Capital, Emerging High-Growth Firms and Public Policy: The Case Against Federal Intervention

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The discontinuation of business signifies the point at which entrepreneurs find it hard and impossible to continue their business ventures. Some circumstances arise which negatively affect businesses. However, entrepreneurs, who are very resilient and optimistic, decide to start all over again. This signifies the loop-back from the discontinuation of business to the potential entrepreneur level where new ideas are nursed. It stands for entrepreneurs who were once knocked out of the process, but came back on board. All the policy factors are equally helpful for all the entrepreneurship phases.

This implies that for all the identified phases, as samples are drawn from the population, all the phases are conveniently factored in our selection. Thus, based on the identified phase per business, the focus of government general policies on the day-to-day running of the sampled businesses are analyzed. With this, we can identify if all phases in different businesses, experience similar experience for the laid down policies guiding business operations in each country.

A registered business name is either a general company, incorporated companies or incorporated trustees. No doubt legally registered business enjoy the benefit of legal entity and access to credits, nonetheless, several MSMEs in Nigeria have their businesses unregistered. Once a business is registered in Nigeria, it is expected to pay tax.

Empirical studies have identified some of the loopholes in governance and entrepreneurship development in Nigeria. This is unlike in South Africa where company registration can be herculean for new entrepreneurs or small business owners. Businesses can either fall into profit or non-profit organizations depending on its focus. The profit-making organizations can then take on the form of MSMEs, public or private company. Once a business is registered, it will then be registered automatically as a taxpayer.

Newly established firms must register with local SARS office to obtain an income tax reference number. This organized and mandatory process of business registration has made it impossible for businesses to evade taxes. However, there are also benefits of compliance with business registration to include business name protection, tax deductions, financial assistance and increasing your staff capacity. This study was conducted in the economic hub of two African emerging economies, Nigeria and South Africa.

It is in the South Western part of Nigeria, and the most populous city in Nigeria. It is the largest city in South Africa and is the provincial capital of Gauteng. The sample size consists of entrepreneurs in Lagos and Johannesburg. A total of copies of questionnaires were administered. And since the estimated figures obtained through extant literature revealed that there are more entrepreneurs in Lagos than in Johannesburg, copies of questionnaires were administered in Johannesburg and in Lagos.

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Convenience Sampling technique was used to select the respondents, after which they were then stratified into the five entrepreneurship phase identified in the extant literature. However, and copies of questionnaires were retrieved in Johannesburg and Lagos, respectively, and analyzed. The survey sample reflected a sufficiently broad representation of entrepreneurs in Nigeria and South Africa.

Meanwhile, the focal policies of the government for this study are market regulations, business registration, taxation and labour laws. This study was conducted in strict compliance with social research ethics such as voluntary consent, anonymity, and confidentiality. For construct validity, the key concepts were properly defined and the operational measures identified.

The instruments were also pre-tested to ensure that the contents were well understood. Respondents were asked to select the level of importance of each of the four policy factors based on a five-point scale of most very crucial, crucial, somewhat crucial, slightly crucial, and not crucial.

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Using Principal Component Analysis PCA , the responses were then analysed based on the entrepreneurship phases identified in the extant literature. PCA is often used to identify the most crucial among the groups of factors. Similarly, in this study, PCA is used to search for importance among the policies, and also as a data reduction method.

It also measures sampling adequacy for each variable in the model and for the complete model.

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The variances represent the percentage values that each group of sustainability factors account for in the data set. In order to establish if the policy factors for the entrepreneurship phases in emerging economies are similar or not, the first step was to examine some general government policies enhancing entrepreneurial activities in each entrepreneurship phase, and then identify the most crucial. Section 4. The next section 4. The green bars show the frequencies of government policies enhancing businesses in the entrepreneurship phases in Nigeria.

The yellow bars show the frequencies of government policies enhancing businesses in the entrepreneurship phases in South Africa. For this study, the statistical significance highlights the relative importance of the policies adopted in each business sector and entrepreneurship phase. A major striking point in Table 3 is the fact that the aggregate measures of the policy factors align with the literature review sections where all the factors were reported as important for entrepreneurial development.

The previous studies, flagging the importance of these policies, were conducted independently, at different points in time, and were not specific about the levels where these policies are more pivotal. Hence, without controlling for phases, the holistic view is that all the policies are equally significant.

But when entrepreneurship phase are introduced, as shown in Appendix IV, interesting insights are obtained. Considering the holistic distribution patterns in Table 3 , market regulation and registration process are the most helpful policies in Nigeria. In South Africa, tax and market regulation were the most helpful while registration process was the most helpful in the pooled data.

This suggests that, the entrepreneurs in both emerging economies attested to the fact that, the improvements in the registration process in both economies did enhance their businesses. For instance, on a scale of 1—9, moving from highly insufficient to insufficient, South Africa had 4. However, the GEM reports a low level 2. Thus, indicating a less flexible system for entrepreneurs to thrive. The DBR also reports a more stringent condition for business in South Africa, especially in terms of business registration and tax payment.

While the South African economy makes it easy to use online platforms available to check business names, the bureaucracy of business registration is still a little complicated. Also, their taxes are costly especially in terms of vehicle and property tax rates. Therefore, the complicated means of paying taxes is evident in the length of time it takes to prepare VAT returns, thereby making business and entrepreneurship activities less flexible Doing Business Report, Factor loadings represent how much a factor explains a variable in factor analysis.

Loadings close to zero indicate that the factor has a weak effect on the variable being measured. For this study, the loadings represent the strength of the policy factors in each entrepreneurship phase and economy. Hence, factors with values such as 0. It is considered to be a measure of scale reliability, that is, it measures whether several items that propose to measure the same general construct produce similar scores.

It also shows the average covariance between each group, and the variance of the total score. So, an alpha value of 0. Thereby confirming the reliability of the results. Factor loadings only depicted if 0. Relatively among the sampled individuals, those in South Africa showed a higher proportion of those with at least a university degree than their counterparts from Nigeria. This is not surprising because, a large percentage of the business owners in Lagos are Ibos who would rather learn a trade and go straight into business, than get a degree in college.

Nigeria is a multi-lingual country with over languages but has three official languages; Yoruba, Igbo, and Hausa. Nigeria is also known for its cultural diversities, but largely dominated by three main languages; the Yorubas in the west, Igbos in the East, and Hausas in the North. At firm birth phase, none of the policy factors were significant in both countries. At the persistence and established phases, none of the policy factors were significant in Nigeria whereas in South Africa, all the policy factors were significant.


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This implies that the policies in South Africa have significant impact on, and are enhancing, their entrepreneurial activities whereas in Nigeria, the impact of the policies are negligible and often not felt Chukwuemeka, At the renowned phase, however, none of the policy factors were significant. This is understandable because at this phase, the entrepreneurs are well grounded and most of their businesses are self-sustaining.

Having confirmed that the policy factors are not equally enhancing entrepreneurial activities in all the five phases, the next step was to examine their relative importance in order to identify the most crucial policy factor s in each entrepreneurship phase. For both economies, the results showed the Eigen-values of the various combinations of policy factors in each phase, but when analyzed separately, the findings varied across countries.

The variances represent the percentage values that the policy factors account for in the data set. The results show that the policies enhancing entrepreneurial activities in emerging economies are different. Also, that the policies needed to boost entrepreneurial activities are peculiar to each economy, and different across phases.

And as such, any prospective entrepreneur or investor, seeking to set up businesses in these economies, must take cognizance of the peculiarities in each economy in order to enjoy the maximum benefits therein. This section, also, addresses the hypothesis stated in Section 2.

At conception phase, the pooled data for both countries and South Africa had market regulations 0. Meaning that the market regulation policies were favourable in both countries. Market regulations such as Open market policies, domestic trade, foreign exchange policies promote entrepreneurial activities.

In Nigeria, however, tax 0. As a result, entrepreneurs worry less about tax payment, and as a result plough back the income into their business. At firm birth phase, South Africa and the pooled data for both economies had the same principal factor, market regulations 0. But in Nigeria, tax 0. At persistence phase, the principal factors were dissimilar as registration process 0. Whereas tax 0.

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Recently, in both economies, the registration process have been enhanced such that the bottle necks and bureaucratic processes have been reduced to the barest minimum. At the established phase, market regulation 0.