small business futures in society

Futures 35 (2003) 297–304www.elsevier.com/locate/futures

Introduction

Small business futures in society

One of the enduring themes throughout this special issue of Futures is that smallbusiness is very personal. It brings to mind the subtitle of Schumacher’s short andseriously argued text, first published in 1973, Small is Beautiful: a study of econom-ics as if people mattered. In the introduction to Dr Schumacher, the text says of himthat having taught economics at Columbia University, New York: “As theorisingwithout practical experience did not suit him, he went into business, farming andjournalism.” In congruence with this principle of engagement with practice, the con-tributors of this issue have grounded their critiques, theories and speculations ofpossible futures, in evidence as well as in theory.

The enterprise of creating this special issue has been challenging and excitingbecause there is no established body of futures research in the domain of smallbusiness. Contributions were encouraged from established figures in the field of smallbusiness research in collaboration with their younger colleagues – the next gener-ation, and from practitioners who are trying to bring about better futures for peoplerunning small businesses. The approach was to invite a variety of authoritative con-tributors, who between them give wide-ranging perspectives of small business indifferent countries and cultures. While each article is intrinsically interesting andsolidly founded, the aim was to make the whole greater than the sum of the parts.

That whole picture shows that small business is dependent upon individuals whoin turn are dependent upon their environment and who also help to create thatenvironment. Each article contributes to our understanding of how this interdepen-dency operates. The futures of small business in society are what society creates foritself. People create small business, but society amplifies the propensity of individualsto create and run those enterprises, whether as sole owners or in partnership withothers. Throughout the contributions are assertions of how the attitude and skill ofindividuals are a fundamental condition for the creation of small business. The art-icles also demonstrate a wide range of conditions through which the individual’sorientation to small enterprise is socialised. The contexts portrayed by contributorsrange from conditions of economic poverty in Bangladesh to the technology-fuelledUSA economy. Every writer argues that in each context small business has importantroles, whether as a means of escaping poverty or low incomes, or as a means tocompeting in global markets.

One common theme is the important linkage between the nature of small businessand the stability and certainty of the context. For example, most contributors high-

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298 Introduction / Futures 35 (2003) 297–304

light the significance of regulatory standards to the growth of individual enterprises.However, some identify environmental uncertainty, such as the removal of tradebarriers or breakdown in economic structures, as a stimulus for enterprising behav-iour. In all the articles there is a sense of history repeating itself as over time eachenvironment moves from an unregulated state, through self-regulation and then intomore formalised regimes through governmental regulation, industry standards andcultural mores, which are themselves open to change.

Small businesses are inter-dependent with other stakeholders. Such is the com-plexity of economic power, world-wide, that the simple practice of making something(or undertaking a service) and then exchanging that for another - or, more usually,for money - takes place in an institutional framework. The term “ institutional” maybe understood at two levels. First, at a cultural level as the “ rules of the game thatshapes human interaction” and second with respect to the actual organisations andnetworks that exist around and between small businesses. These have varying degreesof power. Each contributor provides examples of institutional organisations thatdirectly affect the futures of small business, whether public, private or both. Insti-tutions and markets are globalised; that is, they are all affected in some way byglobal institutions such as the World Trade Organisation, overseas aid programmes,supply chains or, simply, consumer fashions. Some institutions have an explicit rolein small business support. Contributors illustrate the positive effects of small businesssupport, when properly situated alongside the small enterprises they seek to sustain.Weaknesses in the “business support” professions are also identified, stemming frommultiple stakeholder agendas and support systems disconnected from the people whothey are supposed to serve.

Entrepreneurial acts create futures. Each contributor portrays small business as anagent of change. They have multiple roles. For example, they may be seen as inno-vators (or laggards) in the life cycle of particular technologies, as a mechanism forprivatisation of state-owned enterprises, as a response to global competition, or asa device for economic regeneration. In each role, small firms and their proprietor(s)are portrayed as risk bearing and opportunity-seeking agents. The entrepreneurialacts that they perform, by way of innovation or the carrying of innovations intodiscrete markets, or their increasing fitness via mutual competitiveness or collabor-ation, create the future for themselves and their stakeholders. Given the significantscale of small business in nearly every economy, their aggregate achievements affecteveryone’s futures.

Each contributor makes projections as to the futures of small businesses in thecontext of which they write. As the conditions in each context vary, for example,different regimes, levels of wealth and stakeholders, so each future trajectory varies.However, there are some remarkable similarities in the assumptions that underpinthe various scenarios presented, which are traced below. There are also significantcontextual differences. The articles are presented in an order whose juxtapositionshighlight some extremes that exist in the many worlds of small business.

In the first article, Fuller presents an historic account, albeit brief, of small businessin Britain from medieval times to the future. The account reveals changes over timein the meaning and character of small businesses, some of which find resonance

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with, and some contrast with, the accounts of other authors. For example, the signifi-cance of local and self-regulation before an effective national governance structurewas developed finds resonance in China and Russia today, whereas the strong focuson individualism in Britain is in contrast to collective aspects of Asian cultures. Thearticle establishes definitions and a comparative framework. It situates small businessas a social and economic phenomenon and it demonstrates the significance of theindividual and the context as causal of the specific nature of small business. It alsoframes small business in the context of power and interest, illustrating that in Britainthe small business has lost power to the corporate organisations and is “othered” inpolitical and economic discourse. Nevertheless, small businesses exist in a homo-geneous form in political and academic discourse; and in this their meaning continu-ously changes to suit the imperatives of the moment, largely irrespective of evidence.At one time they are employment creators, at another they are engines of economicgrowth. They can be the source of technological innovation or the implied cause oflow productivity.

Fuller’s questions, (those that we need to ask in order to know the future of smallbusiness), are about society’s perspective towards people and relationships. ForFuller the future of small businesses is generated through a co-evolutionary processwith their stakeholders. Small businesses embody the personalities of their ownersand their ways of doing business with stakeholders are largely personal. The human“ touch” and personal networks create the opportunity for enterprises with little mar-ket or financial power to stay more in control of their future.

To provide contrast to the “Western” perspective on small businesses and its capi-talist economy, Allan Gibb and Jun Li describe some aspects of small enterprisesin China, a social market economy. The centrality of their thesis is that a capitalisteconomy is not necessary in order for micro, small and medium sized enterprises(MSMEs) to become established and grow. The Chinese economy has grown sig-nificantly, as have many small enterprises in China, without a capitalist regime. Whatthis demonstrates is that there are “other ways” of stimulating enterprise and thecreation and regulation of small business without personal ownership or privateinvestment. What is essential, they say is a “decentralised marketisation” with thefreedom to set prices and use resources according to local conditions. They claimthat ownership of the many Township and Village Enterprises (TVEs) is a highlyambiguous network of local actors. They also identify the system of mutual obli-gations, called Guanxi, which is prevalent in the Chinese culture, as being a way inwhich personal relationships and local networks are maintained to generate futurebusiness.

Gibb and Li’s point, as far as policy and futures is concerned, is that China pro-vides an alternative to Western models. In a future where “models” are rapidly andglobally disseminated, such a model may help us to understand other economies anddesign development programmes. As they say, global institutions such as the WorldBank and the International Monetary Fund explicitly underpin certain developmentmodels. Structural Adjustment Programmes, for example, carry with them strongformal elements of privatisation, regulation, market- making and an underpinningideology. However, it is evident that the practice of imposing Western models and


the associated benchmark criteria has limited relevance or value in China, and maycause difficulties in the future if their use is attempted.

The self-regulating localised culture in China, which enables enterprise develop-ment contrasts with the situation in Russia as presented by Irina Astrakhan and Alex-ander Chepurenko. An enabling environment for small businesses is crucial to theimprovement of future prospects. They suggest that the present environment doesnot enable the development of small enterprises. For example, self-regulation existsbut this often operates outside the law. For example, only one quarter of small busi-nesses that they surveyed said they would take recourse to the law if let down bybusiness collaborators with the rest choosing “extra-judicial means” . They identifythat the official statistics indicate that the numbers of small businesses and employ-ment in these has fallen in the last three years, and is well below European averages.Their own contact with small businesses and the informal economy also supportsthis evidence. Given that people in Russia are inherently no less enterprising thatelsewhere in Europe, the environment is shown as a strong factor in determining thecontribution of small business to the economy. The conditions prevailing at the startof perestroika favoured stakeholders other than small business owners. The currentlevels of corruption and criminality have arisen from this environment.

Astrakhan and Chepurenko suggest that the current regulatory regime is not sup-portive of small business development. So, while there is a slow development ofsupportive legislation and programmes to assist owner managed business, such asloan guarantees, the situation on the ground prevents these from being effective.Once again, in general the small business is relatively powerless. The futures forsmall business arising from these conditions create quite different scenariosdepending on the effectiveness of the enforcement of institutional means such asanti-monopoly regulation and the design of targeted policies. At best, there couldbe an enabling environment in which small business would become more powerful.At worst, the environment could become more disabling for small business. Withouta change in the environment small businesses cannot make their potential contri-bution to the Russian economy or society.

The environment for small businesses in Taiwan, as portrayed by Ming-Wen Hu,could hardly be more different than Russia. Economically isolated in the 1950s,Taiwan’s economy has grown largely as a result of international business in whichsmall and medium sized enterprises (SMEs) have been heavily involved. She claimsthat small businesses were transformed from being cottage industries in the 1950-60s to being internationally competitive in the 1970s when a policy of internationaltrade was heavily promoted. The reasons for the significance of small businesses inTaiwan seem to include a number of influences. In particular Hu suggests three inter-related factors account for their success, i.e. appropriate government policies, theparticipation in international markets and an abundant supply of entrepreneurs. Poli-cies are designed to create a “ liberal” market economy. The examples Hu give appearparadoxical (or dualistic) at times, but indicate a sensitivity of government to practi-cal needs, such as export credit and loosely regulated private finance. As with manyother national governments, policies are increasingly focussed on providing advancedinfrastructures to facilitate global trade and logistics. It seems that Taiwanese SMEs


have a strong international orientation, and after net inward Foreign Direct Invest-ment in the 1970s, now SMEs themselves invest in other countries and in researchand development to create higher added value services.

Tellingly, Hu claims that in Taiwan there are a lot of people who, “ just want tobe their own boss” . The culture and social heritage of Taiwan, traced from the Handynasty in 206AD, includes hard working, brotherhood, strong family ties and com-petition. These and similar attributes form the basis for strong family businesses andthe basis for future strong small businesses.

Such a dynamic inheritance as Taiwan is not evident in the account of enterprisein South Africa from Martin Nasser, Joe du Preez and Keith Herrmann. However,their hopes and fears for the future seem strongly bound up with how young peoplecan develop enterprise, locally and internationally. The South African economy isstill in shock after the massive political change and subsequent trade liberalisationin 1994. The authors argue that a long period of trade protection and a polarisationof wealth created many slow moving and non-competitive large companies and cul-tures not supportive of enterprise development. They argue that the prerequisites forthe development of the South African economy through the entrepreneurship ofyoung people include: an international perspective, a mindset of creating one’s ownfuture and the institutional frameworks to support that. They acknowledge a rangeof programmes that have been developed between national government, non-govern-mental organisations (NGOs) and numerous partners including a handful of multi-national corporations. They argue that partnership approaches are essential in aninter-dependent economy. However, the future of small business in South Africaultimately relies on the detail and the doing, not the rhetoric.

As Nasser, du Preez and Herrmann point out, to develop the South African econ-omy, things need to be done at the smallest scale in every township, including edu-cation, mentoring and other personal and highly specific support for micro-enterprises. Things also need to be done at the macro level, including the recognitionof the importance of the informal economy and effective renegotiations of WorldTrade Organisation agreements that currently place South Africa at a “distinct disad-vantage” . Perhaps surprisingly, the authors offer an upbeat view of the future, butone that is based on a continued improvement in the effectiveness of basic businesssupport systems.

In contrast to South Africa, the USA has a well-developed enterprise culture. Howwill environmental change influence this in future? An example of change in thebusiness environment is the Internet, and the associated New Economy. Many writersin this issue recognise the macro changes being wrought by global communications.Jerry Katz and Scott Safranski focus very specifically on what the Internet meansfor the futures of small enterprise. In doing so they introduce to the special issueempirical evidence and conceptual normative models from small business andentrepreneurship research. Their analysis highlights the variety of roles that smallbusinesses have with regard to innovation. The authors reiterate the message thatwhile some small enterprises produce significant innovation, most small businessesare conservative and require a stable environment in order to invest, change andcreate economic growth. They suggest that de facto standards are necessary for tech-


nological exploitation in market niches by small firms. This illustrates the way inwhich small firms are deeply embedded in the overall economy and have a co-dependency with governments and corporations.

Katz and Safranski view the future of USA small business firmly in the contextof capitalist globalisation; as achieving increased sales in international markets. Theyalso project the trend, which is amplified by the Internet, of greater variety in “busi-ness models” and faster changes demanding greater flexibility, greater personalisationand shorter life cycles for each new enterprise. Within an overall regulated economy,that is an environment in which enterprising owners of small business can thrive.

But what if the regulations do not fit the situation? Throughout this special issueof Futures we can see the ways in which the meaning of enterprise and small businessis shaped by each culture. We can also see the importance both of institutions andindividual motivations. Smita Premchander beautifully summarises and exemplifiesmany aspects of what happens when indigenous motivations and institutions do notrun parallel to small enterprises. She demonstrates the centrality of women in actingto alleviate poverty through individual work and the support of self-help groups.Women’s groups have developed a track record with donors and development banksfor trustworthiness and motivation. She also demonstrates the significance of NGOs,which play a role with respect to small businesses in nearly every country in theworld, including the Small Business Administration in the USA. It is clear that, aselsewhere, enterprises in India and Bangladesh need formative support, such asadvice, training, network linkages and legitimisation with the more formal and exter-nal systems that govern finance and trade. They also need access to finance at reason-able interest rates. These resources are sometimes taken for granted in developedeconomies.

Premchander’s insight is that without adequate basic funding the NGOs are caughtbetween two roles in a situation that appears contradictory; they need to generateincome for themselves through micro-finance schemes, but in doing so they prejudicetheir formative role. The alternative futures of NGOs are caught up with the futuresfor the micro and small enterprises, in a co-evolutionary dance that can be seenbetween small businesses and their stakeholders everywhere. She suggests that abetter future is based on stronger formative roles for NGOs to develop people, andthe institutional development of locally owned “people’s institutions for micro fin-ance” .

This special issue of Futures is about small business, and is not “of” small busi-nesses. The perception of entrepreneurs about their futures is a fruitful area forresearch. Perhaps it will become the theme of some future issues. The contributorsto this issue have produced many ways that help us to understand small businesses,and to think about their roles in future societies. Many ideas are interwoven in thearticles, but the five points below are common to the contributions and demonstratethe significance of small business to the future of society.

1. Individual enterprising acts and commitments to action, often through small busi-nesses, are personal and usually small-scale. However the aggregate results ofmany small businesses provide variation and diversity as a hedge against risk and


uncertainty for society. A strategy for the uncertainties associated with our openeconomic and ecological systems is to develop diversity and responsibility throughenterprise. Small business is the main vehicle for economic enterprise.

2. Small business and their owners are interdependent with a wide range of stake-holders, from their immediate family and customers, to corporate organisationsand global trade governance. In particular their potential to contribute to localeconomies is highly dependent on the effectiveness of formal and informal insti-tutional frameworks in which they operate. The futures of small business areimplicated in the futures of cultural traditions and operative institutional powers.

3. The degree of uncertainly in particular economies has paradoxical qualities withregard to small business. This is partly because the majority of small businessesare not the highly innovative and entrepreneurial entities that they are sometimesportrayed to be. Some are. Stable environments may give rise to the growth ofindividual enterprises and encourage longer-term views. Unstable environmentsprompt enterprising behaviour such as innovation and change. Such enterprisingbehaviour creates instability in the environment. The greater the number of activeentrepreneurs, the more unstable the environment. Society has to attempt to main-tain a tension between the stability that gives comfort, but which can polarisepower over time, with the enterprise that can create better, or worse, futures.

4. All the authors in this issue see small businesses as important, and in many casesvital to the futures of societies and economies of which they write. The reasonsfor their importance are different, i.e. they perform different roles in differentcontexts. They all contribute to effective work, employment and the creation ofvalue. No one suggests a future without small enterprises, whatever label theyare given in future. Perhaps a missing paper is the one that articulates a futurewithout small business.

5. In some ways these articles voice the hopes of society for the contribution thatentrepreneurs and small businesses can make to the future. The well-documentedtrends of economic globalisation and density of communications are reshapingthe roles and pressures on small business, and in particular society’s expectationsof entrepreneurs to create better futures. The paths to the future are by no meansclear, unambiguous or without dangers from unwanted consequences of morepowerful economic players.

I acknowledge with great thanks the authors who have contributed to this specialissue, especially those who stopped doing for long enough to write about it. Thanksare also due for the invaluable comments of reviewers and colleagues. I am indebtedto the editor of Futures, Zia Sardar, for suggesting the idea in the first place and hisforbearance, along with those contributors with an accurate perception of time, asthe rest of us stole extra time to produce the right words. My greatest thanks, however


are for those who read, digest and continue to work to create better futures for smallfirms and the societies to which they contribute.

Ted FullerUniversity of Teesside, Teesside Business School, Middlesborough,

Tees Valley, TS1 3BA, UKE-mail address: [email protected]

small business futures in society

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