Entrepreneurial Models | Role of Governments in growth of Entrepreneurship

Role of the Government in Entrepreneurial Growth

Entrepreneurial Growth positively or negatively influence the entrepreneurial spirit. Government and various other agencies of a Nation always play a crucial role in promotion entrepreneurship. Such roles are briefly explained below.

Models for Growth of Entrepreneurship - Role of Governments around the world
Models for Growth of Entrepreneurship – Role of Governments around the world

Rabindra Kunango in his book ‘Entrepreneurship Innovation — Models for Development‘ presents 10 conceptual models for entrepreneurship in various cultural contexts.

1. Laissez-Faire Model of Entrepreneurship

The essence of this model is that government interference and regulation binders economic development, the lack of which allows the entrepreneurs to become competitive and create wealth therefrom. Example of model — Cayman Islands.

2. Positive Environment Model of Entrepreneurship

The philosophy behind this model is that government should play a role in encouraging the small business sector, but this role should be limited to providing a positive environment like adequate infrastructure, free trade agreements, low level of taxation, etc. Example of model — Austria.

3. Strategic Interventionist Model of Entrepreneurship

This policy assumes that the State should have a strategy of promoting small business through intervention by ensuring training, research, finance, marketing, know-how and support. Example of model — Namibia.

4. Subsidized Interest Rate Model of Entrepreneurship

Providing subsidized interest rates to certain industries below market rate help a few selected entrepreneurs whose enterprises subsequently develop into mega-conglomerates. Example— South Korea, where only a few industries — Heavy industries and chemicals are supported and the economy is dominated by a small number of diversified mega conglomerates.

5. Egalitarian Model of Entrepreneurship

All borrowings by the entrepreneurs are at relatively high rates. High interest rates are an incentive to be thrifty. Thus, encouraging saving than borrowing. Example of the model — Taiwan.

6. Trade Facilitation Model of Entrepreneurship

It is an unique mercantilist model, focused on the internationalization of small and medium-sized enterprise. Apart from tangible aid, the government facilitates paper-work procedure and reduces bureaucratic constraints. Example of model — Kenya.

7. Yugo-pluralist Model of Entrepreneurship

The policy changes were initiated at the local level. It could be a weak central government and due to cultural heterogeneity.

There is autonomy due to decentralization of the federal system. Culture is an important determinant of differences in the economic policy, which in turn contributed to regional disparity. Example of the model Yugoslavia.

8. Top-down reform Model of Entrepreneurship

The reforms come from the top levels of government, down to people. Several governments declared a change from centrally planned economy to the one driven by market forces. Example of model — German Democratic Republic.

9. Open-door reform Model of Entrepreneurship

The policy adopted is that of open door with major reforms of a completely planned economy. It results in strong incentives to produce. Example is China, where farmers are kept completely outside the planned sector of the economy in order to promote entrepreneurship among them.

10. Doi-Moi Model of Entrepreneurship

The word literally means ‘renovation‘ or ‘new thinking‘. This is to help small enterprise operate within a socialist system. Example of model — Vietnam.

11. Indian model of Entrepreneurship

Indian model of Entrepreneurship is a combination of strategic internationalist and subsidized interest rate. It has probably high entrepreneurial talents in the world.

The above Entrepreneurship models show that each country has chosen a particular model which it regards as the most appropriate to help its small business sector.