urata 2001, the three most obstacles are lack of financial resources, lack of human resources and difficulties in developing distribution network. Financial constraints on the start up of new ventures have received much attention in developing countries (USAID 2002). The measures of financial constraints include the size, number and source of loans, the rate and amount of reinvested profit,Show MoreRelatedBusiness Management : The Financial Manager Essay1277 Words   |  6 Pagesreturn to the enterprise owner(s). 3) Dividend Policy: The financial manager is responsible for deciding the dividend policy of the enterprise. In a small scale enterprise, the responsibility of the financial manager would include that of determining how to allocate the profit from the to the various owner. 4) Working Capital Management: It is especially around the management of cash, debtor, prepayments, stocks, creditors, short term loans, accruals, etc to make sure that enterprise maximizes theRead MoreInformal Employment And The Global Economy954 Words   |  4 PagesSince the 1970s, in both the developed and developing worlds, the global economy has experienced a slowing down in the growth of modern of formal sector employment. Particularly in Latin America and Africa, most countries have been in the growth of informalisation and flexibilisation; although some countries in Asia have gone through moderate growth of modern economy (ILO, 1995). In 1995, World Bank estimates that beyond direct government control and the reach of trade unions, the share of the workRead MoreEconomic Growth And Development Of Lagos And Nigeria958 Words   |  4 PagesDiscussions Contribution to Development The clustered nature of SMEs in Lagos and Zhenjiang gives room for economies of scale ,ideally it is expected to facilitate synergy, specialization, cost reduction via the use of infrastructural facilities available and supply chain processes (Lee et al, 2010).The realities present a sharp disparity while most clusters in Zhenjiang have a well structured supply chain with a robust e-commerce platform that facilitates international businesses, clusters in LagosRead MoreSme Sectors Benefits to the Economy1713 Words   |  7 Pagesbusiness that has less than 250 employees. SME: small and medium-sized enterprises are defined by the European Commission as independent enterprises that have fewer than 250 employees, and an annual turnover not exceeding  £34 million or a balance-sheet total not exceeding  £29 million (new Recommendation 2003/361/EC adopted by commission on 6 May 2003). This revised definition came into force on 1 January 2005. Within this definition micro enterprises are categorised as having fewer than 10 employeesRead MoreEffect of Internal Controls on Financial Performance11978 Words   |  48 Pageslonger remain behind serving only to meet sustenance income for their owners. SMEs engagements have to become a dynamic and integral part of the market economy. The identification of factors that determine new venture performance such as survival, growth or profitability has been one of the most central fields of entrepreneurship research (Sarasvathy, 2004). A multitude of research papers has focused on exploring various variables and their impact on performance (Bamford et al., 2004). However, inRead MoreFactors That Lead The Emerging Market Multinationals Into Essay1429 Words   |  6 Pagesthe global trading system, Multinational companies are extending their operations abroad because of the cheap products in exchange for cheap labor in order to achieve advantages such as new technologies that the market has to offer. These large enterprises have the power of taking control or having big influence in the political system because of the investments in the country. Due to the control and the pig impact that they have in the country they take the advantage of the political system. It wouldRead MorePersonal Goals And Abilities Of A Social Enterprise1361 Words   |  6 Pages2008) â€Å"A social enterprise is thought to be something new and something distinct from classical business and traditional non-profit activity, combining at different extents elements of the social purpose, the market orientation and financial performance standards of business†. When looking at starting up a social enterprise there are important points that need to be looked at the help ensure the enterprise is successful. Firstly before the start up of a social or technological enterprise there are issuesRead MoreEntrepreneurship in Australia Essay1163 Words   |  5 Pagesan astonishing speed in present-day society. Business, which is divided into large, medium and small business, has become a primary symbol of the development of market economy. Entrepreneurship is defined as the process, brought about by individuals, of identifying new opportunities and converting them into marketable products or services(Schaper and Volery 2007, 4), and it is often related to small business. This essay will argue that the level of entrepreneurship in Australia is higher, comparedRead MoreThe Theory Of Economic Development Essay1477 Words   |  6 PagesThe theory of economic development has equipped the underdeveloped countries with a choice between ‘balanced’ and ‘unbalanced’ growth that has been one of the most tendentious topics. One group advocates the theory of Balanced Growth and r efutes, in almost unequivocal terms, the virtues and utility of the doctrine of Unbalanced Growth, which the other group endorses with great insistence. These approaches towards economic development have been expounded and interpreted in various ways in the literatureRead MoreLenovo Strategic Plan1531 Words   |  7 PagesThis thesis practices the baud five powers model theory, the value chain theory, the core competition theory and the SWOT analysis theory to analyze and study the inner and outer surroundings of Lenovo group. Company background Lenovo Group was established in 1984 in the Chinese Beijing, the company mainly produces desktop computer, notebook computer, server, printer, palmtop computer, motherboards, mobile phone and other electronic products. Is a leading global PC business, the original Lenovo