The Major Contributor To Economic Improvement Business Essay


This growing numbers of small businesses is an indicative only of a quantitative measure but this is not just enough to demonstrate the vital contribution of small business to economic growth. Qualitative factors such as characteristics and motivation of business owners are also paramount in understanding the emergence of small business and their undeniable survival. Furthermore, the logic behind such distribution of ownership, the reason why business owners commence in business and why they choose to operate a small business are then analysed.

Brodribb 1967 (cited in Peacock 2004) provided characteristics and motivations of business owners based on five categories - "social and economic background, motivation in choosing their career, present objectives, management practices and growth orientation".

The social and economic background of small business owners suggest that most of them had business-experience for a considerable period, they are also educated although only few have completed a university or college degrees, and most of all they are able to manage significant firms growth. Motivation in choosing a career includes a desire to being independent and to have just a satisfactory income in order to maintain a good living. Present objectives can be seen as more of personal enjoyment of being able to control the firm, being the boss and being able to accomplish what needs to be done. Management practices of small business owners cannot be viewed as a "good management practices", they often have strong determinations but unable to extricate themselves into crucial details, which mean that they preferred to be directly involved in every aspect of the business. Growth and survivals are often the result of continuous activity and awareness. Business owners also differ when it comes to growth orientation. There are those who like their firms to grow and those who don't. Those who are growth-oriented aimed to maximise profits and are ready to consider other factors such as using external funds or employing more people and even devoting more time to the business. On the other hand, non-growth business operators are just happy to stay and enjoy what they are currently earning (Brodribb 19767, cited in Peacock 2004).

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In addition, Stanworth and Curran, 1986 (cited in Peacock 2004) also proposed three latent social identities of small business owners-managers. First is the artisan identity which is more personalised in terms of product or service and in all facets of business. This identity can be seen as quality business rather than quantity, that is to say, it does not aim to earn a fortune but rather provide a high quality product or service and maintain a centralised control of the firm. Second is the classic entrepreneur identity which aims to maximise profits for survival and growth. Last is the manager identity which aims to achieve a quality management, this identity has a less direct control of operation but rather focus on the management aspect of the business as it grows.

Basically, these characteristics and motivations can lead a business owner to commence in business. Economic background such as business experience for a significant period of time can influence an individual decision to open up its own business and makes use of those past experiences. A desire for independency which is sometimes due to disappointment in employment is a strong motivating factor that may push an individual to start a business of their own rather than work for others. Personal objectives such as being a boss and being able to exercise control of their own business can also drives a person into business. Most of them are consistent with the "major reason and benefits for running a small business". Major reasons include "independence, financial reward, job satisfaction, challenge, employment and others". Benefits include being a boss, having control of their life, time flexibility, achievement and having a definite job (Peacock 2004).

Similarly, business owners' motivations, characteristics and identities can also lead to the formation of different business structures. Orientation growth for example - business owners who are growth-oriented are likely to form partnership with others or incorporate as companies, the same with the classical and manager identity. Conversely, non-growth small business owners are less likely to change their current business structures and are just contented to operate as small business, so as with the artisan identity.

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Having known all these, it is still astounding that Australian economy is now driven mostly by small businesses. If business owners are indeed capable of making the firm grow then why majority are still operating a small business, why not aim for big? It is therefore necessary to consider some reasons why business owners prefer to operate as a small business. Possible reasons such as the impact of financial managements, collaboration of decision making with others, ethical outlook, small business orientation rather than entrepreneurial orientation, competition and efficiency are also worth knowing.

Financial investment opportunities are limited in small business and more often than not there are also limited resources. It is managed mostly by one individual so the challenges of growth or expansion are inevitably more difficult. There is also lack of diversification both people and financial resources because owners themselves are involved in the operation and their financial resources are usually unavailable for investment as they are used in business activities (LeCornu et al. 1996).

Collaboration of decision making with others which is also known as "networking" is also an important factor to attain growth and although some Australian SME owners adopted networking, 73% rejected this concept, Holmes & Smith 1997 (cited in Brunetto & Farr-Wharton 2007). Because one of the characteristics of small business owners is personal in nature such as having the total control of the firm, Brodribb 1967 (cited in Peacock 2004), it is undoubtedly that they are reluctant to collaboration specifically in decision making.

Ethical outlook in this context refers to the way a business owner resolves an issue in the manner they conduct their business. It has been found out that small business owner are idealistic and highly committed and are greatly concerned in dealing with others. Ethical behaviour has also found to be more important and small business owners having few employees can easily extend this to customers and to the public (Dawson et al. 2002). This indicate that if growth will result to a more complex issue that will adversely affect the way a business owner conduct its business, then it is unlikely that growth will be of interest.

Majority of small business owners are likely to have a "small business orientation", rather than "entrepreneurial orientation" Stewart and Roth 2001; Stewart et al. 1998 (cited in Highbeam Business). They can both perform well in the business however these two concepts differ mainly in terms of goals and attitudes. As small business owners are more emotionally attached to the business and their goals are not merely maximising profits (Peacock 2004), therefore growth is not a viable option.

Competition and efficiency in small business are consistent with the artisan identity of business owners. It is more personalised, control is more direct, communication is prompt and operating cost is cheaper. This leads small business to be able to compete with the large firms (Peacock 2004). With the existence of quick and simple flow of operation in small business which is not normally present in most large firms, business owners with artisan identity are less likely to be attracted to the whole idea of growth.

Collectively, all of the above propositions are directly relevant to the worldwide recognition of small business as a significant contributor to economic development. Quantitative evidence presented by ABS has been complemented with qualitative information which fortifies the reason to the distribution of business ownership structures. Characteristics and motivations of small business owners were also discussed and analysed further which established reasons as to why business owners commence in business. In summary, small business owners have different individualities and drives which can be both personal and psychological and from these differences, it can be determined that the existence of different business structures is just a matter of preference between business owners; and the reason for commencing in business and deciding for growth depends primarily on purpose and personal perspective.