State Stimulation of Development of Small Entrepreneurship in Developing Countries

Abstract

Introduction At present, developing countries are characterized by domination of information connections in economic system and ineffectiveness of institutional mechanisms in various spheres of economy, including the sphere of entrepreneurship. For this reason, instead of competition in developing countries, monopoly in most of the markets is established. Large market players oust small enterprises, and significant market barriers hinder their reorientation and entering new markets. As a result, economy of developing countries is dominated by medium and large business, which--despite certain positive features--is characterized by low flexibility and insufficient innovational activity. Monopolistic market structure causes difficulty or even impossibility for transition of developing countries for innovations-oriented path of development of economy, which increases their underrun from the developed countries and strengthens disproportions of economic systems in global scale. Taking into account that in developed countries, small business performs the role of main employer in economy and stimulates reduction of unemployment, as is one of key taxpayers, it is possible to speak of existence of serious lost profit in developing countries. This lost profit is caused by underdevelopment of small business and primarily by shortfalls in potential tax payments into state budget, as well as ineffectiveness of labor market. Thus, actuality of development of small entrepreneurship in developing countries grows. This article offers a hypothesis that small business cannot activate in developing countries without state stimulation, as distortion of market mechanism does not allow creating necessary competitive environment and eliminating incoming barriers. The purpose of the article is to verify this hypothesis, determine perspectives, and develop recommendations for state stimulation of development of small entrepreneurship in developing countries. Specifics and role of small entrepreneurship in developing countries Theoretical and methodological aspects of state stimulation of development of entrepreneurship are reflected in materials of research of such authors as (Shi, 2016), (Jerbashian & Kochanova, 2015), (Dzhindzholia et 1., 2015), (Etienne, 2015) et al. Issues of functioning and development of small entrepreneurship are studied in works of such scientists as (Bartz & Winkler, 2016), (Andreeva et al., 2016), (Zengyi, 2016), (Spence, 2016), et al. Peculiarities of developing countries, related to conduct of business and state regulation of economy, as well as work of market mechanism, are studied in multiple research, among which are works by (Lemma &Negash, 2016), (Gnangnon, 2016), (Kratou & Goaied, 2016), (Popkova et al., 2013a), (Popkova et al., 2013b), etc. Small entrepreneurship possesses a range of peculiarities and advantages, as compared to other forms of business. This determines its important role as an economic subject in any economic system. Firstly, such peculiarities include simplicity of creation of business. Starting small business requires minimal set of assets, due to which it is possible to create a large quantity of small enterprises. Secondly, among peculiarities of small business, it is possible to distinguish simplicity of doing business. Accessibility of simplified system of financial accounting and taxation simplifies the process of small enterprise management. Thirdly, it is necessary to note a peculiarity related to simplicity of re-orientation of business. Minimal set of assets makes the procedure of change of targeted market very simple, and small scale of business allows it to re-orient depending on changes of clients' needs. Specifics of small entrepreneurship in developing countries consists in its secondary character. In countries with developing economy, small business is viewed by society and state as economic subject that supplements large business. …