Small Business Entrepreneurship and Its Impact on Economic Growth


The study aims to analyze, synthesize, generalize and systematize the available knowledge regarding small business entrepreneurship and its impact on economic aspects. Accordingly, the research problem is based on investigating the essence of small business entrepreneurship and its potential relationship with the financial components of the country. The design of the study is an appeal to descriptive and causal-comparative elements. The paper’s author received answers by examining relevant and reliable sources of information. The study found that small business entrepreneurship is the idea of starting a small business without opening many networks or turning into a larger company. Moreover, small business entrepreneurship has a deep and close connection with a country’s economy, determining the bulk of national resources. The results allowed one to draw clear conclusions that today there is a particular need for developing small business entrepreneurship in increasing competition, curbing price increases, improving the quality of goods, and several other equally important moments.


Focusing on small business entrepreneurship is one of the priorities for many countries in achieving high economic growth rates, ensuring a country’s development, and improving the population’s welfare. Small business entrepreneurship is an integral part of the modern market systems at the federal and regional levels. Consequently, its evolution is the critical area of accelerated “blossoming” of several financial components of a state. Small business entrepreneurship is managing a small enterprise, which positively affects economic growth and development.

Small Business Entrepreneurship: Definition

Most often, small business entrepreneurship implies a strategy for starting a business without considering its further expansion. It does not claim leadership in its field and is limited to a small staff and a sole leader. In this case, business entrepreneurs invest their assets without the help of external investors to achieve success and get a stable profit. They are additionally engaged in formulating ideas and forming business management founded on them (Patni, 2022, para. 7). Most small businesses are in an individual form of ownership. In other words, the head of such an enterprise takes the development and operation of his business entirely at his own risk. However, this form of ownership has its advantages: individual enterprises have a straightforward organization of production activities. Basically, entrepreneurs tend to get into the category of small businesses due to the simplified taxation scheme. Small business entrepreneurship does not provide for significant financial injections, technical equipment and other needs are minimized. However, the ability to create demand for their products and regularly pay taxes to the state treasury makes “minor” enterprises key in shaping a state’s economy.

One should assume that it is a purposeful risky activity of an individual or legal entity. Nevertheless, small business also allows one to meet individual needs (Patni, 2022, para. 3). The primary purpose of this procedure is to maximize profits through producing and selling goods, performing various kinds of work, and providing services. There are several criteria by which small business entrepreneurship can be determined. In many ways, they are associated with the number of employees, the size of an enterprise’s authorized capital, financial performance, and the type of activity.

In general, small business entrepreneurship is a common form of business. According to Westman et al. (2022, p. 1-2), by its essence and nature, it has a nimble structure and the influence of individual preferences. In a sense, these aspects should be seen as facilitating sustainable practices’ rapid and effective consolidation (Westman et al., 2022, p. 2). Moreover, the creation, development, and implementation of innovations is the main function of small business entrepreneurship (Westman et al., 2022, p. 2). As a rule, the effectiveness of this type of entrepreneurship is determined by a large number of certain factors. It is estimated not solely based on business appreciation but percentage profit growth over a certain period.

Small business is, on the one hand, a specific sector of the economy that creates material benefits with minimal involvement of material, energy, natural resources, and maximum use of human capital. On the other hand, it is the sphere of self-realization and self-sufficiency of citizens. Thus, entrepreneurial activity as a small business is carried out by market economy entities following established laws aimed at systematically profiting from the use of property, the sale of goods, the performance of works, or the provision of services by persons registered in this capacity.

Small Business Entrepreneurship: Effects on Economic Growth

In broad terms, one should emphasize that the role of small business entrepreneurship in a market economic system is difficult to overestimate. Hence, entrepreneurship is a constructive unit and a guarantee of the existence of a developed market economy. In this case, small business entrepreneurship is an engine of economic progress that supports the local economy, a country’s GDP, and the growth of the stock market (Carter, 2021, para. 1). Small business is an integral part of the socio-economic system of the country, ensuring the stability of market relations, drawing most of the country’s citizens into this system of relations by opening their own business, providing high production efficiency through deep specialization and production cooperation, which has a positive effect on the economic growth of the national economy.

Small business performs the most critical functions for the national economy: introduces innovations, maintains an optimal competitive environment, creates additional jobs, counteracts monopolism, and expands consumer demand. Along with innovation, entrepreneurship offers ways and means to overcome existing problems (Hamdan, 2019, p. 65). Furthermore, many small companies have social significance and allow them to unite socially unprotected groups of citizens, providing them with jobs, which is essential both for unemployment rates and for the social protection of citizens.

Small business is present in all spheres and areas of the economy. Today, the advantages of small businesses in comparison with other sectors of the economy are much more pronounced than the disadvantages. This is the specificity of small businesses – to wake up during the general economic downturn and solve many financial problems. The functioning of small enterprises demonstrates good adaptation to external conditions, strengthening market relations with its development. Due to its flexibility and speed of decision-making, it is easier for small enterprises to control the production process and quickly adjust it in connection with changes in market demand.

They are characterized by high maneuverability of production compared to large enterprises, sensitive response to consumer demand, the ability to introduce new equipment and technologies quickly, and more efficient use of production capacities. The development of small businesses leads to the saturation of the market with goods and services and better use of local raw materials. It is a reliable source of budget revenues, and the share of overdue debts of small enterprises to the local and federal budgets is lower than that of other enterprises.

Speaking about the role of small enterprises, it should be emphasized that small enterprises are a side sphere of the economy. Small business is limited in their involvement in the economic structure, competitive environment, and social division of labor. Moreover, its role in modern dynamic life is steadily increasing. As the experience of developed countries shows, if in the past small enterprises were created as a result of the desire of many to open their own business, now the creation of small enterprises is often initiated by large companies that entrust them to conduct certain types of products or establish close ties with the market. In addition to the fact that small enterprises introduce new products and provide jobs, they play an essential role in the activities of large corporations, dealing with the sale of their products, service, supply.

The role of small businesses in a market economy is great. Without it, the market economy is neither able to function nor develop. Its formation and development are one of the main problems of economic policy in the conditions of the normal functioning of the market mechanism. Small business in a market economy is the leading sector that determines the pace of economic growth and the structure and quality of the gross national product.

Small business is a necessary element of a market economy that allows for solving critical socio-economic problems. This is confirmed by the experience of developed countries, where small business occupies a strong position in developing national economies. The development of small entrepreneurship contributes to the revival of folk crafts; the “screening out” of unprofitable and unprofitable enterprises, the rational use of small local sources of raw materials and waste from large industries, and the formation of a competitive environment in the markets of factors of production. Furthermore, small enterprises do not oppose large and medium-sized companies but work closely with them and participate in accelerating the innovation process and the structural restructuring of the national economy. In other words, small business is a rather complex and heterogeneous entity, each segment of which has its problems and needs specific models of interaction with the state, and small business needs to be developed and encouraged.


Summarizing the above, the author should highlight that small business entrepreneurship is a type of entrepreneurship based on the activities of a small and independent firm. This self-sustaining systematic commercial activity initially aims to profit from the sale of their goods, services, or the provision of property for use. As a rule, small business is the most common because it provides for less tax payment and is easier to organize. In addition, one should recognize that small business entrepreneurship plays a leading role in the development of the economy of any country. Accordingly, its dynamics affect economic growth, scientific and technological progress, and market saturation with quality goods.

The author came to such conclusions thanks to a systematic analysis and logical interpretation of the information received from various sources. This research is meaningful and valuable both from the point of view of theoretical and practical aspects. It once again emphasizes the importance and significance of the development of small business entrepreneurship for the development and prosperity of a country from a financial point of view. Accordingly, the findings will complement new research and provide a deeper understanding of small business entrepreneurship.

Reference List

Carter, T. (2021) Why entrepreneurship is the engine of economic development. Web.

Hamdan, A. M. M. (2019) ‘Entrepreneurship and economic growth: an Emirati perspective’, The Journal of Developing Areas, 53(1), 65-78.

Patni, A. (2022) Entrepreneurship v/s small business. Web.

Westman, L. et al. (2022) ‘Market transformations as collaborative change: institutional co-evolution through small business entrepreneurship’, Business Strategy and the Environment, 1-22.

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